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SEC Enforcement Co-Director Gives Guidance for Wells Process

During his recent keynote address at the New York City Bar Association’s 7th Annual White Collar Crime Institute, SEC Enforcement Co-Director Steven Peikin imparted a few suggested “do’s and don’ts” for effective communication with the SEC during the Wells process—typically the last opportunity to address potential charges prior to the authorization of a SEC enforcement proceeding.  We’ve summarized his observations below.

  • Focus on the key issues.

    • DO: Limit the focus to the important elements of the case, and adapt if the Staff appears interested in a different area.

    • DON’T: Take a “blunderbuss” approach and address every possible argument, or contest facts or issues that aren’t subject to reasonable dispute.

  • Inform the Staff about the facts.

    • DO: Educate the Staff about any key facts or arguments well before the meeting so there can be a meaningful discussion.

    • DON’T: Spring a lengthy submission on the Staff containing new facts and arguments at the last minute.

  • Make sure that information is available to allow the Staff to evaluate an advice of counsel defense.

    • DO: Recognize that the Staff will not be persuaded by evidence that they cannot see or testimony that they cannot take.

    • DON’T: Allude to an advice of counsel defense while claiming privilege over all associated information.

  • Precedents can be very effective—use them!

    • DO: Compare your case with arguments in case law and prior Commission actions.

    • DON’T: Cite stale decisions or argue that the Commission won’t vote in favor of the Staff’s recommendation.

  • Exercise caution with visual aids.

    • DO: Keep it short and sweet—focus only on the key evidence.

    • DON’T: March through handouts or PowerPoint slides that cover background issues, facts, and legal standards, or which summarize the Wells submission.

  • Threats to try the case are rarely productive.

    • DO: Explain how you may try the case and why the Commission will face litigation risk based on your strategy.

    • DON’T: Make unspecific overtures that the client is willing to litigate.

  • Avoid raising “non-starter” issues where the Commission has taken a clear and consistent position, and has no ability to compromise.

    • DO: Raise other legal issues inconsistent with prior precedent.

    • DON’T: Make arguments that injunctions are subject to the statute of limitations under Kokesh.

  • Be detailed when asking for cooperation credit.

    • DO: Specifically explain how each “cooperative” action materially aided the Staff’s investigation.

    • DON’T: Run through a laundry list of “cooperation” without further explanation, or argue that actions that are required (such as complying with a subpoena) deserve credit.

  • Wells meetings should be used to focus on key issues—not to retread old ground.

    • DO: Use the time wisely to focus on key arguments.

    • DON’T: Rehash old battles already fought with the Staff.

Despite the clear stance Co-Director Peikin articulated for many of these issues, it pays to keep in mind that every situation is different. In our experience, what might be ineffective in one situation may prove surgically effective for a client in other circumstances. Ultimately, while the suggestions above may provide useful general advice, there are always additional considerations—which will be discussed in our next post.

© 2020 Proskauer Rose LLP. National Law Review, Volume VIII, Number 155


About this Author

Samuel Waldon, Proskauer Law Firm, Washington DC, Corporate Law and Litigation Attorney

Sam Waldon is a partner in the Litigation Department and a member of the Securities Litigation, White Collar Defense & Investigations and Asset Management Litigation Groups.

Sam’s practice focuses on securities litigation, enforcement and regulatory matters. He represents corporations and financial institutions, and their officers, directors and employees, in investigations, exams, internal investigations and litigation. Sam has in-depth experience in a broad range of Securities and Exchange Commission (SEC) enforcement matters, including...

Joshua Newville, Proskauer Rose, regulatory enforcement attorney, industry compliance legal counsel, securities exchange commission lawyer

Joshua M. Newville is a partner in the Litigation Department in New York. His practice focuses on commercial litigation and regulatory investigations. Mr. Newville advises companies and individuals in securities litigation and compliance matters. He also focuses on internal investigations and enforcement matters. Prior to joining Proskauer, Josh was senior counsel in the U.S. Securities and Exchange Commission’s Division of Enforcement, where he investigated and prosecuted violations of the federal securities laws. Josh served in the Enforcement Division’s Asset Management Unit, a specialized unit focusing on investment advisers and the asset management industry.  His prior experience with the SEC provides a unique perspective to help private investment funds and their advisers manage risk and handle regulatory issues.

Brian Hooven, Proskauer, Litigation, Expert Witness Qualifications Attorney

Brian Hooven is an associate in the Litigation Department.

  • Columbia Law School, J.D., 2015 

  • Journal of Law and Social Problems

  • University of Michigan, B.S., 2011