SEC’s Division of Enforcement Announces Key Updates to Its Enforcement Manual

On February 24, 2026, the United States Securities and Exchange Commission’s (“SEC”) Division of Enforcement (“Division”) announced significant updates to its Enforcement Manual for the first time since 2017. These updates aim to standardize the Division’s practices and streamline its processes. SEC Chairman, Paul S. Atkins, noted that the revisions are “an important and long-overdue step that builds on the Division of Enforcement’s commitment to transparency, fairness, and process while ensuring it remains able to fulfill its mission.” Going forward, under the present administration, the Enforcement Manual will undergo yearly reviews. The key updates and our analysis are highlighted below, including important changes to the Wells Process; the creation of a Cooperation Committee, allowing for the simultaneous consideration of waiver requests and settlement offers; and referrals to criminal authorities. 

The Wells Process

The updates enact important new procedures related to the Wells process. The Wells Process, codified in 17 C.F.R. § 202.5(c), allows individuals or companies under investigation by the SEC to present their side of the story before the SEC formally brings any charges.

Typically, the SEC staff sends a “Wells Notice” explaining what enforcement action they are considering and sometimes the bases for those allegations. The person or company being investigated then has the opportunity to submit a voluntary response (a “Wells submission”) explaining the relevant facts and legal arguments believed important for the SEC to consider. In some situations, the person or the company’s representatives may also have the chance to meet directly with SEC staff and senior leadership to discuss their preliminary recommendation and why they believe charges shouldn’t be filed.

Additional Approval Requirements: Now, prior to issuing a Wells Notice, or initiating an enforcement action without issuing a Wells Notice, SEC Staff must obtain approval from both the Associate Director or Unit Chief, and the Director of Enforcement.

• Key Takeaway: These additional approvals are intended to increase consistency across the enforcement process, but may also slow down the Wells Process and potentially lead to a decrease in Wells Notices issued. 

Extended Timeline and Structured Meetings: Under the revised procedures, the Division will generally provide Wells Notice recipients a four-week window to prepare their submissions (as opposed to two weeks—with a potential extension to three at the staff’s discretion—under the prior Administration). Thus, the SEC Staff is providing more time for subjects of SEC investigations to put together their submissions, which will allow for more thorough and well-developed arguments in future Wells submissions. The Manual also sets out, for the first time, a defined timeline for meetings with the SEC after the Wells submission. Now, following a Wells submission, the Division will, within four weeks, arrange a meeting that includes senior leadership at the Associate Director level or higher. Requests for extensions of time must be made in writing, clearly state the basis for the request, and be directed to the appropriate Assistant Director.

• Key Takeaway: Having meetings closer in time to the Wells submission will benefit subjects of SEC investigations by forcing the SEC staff to review the Wells submission in a timely manner, and consult with their supervisors in a fairly defined period. This will also mitigate the risk of a dragged-out Wells Process and reduce uncertainty for companies and individuals under investigation. 

Increased Transparency and Access to Investigative Files: The Manual also establishes important disclosure requirements for SEC staff. When issuing a Wells Notice, staff must now inform the subject not only of the potential charges but also, for the first time, the types of relief or remedies they may recommend. Staff are also expected to share the “salient, probative evidence” gathered during the investigation, subject to appropriate confidentiality protections. In the interests of increasing transparency and efficiency, the updated Manual directs staff to be forthcoming about the content of the investigative file and, on a case-by-case basis, to make reasonable efforts to allow the recipient of a Wells Notice to review relevant portions of the investigative file.

• Key Takeaway: This presumption in favor of reasonable disclosure represents a notable development. It may provide greater visibility into the specific facts underlying the staff’s recommendations. That said, access is not guaranteed. Certain categories of information, including whistleblower-related materials, Bank Secrecy Act records, and documents connected to parallel investigations, may remain unavailable.

Guidance on Effective Wells Submissions. The updated Manual also provides guidance on what makes a Wells submission most helpful to the staff and the Commission. Wells submissions are most effective when they:

• Accurately reflect the evidence, legal issues, and precedent;
• Focus on disputed factual or legal issues;
• Acknowledge and address evidence and precedent in support of the staff’s position, while highlighting exculpatory evidence and adverse precedent;
• Address legal elements required to establish violations and explain why the evidence would not satisfy those elements;
• Address litigation risks or policy or programmatic concerns that would arise if the staff recommended the charges or sought the relief in the Wells notice; and
• Provide documents or citations to the investigative record or legal precedent to support key factual or legal arguments.

• Key Takeaway: This guidance provides a useful outline for subjects to use in their Wells submissions, and makes clear what issues and topics matter to the SEC Division of Enforcement. 

Simultaneous Consideration of Settlements and Waiver Requests

The updated Manual reflects the Commission’s September 2025 restoration of its prior practice of allowing parties seeking settlement to ask the Commission to evaluate both their settlement offer and any accompanying requests for waivers from automatic disqualifications that result from the underlying enforcement action simultaneously.

Certain settlement terms can result in statutory disqualifications with significant collateral consequences to a settling party’s business. As a result, potential defendants and respondents frequently request waivers from the SEC to avoid statutory disqualifications arising from the proposed settlement. 

