SEC’s Division of Enforcement Announces Significant Updates to Its Enforcement Manual – The Changes Provide Important Transparency Regarding Division Practices and Decision-Making

On February 24, 2026, the Securities and Exchange Commission’s (“SEC” or the “Commission”) Division of Enforcement (the “Division”) announced that it had made “substantial” updates (the first since 2017) to its publicly available Enforcement Manual. Although the Enforcement Manual is not binding and does not create specific obligations or rights, it is a critical reference guide for both the SEC staff and SEC enforcement defense bar, as well as the public at large, regarding how the Division conducts inquiries and investigations and, if necessary and appropriate, prosecutes violations of the federal securities laws.

Although some of the changes document previously announced or long-instituted practices, the fact of the update and the changes themselves provide important insight and guidance into the priorities of the Division’s current leadership. In its announcement, the Division explained that the updates “underscore the Commission’s ongoing commitment to fairness, transparency, and efficiency” in investigations and noted that the Division will, going forward, review and update as necessary the Manual on an annual basis.

Of particular note, and as discussed in more detail below, the updated Enforcement Manual memorializes:

• important updates to the Wells process (i.e., the formal opportunity for parties to advocate for no enforcement action, reduced charges, and/or reduced sanctions/remedies);
• the Division’s views on the importance of, and what constitutes, meaningful “cooperation” and its potential impact on the outcome of an investigation; and
• the simultaneous consideration of settlement offers and requests for relief from certain collateral consequences of said settlements.

Taken together, the changes reflect a heightened interest in standardizing enforcement practices across the Division and further centralizing decision-making in the Office of the Director.

The following is a brief summary of the key changes (it is not intended to be a comprehensive account of all substantive updates to the Manual).

Increased Transparency and Other Changes to the Wells Process

Among the most significant changes to the Enforcement Manual are those detailing the timelines and procedures for the Wells process. The Wells process affords potential respondents and defendants information regarding the charges they may face in an enforcement action and the opportunity to advocate for a different enforcement action or for the SEC to decline to proceed with the matter altogether. The process has been the focus of recent speeches by both the Director of the Division of Enforcement, Judge Margaret Ryan, and SEC Chairman Paul S. Atkins, the latter of whom spoke in October of last year of the need to “revisit[] and refresh[]” the Wells process in the interest of ensuring accuracy and transparency in the SEC’s enforcement activity. The revised Manual documents several changes that were discussed in those speeches.

• Approval to Issue a Wells Notice
  The Manual now notes that the issuance of a Wells notice — the communication by which parties are informed that the Division has determined to recommend that the Commission authorize an enforcement action — must be approved by the Associate Director or Unit Chief supervising the matter as well as by the Office of the Director.

• Increased Visibility into Evidence Gathered by SEC Staff
  In addition to informing a recipient of the potential enforcement action against them, the nature of the violations, and the process for Wells submissions, the updated Enforcement Manual directs staff to share the “salient, probative” evidence that staff have gathered or received, which the staff may have or should have reason to believe may not be known to the recipient.
  
  Enforcement staff have long had discretion to provide access to portions of the investigative file. The Manual, however, now makes clear staff should err on the side of openness to facilitate the Wells process. Specifically, the Enforcement Manual directs staff, “[i]n the interests of increasing transparency and efficiency of the investigative process and the Commission’s deliberations,” to (1) be forthcoming about the content of the investigative file and (2) on a case-by-case basis “make reasonable efforts” to allow the recipient of the Wells notice to review relevant, non-privileged or otherwise protected portions of the file. It remains to be seen how this change will play out in practice as the staff will continue to have significant discretion.

• Guidance on Wells Submissions for Wells Notice Recipients 
  The Division has provided new guidance for what constitutes an effective Wells submission. Generally, the Enforcement Manual states that “[a]ccepted Wells submissions are most helpful when they focus on disputed factual or legal issues, or raise significant legal risks or policy or programmatic concerns.” Specifically, the Division has articulated the following characteristics of “helpful” submissions:
  
  • 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;
  • Provide documents or citations to the investigative record or legal precedent to support key factual or legal arguments;
  • If applicable, discuss the factors described in the “Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934 and Commission Statement on the Relationship of Cooperation to Agency Enforcement Decisions,” Securities Exchange Act Release No. 44969 (October 23, 2001) (“Seaboard Report”); or
  • Where charges are particularly complex or technical, an expert report may add to the effectiveness of a Wells submission.

