Got Wells? Know your options...

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stockattorney's picture
Joined: 2010-09-09

Received a Wells Notice?  Hopefully you've engaged an attorney in the process prior to receiving one, if not, now is probably the time.  DON'T BLOW IT OFF?  First, technically FINRA should not be calling it a "Wells Notice" because the federal law, authored by Senator Wells was intended for the SEC to put persons on notice of being subjects to investigation and that the SEC Staff was considering recommending disciplinary or civil action against them.  FINRA ran with the same concept.  Probably a good thing anyway.  This is an opportunity to tell your side of the story to the FINRA staff before senior persons at FINRA determine what, if any, sanctions to impose on you.  FINRA gives you a limitation on the number of pages your response should be.  It is HIGHLY recommended to engage counsel, if you haven't already done so.  Sometimes a well-written Wells Response is perhaps what is needed to make a difference.

Prior to or after submission of the Wells Response is when your counsel may attempt negotiation on a possible disciplinary sanction settlement.  In other words, trying to reduce the amount, severity and wording of the sanction, if possible. If you do not respond to a Wells Notice then it is most probable you will go to a hearing.

Years ago SIFMA published a white paper on the FINRA disciplinary process and determined that your chances of clearing your name or limiting/reducing your sanctions were HIGHER by going to a hearing than by just relying on responding to a Wells Notice and accepting whatever sanctions FINRA sought without a hearing.  The white paper however, said that your chances dropped substantially when respondents appealed the hearing decisions to the FINRA National Adjudicatory Council and even further by appealing those decisions to the SEC Staff or even federal court of appeals. 

The take away is that you will have to weigh between accepting whatever is doled out in terms of sanctions around the Wells process and what can be administered by a hearing officer and the legal costs involved in representation.  Costs will be higher to fight the matter and go to a hearing but if you're right and you want to clear your record, the legal costs may be something to consider.


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