Court Finds No Duty for Public Company to Disclose SEC Wells Notice


A federal judge has ruled that a public company did not have a duty to disclose the receipt of a Wells Notice from the SEC. In that case, shareholders filed a federal securities fraud class action lawsuit against a major investment bank, claiming that the bank had failed to disclose that it received a Wells Notice. The staff of the SEC uses Wells Notices to notify the target of an investigation that the staff intends to recommend to the five commissioners who preside over the SEC that the SEC should pursue an enforcement action against the target. After receiving the Wells Notice, the target is given an opportunity to submit a Wells submission explaining why the staff should not make such a recommendation to the SEC or why the SEC should not follow the staff's recommendation. In the case of the investment bank, the SEC commenced an enforcement action against the bank that resulted in a $550 million settlement.


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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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