On May 18, 2026, the Securities and Exchange Commission (“SEC”) rescinded a long-standing policy that prohibited defendants in enforcement settlements with the SEC from publicly denying the allegations brought against them, and simultaneously announced that it will not seek to enforce any similar “no-deny” provisions in existing settlement agreements.
1 This is a substantial change in practice that could have major impacts on both how the SEC pursues cases and how defendants weigh the pros and cons of SEC settlements.
The SEC’s ‘no-deny’ policy was first codified in 1972 in SEC Rule 202.5(e), which lays out enforcement activities as part of the agency’s informal rules of procedure.
2 And it generally worked hand-in-hand with the SEC policy that, in most cases, a defendant would also not be required to admit any alleged violations as part of a given settlement—thus leading to the “no admit/no deny” framing that has come to typify SEC settlements. Historically, if a defendant publicly denied allegations following a settlement, the SEC could ask the court to vacate the settlement and reopen the matter (or, in the case of a settlement resolved through an administrative proceeding, to reopen such proceedings itself).
However, in rescinding the policy, the Commission stated that it was not aware of any occasion where the agency had actually sought to reopen an action because a defendant violated the “no-deny” term. In part given that history, the Commission stated that it has now decided that removing the “no-deny” condition on settlements better serves the public interest and the agency itself. The Commission emphasized that it recognizes the importance of allowing criticism of the government and believes any negative effects of public denials will be minimal. And it noted that removing the rule aligns the SEC with the majority of federal agencies that do not have a similar rule.
Notably, while the rule had been subject to criticism over the years for restricting free speech, it had never been ruled unconstitutional. In fact, in recent years, the Second Circuit in
SEC v. Romeril, 15 F.4th 166 (2d Cir. 2021), and the Ninth Circuit in
Powell v. SEC, 149 F.4th 1029 (9th Cir. 2025), both upheld SEC Rule 202.5(e) in the face of challenges. In its reasoning, the Ninth Circuit explained that the law has “long regarded the voluntary relinquishment of constitutional rights as permissible[.]”
Powell v. SEC, 149 F.4th 1029, 1038 (9th Cir. 2025). And defendants and market participants more broadly have generally become accustomed to the rules—particularly as it allowed for certain exceptions (such as the ability for defendants to deny the same facts or legal positions in parallel civil actions where the SEC was not a party).
Going forward, defendants in SEC proceedings will face a very different calculus when deciding whether to settle a given matter. For example, knowing that one can publicly challenge the SEC’s claims following a settlement may make defendants more willing to settle, but it may also make the SEC more willing to pursue litigation. It will likely take a number of years for the impact to be fully understood.
Footnotes
1.
https://www.sec.gov/files/rules/final/2026/33-11417.pdf
2. 17 CFR § 202.5
