Wells Notice is a type of notice that the SEC sends to those it suspects have violated security laws. Since the 1970s, the SEC has used it to ask for clarifications about a perceived violation of security laws in the US.
If a company(or person) has been served a Wells Notice, it generally means that the SEC has enough evidence to prosecute but is giving the company (or person) one chance to explain themselves.
The notice is served by the SEC in accordance with the powers of the Securities Act 1933 and the Securities Exchange Act 1934.
Why Is It Called a “Wells Notice”?
John Allison Wells was the first to recommend in 1972 that the companies (or persons) in any SEC case should have the chance to present their side before formal charges were filed. Since then, the notice has been known as Wells Notice.
Meaning
Typically, I have seen the SEC serve this notice when it has found conclusive “reason” that a certain company or an institution has violated the Securities Act 1934. Once the Wells Notice is served, it typically means that the SEC will bring a lawsuit against that company. This has happened in cases against Ripple and Coinbase.
