The U.S. Securities and Exchange Commission's recent updates provide clearer, more prescriptive protections for companies and individuals facing an investigation by the Division of Enforcement.

On February 24, 2026, the U.S. Securities and Exchange Commission's Division of Enforcement published what it labelled "significant" updates to its Enforcement Manual (the "Manual"). The changes are the first revisions to the manual since November 2017. Though not binding on the Commission, the Manual serves as an important guide to Division staff (the "Staff") in the exercise of its responsibilities, delegated by the Commission, to conduct investigations into potential violations of the federal securities laws. Many of last week's updates enhance the baseline of process afforded to investigated parties before the Commission votes to charge them with a violation. We applaud these changes. Other updates make more explicit the Division's expectations of investigated parties, including those seeking cooperation credit in any negotiated settlement.

The Wells Process

Some of the most welcome enhancements are to the so-called "Wells process," which Chair Atkins once dubbed "the SEC's central due process mechanism in enforcement matters." At the end of the Staff's investigation, the Wells process affords respondents with notice and an opportunity to respond to the Staff's intention to recommend that the Commission approve an enforcement action against them. The updated Manual enacts several changes to the Wells process.

First, whereas the prior Manual afforded the Staff the discretion to allow Wells recipients to review non-privileged portions of the Staff's investigative file, the updated Manual now provides that the Staff "should inform the recipient . . . of the salient, probative evidence" that "may not be known to the recipient"; "should be forthcoming about the content of the investigative file"; and "should make reasonable efforts" to allow recipients to review relevant portions of the file, subject to privilege or confidentiality restrictions such as whistleblower protection (emphases added).

Second, the updated Manual provides a fixed, uniform deadline that, absent timing constraints, Wells notice recipients be given four weeks to submit a response. This protection affords respondents adequate time to prepare a submission without a "gotcha" deadline. The updated Manual also outlines the factors that make a submission most effective, including focus on "disputed factual or legal issues" or "significant legal risks or policy or programmatic concerns."

Third, the updated Manual provides that the Staff will "typically grant[]" requests for a meeting to discuss their planned charging recommendation, that such a meeting must happen within four weeks of the Staff's receipt of the Wells submission, and that attendees "will include a member of senior leadership at the Associate Director level or above."

Where a settlement is possible, these measures facilitate a "meeting of the minds" on the terms of a deal, by reassuring respondents that their arguments are being taken seriously by senior staff within the Division.

Cooperation Credit & Zero-Penalty Settlements

The recent updates offer data points that could help to foster some standardization in the Division's evaluation of a respondents' efforts to cooperate with the Staff's investigation, and the credit afforded to that respondent in recognition of such cooperation. As many respondents can attest, cooperation can be in the eye of the beholder, and its benefits can be challenging to quantify.

The revised Manual provides examples of "effective" remediation and "exemplary" cooperation that parties can use to increase their chances of earning credit. The Manual now clarifies that self-reporting credit is appropriate for reports that come before the Staff learns of misconduct and before the imminent threat of disclosure or investigation.

Additionally, the updated Manual includes a new subsection describing the Division's "Cooperation Committee," which "ensures that decisions regarding cooperation are made in an appropriate and consistent manner and recommends improvements to the cooperation program when needed." The Staff are instructed to seek approval from the Cooperation Committee for cooperation agreements, deferred prosecution agreements, non-prosecution agreements, and immunity requests.

Notably, the updated Manual formalizes that cooperation can lead to a "zero-penalty settlement." This change reflects a formal commitment to zero‑penalty settlements as a means of recognizing meaningful cooperation—an approach that the Biden Administration had also, at times, approved.

Simultaneous Consideration of Enforcement Settlement Recommendations and Waiver Requests

The 2026 updates incorporate a recently announced policy change restoring the SEC’s prior practice (from during the first Trump administration) of allowing the simultaneous consideration of settlement offers and requests for waivers of collateral consequences of such a resolution. During the Biden administration, that policy was rescinded. Respondents negotiated settlements with the Division of Enforcement and then addressed requests for waivers of collateral consequences to separate staff in the Division of Corporate Finance, for review by the Commission at a later date. This bifurcation could disincentivize settlement by creating uncertainty as to whether the Commission would later waive automatic disqualifications and other collateral consequences. The 2026 Manual commits the Division to presenting both settlement and waiver requests to the Commission simultaneously, upon request of the respondent. If the Commission only accepts settlement, the investigated party will have time—typically five business days—to decide whether to take that settlement.

Document Preservation and Production

The 2026 updates include a section directing the Staff to "consider" issuing a letter early in the investigation informing the recipient of its obligation to preserve relevant evidence, unless doing so would alert the recipient to a covert investigation into its ongoing activities. The Manual directs that the preservation letter should "explicitly request" the preservation of relevant communications over "any and all messaging platforms and messaging applications," including those found on "personal devices, such as smartphones or tablets." This specification reflects a modernized approach to document retention in line with how the Staff has been conducting its investigations, but it adds to the body of information putting market participants on notice of the Division's expectation that such materials be produced.

Other Modifications

Many other modifications promote transparency and the investigated party's participation in the investigative process. These include requiring that Action Memos, which formally request action by the Commission, be "objective," including by raising arguments that investigated parties presented in accepted Wells submissions or White Papers. The revised Manual also now "encourage[s]" the Staff to send termination letters to parties that make "significant productions in an investigation."

Conclusion

In some ways, these updates are not a surprise. Almost two decades ago, Commission Chair Paul S. Atkins (then a Commissioner) publicly encouraged the Enforcement Division to adopt some of these changes to their manual¹. But to borrow the Division's own description, these changes could carry "significant" impact for parties facing investigation. Certain changes cabin the Staff's discretion by reducing reliance on unwritten norms or broad, open ended guidance, which in our experience has led to uneven practices across the components of the Enforcement Division. Look for future enforcement actions to take subtle steps that telegraph the Division's adherence to this updated Manual.