Going forward, if the Commission accepts a settlement offer but rejects a related waiver request, Enforcement and Division staff will promptly notify the prospective defendant or respondent and request a decision about moving forward with the accepted portion of the settlement offer. If the prospective defendant or respondent does not agree to proceed or withdraws its settlement offer, staff will determine whether to negotiate a new settlement or recommend a litigated proceeding. This approach allows parties to better understand the full ramifications of a settlement, while also reducing administrative burden on the Commission.  

• Key Takeaway: In the past, the collateral consequences of a settlement could be a material, threshold issue and this revision will allow subjects to consider collateral consequences before deciding to settle, rather than having to wait for a waiver.

Revised Cooperation Framework

The updated Manual sets forth the criteria the Division uses to assess cooperation and how such cooperation may affect penalty determinations. For individuals, the Commission considers a multitude of factors, including: (a) the assistance provided; (b) the importance of the underlying matter; (c) its interest in holding the individual accountable; and (d) the profile of the individual. For companies, the Commission considers: (a) self-policing prior to discovery of misconduct; (b) self-reporting of misconduct; (c) remediation; and (d) cooperation with law enforcement authorities.

The Manual explains that cooperation should include:

• Identifying key documents and witnesses;
• Summarizing factual findings;
• Providing expert financial analyses;
• Facilitating voluntary witness interviews;
• Translating foreign language documents; and
• Taking any other steps that meaningfully advance the investigation.

The Manual discusses different potential outcomes for subjects who demonstrate strong cooperation: zero penalty settlements, deferred prosecution agreements (DPAs), and even, in certain circumstances, non-prosecution agreements (NPAs). It also establishes a “Cooperation Committee” to oversee the Division’s cooperation program. Staff must obtain Committee approval for all cooperation agreements, DPAs, NPAs, and immunity requests.

Importantly, the Manual makes clear that timing is critical. Self-reporting credit “will rarely be appropriate” when the SEC is already aware of the conduct or when another regulator is already investigating the matter. The Manual also emphasizes that early cooperation carries significantly more weight, noting that “assistance early in an investigation will often more meaningfully advance an investigation than the same assistance later.” The focus on timelines is critical as it provides an incentive for companies, particularly directors and officers, to detect issues early and strongly favors a robust compliance culture and program. 

• Key Takeaway: While these outcomes had been both a possibility and applied in the past, the codification of these outcomes in the Manual and the formal committee structure demonstrates that the SEC is focused on promoting cooperation from subjects under investigation; although it remains to be seen how this will all play out in practice. It is, however, consistent with other parts of the government, including the Department of Justice, which overhauled its voluntary disclosure program, and the Commodity Futures Trading Commission (CFTC), which also provided a cooperation matrix to promote disclosure and cooperation with the CFTC.  

Referrals to Criminal Authorities

The updated Manual also includes a revised framework for referrals to criminal authorities, reflecting a June 2025 policy statement, Fighting Overcriminalization in Federal Regulations. In determining whether to refer potential violations to criminal authorities at the federal or state level, staff should consider: (1) the harm or risk of harm caused by the potential offense; (2) the potential gain to the putative defendant from the offense; (3) whether the putative defendant held specialized knowledge or expertise, or was licensed in an industry related to the rule or regulation at issue; (4) whether the putative defendant knew the conduct would cause harm or violated the law; (5) whether the putative defendant is a recidivist or has engaged in a pattern of misconduct; and (6) whether involvement of the criminal authority will provide additional meaningful protection to investors.

• Key Takeaway: This provides guidance for subjects who may believe they have potential criminal exposure as it clearly delineates the different factors that the SEC considers for referral to the DOJ. 

Change to Mission Statement

The Manual adds a new value, Engagement, to the SEC’s mission. The prior mission statement had four values: Integrity, Fairness, Commitment and Teamwork. This new value states that the SEC is focused on “engaging with harmed investors and other members of the public in a professional manner.” 

• Key Takeaway: The current SEC has been particularly focused on investor harm and, thus, the SEC staff may be more amenable to arguments about how investigations, enforcement actions, and settlements could adversely impact investors, as well as be more receptive to remediation and mitigation plans that focus on alleviating investor harm and losses. 

Recommended Actions for Clients

• Review and strengthen internal compliance programs to facilitate early detection of potential violations and position the organization for timely self-reporting and cooperation.
• Prepare for a more structured Wells Process by allocating resources for comprehensive Wells submissions within the new four-week timeline and planning for prompt engagement with senior SEC leadership.
• Leverage new transparency provisions by requesting access to relevant portions of the investigative file when responding to a Wells Notice to develop more informed and effective submissions.
• Evaluate settlement strategy holistically by taking advantage of the simultaneous consideration of settlement offers and waiver requests to fully assess the collateral consequences before making a commitment.
• Assess criminal referral risk early in any matter by analyzing the Division’s stated referral factors and developing an appropriate response strategy that addresses both civil and potential criminal exposure.
• Frame advocacy around investor protection in light of the SEC’s renewed emphasis on engagement with harmed investors, ensuring that remediation proposals and settlement arguments clearly address investor harm.