In a keynote address May 9 at the New York City Bar Association’s 7th Annual White Collar Crime Institute, SEC Co-Director of the Division of Enforcement Steven Peikin discussed in broad detail what best-practice techniques make for productive and effective communication with SEC staff during Wells meetings. Prudent defense counsel will want to heed the advice.
During an SEC investigation, the purpose of the Wells process is to ensure that the Commission not only is informed of the findings made by its staff but also, where practicable and appropriate, it has before it the position of persons under investigation.
“A Wells notice is an invitation for defense counsel to respond to the Enforcement staff’s preliminary conclusions and try to persuade us we are mistaken,” Peikin said. “We are focused on getting it right, not bringing cases for the sake of bringing cases, so if we are on the wrong track, we want to know that before we proceed further.”
He went on to describe, based on his own observations, what makes for effective Wells meetings. Those key observations are summarized below:
Focus on what’s important. “Wells meetings tend to be the most productive when defense counsel focuses on the most important arguments and issues in the case, as opposed to taking a blunderbuss approach that attempts to address every possible argument, fact, element, and issue,” Peikin said. In certain circumstances, “contesting facts and issues that are not subject to reasonable dispute adversely impacts credibility,” he said.
“In my experience, the most effective advocates pick their battles and focus on the central issues and arguments,” Peikin added. “This may mean foregoing discussion of every argument made in a written Wells submission.”
Peikin further advised defense counsel to adapt accordingly. If the SEC is not receptive to a particular argument, “move on,” he said. If the SEC suggests that counsel address a particular issue, “pivot to address it. Simply marching though prepared talking points is seldom the best approach.”
Educate staff on what you believe are key facts and explaining why, in your view, those facts don’t support an enforcement action, or a particular charge or form of relief. “In my experience, the parties are unlikely to make much progress during a Wells meeting if staff are surprised with new facts at the beginning of the discussion, especially if defense counsel takes the position that those facts are central to the case,” Peikin said.
Likewise, he said, it is not productive to submit lengthy supplemental submissions on the eve of a long-scheduled Wells meeting. “Those who do this must perceive a strategic advantage in dropping in a new submission at the eleventh hour, providing staff with little time to digest it, but I think otherwise,” Peikin said. “To be in a position to make progress at the meeting, we must know about—and have an opportunity to consider and test—information and arguments in advance.
Don’t allude to an advice-of-counsel defense without disclosing the key underlying facts, including the privileged communications themselves. “Sometimes, defense counsel will claim at a Wells meeting that privileged information they are unwilling or unable to share is central to the case,” Peikin said. “In my experience, alluding to privileged information in Wells meeting—but not sharing it with the staff—is not effective.”
“To be clear, I am not encouraging anyone to waive privilege in these circumstances,” he said. “I simply note that we cannot ground our decision making on documents we cannot see or testimony we cannot hear.”
Grounds arguments in case law and prior Commission actions. When asking staff to make a recommendation to the Commission, “it can be very helpful to show us how and why that recommendation compares with what happened in prior cases,” Peikin said. “This is particularly true when you are asking the staff to recommend that the Commission bring certain charges and not others, or only seek or impose certain types of relief. In these circumstances, pointing to what has been done before can be helpful.”
“Likewise, if an analogous case has been litigated and resulted in a decision that is at odds with what the Staff has proposed, point us to those precedents as well,” he added. “Showing us that we are proposing something that is inconsistent with what we would likely obtain if we were to prevail in litigation can be powerful as well.”
Use visual aids at a Wells meeting judiciously, or not at all. “We spend a great deal of time preparing for Wells meetings, and we are typically well-versed in the key facts and issues. For that reason, it is often not necessary for defense counsel to march through handouts or PowerPoint slides that cover background or elementary issues, facts, and legal standards, or which summarize the Wells submission.” Presentations that focus on key evidence and central issues have greater impact, he said.
Don’t make threats. The SEC staff regularly solicit the views of experienced and talented trial attorneys during the investigative process. “Defense counsel can safely assume that if a case has gotten to the Wells stage, we are serious about the case and we have come to the preliminary conclusion that we can prevail if the case is litigated. Simply telling us that the client will litigate achieves nothing.”
Concerning cooperation credit, “carefully and specifically explain at a Wells meeting how each action your client took aided the staff’s investigation in a material way.” How did you help the staff to tailor its investigation, discover new witnesses, or uncover material facts they otherwise would not have known about? In short, explain to the staff—with specificity—how each action your client took materially aided our investigation. Doing so will assist us in explaining to the Commission why your client should receive credit for its cooperation.
Approached in the right way, a Wells meeting can yield significant benefits for defense counsel and their clients. “In some instances, defense counsel will persuade us that we have gotten something wrong, leading us to abandon a charge, recommend different relief, or decline to pursue a matter entirely,” Peikin said. “Even where that isn’t the case, effective communication often helps defense counsel to better understand our thinking, which in turn allows them to provide better advice to their clients.”