For fifty-four years, in virtually every settlement with the Securities and Exchange Commission (SEC) in which a sanction was imposed, the settling defendant or respondent agreed that as a condition of the settlement the defendant/respondent would not publicly deny the allegations in the SEC’s complaint filed in federal court or in an administrative order. Under this policy, codified in Rule 202.5(e) of the SEC’s Informal Rules of Practice, the settling defendant/respondent would not be required to admit the truth of the SEC’s allegations, but there could be no public denial either, under the threat that the SEC would seek to vacate the settlement and resume its investigation or litigation. Settling defendants and their counsel disdained the no admit/no deny requirement (sometimes disparagingly called a “gag rule”), but it was the necessary price to pay in order to make peace with the SEC.
But no more. On May 18, 2026, the SEC formally rescinded this long-standing policy with barely a fare-thee-well. In a prepared statement, SEC Chair Paul Atkins stated “I am pleased that we are rescinding the no-deny policy today. Speech critical of the government is an important part of the American tradition. This rescission ends the policy prohibiting such criticism by settling defendants.”
Further, in light of the rescission, the SEC stated that it will not enforce existing no admit/no deny provisions in prior settlements. “In the event of a breach of an existing no-deny provision, the Commission will take no action to ask a district court to vacate a settlement (or to reopen an adjudicatory proceeding) in connection with the terms of the settlement agreement.”
Origins of the No Admit/No Deny Policy
The “no admit/no deny” policy dates back to 1972, almost simultaneous with the creation of the SEC’s Division of Enforcement and an effort to formalize enforcement procedures. SEC officials were frustrated that defendants, some of whom had substantial legal exposure and settled precisely to avoid even harsher penalties, would immediately declare after the settlement was executed that they were actually innocent and settled only to avoid the expense and distraction of litigation. Thus, the SEC settled on a compromise: the SEC could obtain injunctive relief, disgorgement, and civil penalties without protracted litigation; defendants could resolve matters without making admissions that would be devastating in parallel private securities litigation or other governmental actions, but they would not be permitted to publicly deny the allegations.
Criticism of No Admit/No Deny Policy
The no admit/no deny policy faced criticism from both the left and the right. On the left, in the aftermath of the 2008 financial crisis, there were protests about letting malefactors “off the hook” by not requiring admissions of misconduct. See SEC v. Citigroup Glob. Markets Inc., 827 F. Supp. 2d 328 (S.D.N.Y. 2011) (concluding that a consent decree that did not require defendant to admit SEC’s allegations was not fair, reasonable or in the public interest), vacated and remanded, 752 F.3d 285 (2d Cir. 2014). Thus, in 2012, the SEC announced that it would no longer permit “no admit/no deny” resolutions where a defendant had already admitted facts in a parallel criminal proceeding. The bigger shift came in 2013, when then-Chair Mary Jo White announced that, in cases involving particularly egregious conduct, harm to large numbers of investors, or obstruction of an investigation, the Division of Enforcement would seek admissions as a condition of settlement. This practice was narrowly applied —used in fewer than two dozen matters per year. The first Trump Administration abandoned this policy, but it was resumed in the Biden Administration, where settlements in certain kinds of cases -- off-channel communications sweeps, certain market manipulation cases, and a handful of high-profile auditor and gatekeeper matters --- all featured admissions language.
Coming from a different direction, conservative legal scholars, the defense bar and the business community asserted that the no admit/no deny policy violated a defendant’s First Amendment free speech rights. Every Court of Appeals to consider the issue rejected such claims. See SEC v. Romeril, 15 F.4th 166 (2d Cir. 2021); Powell v. SEC, 149 F.4th 1029 (9th Cir. 2025). The Supreme Court declined to take up the Romeril case and a petition in the Powell case is pending before the Supreme Court. Of course, that action presumably has been mooted by the SEC’s rescission decision.
Criticism of the no admit/no deny policy also was grounded on practical concerns. A settling defendant would face a quandary in discussing an SEC settlement with partners, clients, investors and other regulators. What was private and what was public? What could the defendant state without the risk that the SEC would assert that the policy had been violated and seek to vacate the settlement? Because the SEC staff would not provide guidance, defendants and their counsel could only proceed at their own risk.
Going Forward
The future of SEC settlements has now become more unpredictable. Perhaps nothing will change. On the other hand, the SEC staff may still object to particular statements by a settling defendant in particular situations. The ability to publicly deny the SEC’s allegations may encourage defendants to agree to an earlier settlement, which will conserve resources both for the SEC and the defendant. On the other hand, the SEC may demand more onerous settlement terms if a defendant insists on publicly denying the SEC’s allegations. Further, a future SEC may reinstate the no admit/no deny policy.
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For more information regarding Alto Litigation’s litigation practice, please contact one of Alto Litigation’s partners: Bahram Seyedin-Noor, Bryan Ketroser, Joshua Korr, or Kevin O’Brien.
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