The Securities and Exchange Commission’s recent reforms to the Wells process under Chairman Paul Atkins represent an important effort to restore procedural fairness to the Enforcement Division’s investigative process. The Commission’s revisions emphasize greater transparency, increased access to investigative materials, expanded opportunities to respond, and more meaningful supervisory involvement in charging decisions.
Those reforms reflect an important principle: The legitimacy of the SEC’s enforcement program depends not only on the correctness of its outcomes, but also on the fairness of its procedures.
Yet the reforms leave unresolved a significant problem that receives far less attention than regulation by enforcement but may ultimately prove just as consequential: regulation by delay.
Regulation by delay occurs when an investigation remains open long after the Wells process has concluded, allowing the practical consequences of an SEC investigation to continue indefinitely without either a formal enforcement action or a formal decision to close the matter.
The issue is not merely administrative. SEC investigations frequently carry substantial consequences, even when no enforcement action is ultimately filed. Financing transactions become more difficult. Banking relationships become strained. Directors’ and officers’ insurance may become unavailable or prohibitively expensive. Strategic transactions are delayed or abandoned. Hiring and retention suffer. Key personnel depart. Investors discount uncertainty. Potential business partners walk away rather than assume regulatory risk.
In theory, investigations are designed to determine whether an enforcement action should be brought. In practice, however, excessively prolonged investigations can themselves become a source of significant economic and reputational harm. The result is a system in which the practical burdens associated with enforcement may persist even where no enforcement action is ever authorized.
In some circumstances, the investigation itself begins to function as the punishment.
Unlike a formal enforcement action, these consequences may persist without any finding of liability, without any adjudication on the merits, and without any Commission vote authorizing charges. The practical burden is real even when the legal process remains incomplete.
As a result, prolonged investigations can sometimes produce many of the same consequences as enforcement actions while avoiding the institutional accountability normally associated with formal agency action.
This dynamic becomes especially troubling when investigations continue long after the Wells process has concluded. At that point, the issue is no longer simply delay. It is whether the government can continue producing significant regulatory effects without either bringing a case or deciding not to bring one.
The Missing Piece of Wells Reform
Historically, the Wells process signaled that an investigation had reached a mature stage. The staff had substantially completed its factual investigation, identified the legal theories it believed justified an enforcement recommendation, and provided the recipient an opportunity to persuade both the staff and the Commission not to proceed.
Although the SEC has never imposed a formal deadline for action following a Wells submission, the process traditionally carried an expectation that a charging recommendation or investigative closure would follow within a reasonable period.
Increasingly, however, some investigations appear capable of remaining unresolved for extended periods after Wells notices have been issued and Wells submissions completed.
This creates a gap in the Commission’s recent reforms. The reforms improve the process leading up to a Wells submission. They do not meaningfully address what happens afterward.
The consequence is that the most important question may remain unanswered: when must the government decide?
The significance of that gap extends beyond individual investigations. It raises a broader question about how administrative agencies exercise power when they decline to make a final decision.
From Regulation by Enforcement to Regulation by Delay
Chairman Atkins and other members of the current Commission have repeatedly criticized “regulation by enforcement”—the use of enforcement actions to establish legal standards that should instead be adopted through the Commission’s policy making processes. In a September 2025 article, David W. Woodcock advocated additional reforms to the Wells process designed to promote transparency, fairness, and supervisory accountability in SEC enforcement.
Regulation by delay presents a related concern.
Regulation by delay occurs when an agency achieves practical regulatory effects not through a rule, not through an adjudicated enforcement action, and not through a Commission vote, but through the indefinite continuation of an unresolved investigation.
The concept is distinct from ordinary investigative delay. Every enforcement agency requires time to investigate complex matters, evaluate evidence, and make informed decisions. The problem arises when delay itself becomes a substitute for decision-making.
In a traditional enforcement framework, agency officials must eventually decide whether to proceed or stand down. If the agency believes the law has been violated, it seeks authorization to bring a case. If it concludes that an action is unwarranted, it closes the matter. Either path requires accountability because both require a decision.
Regulation by delay operates differently. Rather than deciding, the agency preserves uncertainty. The investigation remains open. The practical burdens associated with the investigation continue. The subject remains under a cloud. Yet no formal action is taken and no final determination is made.
