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On May 18, 2026, the SEC adopted a final rule eliminating its longstanding requirement that parties settling SEC enforcement actions agree not to publicly deny the Commission’s allegations, otherwise known as the “no-deny” portion of its longstanding “no-admit, no-deny” settlement policy. The SEC’s rescission of Rule 202.5(e) of its rules of informal procedure (a.k.a. the “no-deny” rule) removes a common settlement friction point and may expand the range of resolutions available to the SEC and settling parties.
Background
Since 1972, the SEC has conditioned settlement of its enforcement actions upon defendants’/respondents’ agreements not to publicly deny the allegations set forth in the SEC’s complaint or administrative order. In recent years, the policy has been repeatedly challenged and criticized, including on First Amendment and APA grounds. Appellate courts have stated differing views on the policy, and certain circuits have upheld the policy’s constitutionality.
SEC’s Rationale for Rescinding Rule 202.5(e)
The SEC’s analysis, set forth in its final rule, reflects a shift in the Commission’s view of the no-deny policy’s utility and highlights five considerations supporting rescission:
1. Limited Impact on the Public Interest
At the outset of its final ruling, the SEC revisited the foundational premise of Rule 202.5(e): that prohibiting post-settlement denials is necessary to avoid creating the impression that sanctions are imposed where misconduct did not occur. The SEC determined that post-settlement denials have only a minimal negative impact on the public interest.
The SEC explained that a defendant’s denial may create some tension with the Commission’s allegations, but that concern arises only because settlement forecloses the SEC’s opportunity to prove its case in court.
The SEC also recognized that the policy itself may have contributed to the opposite concern — creating the impression that the SEC seeks to shield itself from criticism — which is inconsistent with the values associated with permitting criticism of government action.
2. Limited Benefits and Limited Practical Use
The SEC next emphasized that Rule 202.5(e) offered only a narrow back-end remedy (i.e., if a settling party later publicly denied the allegations, the SEC could seek vacatur of the consent judgment or reopening of an administrative proceeding). The Commission noted that it is not aware of any instance in which it pursued that remedy (or in which a court has reopened an enforcement action following a denial), and courts retain discretion to grant such relief, further limiting the remedy’s utility.
The SEC also identified a built-in temporal disincentive: as time passes, evidence degrades and reopening becomes less likely, which makes the remedy progressively less practical.
3. Technological Developments (Including Social Media) Complicate Enforcement of the Rule
The SEC explained that changes in communications technology — particularly social media — have made the policy more difficult to administer. The line between public and private statements is not always clear, and settlement language can be read to sweep more broadly than Rule 202.5(e) itself (including “indirect” denials or statements “creating the impression” that allegations lack a factual basis). The Commission chose to rescind the rule rather than attempt to police those boundaries.
4. Alignment with Other Federal Agencies
The SEC noted that rescission aligns the Commission with most federal agencies — including the Department of Justice — that do not impose a comparable no-deny policy and concluded that eliminating Rule 202.5(e) does not harm the public interest.
5. Greater Settlement Flexibility and More Efficient Enforcement Outcomes
Finally, the SEC emphasized the practical settlement impact: Rule 202.5(e) prevented parties from settling if they would not accept a continuing contractual restriction on future speech. Rescission removes that barrier and, according to the SEC, conserves resources, provides greater certainty, and may speed the return of money to injured investors (when feasible).
Retroactive Effect and Existing Settlements
Consistent with the rescission — and for the same reasons — the SEC confirmed that it will not enforce existing no-deny provisions in settlements already entered. If a settling party breaches such a provision, the SEC will not ask a court to vacate the settlement or reopen an adjudicatory proceeding.
Administrative Law Note (Notice-and-Comment/Effective Date)
The SEC concluded the rescission is exempt from APA notice-and-comment requirements because it constitutes a general statement of policy and relates solely to agency organization, procedure, or practice. The SEC also found good cause to make the rescission effective upon publication, reasoning that a delayed effective date may incentivize parties to delay settlement until the rescission becomes effective.
Conclusion
The Commission’s rescission of Rule 202.5(e) changes the SEC settlement landscape. Parties may now settle SEC enforcement matters without agreeing to refrain from public denials, and the SEC will not enforce legacy no-deny provisions to which respondents/defendants have already agreed. Market participants should consider how this shift may affect settlement strategy, public communications, and parallel litigation risk in current and future SEC matters.