A rescission of the no-deny policy would change the settlement calculus for nearly every SEC enforcement matter.
For respondents and defendants, the change would create room to settle without surrendering the ability to speak publicly about the case. That matters most in cases where reputational consequences are as important as monetary penalties. Individuals, investment advisers, broker-dealers, public companies, crypto firms, and executives often settle because litigation is costly, distracting, and risky. But under the current framework, settlement comes with a speech restriction that can leave the SEC’s version of events as the only permissible public account.
Commissioner Hester Peirce made that point in her January 2024 dissent from the Commission’s denial of a rulemaking petition seeking to amend Rule 202.5(e). She criticized the policy as a “so-called gag rule” and explained that the settlement language requires defendants not only to refrain from denying the allegations, but also to withdraw papers that deny them and risk reopening the case if they later breach the settlement condition.
The opposing view, reflected in then-Chair Gary Gensler’s January 2024 statement supporting the denial of that petition, is that the policy protects the integrity of SEC settlements. Gensler argued that allowing defendants to settle while publicly denying wrongdoing would undermine the value of the factual recitation in settled orders and reduce the deterrent message to the market.
The pending final rule appears to put that debate back on the table, this time with the Commission moving toward rescission rather than mere reconsideration.
Source: SEC Moves Toward Rescinding “No-Deny” Settlement Policy — Anderson Insights