Wells Notice (SEC)

Wells Notice is a type of notice that the SEC sends to those it suspects have violated security laws. Since the 1970s, the SEC has used it to ask for clarifications about a perceived violation of security laws in the US.

If a company(or person) has been served a Wells Notice, it generally means that the SEC has enough evidence to prosecute but is giving the company (or person) one chance to explain themselves.

The notice is served by the SEC in accordance with the powers of the Securities Act 1933 and the Securities Exchange Act 1934.

Why Is It Called a “Wells Notice”?

John Allison Wells was the first to recommend in 1972 that the companies (or persons) in any SEC case should have the chance to present their side before formal charges were filed. Since then, the notice has been known as Wells Notice.

Meaning

Typically, I have seen the SEC serve this notice when it has found conclusive “reason” that a certain company or an institution has violated the Securities Act 1934. Once the Wells Notice is served, it typically means that the SEC will bring a lawsuit against that company. This has happened in cases against Ripple and Coinbase.

Topics Related To The SEC

Howey Test

The Howey Test is a list of instructions given by the US Supreme Court which mentions the process to determine if a “financial asset” is a security or not.

It has four major rules for classifying something as security all of which should be satisfied to classify an asset as a security.

  1. The financial asset should seek investments from others.
  2. Investment should be in a “Common Enterprise”.
  3. For the generation of profits.
  4. The profits should arise from the efforts of people other than investors.

The US Securities and Exchanges Commission

The US Securities and Exchanges Commission (SEC) is an authority that regulates the US Securities Markets as per the US SEC Act of 1934.

The SEC Act 1934

The United States Securities and Exchange Commission Act of 1934 established a list of rules and regulations to be followed by the US SEC to regulate securities markets within the United States of America.

Securities Act 1933

The US Securities Act of 1933 lays down the basis of investor protection. It resulted in the creation of the US SEC in 1934.

Dhirendra Das

Dhirendra Das

Dhirendra is a seasoned SEO expert specializing in crypto, blockchain, and Web3, with a strong background as a trader and investor since 2015. He holds a B.Tech and dual MBAs in Finance and Marketing, bringing both technical and financial insights to his work. Dhirendra has written thousands of articles for leading crypto media outlets, establishing a respected voice in crypto and blockchain technology. His deep industry knowledge and practical experience empower readers with reliable, up-to-date content that fosters informed decision-making in rapidly evolving digital asset markets.

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