The Securities and Exchange Commission (SEC) had already started a probe of Under Armour when it issued a Wells Notice on July 22, 2020. The matter in question includes accounting of sales spanning the time period of 2015’s third quarter to 2016’s fourth quarter. The SEC was already looking into whether Under Armour tried to make their sales look stronger than they really were. The probe began in July 2017 with requests for records regarding the company’s accounting practices.
What is a Wells Notice?
A Wells Notice is an indication from the SEC that they are contemplating some type of enforcement action. It will often lay out SEC violations discovered in an investigation. The SEC may follow up with a civil action against a firm or an individual. That firm or individual has a chance to provide information to argue against any civil action. Charges do often follow the notice, however.
A Wells Submission
Recipients of a Wells Notice have 30 days to make a formal response, called a Wells Submission. Most companies rely on a securities law attorney for assistance with their response. A Wells Submission presents both legal and factual arguments to rebut the allegations in the Wells Notice. A Wells Submission is public information, however, and may not always be in the prospective defendant’s best interest.
In Under Armour’s case, one expert expects that they will respond, and may attempt to settle the case. The company claims it did not violate any SEC regulations, but hopes to resolve the matter with the SEC.
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