SEC Restores Practice Of Considering Settlement Offers Conditioned On The Issuance Of Collateral Consequence Waivers

On September 26, 2025, Securities and Exchange Commission (“SEC” or the “Commission”) Chairman Paul Atkins issued a Statement on Simultaneous Commission Consideration of Settlement Offers and Related Requests (the “Public Statement”), announcing a significant policy reversal and return to prior practice. Going forward, the Commission will again consider settlement offers made in enforcement actions alongside contemporaneous requests for waivers from automatic disqualifications and other collateral consequences. This change will be a relief to companies facing SEC enforcement actions that might trigger automatic disqualifications under applicable SEC rules; as without such simultaneous consideration, companies can be forced to make settlement decisions without complete visibility as to the settlement’s full impact. 

Collateral Consequences Of SEC Enforcement Actions

Successful SEC enforcement can automatically trigger significant collateral consequences for the settling entity, which can extend far beyond the scope of any sanctions imposed in the enforcement action itself. These collateral consequences can include:

• loss of well-known seasoned issuer status, which would prevent companies from accessing the public capital markets without SEC review;
• disqualification under Section 9(a) of the Investment Company Act of 1940, which bars the affected entity and its affiliates from serving as an investment adviser, depositor, or principal underwriter of certain registered investment companies;
• loss of statutory safe harbors under the Securities Act of 1933 (“Securities Act”), and the Securities Exchange Act of 1934, for forward-looking statements;
• loss of private offering exemptions provided by Regulations A and D under the Securities Act, which includes private placements under Rule 506(b);
• loss of the exemption from registration under the Securities Act for securities issued by certain small business investment companies and business development companies provided by Regulation E; and
• the prohibition on a registered investment adviser from receiving cash fees for solicitation under Rule 206(4)-3 of the Investment Advisers Act of 1940.

While these disqualifications and collateral consequences are generally triggered automatically upon the entry of judgments finding certain types of violations, the Commission has the ability to waive these disqualifications and collateral consequences when it is “necessary or appropriate in the public interest, and is consistent with the protection of investors.” See 15 U.S.C. § 78mm(a)(1). As reiterated by Chairman Atkins in the Public Statement, the SEC’s analysis regarding the appropriateness of a waiver “will continue to be rigorous and fair, and, in the context of determining whether the applicant has met the applicable standard for the waiver, will continue to seek what is best for the protection of investors, the markets, and the public, as well as the promotion of market integrity.”

Simultaneous Consideration Of Settlements And Waivers

Under the newly restored approach, settlement offers in enforcement actions that include contemporaneous waiver requests will be presented to the Commission for simultaneous consideration.

The Commission may still choose not to accept a simultaneous settlement and waiver request; but if the Commission accepts a settlement offer while denying a waiver request, the settling party will be promptly notified and have the opportunity to decide whether to proceed with the accepted portion of the settlement. 

A Return To Prior Practice

This announcement marks the third shift on this very issue in recent years. In 2019, as previously discussed in “In Significant Shift, SEC Will Consider Offers Of Settlement And Collateral Waiver Applications Together,” then-Chairman Jay Clayton introduced a formal policy of simultaneous consideration of settlements and waivers. Chairman Clayton noted that a segregated process “may not produce the best outcome for investors in all circumstances.”

In 2021, however, the SEC reversed course under then-Acting Chair Allison Herren Lee. As we discussed in “SEC Reverses Position On Accepting Settlement Offers Contingent On Waivers, Creating Once Again Risk That Defendants Will Be Forced To Make Settlement Decisions With Significant Uncertainty,” Acting Chair Lee announced that the Division of Enforcement would no longer recommend settlement offers conditioned on granting a waiver because of a concern that connecting the settlement negotiation and waiver request processes could create “structural conflicts or pressures” within the SEC.

Implications

This latest policy shift is sure to be a welcome one for companies and firms navigating SEC enforcement actions. By once again allowing simultaneous consideration of settlements and waivers, the SEC is both streamlining the process and providing much-needed clarity and predictability. Companies will now be able to evaluate the full scope of potential consequences before committing to a settlement, empowering them to make better-informed, strategic decisions.