Criminal Defense Lawyers

Wells Notice vs. Target Letter: Understanding the Difference

You received something official. It might be from the SEC. It might be from the Department of Justice. You are trying to figure out which is worse and what you should do about it. The standard advice compares the two documents and explains that a Wells Notice is civil while a target letter is criminal. That advice is technically accurate. It is also missing the thing that actually matters.

Welcome to Spodek Law Group. Our goal is to explain what practitioners actually understand about these two documents, because the comparison question is the wrong question. The real question is whether you are facing both at the same time without knowing it. Parallel SEC and DOJ investigations are common. You might receive a Wells Notice from the SEC while a criminal investigation you dont know about is already building a case against you.

Here is the uncomfortable truth that nobody explains. The SEC is legally instructed to make no representation if you ask whether DOJ is involved. Those are the actual words from the SEC Enforcement Manual. If asked whether a DOJ investigation is occurring in parallel, SEC staff should make no representation. You can ask directly. They wont tell you. They are instructed not to tell you. You might be sitting in a civil enforcement meeting while prosecutors are quietly building criminal charges you wont learn about until the indictment.

The Surface Distinction: What Each Notice Officially Means

Heres what the two documents officially represent at the surface level. A Wells Notice comes from the SEC. It means the enforcement staff has completed their investigation and is prepared to recommend that the Commission file civil charges against you. The notice gives you an opportunity to respond before that recommendation is finalized. Its named after John Wells, who chaired the committee that created this procedure in 1972.

A target letter comes from a federal prosecutors office. It means a grand jury is investigating you and you are a target of that investigation. Target means the prosecutor has substantial evidence linking you to a crime and believes charges are likely. Unlike a Wells Notice, a target letter is not legally required. Prosecutors send them as a courtesy, not an obligation.

The surface distinction is simple. SEC Wells Notice means potential civil penalties, disgorgement of profits, and industry bars. DOJ target letter means potential criminal charges, conviction, and imprisonment. Most people stop there and conclude that target letters are worse becuase prison is worse then money.

That analysis misses almost everything that actualy matters.

The Parallel Investigation Reality: Why Both Can Exist Simultaneously

Heres the part that changes everything. One practitioner firm described it directly. Parallel proceedings where civil and criminal investigations run simultaneously are entirely appropriate under the law. This is not a rare occurrence. This is how the enforcement system actualy works.

Think about what happens when the SEC opens a securities fraud investigation. They issue subpoenas. They take testimony. They gather documents. And attached to every SEC subpoena is something called Form 1662. This form lists the routine uses of the information you provide. One of those routine uses is sharing with DOJ for criminal prosecution.

The SEC tells you in writing that they may share everything with criminal prosecutors. Most people dont read the fine print.

And heres what makes this genuinely dangerous. If you recieve a Wells Notice, theres a good chance criminal prosecutors are also looking into the matter. The SEC dosent have to tell you. Under the Enforcement Manual, if asked whether a DOJ investigation is occurring in parallel, SEC staff should make no representation. They are literally instructed to neither confirm nor deny.

The DOJ dosent launch criminal investigations becuase they might find something. They launch becuase they already know something is there. By the time you see signs of a parallel investigation, the criminal case has been building for months, maybe years.

The Disclosure Asymmetry: Why One Is Public and One Stays Secret

Heres the trap that catches almost everyone. The Wells Notice triggers immediate public disclosure. The target letter stays secret.

If you are a registered broker dealer or investment advisor, you have Form U4 disclosure requirements. Under FINRA Rule 09-17, an associated person who recieves a written Wells Notice is required to report that event on Form U4. This disclosure becomes visible on BrokerCheck. Anyone can see it. Clients, employers, competitors, journalists. Your name goes on a public database the moment the Wells Notice arrives.

But heres the asymmetry. The target letter stays completely secret. Prosecutors dont announce criminal investigations. Grand jury proceedings are confidential. The target letter is a private communication that creates no public record until charges are actualy filed.

Think about what this means practically. You might be explaining a public SEC Wells Notice to clients and employers while prosecutors quietly build the criminal case nobody knows about. Your reputation takes the civil hit immediately. The criminal exposure stays hidden.

Form U4 specificaly lists both Wells Notice AND grand jury investigation as reportable events. But only one actualy becomes public before charges are filed.

And heres the irony. You might spend enormous resources responding to the Wells Notice, trying to convince the SEC not to proceed with civil charges. Meanwhile, the criminal case you dont know about is the one that actualy threatens your liberty. Youve focused on the wrong problem.

The Fifth Amendment Trap: How Civil Cooperation Destroys Criminal Defense

Heres the consequence cascade that destroys people who dont understand paralel investigations. You cooperate with the SEC. You answer questions. You provide testimony. You think this will help resolve the civil matter. And then you learn the DOJ has been watching the entire time.

The Fifth Amendment protects you from compelled self-incrimination in criminal proceedings. But the SEC is a civil agency. When you provide testimony to the SEC, you are not technicaly being compelled to incriminate yourself in a criminal case. The problem is that your testimony is recorded. And that recording can be shared with DOJ.

