By R. Jason Howard, J.D.
SEC Co-Director for the Division of Enforcement, Steven Peikin, gave the keynote address at the New York City Bar Association’s 7th Annual White Collar Crime Institute and discussed “techniques for productive and effective communication with SEC staff during Wells meetings.”
Wells process. As Mr. Peikin explained, the Wells process “takes its name from an advisory committee, headed by the distinguished corporate lawyer John A. Wells, which was convened in 1972 to review and evaluate the Commission’s enforcement policies and practices. As the Commission noted in responding to the recommendations of the committee, the purpose of the Wells process is to ensure that the Commission ‘not only [is] informed of the findings made by its staff but also, where practicable and appropriate, [has] before it the position of persons under investigation.’”
Although the Commission “declined to adopt a formal rule or procedure requiring a prospective defendant or respondent to be given notice of the staff’s charges and proposed enforcement recommendation and an opportunity to respond, deeming such a requirement to be impractical given that the Commission is frequently required to act with exigency,” the Wells process is still one “the Commission staff has followed in most cases where doing so would not compromise other law enforcement interests.”
When defense counsel asks the Division of Enforcement to make a recommendation to the Commission, Mr. Peikin explained that “it can be very helpful to show us how and why that recommendation compares with what happened in prior cases. This is particularly true when you are asking the staff to recommend that the Commission bring certain charges and not others, or only seek or impose certain types of relief. In these circumstances, pointing to what has been done before can be helpful.”
Mr. Peikin also noted that Wells meetings are least productive when defense counsel raises what he calls “nonstarters,” and by that he means “issues of programmatic importance on which counsel knows that the Commission and the Division have taken clear and consistent positions,” and on which they simply don’t have any ability to compromise.
On credit for cooperation, Mr. Peikin said simply listing the actions taken by a client does not explain the significance of the cooperation, rather, he said that counsel should “carefully and specifically explain at a Wells meeting how each action your client took aided the staff’s investigation in a material way. How did you help the staff to tailor its investigation, discover new witnesses, or uncover material facts they otherwise would not have known about? In short, explain to the staff—with specificity—how each action your client took materially aided our investigation.”
Mr. Peikin concluded, saying, “the Wells meeting is your client’s opportunity to educate us on your positions about the key issues. I have found that it is rarely a productive for defense counsel to rehash old disagreements with the staff about the way the investigation was conducted. Those disagreements won’t have a bearing on what we decide to recommend to the Commission. We will make more progress when everyone sticks to the facts and the law.”