The result is that the investigation itself begins to perform a regulatory function.
Market participants frequently modify their conduct in response to pending investigations even where no charges have been filed. Businesses may abandon products, terminate business lines, alter marketing practices, withdraw from particular markets, postpone transactions, or avoid otherwise lawful activity because they cannot predict whether the government ultimately intends to proceed.
In this respect, delay can sometimes accomplish many of the same practical objectives as an enforcement action. Conduct changes. Capital allocation changes. Risk assessments change. Business decisions change. The difference is that these effects occur without the procedural safeguards and accountability mechanisms ordinarily associated with formal agency action.
In some respects, regulation by delay may present a more serious accountability concern than regulation by enforcement. Regulation by enforcement at least culminates in a public action subject to Commission oversight, judicial review, and adversarial testing. Regulation by delay may generate many of the same practical consequences while avoiding all three.
There is no complaint to challenge, no legal theory to test, no Commission vote to scrutinize, and often no meaningful mechanism through which the subject can obtain resolution. Yet the real-world effects on financing, business operations, personnel decisions, and market conduct may continue indefinitely.
The concern becomes particularly significant during periods of policy transition.
One of the principal functions of a Commission is to establish enforcement priorities and determine how the agency’s limited resources should be deployed. Elections matter because policy priorities change. Commissioners are appointed precisely so that they can exercise judgment regarding which theories should be advanced, which cases should be brought, and which matters no longer warrant pursuit.
But prolonged investigative delay can partially frustrate that process. Investigations initiated under one Commission’s policy framework may continue generating practical consequences long after the Commission itself has adopted different priorities. In effect, the regulatory impact of a prior enforcement philosophy survives through investigative inertia.
The concern is not simply that a matter remains open. The concern is that an investigation initiated under one Commission may remain unresolved long enough to avoid meaningful review by the Commission currently charged with setting enforcement policy and to outlast the policy priorities of the Commission that inherited it. In that circumstance, delay itself becomes a mechanism for preserving regulatory priorities that current leadership may never choose to adopt, allowing the practical effects of a prior enforcement agenda to continue without a corresponding decision by the Commission presently entrusted with governing the agency.
That possibility is particularly troubling in a system that places ultimate policy making authority in Commissioners appointed by elected officials. The concern is not simply delay. The concern is whether delay can effectively substitute for the policy judgments that the Commission itself is supposed to make.
That dynamic raises a basic question of administrative accountability. If a theory cannot command support from the Commission currently charged with governing the agency, should it nevertheless continue producing practical consequences indefinitely while avoiding a Commission vote?
The better answer is no.
The SEC has appropriately devoted substantial attention to concerns regarding regulation by enforcement. Yet regulation by delay presents a related challenge. In both situations, the impacts of government action may exceed the degree of institutional accountability accompanying the underlying decision.
The difference is that one operates through action and the other through inaction.
Both deserve scrutiny.
The question therefore is not simply whether an investigation remains open too long. The question is whether prolonged uncertainty can become a mechanism for achieving regulatory objectives without the institutional accountability ordinarily required for agency action.
The Incentive Problem
The broader issue is institutional rather than individual.
Enforcement systems inevitably respond to incentives. A system that imposes greater institutional risk on formally ending investigations than on leaving them unresolved will predictably tend toward prolonged investigative limbo.
That tendency does not require bad faith. It does not require improper motives. It does not even require conscious decision-making. It is simply the natural consequence of asymmetrical incentives.
Consider the choices facing enforcement staff at the conclusion of a mature investigation involving a disputed legal theory.
Formally closing the matter carries consequences. Closure forecloses future enforcement opportunities. It may be criticized if later events appear to validate the underlying theory. It may require supervisors to affirmatively approve a decision not to proceed. Most importantly, it eliminates optionality.
Leaving the matter open, by contrast, often carries comparatively little institutional cost. The investigation can always be revisited later. Additional evidence may emerge. Future leadership may take a different view. Legal developments may become more favorable. The matter remains available.
From an institutional perspective, preserving optionality frequently appears safer than relinquishing it.
The result is a subtle but powerful structural bias. The system may gradually favor non decisions over decisions, not because anyone intends that outcome, but because the consequences of action and inaction are not evenly distributed.
This dynamic may become especially pronounced during transitions in Commission leadership.
