Second Chances

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Written by Kalie Williams

Edited by Sarah Mejia

Wouldn’t it be nice if we all received a warning after every wrongdoing, allowing us to explain our actions and cover up our mistakes? The SEC is giving people this “second chance” in an action that is known as Wells Notice. These notices are named after the lawyer who led an SEC advisory panel in 1972 on enforcement procedures. When Wells Notices are used, they disclose the specific charges that enforcement officials are considering recommending to the SEC’s commissioners for approval.

Government figures show that about 20 percent of those who were warned that they might be sued by U.S. regulators for allegedly violating securities law ended up facing no charges at all. These people targeted by Wells Notices can respond with a “submission.” In an attempt to be cleared from charges, individuals may explain why they believe the SEC should water down or completely drop its civil case. Members of the SEC take a close look at the evidence and presented arguments.  Even familiar figures such as Anthony Piszel of Freddie Mac have received a Wells Notice. However after consideration, Piszel was cleared.

“The system is working,” says former SEC Chairman Mary Schapiro. “It’s exactly what the Wells Notices are intended to do: to bring out someone’s best defense before a decision is made on whether to charge them.” Coming from Schapiro’s statements, I too believe that the SEC is making the proper management decision. It is not only fair for the individuals being charged, but also more efficient for the SEC to give out a warning before jumping to further conclusions. This also gives time for more information about the problems to be revealed.

It seems that since Wells Notices have been issued, the SEC has had more success than in the past. It was said privately by several SEC officials that they believe that less people have gotten away with wrong doing than before the Wells Notice system was established. The SEC must remain extremely careful and conscience when looking at and going over specific situations. For example, the SEC will need to be sure not to favor specific corporations or individuals. The system of Wells Notices may cause some problems with past charges that have taken place. Years ago, when Wells Notices did not exist, individuals were charged upfront and did not receive “second chances.” However, if that person would have been able to receive this special notice beforehand, they would have then evaluated the situation in deeper context. It is important that the SEC continue in the positive direction that they have been going in. It is even more crucial, however, that they pay close attention and treat each and every case as ethically as possible.


**Due to technical difficulties, we recently had to switch domains and transfer all of our website content.  Please keep in mind that while we have been publishing articles for two years, the published dates shown may not reflect the initial publish date.


Eaglesham, Jean. “SEC Drops 20% of Probes After ‘Wells Notice'” Wall Street Journal. n.p., 9 Oct. 2013. Web. 10 Oct. 2013.

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