SEC Division of Enforcement Announces Significant Updates to Enforcement Manual

On February 24, the Securities and Exchange Commission’s (SEC) Division of Enforcement announced significant updates to its Enforcement Manual (Manual).[1] The updated Manual includes changes to the Division’s investigative procedures and practices, including significant changes to the Wells process and additional information regarding cooperation credit.[2]

SEC Chairman Paul Atkins has been a proponent for greater due process for respondents in enforcement actions for many years and was the primary author of a seminal law review article on the history of the SEC’s enforcement program.[3] The updates to the Manual are the first since 2017 and reflect Chairman Atkins’ recent emphasis on transparency and fairness in enforcement proceedings.[4]

Many of the changes have the potential to benefit entities and individuals involved in SEC enforcement investigations in certain circumstances. Among other changes, the updates (1) enhance transparency in the Wells process; (2) provide guidance regarding cooperation in SEC investigations, (3) address procedures for simultaneous settlement and waiver of disqualification, and (4) address amended regulations eliminating delegated authority to issue formal orders without Commission involvement.

1. The Manual Enhances Transparency in the Wells Process and Provides Guidance on Wells Submissions

   Many of the significant changes to the Manual involve the Wells process and address the staff’s desire for transparency, consistency, and focus on disputed legal and factual issues.

   Enhanced Transparency. The Manual instructs the staff to “be forthcoming about the content of the investigative file.” The Manual directs the staff to make “reasonable efforts” to allow recipients of Wells notices to review relevant portions of the investigative file, including information that the staff believes may not be known to the Wells notice recipient. (Manual Section 2.3). This instruction differs from the prior manual that merely gave the staff “discretion” to allow Wells notice recipients to review investigative files.

   Guidance on Wells Submission Content. The Manual instructs that “Wells submissions are most helpful when they focus on disputed factual or legal issues, or raise significant legal risks or policy or programmatic concerns.” (Manual Section 2.3). The Manual then lists elements of effective Wells submissions, including:

   • • Accurately reflecting the evidence, legal issues, and precedent.
     • Focusing on disputed factual or legal issues.
     • Acknowledging and addressing evidence and precedent that support the staff’s position while highlighting exculpatory evidence and contrary precedent.
     • Addressing the legal elements required to establish violations and explaining why the evidence would not satisfy those elements.
     • Addressing litigation risks or programmatic concerns that would result from the charges sought in the Wells notice.
     • Providing documents or citations to investigative record or relevant legal precedent.
     • Discussing the factors of the Seaboard Report[5] to the extent they are relevant.
     • Including an expert report if the proposed charges are particularly complex or technical.

   Other Notable Changes to the Wells Process. The updated Manual contains additional changes that enhance the transparency and uniformity of the Wells process. (Manual Section 2.3). These changes include:

   • • The staff must obtain approval from the Office of the Director before issuing a Wells notice.
     • Wells notices must include the types of relief the staff has determined to recommend to the Commission.
     • The staff must allow four weeks for a recipient to provide a Wells submission.
     • Any post-Wells notice meeting with the staff should be “scheduled to occur within a reasonable time after the recipient makes a Wells submission” but no later than four weeks after the Wells submission. The meeting will include senior leadership at the Associate Director level or above.

2. The Manual Provides Guidance on Effective Cooperation and Instructs the Staff To  Publicize Cooperative and Remedial Conduct

   The Manual contains significant updates for entities and individuals that seek leniency in exchange for cooperating with SEC investigations. The updates clarify the requirements for obtaining cooperation credit and promote uniformity in determining when to award cooperation credit.

   Evaluating Cooperation. The Manual continues to cite the 2001 Seaboard Report in which the Commission set out an analytical framework for evaluating cooperation by companies. The framework contains four key elements: self-policing, self-reporting, remediation, and cooperation. The Manual contains substantive updates touching on three elements: self-reporting, self-policing, and cooperation. (Manual Section 6.1.2).

   • • Self-reporting. The Manual states that self-reporting credit is appropriate when a company reports misconduct “before the staff learns of misconduct from other sources” or before “an imminent threat of disclosure or government investigation.”
     • Remediation. The Manual adds examples of effective remediation, including:
   • • • Taking appropriate action with respect to employees involved in the 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.
       • Retaining independent compliance consultants to advise on other remedial measures
     • Cooperation. When evaluating cooperation, the Manual instructs the staff to consider ways in which the company assisted the staff’s investigation beyond what is required by law. According to the Manual, companies seeking cooperation credit typically must do more than merely comply with subpoenas for documents or testimony. The Manual lists the following examples of 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.
       • Any other measures that meaningfully advance the Commission’s investigation.

   As for individuals seeking cooperation credit, the Manual continues to cite the SEC’s 2010 policy statement on individual cooperation[6] and carries forward the focus on individual accountability and acceptance of responsibility. (Manual Section 6.1.1). The Manual also continues to emphasize that the staff should consider the timeliness of cooperation because early cooperation “will often more meaningfully advance an investigation than the same assistance later in the investigation.” (Manual Section 6.1.2).

