Securities Enforcement Update - August 2026

The SEC’s Revised Enforcement Manual, Four Months On: A Recalibrated Path Through SEC Investigations

On February 24, 2026, the Securities and Exchange Commission’s Division of Enforcement (the “Division”) issued the first comprehensive revision of its Enforcement Manual (the “Manual”) since 2017. See Press Release, SEC, SEC’s Division of Enforcement Announces Updates to Enforcement Manual, No. 2026-20 (Feb. 24, 2026). Although the Manual is internal staff guidance and confers no enforceable rights on those under investigation, it is the playbook the staff follows in opening and executing investigations, including issuing Wells notices, weighing cooperation, and recommending charges. It therefore offers a valuable window into how the staff will ordinarily operate and informs enforcement defense practice. The revisions, which promote earlier engagement, greater transparency, and a recalibrated settlement bargain—and which have been reinforced by subsequent Commission activity—warrant attention from public companies, financial institutions, boards, and individuals under investigation alike.

Most SEC enforcement matters follow the same arc. The staff opens an investigation, gathers documents and testimony, and—if it concludes the evidence supports charges—notifies the prospective defendant through a “Wells notice” identifying the specific charges and relief it intends to recommend. The recipient may then file a “Wells submission,” a written or video response arguing why the Commission should not proceed. The staff forwards its recommendation, with any accepted submission, to the Commission, which decides whether to authorize an action the parties may settle or litigate. The Wells process is the principal pre-charge opportunity for a party under investigation to be heard—and the stage most affected by the revisions. See 17 C.F.R. § 202.5(c); Securities Act Release No. 5310 (Sept. 27, 1972).

A More Structured, Front-Loaded Wells Process.

The revisions formalize and expand the respondent’s opportunity to be heard before charges are filed. The revised Manual establishes, “in the absence of timing constraints,” a four-week period for a Wells submission—an explicit default the prior Manual did not specify.  A post-Wells notice meeting—requests for which are now “typically granted”—must be scheduled no later than four weeks after the submission and must include a member of senior leadership at the Associate Director level or above. The Manual also makes explicit that the staff will reject any Wells submission that seeks to limit its admissibility under Federal Rule of Evidence 408 or the Commission’s use of it under Form 1662, or that includes a settlement offer, which must instead be made separately. See Manual § 2.3. For respondents, the net effect is a predictable timeline for their Wells submission and a more senior audience for pre-charge advocacy. 

Access to the Staff’s Evidence.

Among the most consequential changes is the Manual’s new posture toward the investigative file. The 2017 Manual left disclosure to staff discretion; the revised Manual directs the staff to “be forthcoming about the content of the investigative file” and, case by case, to “make reasonable efforts to allow the recipient” to review relevant, non-privileged portions—excluding material that implicates whistleblower or Bank Secrecy Act information or other confidentiality constraints. See Manual § 2.3. The staff should also affirmatively flag the “salient, probative evidence” it has gathered that the recipient may not know about. For respondents, this narrows a longstanding asymmetry: a party could previously be asked to rebut a contemplated charge without seeing key materials the staff had collected from third parties. Id. That access is not absolute, however. It is a case-by-case “reasonable efforts” standard, and among the factors the staff weighs is whether the recipient “was unresponsive to staff requests, failed to cooperate, or otherwise refused to provide information during the investigation.” Id. A party’s own cooperation can thus influence whether it sees the staff's evidence—tying the new transparency directly to the cooperation calculus. Id.

A Recalibrated Settlement Bargain.

The Manual reflects the Commission’s September 2025 restoration of the practice of simultaneously considering an offer of settlement and any related request for waivers from the automatic disqualifications and collateral consequences an enforcement resolution can trigger. Those consequences vary by client. For example: an issuer may lose well-known seasoned issuer status and the expedited registration it affords; an investment adviser or registered fund may be disqualified from serving in certain capacities under Section 9 of the Investment Company Act; and a private placement may forfeit the Regulation D or Regulation A exemptions on which its fundraising depends. Because these effects can dwarf the monetary terms of a settlement, the ability to weigh them before agreeing to settle is at the core of the reform. See Manual § 2.5.2.1. 

Under the policy in place since 2021, the Commission had weighed settlements and waiver requests separately and would not let a party condition its settlement on the waiver—leaving a respondent potentially settled while still awaiting, and at risk of losing, the collateral relief it needed. See Statement of Acting Chair Allison Herren Lee on Contingent Settlement Offers (Feb. 11, 2021). The restored practice, reviving an approach Chairman Clayton adopted in 2019, lets the Commission weigh both together; if it accepts the settlement but denies the waiver, the party ordinarily has five business days to withdraw. See Statement of Chairman Paul S. Atkins on Simultaneous Commission Consideration of Settlement Offers and Related Waiver Requests (Sept. 26, 2025). The settlement landscape has shifted further since. On May 18, 2026, the Commission rescinded Rule 202.5(e)—the “no-deny,” or “gag,” rule that since 1972 had barred settling parties from publicly denying the Commission’s allegations—and announced that it would not enforce no-deny provisions in existing settlements. See Press Release, SEC, SEC Rescinds Policy Regarding Denials of Settlements in Enforcement Actions, No. 2026-45 (May 18, 2026). Chairman Atkins framed the change in free-speech terms. Together, the two changes give settling parties more certainty and control: the waiver reform is a real bargaining improvement, since a party can decline to settle if it cannot secure the collateral relief it needs, while the end of the gag rule is more a matter of optics and post-settlement control—removing the cost of enforced silence and letting a settling party publicly contest the allegations.