One practitioner described it bluntly. SEC testimony could waive Fifth Amendment rights and lead to compelled self-incrimination. You sit down with SEC enforcement staff. You answer their questions. You think its just a civil matter. Then prosecutors subpoena your SEC testimony and use your own words against you in a criminal prosecution.

What you tell the SEC in a civil context can become evidence in the criminal case you didnt know existed.

And heres the knife twist. Settling either matter could undercut defenses in the other. If you settle the SEC case and admit to violations, those admissions can be used against you criminally. If you fight the SEC case to protect your criminal defense, you face prolonged civil litigation while prosecutors watch. There is no clean path.

This is why experienced defense attorneys coordinate strategy across both proceedings. You cannot treat the Wells Notice as a standalone civil problem. You must assume parallel criminal exposure until proven otherwise.

The Target Letter Fiction: Why Most Indictees Never Get One

Heres the uncomfortable truth about target letters that most people dont understand. Target letters are not legally required. Prosecutors send them as a courtesy. Many people who get indicted never recieved a target letter. The first indication of the criminal case is often the indictment itself or FBI agents at the door.

The DOJ policy is that prosecutors should advise targets of their status when subpoenaing them to testify before a grand jury. But if you are not subpoenaed to testify, if the grand jury already has enough evidence from other sources, there is no requirement to send a letter at all. Most people who get indicted never recieved one. First indication is the indictment itself.

Think about what that means for the Wells Notice vs target letter comparison. You might recieve a Wells Notice from the SEC. You might never recieve a target letter from DOJ. But that dosent mean theres no criminal investigation. It just means prosecutors havnt decided to notify you yet. Or they have enough evidence already and see no reason to give you warning.

The absence of a target letter provides zero comfort. Some districts, like SDNY, can move from investigation to indictment in three weeks. By the time you learn about the criminal case, you are being arraigned.

The Coordination No One Admits: SEC-DOJ Information Sharing

Heres the system revelation that practitioners understand but the public rarely sees. The SEC and DOJ coordinate extensively on securities fraud matters. The information you provide to one agency flows to the other.

Form 1662 attached to every SEC subpoena spells this out explicitly. The SEC states that information you provide may be used in investigations or proceedings of DOJ and other law enforcement agencies. This is not speculation. This is the published policy the SEC attaches to every document demand.

The coordination goes beyond document sharing. SEC and DOJ investigators meet regularly on cases involving parallel investigations. They share factual information. They coordinate timing. They sometimes sequence their actions strategically, with the SEC moving first to gather evidence through civil process, then DOJ following with criminal charges based partly on what the SEC obtained.

The SEC has civil subpoena power that is broader then grand jury subpoena power in some ways. Prosecutors can benefit from information the SEC gathers.

And heres what makes this particularly dangerous. When you respond to SEC civil process, you might be providing evidence that ends up in a criminal file. When you make statements to SEC staff, prosecutors might eventually see those statements. The civil investigation is functioning as an evidence-gathering tool for the criminal case.

One practitioner firm noted that defense counsel should coordinate defense strategy across the proceedings. This isnt optional advice. If you treat the SEC matter as purely civil, you might create criminal exposure without realizing it.

What Actually Matters: Responding When You Dont Know Which You Have

Heres what practitioners actually do when clients recieve either document. They assume parallel exposure exists until proven otherwise.

If you recieve a Wells Notice, the first question is whether DOJ is also investigating. You cannot simply ask the SEC and expect an answer. They are instructed to make no representation. So you look for other signs. Has anyone else in the matter recieved grand jury subpoenas? Have witnesses reported being approached by FBI agents? Are there gaps in the evidence production that suggest documents were seized rather then requested?

If you recieve a target letter, the question is simpler becuase the criminal exposure is now confirmed. But you still need to evaluate whether SEC enforcement is also likely. Many securities fraud cases involve both agencies. Coordinating defense strategy across civil and criminal proceedings is essential.

The worst mistake is treating either document in isolation. The Wells Notice recipient who focuses only on convincing the SEC to drop charges might ignore criminal exposure that materializes months later. The target letter recipient who focuses only on the criminal case might ignore SEC proceedings that create their own significant consequences.

The question is never Wells Notice or target letter. The question is what you dont know about paralel proceedings.

The Signs You’re Facing Both

Heres what experienced defense attorneys look for when evaluating whether parallel proceedings are running. These are the warning signs that most people miss.

First, look at who else has been contacted. If colleagues, business partners, or employees have recieved grand jury subpoenas, that tells you DOJ is actively investigating. Grand jury subpoenas are criminal process. SEC civil subpoenas and grand jury criminal subpoenas are different documents from different agencies. If you see grand jury subpoenas going to people in your orbit, assume criminal exposure exists.

Second, look at the timing of the SEC investigation. If the SEC investigation seemed to accelerate suddenly, or if the enforcement staff seems particularly aggressive, that might indicate coordination with DOJ. Sometimes the SEC pushes harder becuase prosecutors are watching. Sometimes they move faster becuase a criminal timeline is driving decisions.