Taken altogether, these insights highlight the importance of relying on the factual record and legal precedent in any Wells submission, and addressing the evidence and precedent supportive of the SEC staff’s position head-on, rather than committing to what the staff may view to be a one-sided narrative and/or ignoring unfavorable facts or precedent.

• Timing of Wells Submissions and Post-Wells Notice Meetings
  The updated Enforcement Manual provides that recipients of a Wells notice should generally receive four weeks to make Wells submissions, rather than the previous two-week deadline. While it was fairly typical for staff to grant an extension to the two-week deadline, mandating a four week turnaround provides important clarity and uniformity.
  
  Further, the Manual requires post-Wells notice meetings with senior leadership of the Division (i.e., the Associate Director, Unit Chief, or above) be scheduled within four weeks of a receiving a submission. This reflects a meaningful shift as it was not unusual for meetings to be scheduled months after the submission date and will put additional pressure on both defense counsel and the SEC staff to proceed with an even heightened sense of urgency.

Simultaneous Consideration of Settlement Recommendations and Waiver Requests

The updated Enforcement Manual incorporates the Commission’s previously announced return to its prior practice of permitting a settling party to request that the Commission simultaneously consider an offer of settlement and any related request for a Commission waiver from automatic disqualifications and other collateral consequences that result from the underlying enforcement action. As a part of this process, the settling party would be notified if the Commission were to accept the settlement offer but reject the waiver request, and then have the opportunity to consider whether to move forward with the settlement. If the party does not accept the offer, or does not promptly notify the staff of their agreement to move forward with the offer, the staff will then determine whether to negotiate and recommend a new settlement, or recommend a litigated proceeding.

Cooperation Credit for Entities

In line with Commission leadership’s oft-repeated twin goals of fairness and transparency, the Division has also revised the Enforcement Manual to offer more visibility into the facts and circumstances SEC staff may consider when evaluating cooperation and related efforts by entities facing potential enforcement action.

Still, the discretion of the staff to weigh these considerations remains broad. These details, however, provide insight into the analytical framework, but the degree to which staff rely on any of these considerations in decision-making remains opaque and likely to vary depending on the facts and circumstances of any particular matter.

• Examples of Effective Cooperation
  The revised Enforcement Manual provides the following examples of what the Division has deemed to be “exemplary cooperation”:
  
  • Summarizing factual findings from internal investigations;
  • Summarizing interviews of witnesses located abroad;
  • Identifying key documents and witnesses;
  • Translating foreign-language documents;
    
  • Providing detailed explanations and summaries of factual issues;
  • Providing financial analyses conducted by external experts;
  • Facilitating voluntary interviews of witnesses; and/or
  • Any other measures that meaningfully advance the Commission’s investigation.

The Enforcement Manual also now makes clear that staff should consider the timing of cooperation in their analysis, crediting early cooperation as “more meaningful[]” to the progress of an investigation than the same assistance later on.

• Examples of Effective Remediation
  The Division also provides specific examples of “effective” remediation, including:
  
  • Taking appropriate action with respect to employees involved in misconduct;
  • Strengthening internal controls;
  • Clawing back compensation from responsible executives;
  • Making prompt corrective disclosures;
  • Hiring new financial and accounting staff to address accounting and disclosure issues;
  • Improving training for relevant personnel; and
  • Retaining independent compliance consultants to advise on other remedial measures.

• Effective Self-Reporting
  Self-reporting misconduct is a key factor the Division and Commission consider when assessing enforcement recommendations. The updated Manual notes that credit for self-reporting is appropriate when a company reports the misconduct before the SEC staff learn of it from other sources or prior to the imminent threat of disclosure or government investigation. The Division makes clear that self-reporting credit “will rarely be appropriate” for conduct that is already the subject of media attention or of an investigation by another regulatory authority. This new language puts added emphasis and pressure on entities to make self-reporting decisions before they may have even fully assessed the nature of suspected misconduct or violation.