Cooperation, Clarified—and the New Director’s Gloss.

The revised Manual consolidates the Division’s cooperation framework, which traces to the Seaboard Report for entities and the 2010 cooperation policy statement for individuals. See Report of Investigation, Exchange Act Release No. 44969 (Oct. 23, 2001); 17 C.F.R. § 202.12. A new section addressing the “Other Benefits of Cooperation” confirms that the Division may recommend reduced civil penalties—or none at all—for meaningful self-reporting, cooperation, and remediation, and a newly formalized Cooperation Committee is charged with keeping such decisions consistent. See Manual §§ 6.2.1, 6.2.5.  The framework is not all carrot. Self-reporting credit will “rarely” be available once the conduct has drawn media attention or another regulator’s scrutiny; mere compliance with subpoenas earns no credit; and the threshold for a non-prosecution agreement has risen from “limited and appropriate” to “exceptional” circumstances.  See Manual §§ 6.1.2, 6.2.4.

New Enforcement Director David Woodcock struck a similar note in his first public remarks, distinguishing honest mistakes from fraud: the Commission, he said, “recognizes the difference between error and fraud” and will calibrate its remedies accordingly, and a company that “self-reports, cooperates fully, and remediates will not be treated the same as one that conceals or obstructs.” See David Woodcock, Dir., Div. of Enf’t, Remarks at the MFA Legal & Compliance 2026 Conference (May 13, 2026). The implication for counsel at regulated companies is practical and time-sensitive: because both the value of cooperation and the very availability of self-reporting credit fall away once the conduct becomes public or draws another regulator’s attention, the premium is on rapid internal escalation and an early, deliberate decision whether to self-report.

A Direction That Has Held.

These changes are institutional and adopted at the Commission level, which is why the leadership turnover that followed has not altered their trajectory. Director Margaret Ryan, who led the drafting, resigned on March 16, 2026, after roughly six months. See Press Release, SEC, SEC Announces Enforcement Division Director Judge Margaret A. Ryan Has Resigned From Agency, No. 2026-27 (Mar. 16, 2026). David Woodcock, a former Director of the SEC’s Fort Worth Regional Office, succeeded her effective May 4, 2026. See Press Release, SEC, SEC Appoints David Woodcock as Director of the Division of Enforcement, No. 2026-35 (Apr. 8, 2026). The direction has nonetheless held. The Commission’s fiscal year 2025 enforcement results reset the measure of enforcement success toward fraud, investor protection, and individual accountability and away from high-volume, headline-driven actions. See Press Release, SEC, SEC Announces Enforcement Results for Fiscal Year 2025, No. 2026-34 (Apr. 7, 2026). Director Woodcock has embraced the same “back to basics” approach. See David Woodcock, Dir., Div. of Enf’t, Remarks at the MFA Legal & Compliance 2026 Conference (May 13, 2026).

The Division has dismissed inherited matters while directing its resources toward fraud-focused charges. In late March 2026 it voluntarily dismissed cases against five defendants in crypto wash-trading cases filed in 2024. See, SEC v. CLS Global FZC LLC et al., No. 1:24-cv-12590 (D. Mass); SEC v. Gotbit Consulting LLC et al., No. 1:24-cv-12589 (D. Mass); SEC v. Vy Pham, No. 1:24-cv-12588 (D. Mass); SEC v. ZM Quant Investment Ltd. et al., No. 1:24-cv-12587 (D. Mass). The SEC also dismissed with prejudice its long-running fraud action against FAT Brands, Inc. and its executives, citing “the evidence developed in discovery.” See Litigation Release No. 26510 (Mar. 27, 2026), SEC v. FAT Brands, Inc., No. 2:24-cv-03913-MCS-AGR (C.D. Cal.). At the same time, the Division has directed its fraud resources at conduct that harms investors—for example, charging the founder and former CEO of Drake’s Organic Spirits with an alleged offering fraud built on sham round-trip sales that raised roughly $2.4 million from investors. See SEC v. Anderson, No. 26-cv-02174 (D. Minn. filed Apr. 7, 2026).

Takeaways.

The throughline of these changes is earlier, more senior, and more transparent engagement before charges are filed. Entities and individuals who anticipate SEC scrutiny should approach the pre-charge phase deliberately—seeking access to the investigative file (where a record of cooperation can help), using the fuller four-week window and the senior-leadership meeting to full advantage, and pursuing settlement and waivers in tandem. The revisions are real improvements, but they come with limits: the Manual is not binding, cooperation credit remains discretionary and unquantified, and the non-prosecution bar is higher. Navigated with those caveats in mind, the new framework offers respondents a genuine opportunity to engage the staff constructively—and to influence outcomes earlier than the prior framework prescribed.

 

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Immanuel Foster, Associate
immanuelfoster@quinnemanuel.com
+1 617-712-7142