When enforcement priorities are changing, staff may reasonably conclude that it is preferable to preserve unresolved matters until future policy directions become clearer. An investigation that is formally closed today cannot easily be revived tomorrow. An investigation that remains open can always be pursued later.
Yet that very logic illustrates the problem.
The purpose of Commission oversight is to ensure that major enforcement decisions reflect the policy judgments of the officials charged with making them. If matters remain unresolved primarily because preserving future optionality is institutionally easier than making a present decision, the practical effect is to shift policy influence away from the Commission and toward the passage of time itself.
The danger is not simply delay. It is the accumulation of unresolved investigations that continue generating consequences without a corresponding determination that those consequences remain justified.
At some point, preserving optionality ceases to be a neutral administrative choice and becomes a substantive policy decision. The decision is not whether to bring a case. The decision is whether the burdens of an investigation should continue notwithstanding the absence of a charging recommendation, a closure determination, or a Commission vote.
If unresolved investigations can continue producing substantial regulatory effects for years without either a charging recommendation or a closure determination, unelected staff may effectively shape policy through delay rather than through Commission-approved action.
That outcome need not result from bad faith. It arises naturally whenever preserving optionality becomes institutionally easier than making a final decision. But regardless of intent, the practical consequence is the same: Policy influences gradually migrates away from the Commission and toward the indefinite continuation of unresolved investigations.
That outcome is difficult to reconcile with the basic principle that major enforcement priorities should ultimately be set by the Commission itself. That decision should not occur by default. It should occur deliberately, transparently, and under meaningful supervisory review.
Understanding the problem in these terms is important because it suggests that prolonged post-Wells investigations are not merely the product of delay. They may instead be the predictable consequence of a system in which preserving optionality is easier than making a decision.
A Recent Illustration
One recent SEC investigation illustrates the concern.
According to correspondence reviewed by the author, the staff communicated Wells notices in late 2025 and subsequently confirmed its preliminary determination to recommend enforcement action in writing. After counsel repeatedly requested closure of the investigation, the staff responded not by indicating whether it intended to recommend enforcement action or close the matter, but principally by recounting prior procedural extensions and stating it was “moving forward with our process.”
This illustration is significant because it arises in an area where enforcement priorities have shifted dramatically between the Gensler and Atkins commissions. The investigation concerns precious-metals IRA transactions, an area in which Congress has expressly authorized precious-metals ownership through individual retirement accounts and where, historically, primary regulatory oversight was more commonly associated with the Internal Revenue Service, the Commodity Futures Trading Commission, state regulators, and consumer-protection authorities than with aggressive SEC enforcement initiatives. It also involves the SEC’s assertion of authority over communications concerning that alternative asset class. The issues presented bear directly on questions addressed by the Supreme Court in Lowe v. SEC, 472 U.S. 181 (1985), which distinguished between personalized investment advice and impersonal market commentary.
The significance of the example extends well beyond precious metals. Like digital assets, precious metals became the subject of an aggressive enforcement agenda under the prior Commission, including legal theories that many viewed as extending SEC authority into areas traditionally governed by other regulatory frameworks. Under current leadership, however, alternative assets are increasingly being viewed as a matter of investor choice, market access, and regulatory restraint rather than expansive assertions of jurisdiction.
That reality makes prolonged investigative delay particularly consequential. If investigations initiated under one administration’s policy assumptions can remain unresolved long enough to outlast a change in Commission leadership, the consequences of a prior enforcement agenda may continue even after the Commission itself has adopted different priorities. In that circumstance, delay becomes more than a procedural issue. It becomes a mechanism through which one administration’s enforcement priorities can persist without a corresponding decision by the Commission currently entrusted with setting policy.
Yet the correspondence provided no indication whether the matter was moving toward a recommendation to the Commission or moving toward closure. Nor did it indicate whether the staff intended to present the matter to the Commission currently charged with setting enforcement policy.
Whatever the ultimate merits of that investigation, the correspondence highlights the broader problem. At some point, a mature investigation must produce a decision.
The SEC should not be required to file a case merely because a Wells process has concluded. Many investigations properly end without charges because the evidence is insufficient, the legal theory proves unpersuasive, or further review demonstrates that enforcement action is unwarranted. But when the government has communicated a preliminary determination to recommend enforcement action and months continue to pass without resolution, the individuals, businesses, shareholders, officers, employees, lenders, insurers, and counter parties bearing the consequences of the investigation have a legitimate interest in knowing whether the matter is moving toward an enforcement recommendation or moving toward closure.
