Recent News: Accounting Probe / Wells Notice

Wells notice (Cornell University Law School)
A "Wells Notice" is a letter sent by a securities regulator to a prospective respondent, notifying him of the substance of charges that the regulator intends to bring against the respondent, and affording the respondent with the opportunity to submit a written statement to the ultimate decision maker.

There is no legal requirement for a regulator to provide a Wells Notice, however it is the practice of the SEC and the NASD to provide such notice. Procedurally, the SEC and NASD Staff (the people you are dealing with during the investigation) do not have the authority to commence proceedings. They need to obtain approval to commence proceedings. The approval process is handled without any input from the prospective defendant.

While there is no rule or regulation that requires that a prospective defendant be given the opportunity to address the decision maker prior to the filing of an action, in 1972, SEC Chairman William J. Casey appointed a committee (chaired by John Wells and commonly referred to as the “Wells Committee”) to review and evaluate the Commission's enforcement policies and practices.

GE may face civil action on securities violations
General Electric Co. said Friday it has been informed that the Securities and Exchange Commission may recommend fines and other action for possible violations of securities law related to accounting changes the company made. GE said in a regulatory filing that the notification, called a "Wells notice," is related to issues dating to several years ago concerning GE's accounting for certain derivatives used for hedging interest rate risk and other transactions....

GE gets "Wells notice" in SEC accounting probe
General Electric Co said on Friday it had been notified by U.S. regulators that a civil complaint could be filed against the company following a more than three-year-long probe into its use of hedge accounting for derivatives and other accounting matters....

SEC Weighs GE Civil Charges
General Electric Co. said it received a Wells notice that staffers at the Securities and Exchange Commission are considering recommending the SEC file civil charges in a long-running probe of GE's accounting....

GE says SEC probing possible securities violations
General Electric Co. says the Securities and Exchange Commission staff has notified the company it may recommend fines and other action for possible violations of securities laws.
GE said Friday that the notification concerns issues from several years ago over its accounting for derivatives formerly used to hedge the risk of interest-rate changes related to commercial paper and derivatives in which a fee was a part of the consideration for the derivative....

GE Says SEC May File Civil Case in Accounting Probe (Update2)
General Electric Co. said the U.S. Securities and Exchange Commission plans to recommend a civil complaint against the company in a three-year-old probe that includes the way it recognizes revenue and presents cash flow. The SEC staff issued a so-called Wells notice yesterday, GE said in a regulatory filing after the close of U.S. markets today. Wells notices typically give the recipient an opportunity to dissuade the SEC from proceeding. GE, the world's third- biggest company by market value, is in preliminary settlement discussions with the agency, spokesman Russell Wilkerson said....