The Shutdown Continues
Summary: The Government Shutdown has stretched into its fifth week, the longest on record. The SEC is operating with a skeleton staff with more than 90% of its current staff furloughed. That said, the SEC is still watching. During the Shutdown, the Commission has suspended trading in securities of at least eight foreign companies on Nasdaq for “ramp and dump” schemes and filed at least five enforcement actions. Chairman Atkins continues to make public appearances and to push forward the Administration’s agenda, including soliciting opinions on ending the quarterly reporting process.
Takeaway: Things are much quieter on the SEC front, but this is the most active Government Shutdown yet with some middle-of-the-road enforcement actions and even some public appearances by SEC commissioners.
Best Practice Tip: Continue your business as usual consistent with the belief that regulators are on active duty. To the extent investigations have been suspended for the Shutdown, push things forward in appropriate cases to continue to foster goodwill and take advantage of the lull to sharpen your strategy.
Less of a Black Box: Changes to the Wells Process on the Horizon
Summary: On October 7, Chairman Atkins previewed plans to refresh the SEC’s Wells process for engaging with potential respondents or defendants at the end of an investigation. Atkins expressed his view that the Wells process is “an extension of due process and fundamental constitutional rights,” not a mere courtesy.
-
Atkins made clear his expectation that Enforcement Staff provide respondents with “sufficient information,” including testimony transcripts and key documents. In addition, Enforcement Staff must “be realistic about time periods for submissions,” but in any event, respondents should be afforded at least four weeks to submit a response. Overall, Atkins expects the Wells process to be an avenue toward ensuring accuracy in enforcement cases; to do that, advocates must be given insight into the claims, evidence, and legal theories against which they will be expected to defend.
Takeaway: Respondents already often (but not always) receive many of the procedural protections Atkins identified. Going forward, all respondents should expect transparency at the Wells phase and a meaningful opportunity to respond.
Best Practice Tip: Targets of SEC investigations should take advantage of opportunities to ask questions regarding the Staff’s areas of inquiry and tentative legal theories early in the case to best position advocacy. During the Wells process, do not hesitate to request clarity or access to particular documents—particularly testimony transcripts that would not otherwise be accessible—so submissions address the Staff’s specific areas of concern.