SEC Rescinds “No-Deny” Policy

Background of the SEC’s Rescission of the “No-Deny” Policy

Critics have long argued that the SEC’s no-deny policy repressed speech and reduced transparency. Now that policy is gone. As a result of the rescission, settling defendants will no longer be required to agree not to publicly deny the allegations in the complaint or administrative order as a condition of settlement and will be free to publicly comment on or contest the allegations following resolution.

The Commission reasoned that the negative effect on the public interest from post-settlement denials “may be minimal,” and that the policy itself “may create the incorrect impression that the Commission is trying to shield itself from criticism.”

The Commission provided four additional reasons for the rescission: (1) the rule was never actually enforced because the sole remedy—vacating a settlement—was never sought; (2) the rise of social media has blurred the line between public and private statements, challenging implementation; (3) the change aligns the SEC with the majority of federal agencies that lack a comparable restriction; and (4) rescinding the rule gives the Commission greater flexibility to resolve cases and return money to investors more quickly.

Notably, the recission will have an immediate effect. The Commission will not enforce existing no-deny provisions in prior settlements and will take no action to vacate a settlement or reopen a proceeding based on a breach. However, it is important to note that the underlying consent judgments and administrative orders remain in place—the Commission is simply declining to exercise its contractual remedy.

In addition, the rescission does not affect the Commission’s “discretion to settle with defendants who decline to admit facts or liability” or “negotiate for admissions as part of a settlement.”

Practical Implications

• Charging Documents. Enforcement staff may be less willing to soften allegations if the defendant can publicly deny them, potentially resulting in more aggressive language in administrative orders and consent decrees.
• Public Statements. Settling defendants may now publicly deny allegations without risk of the Commission seeking to reopen the matter, though such statements remain subject to antifraud liability, defamation risk, and potential use by adverse parties.
• Public Denials Carry Risk. Denials can be used by state regulators, plaintiffs’ lawyers, and shareholders. Denying specific allegations may be treated as an implicit admission that others are true, and forward-looking statements may invite fresh scrutiny.
• Settlement Dynamics. Parties may be more inclined to settle with the SEC because without the effective “gag order” imposed by Rule 202.5(e), they have more flexibility to mitigate reputational harm and follow-on litigation exposure through public disclosure strategies.
• Parallel Criminal Proceedings. Parties facing parallel criminal exposure may see limited effect on terms available in an SEC settlement as the Commission expressly reserved the ability to “continue to address admissions and denials in settlement agreements to ensure consistency” where the defendant has pleaded or is expected to plead guilty, or has been convicted.

Key Takeaways

The rescission of Rule 202.5(e) marks a significant shift in the SEC’s enforcement posture—one that expands the expressive freedom of settling defendants while introducing new strategic complexities for all parties. Practitioners should reassess existing settlement playbooks in light of the changed landscape, weighing the reputational benefits of public denial against the litigation risks that such statements may invite. Companies and individuals currently in settlement negotiations or subject to prior consent orders should consult counsel promptly to evaluate their options. While the full consequences of the rescission will unfold over time as market participants, courts, and fellow regulators respond, one thing is clear: the calculus surrounding SEC settlements has fundamentally changed.