   Notably, cooperation credit is not premised on waiver of the attorney-client privilege or the attorney work product protection, and the Manual states that a “decision to asset a legitimate claim of privilege will not negatively affect that party’s claim to credit for cooperation.” (Manual Section 4.3).

   Publicizing Cooperation. The Manual instructs the staff to publicize the specific cooperative and remedial steps individuals and companies have taken to receive cooperation credit. This publicity can advance the goals of the SEC’s cooperation program by “providing examples for other parties considering whether or how best to cooperate in investigations.” (Manual Section 6.3).

   Penalties. The Manual specifically empowers the Enforcement Division to recommend that the Commission forgo seeking civil penalties, or seek reduced civil penalties, against an entity in view of the entities’ cooperation. (Manual Section 2.5.1). For the first time, the Manual refers to the Commission’s 2006 penalty statement for information regarding the analytical framework that the Commission uses to evaluate cooperation by companies, including whether to impose a penalty at all. (Manual Section 6.1.2).[7]

   Cooperation Committee. The Manual states that a Cooperation Committee will oversee the Division’s cooperation program to ensure that “decisions regarding cooperation are made in an appropriate and consistent manner.” (Manual Section 6.2.1). The Manual instructs the staff to seek Cooperation Committee approval for all cooperation agreements, deferred prosecution agreements, non-prosecution agreements, and immunity requests.

3. The Commission’s Policy for Simultaneous Consideration of Settlement Recommendations and Waiver Requests Allows Respondents To Consider the Full Scope of Sanctions Before Settling

   The Manual incorporates the Commission’s 2025 announcement regarding simultaneous settlement recommendations and waiver requests.[8] (Manual Section 2.5.2.1). A settling entity now can request that the Commission simultaneously consider an offer of settlement and a request for waiver from disqualifications. If the Commission accepts the settlement offer but rejects the waiver request, the Division will notify the potential defendant or respondent about the rejection so that the potential defendant or respondent can decide whether to move forward with the settlement.

   Notably, however, the updated Manual does not require the staff to make a settlement offer before recommending an enforcement action to the Commission. Commentators have suggested that settlement offers should be part of the staff’s standard process.

4. The Updated Manual Incorporates the Rescission of Delegated Authority for Formal Orders

   The Manual incorporates the Commission’s March 2025 amendment to its regulations that eliminated the delegation of authority to the Director of Enforcement to issue formal orders of investigation. The Manual now states that a request for a formal order of investigation must be presented to the Commission. (Manual Section 2.2.3). To request a formal order, the staff are directed to prepare a memo for approval by the Division’s Office of the Director, which, once approved, should be submitted to the Commission for final determination. (Manual Section 2.2.3.1).

5. The Updated Manual Includes New Instructions for Preserving and Producing Information Responsive to Subpoenas

   The Manual contains several revisions to the instructions for entities and individuals responding to SEC subpoenas. Among other things, the Manual document preservation letters “should explicitly request the preservation of all relevant communications sent or received on any and all messaging platforms and messaging applications, including those communications sent or received on personal devices, such as smartphones or tablets.” (Manual Section 3.2.2). The Manual also revises the definition of the term “documents” in the context of producing information responsive to an SEC subpoena. The new definition encompasses “all electronic communications” and specifically mentions platforms such as WhatsApp, iMessage, Signal, Teams, Slack, Discord, Telegram and “messages sent or received on personal devices such as smartphones or tablets.” (Manual Section 3.2.7.3). In connection with the Commission’s consideration of a settlement, the Manual continues to urge the staff to obtain a certificate confirming the entity or individual under investigation has produced all responsive documents. (Manual Section 3.2.9.6).

6. The Updated Manual Incorporates the Commission’s Framework on Agency Referrals to the Department of Justice

   The Manual incorporates the Commission’s June 2025 policy statement on agency referrals to the Department of Justice (DOJ) for potential criminal enforcement.[9] (Manual Section 5.6.1). When considering whether to refer potential violations to criminal law enforcement authorities, the staff should consider:

   • • 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.
     • Whether the involvement of the DOJ or the criminal authority to which staff is considering making a referral will provide additional meaningful protection to investors.

7. The Updated Manual Warns Against Demands for Retroactive Tolling Agreements

   The Manual instructs the staff to obtain tolling agreements before the expiration of the applicable statute of limitations. Tolling agreements with retroactive effect are now “disfavored.” (Manual Section 3.1.2). The SEC’s practice of seeking retroactive tolling agreements has been the subject of recent litigation and commentary questioning the fairness of the staff’s attempts to revive time-barred claims through the use of such agreements.[10]

Looking Ahead

Chairman Atkins stated in October 2025 that the enforcement process should not be a “gotcha” game. The staff’s objective instead should be “to get to the truth” and adhere to principles of due process, fairness, and transparency.[11]

On balance, the revisions to the Manual align with those objectives. Whether the Manual successfully achieves Chairman Atkins’ objectives will depend on how the Manual is applied in practice. Still, individuals and entities subject to SEC enforcement investigations should welcome the enhanced protections in the updated Manual.