The costs of prolonged uncertainty are not theoretical. Businesses may lose access to financing, insurance, banking relationships, key personnel, strategic transactions, and investment opportunities. In extreme cases, the economic and reputational burdens associated with an unresolved investigation may become so severe that the investigation itself effectively determines the outcome, regardless of whether charges are ever filed. That possibility is fundamentally inconsistent with a system that is supposed to determine liability through decisions rather than delay.
Too often, the current system permits that uncertainty to continue indefinitely.
Why This Matters Now
The issue is particularly important because the Commission has recently emphasized a return to traditional enforcement principles.
Current leadership has repeatedly stressed the importance of focusing on fraud, respecting statutory limits, and avoiding expansive theories untethered from clear legal authority.
The issue is especially important because many investigations currently remaining open were initiated during a period in which the Commission pursued significantly broader enforcement agendas. Whether one agrees or disagrees with those priorities is beside the point. The relevant question is who should decide whether those matters continue. Under our system, that decision belongs to the Commission currently entrusted with governing the agency, not to the simple passage of time.
Those themes are difficult to reconcile with investigations that continue indefinitely after the Wells process has concluded. If a matter no longer reflects the priorities of the Commission currently directing the agency, continued delay merely postpones a decision that will eventually have to be made. More importantly, prolonged delay risks undermining the very legitimacy that the Commission’s recent reforms seek to strengthen.
The Wells process exists because procedural fairness matters. But fairness requires more than an opportunity to respond. Fairness also requires resolution. An investigation cannot remain perpetually suspended between accusation and closure.
A Better Framework
The solution need not be complicated.
The goal is not to impose arbitrary deadlines. The goal is to ensure that delay itself does not become a substitute for decision-making.
The Commission could adopt a presumptive period perhaps 180 days following a Wells submission or Wells meeting within which the staff must:
- Recommend an enforcement action;
- Formally close the investigation; or
- Obtain senior-level authorization to continue the matter based on identified investigative or policy considerations.
The Commission could further require periodic supervisory review of investigations that remain open after the Wells process has concluded, written justification for continued investigation, and periodic status notifications to investigation subjects.
Such reforms would not impair the SEC’s enforcement mission.
The Commission would retain discretion to continue genuinely complex matters where additional investigation is warranted. Significant cases often require additional time.
But the reforms would recognize an important reality: Investigations themselves carry consequences.
When an investigation has matured to the point that the staff has formally communicated a preliminary determination to recommend enforcement action, indefinite delay should not be the default outcome.
Conclusion
The SEC’s recent Wells reforms reflect an important recognition that enforcement legitimacy depends not only on outcomes but on process.
The next step should be extending that principle beyond the Wells submission itself.
A system that allows investigations to remain unresolved indefinitely after Wells notices have been issued risks creating a form of regulation through uncertainty rather than decision-making. It allows the burdens of enforcement to persist without the accountability that accompanies either a charging recommendation or a closure determination.
The SEC has appropriately devoted considerable attention to concerns regarding regulation by enforcement.
It should now address the related phenomenon of regulation by delay. Regulation by enforcement allows agencies to shape conduct through lawsuits. Regulation by delay allows agencies to shape conduct through unresolved investigations.
Both can influence markets. Both can influence business decisions. Both can influence access to capital. Both can affect hiring, retention, financing, insurance, and investment decisions. The difference is that regulation by enforcement ultimately requires the government to decide.
Regulation by delay permits the government to postpone the decision while many of the consequences continue. The Commission cannot fully solve the post-Wells problem unless it also addresses the problem of indefinite post-Wells uncertainty.
At some point, procedural fairness requires more than process. It requires resolution. And when the economic effects of regulation are achieved primarily through the continuation of unresolved investigations, the issue is no longer merely delay.
It is regulation by delay.
Charles Cannon heads the securities practice at the law firm of Mahdavi Bacon Halfhill & Young PLLC. He served as senior counsel in the SEC Division of Enforcement and as counsel to SEC Commissioner, now chairman, Paul S. Atkins. The views expressed in this piece are solely his.