SEC Rescinds 54-year-old ‘no-deny’ Settlement Policy

The Securities and Exchange Commission’s (SEC or Commission) “no-deny” settlement policy has been rescinded. Effective May 21, 2026, settling defendants are no longer prohibited from publicly denying the SEC’s allegations. This change, which we have long suggested, eliminates a significant and, as we have previously argued, constitutionally questionable restriction on the speech of settling defendants.

Background: The no-deny policy

Since 1972, the SEC has maintained a policy, codified in Rule 202.5(e), that allowed individuals and entities to settle civil enforcement proceedings without admitting or denying the SEC’s allegations against them only if the defendant or respondent also agreed not to publicly deny the allegations in the complaint or administrative order. 

“The no-deny provisions that appear in settlements pursuant to this policy are usually paired with a statement that a defendant is not admitting the allegations (or liability).”¹ Defendants and respondents usually agree “not to make ‘any public statement denying, directly or indirectly, any allegation in the complaint or creating the impression that the complaint is without factual basis.’”²

The new rule: Rescission of Rule 202.5(e)

Effective May 21, 2026, the SEC rescinded Rule 202.5(e). In light of the rescission, the Commission also announced that it will not enforce existing no-deny provisions in settlements that have already been entered. 

“To the extent a settling defendant has previously agreed to a no-deny provision as part of a consent judgment entered in Federal court or administrative adjudicative order before the Commission, and the defendant then breaches the terms of that no-deny provision, the Commission will not seek or attempt to reopen an otherwise settled case.”³ Furthermore, the Commission will take no action to ask a district court to vacate the settlement or to reopen an adjudicatory proceeding in the event of a breach of an existing no-deny provision.

As such, the new policy applies both prospectively and retroactively by eliminating the no-deny requirement from all future settlements and releasing all existing settling defendants from their contractual no-deny obligations.

Context: Our prior coverage

This development brings to a close a legal saga that our firm has tracked closely.

In an August 2022 New York Law Journal article, we reported on the Fifth Circuit’s decision in SEC v. Novinger and the Supreme Court’s denial of certiorari in SEC v. Romeril, the most significant challenges to the no-deny policy at that time. We noted that while long-standing SEC policy allowed defendants to settle civil actions without admitting or denying wrongdoing, it required that they agree not to publicly deny the SEC’s allegations. While no attempt to undo existing consent decree provisions had yet succeeded, courts had nonetheless expressed concern as to the requirement’s validity. We observed that it remained to be seen whether litigants could formulate a more attractive procedural posture to litigate these claims and whether the SEC would reevaluate its rule in light of these criticisms and concerns. 

In contrast, others, such as Judge Jed S. Rakoff, argued in the past for more admissions. Rakoff criticized the no-deny policy for “allowing defendants to enter into Consent Judgments without admitting or denying the underlying allegations,” thus “[depriving] the Court of even the most minimal assurance that the substantial injunctive relief it is being asked to impose has any basis in fact.”⁴

We also noted the broader policy concern: One can justifiably ask why the SEC should not just have the last word, with its settled order or complaint and expansive litigation release, but the only word publicly addressing the facts on what are often matters of public importance. 

In a more recent article on the Ninth Circuit’s 2025 decision in Powell v. SEC, we reported on the latest, and what has proven to be the final, unsuccessful challenge to the rule. The Ninth Circuit rejected a facial challenge to the SEC’s refusal to amend Rule 202.5(e), in which petitioners argued that the provision constitutes an unconstitutional gag order, the most recent in a series of so far unsuccessful assaults on the controversial 1972 rule. However, we noted reasons for optimism among those opposed to the policy: While the court rejected the petitioners’ challenge, it did so “on necessarily narrow grounds,” holding that the rule is not per se unconstitutional but leaving open the possibility of factual, as-applied constitutional challenges, noting that Rule 202.5(e) has the potential to impermissibly intrude on First Amendment rights. 

We also highlighted the significance of Commissioner Hester Peirce’s dissent from the Commission’s 2024 denial of the rulemaking petition, quoting her statement that “[o]ur prohibition on denials prevents the American public from ever hearing criticisms that might otherwise be lodged against the government, let alone assessing their credibility. The policy of denying defendants the right to criticize publicly a settlement after it is signed is unnecessary, undermines regulatory integrity, and raises First Amendment concerns.” We observed that Peirce’s dissent may be indicative of a potential shift on the Commission itself, especially given recent changes in the Commission’s composition. That prediction has now come to fruition.

