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Navigating a Wells Notice: Crucial Steps for Compliance and Response

What is a Wells Notice?

A Wells Notice is a notification issued by regulators to inform individuals or companies of completed investigations where infractions have been discovered. It usually takes the form of a letter, which notifies recipients of the broad nature of the violations uncovered and the nature of the enforcement proceedings to be initiated against them.[1]

Most recently, Crypto.com received a Wells Notice from the Securities and Exchange Committee (“SEC”) in October 2024, as did RobinHood in May 2024, among others in the past several years.[2]

What Does This Mean for You and Your Business?

If you receive an SEC Wells Notice, it is a serious matter, and companies should look to take several important steps to address the Wells Notice successfully:

1. Seek guidance from legal counsel
2. Understand what the SEC is alleging within the Wells Notice
3. Compile a response to the SEC in the form of a Wells Submission, including aggregating any necessary support
4. If a public company, consider any relevant disclosure requirements

How Centri Can Help

At Centri, our Digital Assets and SEC Compliance experts understand the complexities and challenges of responding to a Wells Notice and helping to reduce the chances of future SEC scrutiny. We work as an extension of management to save you time and effort in several ways, including:

• Working with management to develop policies and procedures around the classification of the assets in which the company transacts
• Preparing technical accounting memorandums documenting the classification of any internally developed token assets
• Assisting with the preparation of financial statements and underlying support, including supporting management through the audit process, as applicable
• Maintaining open and proactive communication with the SEC

We work with your company to help respond effectively to getting a Wells Notice, including remaining in good standing with the SEC. Contact us to learn more.

[1]U.S. Securities and Exchange Commission. “Enforcement Manual,” Pages 19-21. Accessed Mar 23, 2021.

[2]https://www.ccn.com/news/crypto/crypto-wells-notice-recipients-2024-full-list-of-entities-in-sec-crosshairs/

Mike Andrusko

Partner | Fintech and Digital Assets Practice Leader | CPA

Michael is a Partner at Centri Business Consulting and the leader of the firm’s Fintech and Digital Asset Practices. He has more than 13 years of experience in the accounting treatment of various transactions, including complex debt and equity analysis, business combinations and acquisition accounting process integration. View Mike Andrusko's Full Bio