Chair Atkins and ICAN Agree on Two Critical Fixes to SEC Enforcement

The Wells Notice is the SEC’s last step before formal enforcement. It alerts a person or firm that the Enforcement Division intends to recommend that the Commission file charges. At that point, the recipient can respond in writing—called a Wells Submission—to explain why charges should not be brought. They can correct factual errors, raise legal issues, and try to persuade the Commission that enforcement isn’t justified.

The Wells process, created in 1972, was supposed to promote fairness, efficiency, and transparency—especially during a time when Americans were growing concerned about unchecked federal agency power. But in practice, it has often had the opposite effect.

As ICAN noted in our 2025 SEC Action Plan, one of the most troubling aspects of SEC enforcement today is that investigations can drag on indefinitely—often without clear scope, updates, or timelines. This regulatory limbo can leave individuals and companies under a cloud of uncertainty for years, with significant financial and reputational costs.

Our proposed solution is straightforward:

• Limit pre-Wells investigations to 12 months.
  

• Require defined investigation scopes and regular updates to senior staff.
  

• Mandate notice for extensions beyond 180 days after a Wells Notice is issued.
  

These reforms would maintain the SEC’s ability to conduct robust investigations while bringing much-needed predictability and fairness to the process.

In a recent Fortune article, attorneys John Carney and Nikita Mistry described just how lopsided the Wells process can be:

“As SEC defense counsel, we can attest first-hand to the dread our clients experience when we inform them that we have received a ‘Wells Notice.’ The Wells Notice, which serves as the civil equivalent of a criminal target letter, informs recipients that the SEC is prepared to recommend that they be sued. They then learn that they have only two weeks to submit a written defense that may or may not even be read by the commissioners—and that their submission can later be used against them. Hardly a level playing field.”

Chair Atkins announced several welcome improvements, including:

• Extending the response time for Wells Submissions from two weeks to at least four weeks, and

• Requiring SEC staff to provide enough detail for recipients to understand the potential charges and the evidence behind them, and

• Focusing on bad acts and investor harm rather than technical violations.
  

ICAN President and Founder Nick Morgan was asked to share his insights in a recent ThinkAdvisor piece on the topic and noted:

“Atkins is also suggesting that the staff might be (will be?) more open to what’s informally known as a ‘reverse Wells,’ which is when the staff shows its cards and describes the best evidence and arguments supporting its recommended enforcement action,” said Morgan, a former SEC enforcement attorney. “In my experience, a ‘reverse Wells’ can often bring a potential defendant to the settlement table or avoid misunderstandings or overlooked evidence that might change the staff’s mind. Not all Enforcement staff have been willing to engage in this process in the past.”

These are meaningful steps. But as ICAN has long argued, true reform must go further. Even a rumor of a Wells Notice can cause a company’s stock price to drop sharply, harming innocent shareholders and creating lasting damage long before any formal action is taken.

While many are rightly focused on the Wells changes, Chair Atkins also raised another issue that deserves equal attention—how the SEC measures success inside its Enforcement Division.

As Atkins noted, “If we reward the staff only for bringing enforcement actions, then we have discouraged the staff from determining not to recommend an enforcement action.”

That’s a crucial insight. For years, the SEC has measured enforcement “success” by tallying how many cases its staff brings—what insiders call “stats.” Each case counts as one, regardless of complexity, significance, or the harm prevented. That means a team that delists 100 defunct shell companies can appear more productive on paper than one that spends months unwinding a major fraud.

This “stats-based” culture has been criticized as far back as a 2010 report of the SEC’s Office of Inspector General, which found that it encouraged quantity over quality and sometimes led to weak or unmeritorious actions being pursued just to boost tallies.

ICAN called out this very issue in our 2025 Action Plan, urging the SEC to reform its internal performance metrics so that enforcement staff are rewarded not just for filing cases, but also for closing investigations when appropriate and for focusing on matters that genuinely protect investors.

As ICAN President and Founder Nick Morgan explained:

“A system that only rewards staff for bringing cases guarantees overreach. Real accountability means rewarding staff for sound judgment—especially when they decide a case shouldn’t move forward. That’s how you restore balance and credibility to enforcement.”

With a 15% reduction in the Enforcement Division’s headcount, reforming internal metrics isn’t just about fairness—it’s about efficiency. If staff are measured by thoughtful outcomes rather than raw case volume, the SEC can direct its limited resources toward genuine violations that matter, rather than chasing marginal or technical cases that drain capacity and erode due process.

Chair Atkins deserves credit for acknowledging both the procedural and cultural challenges within the SEC. Improving the Wells process and reforming the incentive system that drives enforcement decisions are critical steps toward restoring balance.

At ICAN, we’re pleased to see the Commission begin to address these longstanding issues—and we’ll continue to advocate for reforms that strengthen fairness, transparency, and accountability across the agency.