SEC Updates Its Enforcement Manual: A New Era Of Transparency, Fairness And Due Process?

Key takeaways

• The Wells process now allows four weeks for submissions and provides recipients with more evidence from the SEC staff.
• The SEC restored simultaneous consideration of settlement offers and waiver requests, improving clarity for parties to SEC actions.
• Canadian companies should understand the Manual’s principles, as it extends to those that access the American capital market.

On February 24, 2026, the U.S. Securities and Exchange Commission’s (SEC) Division of Enforcement (Division) updated its Enforcement Manual (Manual) for the first time in eight years. These updates were driven by the SEC’s commitment to transparency, fairness and due process in the investigations conducted by the Division.

The Manual does not have the force of law, nor is it binding on the SEC. However, it is a key reference guide containing various general policies and procedures and is intended to provide guidance to the staff of the Division in the exercise of its responsibilities to the SEC for conducting enforcement activities.

Although the Manual provides general guidance, it still allows for flexibility and discretion regarding decisions about individual investigations, cases and charges made based on the specific facts and circumstances presented.

Highlights of the new updates

Standardized Wells process

The Wells process is a procedure by which SEC enforcement staff may exercise their discretion to notify individuals or entities under investigation of the general nature of the investigation. This notification may include the indicated violations and the amount of time that may be available for preparing and submitting a statement prior to the presentation of a staff recommendation to the SEC for the commencement of an administrative or injunction proceeding. A Wells submission is a written statement to the SEC from those who become involved in investigations, setting forth their interests and position in regard to the subject matter of the investigation.

Subject to confidentiality or other constraints, there is now guidance to inform the recipients of Wells notices of the salient, probative evidence that the staff has gathered or received, which the staff may have or should have reason to believe may not be known to the recipient.

The updates also now allow a four-week period for the recipient of a Wells notice to provide a Wells submission. Prior to these updates, recipients typically had two weeks to prepare these submissions. Wells submissions can be crucial as they have the potential to change outcomes on an enforcement recommendation.

Among other changes, greater access to evidence and increased timelines for submissions emphasize the SEC’s commitment to transparency, fairness and due process.

Restoration of simultaneous settlement offers and waiver requests consideration

The updated Manual notes that in September 2025, the SEC restored its previous practice of allowing a settling entity to request that the SEC simultaneously consider (1) an offer of settlement and (2) any related request for SEC waivers from automatic disqualifications and other collateral consequences that result from the underlying enforcement action.

This update further reinforces the SEC’s commitment to transparency by giving potential parties to an SEC action a clearer understanding of the effects of a settlement.

Increased cooperation considerations

The updates provide a detailed and expanded framework for how the SEC may exercise their discretion in evaluating cooperation by companies and individuals, potentially leading to reduced or no penalties.

By providing greater insight into the evaluation criteria being used, this update also illustrates the SEC’s commitment to transparency in its decision-making process.

What does it mean for Canada?

While the SEC’s Enforcement Manual guides U.S. securities regulations, its implications can extend to Canadian companies and market participants that access the American capital market. The new updates provide these companies with clearer expectations and insight into the enforcement and decision-making process.

It is crucial for Canadian companies and individuals under SEC investigations to be familiar with the principles and priority directions reflected in the Manual. In particular, the SEC’s approach to clarifying the Wells process and providing recipients with greater access to all evidence gathered in the course of an investigation, prior to responding to a Wells notice, is a welcome contribution to greater transparency and fairness in the process. In contrast, the “Enforcement Notice” process in Ontario tends to be more pro forma than substantive, given that parties who face threats of proceedings are forced either to respond to little, if any, evidence obtained by staff or to stay silent.

It remains to be seen whether the SEC’s new vision could also influence Canadian enforcement strategies and processes over time.

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