SEC Updates Enforcement Manual, Improving Process and Transparency

Summary

• In February 2026, the U.S. Securities and Exchange Commission announced the first updates to its Enforcement Manual in nearly a decade.
• The revisions provide improvements to process and transparency, and they should be helpful to lawyers who represent parties involved in SEC investigations.

On February 24, 2026, the U.S. Securities and Exchange Commission (SEC) announced significant updates to its Enforcement Manual. These revisions make improvements to process and transparency, and they should be helpful to companies and individuals who find themselves involved in SEC investigations.

Background on the Enforcement Manual

The manual guides staff members of the SEC's Division of Enforcement as they conduct investigations. Although the manual does not have the force of law, division staff members regularly consult it for direction and seek to comply with it.

The SEC also makes the manual publicly available on its website. So, besides guiding SEC staff, the manual also is a valuable resource to companies and individuals as they navigate investigations by the division.

The recent updates to the manual are the first revisions since 2017. Going forward, however, the SEC announced that the manual will undergo yearly reviews.

SEC Chairman Paul S. Atkins explained that the recent revisions to the manual enhance the division's "commitment to transparency, fairness, and process" in conducting investigations. Similarly, Margaret A. Ryan, the division's director, commented that the updated manual "seeks to clarify, and enhance the public's understanding of, how we enforce the federal securities laws." Although the manual includes multiple updates, the more significant revisions highlighted in the SEC's press release are discussed below.

Revisions to the Wells Process

A Wells notice is a formal communication from division staff to a person under investigation, informing the person that the staff intends to recommend charges against the person for violating the federal securities laws. See SEC, Enforcement Manual [hereinafter Manual] at 2-22. The Wells notice itself typically does not provide many details, but it identifies the securities law violations at issue and informs the recipient that the recipient may make a Wells submission to the SEC, explaining the recipient's view of the matter. A Wells notice is typically accompanied by a Wells call, in which the staff explains the factual basis for the contemplated charges in greater detail. See Manual at 2-22 to 2-23.

Before the SEC brings an enforcement action, the action must be approved by a majority of the SEC commissioners. And before voting on whether to approve an enforcement action, the commissioners are provided with an action memo detailing the staff's view of the matter, along with any Wells submissions. See Manual at 2-24, 2-27.

The new manual updates several aspects of the Wells process. First, the manual advises that, after issuing a Wells notice, "the staff should be forthcoming about the content of the investigative file." Manual at 2-24. This sharing of information is recommended in "the interests of increasing transparency and efficiency." Id. The manual suggests that information in the investigative file should be shared if it is "relevant," "not privileged," and not subject to confidentiality restrictions. Manual at 2-24 to 2-25. Ultimately, however, the staff will decide what information to share on a "case-by-case basis." Manual at 2-24. Although the directive to be more forthcoming with the investigative file could be significant for parties under investigation-especially in drafting a Wells submission and preparing for a Wells meeting-its impact likely will depend on how the staff implements this guidance in practice.

Second, the default period for making a Wells submission will now be four weeks, which is longer than the two-week period that applied in the past. Manual at 2-23. The impact of this change, however, seems minimal, as defense counsel often negotiate extensions of time for Wells submissions.

Third, the updated manual offers detailed guidance on what types of information are most "helpful" in a Wells submission. Manual at 2-24. This includes the potential use of expert reports in complex cases. Id. Such specific guidance should help parties under investigation make their Wells submissions as persuasive as possible.

Fourth, it is common, after making a Wells submission, for a party to request a Wells meeting with division leadership to argue the party's case in person. The updated manual states that Wells meetings should take place no later than four weeks after receipt of a Wells submission and that such meetings will be attended by a member of division leadership at the associate director level or above. See Manual at 2-25. This largely formalizes the process that often (but not always) occurred in the past.

Simultaneous Consideration of Settlements and Waiver Requests

SEC settlements sometimes trigger automatic collateral consequences for the settling party beyond the sanctions specifically imposed by the settlement. For example, settling fraud charges may result in a so-called "bad actor" disqualification related to certain securities offerings. See generally SEC, Disqualification of Felons and Other "Bad Actors" from Rule 506 Offerings and Related Disclosure Requirements (Sept. 19, 2013). But the SEC may grant a waiver from disqualification upon a showing of good cause, and parties attempt to show good cause in a formal, written waiver request.

The updated manual affirms the SEC's recent practice, since September 2025, to simultaneously consider an offer of settlement along with any related request for a waiver from disqualification or other collateral consequences. If the commissioners accept a settlement offer but reject a waiver request, the staff must promptly notify the party at issue so that it may decide whether to withdraw its settlement offer. See Manual at 2-27. This allows a party to understand both the direct and collateral consequences of a potential settlement before it takes effect.

Additional Guidance on Cooperation

The updated manual also offers additional guidance on the division's framework for evaluating cooperation by parties under investigation. Among other things, the manual addresses (i) the framework for evaluating cooperation by individuals; (ii) the framework for evaluating cooperation by companies; and (iii) the benefits of cooperation, including reduced civil penalties or, in certain circumstances, no penalties at all. See Manual at 6-92 to 6-97, 6-103. This guidance should help the division obtain cooperation, while also providing parties under investigation with incentives to cooperate and direction on how to do so.

Considerations for Criminal Referrals

The manual provides an updated framework for staff to use in making referrals to criminal authorities. Although the SEC brings only civil enforcement actions, parallel civil and criminal proceedings are common, and "the staff is encouraged to work cooperatively with criminal authorities." Manual at 5-82.

Often, at some point during an investigation, division staff will consider whether a referral to criminal authorities, such as the U.S. Department of Justice, may be appropriate. The updated manual sets forth six non-exclusive factors for the staff to consider in determining whether to make a criminal referral. Manual at 5-88. Where the staff makes a criminal referral, however, it typically does not inform the party under investigation, nor does it provide further information about any referral, even if asked, unless authorized to do so by the criminal authorities. Manual at 5-83.

Takeaways

The updated manual appears to be a positive development for parties under investigation and the lawyers who represent them. In particular, the improvements to the Wells process, simultaneous consideration of settlement offers and waiver requests, and enhanced guidance on cooperation should benefit parties as they seek to make their case before the SEC.

Republished with permission. This article, "SEC Updates Enforcement Manual, Improving Process and Transparency," was published by American Bar Association on March 12, 2026. (login required)