What You Need To Know About the SEC’s Enforcement Manual Update

On February 24, 2026, the U.S. Securities and Exchange Commission’s (SEC or Commission) Division of Enforcement (Division or Enforcement) announced updates to its Enforcement Manual (Manual), last revised in 2017. For nearly two decades, the publication of the Manual has provided insight into the Division’s investigation of potential violations of federal securities laws and regulations, as well as related decision-making. Today, it not only serves as an internal guide for Enforcement staff on the policies and procedures for conducting an investigation, but also provides the public with transparency into the full lifecycle of an enforcement matter and a critical roadmap for companies and individuals navigating an SEC inquiry.

According to Enforcement Director Margaret Ryan, the update to the Manual seeks to provide greater clarity, ensure greater uniformity, and improve Division staff’s work. SEC Chairman Paul Atkins called the 2026 update a “long-overdue” step that reflects the Division's renewed commitment to transparency, fairness, and efficiency. Below is a summary of the notable procedural changes that any company or individual navigating an SEC inquiry should understand.

Formal Orders of Investigation

The 2026 Manual incorporates and reflects the structural change to the formal order process resulting from the Commission's March 2025 revocation of authority delegated to the Enforcement Director and the Director’s potential sub-delegation to senior officers in the Division to issue formal orders. The 2026 Manual formalizes this change by specifying the content requirements for the staff memorandum seeking a formal order: staff must succinctly describe the relevant conduct and potential violations, obtain approval from the Office of the Director, and then submit both the memorandum and the proposed formal order to the full Commission for a vote. Only upon Commission approval will the formal order and the subpoena authority it carries be issued.

More Predictable and Structured Wells Process

Dual Approval within the Division. Staff must now obtain approval from both an Associate Director or Unit Chief and the Office of the Director before issuing, or deciding not to issue, a Wells notice. This added layer of senior leadership review is intended to bring greater scrutiny to potential enforcement actions at an earlier stage, and signals that Wells notices will receive heightened internal vetting before issuance.

Covert Criminal Investigation Carve-Out. The 2026 Manual narrows the circumstances under which staff may withhold issuing a Wells notice before making a recommendation to the Commission when there is a parallel criminal investigation, limiting it to situations where the parallel investigation is “covert.” This change meaningfully limits staff's discretion to withhold Wells notices solely because of a parallel criminal matter, providing greater predictability for subjects of concurrent civil and criminal inquiries.

Advance Oral Notice Now Expected. The updated Manual enhances the standard for advance oral notice of a Wells notice from a discretionary “may” to an expectation that staff “should, when feasible,” provide oral notice before sending a written Wells notice. This shift is meaningful: companies and their counsel can now reasonably expect a Wells call in advance of a written notice, providing an earlier opportunity to engage with staff on the substance of a potential recommendation before formal submissions are due.

New Guidance on Wells Submissions. The Manual provides expanded guidance on what makes a Wells submission most “helpful.” Helpful submissions are those that accurately reflect the evidence, focus on disputed factual or legal issues, acknowledge and address evidence and precedent supporting the staff's position, raise significant legal risks or policy concerns, and, where charges are complex, may include expert reports. Submissions are generally limited to 40 pages (excluding exhibits), with video submissions capped at 12 minutes.

Mandatory Rejection of Wells Submissions with Settlement Offers. The 2026 Manual makes explicit that staff must reject any Wells submission that contains or discusses a settlement offer. Settlement offers must be made in a separate document and cannot be combined with substantive Wells submissions. Respondents to an investigation should carefully segregate these communications to avoid rejection of an otherwise meritorious submission on procedural grounds.

Greater Transparency into the Investigative File. The updated Manual directs staff to be forthcoming with respondents about the contents of the investigative file following issuance of a Wells notice. On a case-by-case basis, staff should make reasonable efforts to allow Wells recipients to review relevant, non-privileged portions of the file, considering whether such access will facilitate the recipient’s ability to respond meaningfully to the staff’s proposed recommendation.

Post-Wells Notice Meeting Changes. The updated Manual formalizes the post-Wells notice process for meetings with a senior officer in the Division, requiring that a meeting be scheduled within 4 weeks of receipt of the Wells submission. The meeting must include a member of senior leadership at the Associate Director level or above. Respondents are still generally limited to one post-Wells notice meeting. These changes give respondents a clearer timeline and assurance of meaningful senior-level engagement.

Cooperation Credit

The 2026 Manual provides expanded and more concrete guidance on how cooperation credit is evaluated for companies. The Manual now explicitly enumerates specific examples of effective remediation, including taking appropriate action for employee misconduct, strengthening internal controls, clawing back executive compensation, making prompt corrective disclosures, hiring new financial staff, and retaining independent compliance consultants. The Manual also expressly acknowledges the possibility of zero-penalty resolutions for companies that engage in meaningful cooperation, self-policing, self-reporting, and remediation. This recognition of no-penalty outcomes underscores the Division's intent to incentivize early and substantive cooperation. Critically, the 2026 Manual also clarifies when self-reporting credit is available. Such credit is appropriate only when a company reports misconduct before staff learns of it from another source and before any imminent threat of disclosure or government investigation.

In addition, the 2026 Manual updates the standards and procedures governing both deferred prosecution agreements (DPAs) and non-prosecution agreements (NPAs). For DPAs, the Manual clarifies that Commission approval is required and that approval must be sought from a Cooperation Committee before a DPA is recommended to the Commission. For NPAs, the Manual raises the substantive threshold from “limited and appropriate circumstances” to “exceptional circumstances” — a materially higher bar that signals the Division intends to reserve NPAs for only the most compelling cases. Like DPAs, NPAs now require Cooperation Committee approval before a recommendation is made to the Commission, and both generally will be made publicly available on the Commission’s website.

