Key Takeaways from the SEC's Revised Enforcement Manual

On February 24, 2026, the SEC's Enforcement Division released a substantially revised Manual, the first update in nearly a decade and only the second substantive revision since the Manual was first introduced in 2008. The new Manual significantly revises four critical Enforcement Division practices: the Wells process; corporate cooperation credit; consideration of collateral waivers; and criteria for criminal referrals. We consider each in turn.

The Wells Process: More Transparent and Predictable

The Wells process is critical to the SEC's enforcement function because it allows prospective defendants to tell the Commission why proposed enforcement action is unwarranted. Practices across the Enforcement Division, however, have varied over time on such issues as access to the investigative record, submission deadlines, and opportunities for post-submission meetings with senior staff. The updated Manual seeks to remedy these inconsistencies to provide a more transparent and uniform process.

Most significantly, it directs staff to alert prospective defendants of "salient, probative evidence" in the investigative record and to otherwise be "forthcoming about the content of the investigative file" and "make reasonable efforts" to provide access to relevant parts of the record that are not privileged or restricted from disclosure. This change alone should provide far greater transparency into the staff's proposed case, which will allow for more cogent and relevant Wells submissions.

The submission deadline has also been standardized to four weeks, absent timing constraints. Prospective defendants may request extensions of this deadline by providing the basis for the request in writing to the appropriate assistant director. The staff may deny extension requests "for good cause."

The SEC has also refined its policies for post-Wells submission meetings with the staff. These meetings have long been part of the Wells process, but practices around the Enforcement Division varied widely regarding the number of meetings allowed and the level of management involved. The updated Manual clarifies that prospective defendants in most cases can expect just one post-Wells submission meeting with "a member of senior leadership at the Associate Director level or above," to occur within four weeks of the Wells submission.

Additional refinements include requiring Enforcement Director approval to issue a Wells notice; highlighting the qualities of effective Wells submissions; and instructing the staff to reject Wells submissions that seek to limit the submission's admissibility or use in later proceedings.

Enhanced Corporate Cooperation Credit Framework

Other than occasional references in settled enforcement cases, the SEC has provided little guidance about corporate cooperation since articulating its framework in the Seaboard Report 25 years ago. The updated Manual changes this by providing guidance and specific examples of conduct the SEC considers to be "exemplary" or "effective" self-reporting, remediation, and cooperation:

• Self-reporting credit is available only when a company reports misconduct before the staff learns of it from other sources—and before there is an imminent threat of disclosure or government investigation. Credit will rarely be appropriate for conduct that has already received media attention.
•  Effective remediation includes, among other things, clawing back compensation, making prompt corrective disclosures, strengthening internal controls, and retaining independent compliance consultants.
• Exemplary cooperation can include, among other things, summarizing internal investigation findings, identifying key documents and witnesses, translating foreign-language documents, and providing financial analyses conducted by external experts.

Although the benefits of corporate cooperation continue to be less clear under the SEC's framework than DOJ's—with the SEC expressly retaining "broad discretion" to evaluate each case on its merits—these changes should provide corporations a clearer and more predictable path to qualifying for credit.

Enforcement Settlement Offers and Waiver Requests: No Longer Separate

The Manual memorializes the SEC's revised policy of simultaneously considering a party's offer to settle enforcement proceedings and its request to waive the statutory disqualifications and other collateral consequences of settling the enforcement case. The SEC Chairman first announced this policy change in September 2025, reversing the previous policy that treated these as separate questions that could not be conditioned on one another.

SEC staff will now present the settlement offer and waiver request to the Commission at the same time, together with recommendations from the relevant SEC divisions. The Commission can accept or reject either or both, but if it accepts the settlement offer but rejects the waiver request, the party generally has five business days to decide whether to proceed with settlement.

Formalized Criminal Referral Policy

As a civil regulatory agency, the SEC does not enforce criminal laws but instead refers matters to DOJ or other law enforcement agencies for criminal prosecution where warranted. Historically, these referrals were highly discretionary and handled at the Associate Director level or below. As a result, practices and considerations for making referrals varied across the Enforcement Division, and referrals were usually made without input from the Commission or senior Enforcement management.

In May 2025, the president issued an executive order directing federal agencies to issue formal guidance on their plans to address regulatory offenses that may be enforceable by criminal penalties. In response, the SEC published its Policy Statement Concerning Agency Referrals for Potential Criminal Enforcement, now memorialized in the Manual.

Under this policy, SEC staff must consider six factors when deciding to make a criminal referral: (i) harm or risk of harm; (ii) potential gain to the defendant; (iii) specialized knowledge or licensing; (iv) knowledge of harm or illegality; (v) recidivism or pattern of misconduct; and (vi) whether DOJ involvement provides additional investor protection.

Critically, the Enforcement Director must now be notified of all criminal referrals and, for standard, non-urgent matters, the staff should not make a criminal referral until authorized by the Enforcement Director.

A Commitment Not to Grow Stale

Recognizing that it had been nine years since the last substantive revision, the SEC will now review and update the Manual at least annually, ensuring that changes in law, practice, administration priorities, and technology are taken into account on a timely basis. This will also ensure that outdated and inefficient practices are revised or discontinued.