By Chris Prentice
NEW YORK, Feb 24 (Reuters) – The U.S. Securities and Exchange Commission said on Tuesday it will give the subjects of investigations more time at the outset to respond to notices of potential charges and an opportunity to meet with staff within four weeks, as part of a broader update of its internal enforcement protocols.
The SEC’s move to update its enforcement manual, which was last published in 2017, is the latest change to the way Wall Street’s top regulator polices financial markets under Republican Chairman Paul Atkins, who has long argued the SEC can be too opaque in its dealings with the subjects of enforcement probes.
Some Wall Street attorneys have also said the agency has been inconsistent in its communications with the subjects of probes, depending on which office or unit is handling an investigation. The new manual will ensure “greater uniformity,” SEC enforcement director Margaret Ryan said in a statement.
At issue are so-called Wells notices, which alert firms or individuals of potential charges the SEC is weighing against them. Under the changes, recipients of such notices will be given four weeks to respond to allegations. Previously, the regulator often gave subjects two weeks to respond, although the timeline could be extended.
Subjects will also be entitled to a meeting with the SEC within four weeks of submitting their response, a move SEC officials say could expedite the process.
“We’re trying to be more efficient. This gives them enough time to focus on legal or factual issues and to respond in a meaningful way,” Ryan said in an interview. “We’re hoping to underscore the importance of open, informed dialogue.”
Some defense lawyers welcomed the changes.
“More predictability is a good thing here. In the past, the process was very ad hoc and informal,” said Robert Frenchman, a lawyer with Dynamis LLP.
The new manual also laid out how SEC staff should share key information with people or firms being scrutinized, a change many have sought.
Stephen Crimmins of Davis Wright Tremaine said the update marked a shift in attitude at the agency.
“This is not a giveaway to the defense bar. It’s an enhancement of the process,” he said. “It allows everyone, before embarking on litigation, to put their cards on the table.”
Among the other changes to the manual were new details outlining a process for giving a firm under investigation a waiver from consequences of an enforcement action, such as losing certain securities registration benefits, at the same time it weighs a settlement with the agency.
(Reporting by Chris Prentice; Editing by Michelle Price, Lincoln Feast and Nia Williams)
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