For decades, settling with the U.S. Securities and Exchange Commission (SEC) came with an unusual requirement: silence. Under Rule 202.5(e) of the SEC’s informal procedures, defendants who settled SEC enforcement actions were prohibited from publicly denying the agency’s allegations. On May 18, 2026, the SEC rescinded that policy, closing a chapter that had drawn criticism from judges, commissioners, and defense practitioners alike.
The No-Deny Policy
For many parties caught in an SEC investigation or enforcement action, settlement can often pose a practical dilemma: settle on the agency’s terms or endure financially crippling litigation. The SEC’s no-deny rule compounded this bind, as parties who settled were permanently barred from publicly disputing the very allegations they never had a meaningful opportunity to contest. Fifth Circuit Judge Edith Jones put it bluntly: the SEC’s policy effectively told settling parties to “‘[h]old your tongue, and don’t say anything truthful — ever’ — or get bankrupted by having to continue litigating.” SEC v. Novinger, 40 F.4th 297, 308 (5th Cir. 2022) (Jones, J., concurring).
Critics of the no-deny policy also included current SEC Commissioner Hester Peirce. In 2024, she dissented from the denial of a petition to amend the rule. In Commissioner Peirce’s view, “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.” Additionally, the commissioner noted that for “most individuals, and even for many well-resourced corporate defendants, the time, expense, and difficulty of litigating against the federal government makes settling the only economically viable option.” Viewed in this light, the “choice” to settle may not be a genuine one.
Nevertheless, courts evaluating challenges to the no-deny policy, including the Ninth Circuit as recently as 2025, relied heavily on the principle that constitutional rights may be waived voluntarily. See Powell v. SEC, 149 F.4th 1029, 1038 (9th Cir. 2025). The Powell court concluded that a facial challenge to the no-deny policy failed — because First Amendment rights could be waived as part of a settlement — but the court suggested it might reach a different result in an as-applied challenge, depending on the facts in the record.
Ultimately, despite several attempts, no judicial challenge to the no-deny policy ever succeeded on the merits.
Rescission of the Policy
What litigation could not accomplish, regulatory policy finally did. In the press release announcing rescission of the no-deny policy, SEC Chairman Paul S. Atkins stated he was “pleased that we are rescinding the no-deny policy” because “[s]peech critical of the government is an important part of the American tradition.” The rescission thus ended the SEC’s policy “prohibiting such criticism by settling defendants.”
The SEC further announced that not only would rescission of the policy apply going forward, but the agency also would “not enforce existing no-deny provisions that have already been entered” — meaning defendants who previously settled would face no SEC action for publicly disputing the allegations against them. The SEC additionally stated that rescinding the no-deny policy would not affect its practice of generally not requiring settling parties to admit the SEC’s allegations.
Takeaways
The immediate implications for settling parties appear favorable. A public company, for example, may now settle an SEC enforcement action and simultaneously issue a statement disagreeing with the agency’s allegations, asserting it does not believe it violated the securities laws, and noting it settled solely to avoid the cost and distraction of litigation. For purposes of investor relations and fending off potential litigation by private plaintiffs, the ability to make such statements could be significant. (Of course, any party making such statements should ensure they are true, so as not to create a new problem.)
The effect of the policy rescission on the SEC’s enforcement program seems harder to forecast. While some had predicted the end of the no-deny policy might involve more settlements with admissions, the SEC’s press release suggests otherwise. Perhaps a more realistic consequence is that the SEC’s charging documents (complaints and administrative orders) will become more detailed. For example, when a party settles with the SEC at the end of an investigation, the staff may sometimes omit certain allegations from the charging document because they seem unnecessary in light of the resolution. Now, however, with settling parties free to deny or otherwise criticize the SEC’s allegations, perhaps the staff will feel emboldened to allege more facts than they otherwise might. Time will tell.