SEC DiPaola Ruling: A Wells Notice Does Not End the Investigation

The DiPaola Ruling: FINRA Can Still Compel Testimony After a Wells Notice

Under the SEC's May 28, 2026 opinion in In the Matter of the Application of Jason Lynn DiPaola, Exchange Act Release No. 105568, a Wells notice does not strip FINRA of its power to compel testimony. Fridman Fels attorneys Alejandro Soto and Eric Bustillo summarize the holding in Law360 this way: FINRA does not lose its ability to compel testimony simply because it has issued a Wells notice. Their October 2, 2026 article argues that the ruling also shows how the Commission expects its own enforcement program to operate.

The timing is the overlooked point. The Commission needed roughly three years to answer that question, because DiPaola filed his appeal on May 1, 2023. The SEC's own Division of Enforcement, by contrast, runs on a far shorter clock. Under the Enforcement Manual update the Division announced February 24, 2026, Wells recipients ordinarily receive four weeks to make submissions, and Wells meetings are scheduled within four weeks of a submission with a member of senior Division leadership. The four-week window governs SEC Division Wells notices, not FINRA's, and DiPaola confirms that, in FINRA's process, a Wells notice does not close fact-finding.

Here is what happened, why it matters, and what your leadership team should decide.

What the SEC Actually Decided in DiPaola

The case began as a disclosure failure. FINRA found that DiPaola, formerly of Chardan Capital Markets LLC, violated NASD Rule 3050(c) and FINRA Rule 2010. He failed to disclose an outside account and submitted compliance forms that did not disclose it.

FINRA also found separate violations of FINRA Rules 8210 and 2010 because DiPaola did not provide on-the-record testimony. According to the opinion, for the violations related to his failure to disclose the outside account, FINRA suspended DiPaola for two years and imposed a $25,000 fine. For his failure to provide on-the-record testimony, FINRA suspended DiPaola for an additional two years, to run consecutively with the former suspension, and imposed a $15,000 fine. In total, FINRA imposed two two-year suspensions, to run consecutively, and $40,000 in fines. Rule 8210 is FINRA's authority to demand documents and testimony from member firms and associated persons.

On review, the Commission sustained FINRA's findings of violations. It sustained FINRA's sanctions in part and set them aside in part. A Practus LLP analysis reads the opinion this way:

• FINRA could enforce a Rule 8210 testimony demand even after issuing a Wells notice.
• The SEC set aside the Rule 8210 sanctions after questioning the timing of the late-stage, post-Wells demand.

The three-year docket

The procedural history carries its own lesson. The last brief arrived November 15, 2023. The Commission then issued repeated 90-day extension orders, including orders dated July 14, 2025 and March 25, 2026, each extending the period for its decision by 90 days. The opinion issued about three years after the appeal was filed. DiPaola refused a Rule 8210 testimony demand, waited roughly three years for the Commission's answer, and saw every violation finding sustained.

Reading the Enforcement Signal in DiPaola

The Law360 authors read DiPaola as more than a Rule 8210 decision. In their view, it shows how the Commission expects its own enforcement program to operate. For a firm under FINRA investigation, the opinion itself supplies the substance of that signal.

The signal is a contrast in clocks. Under the February 2026 Enforcement Manual update, recipients of an SEC Division of Enforcement Wells notice ordinarily receive four weeks to make submissions. Yet the Commission took about three years to resolve DiPaola's appeal. A refusal to testify now cannot be cured by appellate delay. In DiPaola, the Rule 8210 violation finding survived even though the Commission set aside the sanction for it.

Rule 8210 itself reaches information and testimony relating to investigations, examinations, and proceedings. FINRA sought DiPaola's testimony after issuing a Wells notice. The investigation was still open. DiPaola argued that the Wells notice meant FINRA already had all the information it needed. The Commission disagreed.

The signal for a firm is plain. Until a complaint issues, the investigation continues, and the firm must manage the Wells response and any further Rule 8210 demands at the same time.

Key Takeaways for Broker-Dealer Leadership

• Do not treat a Wells notice as the end of fact-finding. FINRA may still issue Rule 8210 testimony demands while the matter remains in its investigative phase, before a complaint issues.
• Do not refuse testimony on the theory that FINRA already has what it needs. DiPaola made that argument, and the Commission rejected it.
• Prepare the Wells submission and testimony readiness together. The Wells notice is an opportunity to explain why formal charges are not appropriate, and further testimony demands can arrive during that same window.
• Separate the violation from the sanction. The Commission sustained every FINRA violation finding, including the Rule 8210 violation, while setting aside part of the sanctions. A reduced sanction does not erase the violation.