Simultaneous Consideration of Settlements and Statutory Disqualifying Waivers

The practice of simultaneously considering settlement offers and statutory disqualification waiver requests was absent from the 2017 Manual and eliminated by former SEC Chairman Gary Gensler during the Biden administration. The updated Manual reflects the Commission's September 2025 restoration of this prior practice, permitting a settling party to request that the Commission simultaneously consider an offer of settlement and any related request for a waiver from automatic statutory disqualifications and other collateral consequences arising from the underlying enforcement action. If the Commission accepts the settlement offer but rejects the waiver request, the respondent will typically have five business days to decide whether to proceed with the accepted settlement terms. This change provides companies with greater certainty and efficiency in the settlement process by allowing them to assess the full scope of consequences, including collateral disqualifications, before committing to a resolution.

Formalization of the Criminal Referrals Policy

Pursuant to Executive Order 14294, the Commission issued a formal policy statement in June 2025 governing referrals to the U.S. Department of Justice for potential criminal enforcement, which is now incorporated into the 2026 Manual. The Manual sets out specific factors that staff must consider when evaluating whether to refer potential violations to the DOJ or other criminal authorities, including the degree of harm, the defendant's potential gain, specialized knowledge, scienter, recidivism, and whether criminal involvement would provide meaningful additional protection to investors. Referrals must be approved at the Associate Director or Unit Chief level, and staff are generally required to notify the Director before making a referral in non-urgent matters. This formalization provides important guidance on the circumstances under which civil SEC investigations may escalate to criminal referrals.

Certification of Completeness in Settlement Context

The 2026 Manual adds additional guidance on the requirement that settling parties provide an executed Certification of Completeness of Document Production, declaring under penalty of perjury that a diligent search of files for responsive documents was conducted and acknowledging that the Commission has relied on the completeness of the production. Division staff now have a new affirmative obligation to inform individuals and entities of this requirement early in the investigation and to reiterate it upon any changes in counsel or at the commencement of settlement negotiations. Companies should be mindful that representations regarding production completeness can have significant implications, and should ensure their litigation holds and document-collection processes are robust from the outset of an inquiry.

Expanded Scope of Preservation Notices

The 2026 update broadens document preservation expectations to expressly require that preservation notices encompass communications sent or received on all messaging platforms and applications, including personal devices such as smartphones and tablets. This explicit expansion reflects the Division's recognition that relevant business communications increasingly occur outside of traditional corporate email systems, and on platforms such as WhatsApp, iMessage, Signal, Teams, Slack, Discord, and Telegram.

Other noteworthy changes:

Top 5 Investigation Prioritization. Associate Directors and Unit Chiefs are now required to designate their “Top 5” priority matters each quarter, replacing the prior “National Priority Matters” designation.

Quarterly Case Review. The Manual formalizes a quarterly case review structure at all supervisory levels, from staff attorneys up through the Director, requiring written investigative plans, regular status updates, and active monitoring of investigation timelines and resource allocation.

Consolidated Audit Trail Data. The 2026 Manual explicitly incorporates the Consolidated Audit Trail (a comprehensive database tracking the full lifecycle of customer orders across all U.S. equity and options markets) as an investigative tool alongside traditional Blue Sheet requests, particularly in insider trading and market manipulation investigations.

NDAA Statute of Limitations. The Manual now incorporates the expanded statute of limitations provisions enacted by the National Defense Authorization Act (NDAA) for Fiscal Year 2021, clarifying that the five-year limitations period to bring an action is extended to ten years for disgorgement for violations requiring scienter, and also for certain equitable remedies, including bars, suspensions, and cease and desist orders.

Expanded Scope of Termination Letters. The updated Manual broadens the circumstances under which staff should issue termination letters to include not only named parties and Wells recipients, but also parties who made significant document productions and issuers whose securities were implicated in an insider trading investigation. This expansion reflects the Division's interest in providing closure to those who participated meaningfully in an investigation, even if they were never formally named as potential defendants.

Stronger Emphasis on Whistleblower Confidentiality and BSA Restrictions. The updated Manual includes stronger, more explicit guidance on the handling of whistleblower-identifying information and Bank Secrecy Act materials, including Suspicious Activity Reports (SARs). Staff must now periodically search the Financial Crimes Enforcement Network database in connection with their investigations, and heightened procedures govern the segregation, storage, and disclosure restrictions applicable to SAR materials.

Conclusion

The 2026 Enforcement Manual updates represent the most comprehensive revision of the Division's investigative playbook in nearly a decade, and their significance extends well beyond internal procedure. For companies and individuals under investigation, the changes offer meaningful opportunities: clearer standards for cooperation credit (including the possibility of no-penalty resolutions), a more structured and transparent Wells process, and greater access to the investigative record. At the same time, the enhanced oversight requirements, formalized criminal referral criteria, and expanded document preservation obligations underscore that the Division is committed to rigorous, senior-level scrutiny at every stage of the enforcement process. The Division's commitment to annual updates going forward means the Manual will continue to evolve, making it an essential reference for any company or individual navigating a securities enforcement inquiry. Companies should carefully monitor these developments, engage proactively, and cooperate meaningfully with Division staff from the earliest stages of an investigation.

Arnold & Porter continues to monitor policy shifts at U.S. market regulators as a result of the change in presidential administration. Please reach out to the authors of this Advisory or any of their colleagues in Arnold & Porter’s Securities Enforcement & Litigation and White Collar Defense & Investigations practice groups.

© Arnold & Porter Kaye Scholer LLP 2026 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.