The SEC’s rationale for rescission

In the final rule, the Commission acknowledged that the no-deny policy could potentially create the false impression that the Commission was trying to shield itself from criticism, “even though the main thrust of the policy was to allow the Commission, in the wake of a denial, to ask for the ability to test its allegations and legal theories.”⁵ The Commission also offered four additional reasons for rescinding Rule 202.5(e):

1. The policy’s remedy has proven to be limited 

Under Rule 202.5(e), if a settling defendant who agreed to a no-deny provision then publicly denied the allegations, the Commission’s only recourse was to ask a district court to vacate the settlement or to reopen an adjudicatory proceeding. However, the final rule rescinding Rule 202.5(e) noted that “there is no known instance of the Commission exercising this option for administrative proceedings in the wake of a breach since Rule 202.5(e) was adopted, and the Commission is not aware of any instances in which the Commission asked a court to vacate a settlement in the wake of a breach, or that a court has agreed to such a request and reopened an enforcement action in the wake of a public denial.”⁶ Moreover, the passage of time is another disincentive to invoking the remedy. As time passes between the settlement and a hypothetical denial, the Commission grows less likely to reopen a case.

2. Technological change has made enforcement impractical

As technology changes, particularly in the way we use social media to communicate, the policy becomes more challenging to implement. For example, the rescission recognizes the difficulty in distinguishing public and private social media interactions. How would the SEC enforce the policy, which covers public denials of allegations, in a situation with a denial made through “social media interactions that are intended for a private, self-selected community, but nonetheless are visible to dozens of individuals”?⁷

3. The change aligns with other federal agencies

Eliminating Rule 202.5(e) aligns the Commission with other federal agencies that do not have a similar rule. 

4. The Commission believes the change offers greater flexibility in settlements

Rescinding Rule 202.5(e) gives the Commission more flexibility in settling enforcement actions. According to the Commission, now that it is no longer barred from accepting settlements that lack a no-deny provision, the Commission can better structure settlements, conserving resources, providing certainty and potentially accelerating the return of money to injured investors. 

What this means for settling defendants 

The practical implications of this rescission are significant:

• Existing settlements’ no-deny provisions are no longer enforceable as a practical matter. The Commission has expressly stated that it will take no action to ask a district court to vacate the settlement or to reopen an adjudicatory proceeding in the event of a breach of an existing no-deny provision. 
• Future settlements need not include any prohibition on public denial of the SEC’s allegations. Defendants retain the ability to dispute the factual basis of the SEC’s claims in the court of public opinion, even while agreeing to a settlement.
• The no-admit/no-deny framework as a whole has not been eliminated. The rescission of Rule 202.5(e) does not affect the SEC’s discretion to negotiate for admissions as part of a settlement. 
• While no longer subject to the no-deny restriction, respondents in parallel criminal proceedings will have to consider the effect of all statements and settlements. Where a defendant has pleaded, or is expected to plead, guilty or been convicted, the Commission may continue to address admissions and denials in expanded settlement agreements to ensure consistency between the Commission settlement and the resolution of the parallel matter.⁸
• The rescission of Rule 202.5(e), and the subsequent anticipation of public denials, may cause the SEC to act more aggressively and make more specific allegations. To the extent the Enforcement Staff anticipates a defendant will publicly deny wrongdoing, the staff may be incentivized to lay out in greater detail the evidence it believes will support the charges.
• Public denials carry some risk. Entities will need to consider the effect of such denials in parallel regulatory investigations and private civil litigation. In addition, denying some allegations and not others could be taken as an implicit admission. 

Conclusion 

The SEC’s rescission of Rule 202.5(e) represents one of the most significant changes to the enforcement settlement practice in over half a century. It vindicates years of criticism from courts, litigants, academics and commissioners themselves that the no-deny policy imposed an unjustifiable restraint on the speech of settling defendants. The rule is gone, and the gag order has been lifted.

Following the SEC’s announcement, on June 3, 2026, the Commodity Futures Trading Commission rescinded its own policy of not accepting settlement offers in which defendants deny the allegations against them.

Footnotes

1. Rescission of Policy Regarding Denials in Settlements of Enforcement Actions, Rel. No. 34-105504 (May 18, 2026)

2. Rescission of Policy Regarding Denials in Settlements of Enforcement Actions, Rel. No. 34-105504 (May 18, 2026) (citing Powell v. SEC, 149 F.4th 1029, 1045 (9th Cir. 2025)) 

3. Rescission of Policy Regarding Denials in Settlements of Enforcement Actions, Rel. No. 34-105504 (May 18, 2026)

4. U.S. S.E.C. v. Citigroup Glob. Markets Inc., 827 F. Supp. 2d 328, 332 (S.D.N.Y. 2011), vacated and remanded, 752 F.3d 285 (2d Cir. 2014)

5. Rescission of Policy Regarding Denials in Settlements of Enforcement Actions, Rel. No. 34-105504 (May 18, 2026)

6. Rescission of Policy Regarding Denials in Settlements of Enforcement Actions, Rel. No. 34-105504 (May 18, 2026)

7. Rescission of Policy Regarding Denials in Settlements of Enforcement Actions, Rel. No. 34-105504 (May 18, 2026)

8. Rescission of Policy Regarding Denials in Settlements of Enforcement Actions, Rel. No. 34-105504 (May 18, 2026)

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