SEC ‘Gag Orders’ at Risk as Skeptical Court Takes Up Challenge

The Securities and Exchange Commission’s controversial policy of silencing defendants who settle with the agency is under fire once again, as a federal appeals court wary of regulators weighs a constitutional challenge.

The SEC has long allowed parties to settle cases brought by the agency without admitting wrongdoing. But they must also promise not to publicly deny the SEC’s allegations—a policy that’s prompted pushback from SEC targets like Elon Musk and Mark Cuban.

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“I don’t know that there would be a more significant impact that I could imagine on SEC enforcement when it comes to getting cases resolved,” said Scott Mascianica, a Holland & Knight LLP partner and former SEC attorney.

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The “no-deny” policy—often referred to as the Gag Rule—will be back in the spotlight next month, when the US Court of Appeals for the Fifth Circuit hears arguments in a case challenging the policy. The challenge was brought by Christopher Novinger, a financial planner and radio host from Texas.

Source: SEC ‘Gag Orders’ at Risk as Skeptical Court Takes Up Challenge