The SEC has completed its review of Freedom Holding

The U.S. Securities and Exchange Commission (SEC) has effectively completed its examination of Freedom Holding Corp. the company and its controlling shareholder and CEO Timur Turlov have been sent a so-called Wells Notice, the holding company disclosed in a June 1 filing.

In March 2026, the company received a notice from the SEC staff. It reflects the regulator's staff's preliminary position and its proposal to consider further civil proceedings. Freedom Holding disputes the results of the examination and has filed its objection in due course, the company said. This completes a nearly five-year examination that began in 2021.

The SEC examined the accuracy of disclosures and accounting features, namely internalized trades - over-the-counter transactions executed between customers within a clearing firm. Deloitte LLP, which acted as auditor, separately mentioned in its opinion that revenue recognition for such transactions is correctly accounted for by Freedom.

"As a rule, such inspections by the regulator end with the receipt of a Wells notice. Firstly, it means that the inspection is completed, and, secondly, such notices were received by Coinbase, Tesla and separately personally Elon Musk, Goldman Sachs, JPMorgan, Morgan Stanley and almost all professional participants of Wall Street. In most cases, it just ends with a simple fine with no admission of guilt. But it should be taken into account that yesterday Freedom received a correspondent account in The Bank of New York Mellon and positive auditor's reports, including those on controversial issues with the SEC, which are definitely positive signals, as BoNY is known for its compliance. Thanks to this, Freedom will be able to attract capital more actively both in the global West and in the U.S. in particular," explains independent financial analyst Andrei Chebotarev.

The day before it became known that Freedom Holding opened a direct correspondent account in U.S. dollars in The Bank of New York Mellon.

A Wells Notice is the mechanism by which the SEC preliminarily signals to a company that it has been subject to an examination. Issuing a notice means that the company can respond to the regulator - for example, by providing key facts or context that the examiners may have missed - before the SEC decides to take further action.

By the time the SEC staff issues a notice, it has typically already spent 12 to 18 months vetting the company and has collected a significant portion of the recommendations for enforcement action, writes Astraea Law founder and digital asset attorney Shante Eliaszadeh.

"This does not mean that the case is knowingly lost - I have seen cases where Wells' notices have been withdrawn after persuasively drafted opinions," she notes. According to the lawyer, Wells' response opens up strategic opportunities for the company: to present its position in the most favorable light, to document the good faith of its actions and to identify weaknesses in the regulator's position.

Wells notices are not published by the regulator, and companies are not required to report receiving them. But in recent years, they have become more likely to voluntarily disclose this information to investors.

For example, in 2024, trading platform Robinhood Markets reported that the SEC had issued a Wells Notice regarding its cryptocurrency business. The regulator believed that trading in certain digital assets should be regulated under the Securities Act - which meant Robinhood had to register as a broker. Robinhood delisted some tokens even before the notice and challenged the SEC's position. In 2025, the regulator dropped its investigation without taking any action against the company.

The same year, the SEC withdrew a lawsuit against Coinbase, the largest publicly traded crypto exchange in the United States. The regulator accused it of running an unregistered securities exchange, to which it equated cryptocurrencies. However, the SEC later recognized the uncertainty in regulating the sector. The Coinbase case was closed without a single fine.

In total, more than 300 companies received Wells notices from the SEC in 2025. In general, the practice of recent years shows that the regulator's position is softening. In 2025, it issued the lowest number of notices to companies in a decade, according to a survey by law firm Paul Weiss. Compared to 2024, there were 27% fewer notices, and 38% fewer notices compared to 2023. The regulator initiated only four lawsuits as a result of the inspections, the lowest number since 2013. The amount of monetary compensation also fell sharply - by 45% to $808 million, which was the lowest since 2012, lawyers calculated.

In 2025, the SEC announced reforms to the Wells procedure - companies will get a minimum of four weeks to respond instead of the previous two, and the regulator's staff will be required to provide enough information to understand their claims, including key investigation documents. This will allow companies to have more influence on the investigation at an early stage by seeking a waiver of enforcement action, say Alston & Bird lawyers Drew Roll and Paul Monnin. If a settlement is required, eliminating the information asymmetry between the company and the regulator will allow a fair outcome to be reached more quickly and at lower cost, they wrote.

This article was AI-translated and verified by a human editor