Other Changes to the Enforcement Manual

• Referrals for Potential Criminal Enforcement
  The Enforcement Manual has been revised to state that the decision to make a criminal referral should be made by staff at the Associate Director or Unit Chief level or above, indicating a desire to centralize decision-making on criminal referrals closer to the top of the Division’s organization. The Manual also incorporates previously announced factors staff should consider in determining whether to refer potential criminal violations to Department of Justice (“DOJ”), or other federal and local authorities, as follow:
  
  • The harm or risk of harm, pecuniary or otherwise, caused by the potential offense, including whether the putative defendant’s conduct harmed or risked harming many victims;
  • The potential gain to the putative defendant that could result from the offense;
  • Whether the putative defendant held specialized knowledge, expertise, or was licensed in an industry related to the rule or regulation at issue;
  • Whether the putative defendant knew the conduct would cause harm or that it violated the law;
  • Whether the putative defendant is a recidivist or has otherwise engaged in a pattern of misconduct; and
  • Whether the involvement of the DOJ or the criminal authority to which staff are considering making a referral will provide additional meaningful protection to investors.

• Formal Orders of Investigation
  The revised Enforcement Manual details updates to the Formal Order process to reflect current practice and requirements. The issuance by the Commission of a Formal Order is an early step in the investigative process (it is not a determination that any violations have occurred) and authorizes certain individuals to issue subpoenas and take formal testimony.¹

• Issuance of Termination Notices
  Staff have long been required, per the Enforcement Manual, to send termination notices to certain parties involved in investigations (i.e., any parties identified in the caption of a Formal Order; any party that submitted or was solicited to submit a Wells submission; any party asking for such a notice; or, any party staff determine to have a reasonable belief that staff were considering an enforcement action against them). The revised Manual encourages staff to send a termination notice to any party who made “significant productions” in an investigation. This measure will provide meaningful clarity to parties that have been required to provide information and documents in investigations, even if they do not fall within the above listed categories of parties who would otherwise receive a termination notice. Staff are also instructed to “continuously review” the status of open investigations and send a termination notice when appropriate.

• Guidance on the Application of the Statute of Limitations and Related Tolling Agreements
  In the revised Enforcement Manual, the Division states that ten-year statute of limitations for securities law violations involving scienter applies not only to disgorgement of ill-gotten gains, but also to “equitable remedies,” including, as the Division describes, injunctions, bars, suspensions, or cease and desist orders.
  
  Separately, the Enforcement Manual reflects centralized authority over agreements that staff may ask a party to an investigation to sign to toll the applicable statute of limitations (i.e., tolling agreements). If the staff believe that a tolling agreement is appropriate, they may, in the first instance, obtain approval from the appropriate Associate Director/Unit Chief for up to 90 days. But, any requests to extend tolling agreements beyond the initial 90 days require approval from the Director or appropriate Deputy Director.

• Document Preservation Letters
  The revised Enforcement Manual instructs that document preservation letters, which staff are encouraged to send as early as is appropriate in an investigation, apply to all forms of documents and communications, including electric communications sent on any messaging platforms and applications and including those on personal devices.

• Forthwith Subpoenas
  Under the updated Manual, staff are advised to consult with the Division’s Chief and Deputy Chief Litigation Counsel when they believe there may be a need to issue a forthwith subpoena, which call for the immediate production of information and which should only be used in exigent circumstances, for example, witnesses who staff reasonably believe may destroy information, are uncooperative or obstructive, or are flight risks.

• Privilege Logs
  Revisions to the Enforcement Manual suggest the SEC staff are going to demand, going forward, increased detail when producing parties submit privilege logs accounting for documents withheld or redacted for privilege. For each document withheld on the basis of a claim of attorney-client privilege, the privilege log should include the identity of the attorney and client involved. For each document withheld on the basis of the attorney work product doctrine, the privilege log should identify the litigation in anticipation of which the document was prepared. These requirements may result in added challenges for producing parties, not only by making the production process more burdensome, but the work product requirement may be particularly challenging given limitations on the amount of detail parties may be able to provide about the anticipated litigation and the context in which the document was prepared.

Key Takeaways

While the fact of the changes to the Manual and changes themselves are important and substantial, many reflect long-held views or practices and are consistent with recent remarks from Commission leadership on the agency’s enforcement priorities. That aside, the changes do reflect an effort to make the enforcement process more efficient for all parties, and meaningfully more transparent for parties facing potential enforcement action by offering more visibility into the charges and evidence against them, along with a roadmap for effectively challenging and/or reducing the charges and relief recommended against them. Staff, however, continue to have significant discretion to conduct an investigation. So, the impact of these changes will have to be assessed in connection with specific investigations on a go-forward basis.

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1. ^[1] Previously, the Director of Enforcement had the delegated authority to issue Formal Orders. The Commission recently revoked that delegation. ↩

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