Third, look at the questions being asked. SEC investigators asking about intent, knowledge, and state of mind are gathering evidence that matters more for criminal prosecution then for civil enforcement. Civil violations often focus on whether rules were broken. Criminal violations require proving you knew you were breaking them. If questions emphasize what you knew and when you knew it, prosecutors may be interested in the answers.

Fourth, look for FBI involvement. If FBI agents have contacted anyone involved in the matter, criminal investigation is confirmed. The FBI dosent investigate civil violations. Their presence means DOJ is building a case. This seems obvious, but people miss it becuase they dont connect FBI activity with their SEC matter.

Fifth, look at delays in the SEC process. Sometimes the SEC slows down their timeline to let prosecutors move first. Sometimes they delay the Wells Notice until criminal charges are imminent. Unexplained delays might mean coordination is happening behind the scenes.

The absence of these signs dosent mean parallel investigation doesn’t exist. These are indicators when present. The SEC and DOJ are under no obligation to reveal coordination to you. By the time you see these signs, the parallel investigation has been running for months, maybe years.

The Eighty Percent Reality

Heres the statistic that matters for Wells Notice recipients. Approximately eighty percent of people who recieve Wells Notices end up facing SEC enforcement action. The submission process rarely results in dropped cases. The staff has already decided to recommend charges. Your response goes to the same people who made that decision.

For target letter recipients, the statistics are even more stark. Federal prosecutors have conviction rates exceeding ninety percent. When you recieve a target letter, you are not being invited to explain yourself. You are being notified that substantial evidence already exists and charges are likely.

The thirty to forty-five day timeline from target letter to potential indictment is significantly faster then the SEC timeline. SDNY in particular moves quickly. Some targets go from letter to arraignment in weeks, not months.

These statistics shape strategy. If eighty percent of Wells Notice recipients face charges regardless of their submission, the question becomes how to position for the best possible outcome, not whether to believe the process will exonerate you. If criminal prosecutors already have substantial evidence, the question becomes how to mitigate exposure, not whether cooperation will make the investigation go away.

What the statistics dont tell you is how many Wells Notice recipients also faced criminal charges. That data is harder to find becuase the connection between civil and criminal cases isnt always public. But practitioners who work in this area know that parallel proceedings are common, not exceptional. The question is not whether eighty percent face SEC charges. The question is what percentage of that eighty percent also faced DOJ investigation they didnt know about.

The Timeline That Actually Matters

Heres what most people get wrong about timing. They think the Wells Notice timeline and the target letter timeline are separate. They are not.

When parallel investigations exist, the SEC and DOJ often coordinate their actions. The SEC might issue a Wells Notice first, using civil process to gather additional evidence. Your response to the Wells Notice gets shared with DOJ. Prosecutors might wait for the SEC matter to develop before moving forward criminally.

Alternatively, DOJ might move first. Criminal charges get filed. You are arrested and arraigned. Then the SEC institutes its own proceeding based on the same conduct. The criminal case takes priority, but civil exposure remains.

The coordination can work against you in subtle ways. Settling with the SEC might require admissions that hurt the criminal defense. Fighting the SEC case to protect the criminal defense means prolonged civil litigation. Each timing decision affects both proceedings.

What The Surface Comparison Misses

Heres the bottom line on the Wells Notice versus target letter question. The surface comparison tells you that one is civil and one is criminal. It tells you that one involves money and one involves prison. It tells you that one comes from the SEC and one comes from DOJ.

What the surface comparison misses is everything that actualy matters. It misses that both can exist simultaneously. It misses that the SEC is instructed not to tell you about parallel criminal investigations. It misses that target letters are a courtesy, not a requirement, and most indictees never recieve one. It misses that your cooperation with one agency can create evidence used by the other. It misses that Form U4 makes the Wells Notice public while the target letter stays secret.

The question you should be asking is not which document is worse. The question is whether you are facing paralel exposure that you dont yet know about. The question is whether your response to one proceeding will affect the other. The question is whether statements you make in civil context will become criminal evidence.

Most people who recieve a Wells Notice focus entirely on responding to the SEC. They craft arguments about why civil charges are unwarranted. They negotiate with enforcement staff about potential settlements. They do all of this without knowing whether prosecutors are building a case behind the scenes.

Then the criminal charges arrive. And everything they said in the civil matter becomes evidence. And the settlement discussions they had reveal their theory of the case. And the admissions they made to resolve the SEC matter become the foundation of a criminal prosecution they never saw coming.

Call us at 212-300-5196. The consultation is about understanding the complete picture. We need to know what documents you have recieved, what the underlying conduct involves, whether there are signs of parallel investigation, and what the realistic exposure actualy is across both civil and criminal proceedings.

Todd Spodek and the team at Spodek Law Group understand how parallel investigations work. We know that the question is never just Wells Notice or target letter. We know how to coordinate defense strategy across proceedings that are designed to operate against you simultaneously. We know that the surface distinction between civil and criminal misses almost everything that actualy matters.

The clock is running on both timelines. Whether you have recieved a Wells Notice, a target letter, or both, the strategy must account for parallel exposure. Contact Spodek Law Group now.