(Article from Registered Funds Regulatory Update, July 2026)
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On May 18, 2026, the SEC formally rescinded its policy—commonly referred to as the “no-deny” settlement policy—codified in Rule 202.5(e) of its informal rules of procedures, which for decades had prohibited companies and individuals settling enforcement actions from publicly denying the agency’s allegations. Critics had characterized the policy as a “gag rule” because it effectively prevented settling parties from defending their reputations after paying fines or accepting other sanctions. Going forward, parties that settle with the SEC may publicly dispute the agency’s allegations without risking rescission of their settlements.
Notably, the SEC also announced that it will not enforce existing no-deny provisions in previously executed settlements, thereby permitting parties who settled in the past to speak publicly about their cases. SEC Chair Atkins characterized the decision in constitutional terms, stating that “[s]peech critical of the government is an important part of the American tradition. This rescission ends the policy prohibiting such criticism by settling defendants.”
The SEC retains full authority to require a settling party to admit wrongdoing as a condition of settlement, particularly in serious matters or those involving parallel criminal proceedings. The rescission simply eliminates the blanket prohibition on public denials and does not constrain the SEC’s ability to seek admissions or negotiate other settlement terms.
SEC Press Release, SEC Rescinds Policy Regarding Denials of Settlements in Enforcement Actions (May 18, 2026), available at: https://www.sec.gov/newsroom/press-releases/2026-45-sec-rescinds-policy-regarding-denials-settlements-enforcement-actions.