The Securities and Exchange Commission has rescinded its long-standing SEC no-deny settlement policy, ending a rule that for more than 50 years generally required settling defendants and respondents to agree not to publicly deny the agency’s allegations after settling an enforcement action.
The policy, codified in Rule 202.5(e) of the SEC’s informal rules of procedure, applied when the Commission chose to settle an enforcement action in which a sanction was imposed. Under the now-rescinded policy, the SEC would not settle unless the settling party agreed not to publicly deny the allegations in the complaint or administrative order.
The change is significant for companies, officers, directors, investment advisers, broker-dealers, transfer agents, auditors, and other market participants involved in SEC enforcement investigations or settlement negotiations.
Bottom line: The SEC may now settle enforcement actions without requiring defendants to promise that they will not publicly deny the SEC’s allegations.
What Was the SEC’s No-Deny Policy?
The SEC’s no-deny policy was part of the agency’s traditional “no admit, no deny” settlement framework. In many SEC enforcement cases, a defendant or respondent could resolve the matter without admitting the SEC’s allegations. But the settling party also had to agree not to publicly deny those allegations after the settlement.
That created a practical tension. A party could settle without admitting liability, but it could not publicly say the SEC’s allegations were false or that the complaint lacked a factual basis. The result was a settlement structure that allowed silence, but not public denial.
For decades, this language appeared in many SEC consent judgments, administrative orders, and settlement papers. It was often treated as standard SEC settlement language, even though it raised recurring questions about speech, fairness, and collateral consequences.
Why Did the SEC Rescind Rule 202.5(e)?
According to the SEC, rescinding Rule 202.5(e) gives the Commission more flexibility in settling enforcement actions. The agency stated that the change may conserve resources, provide certainty, and potentially expedite the return of money to injured investors.
The Commission also noted that the policy may have created the incorrect impression that the SEC was trying to shield itself from criticism. SEC Chairman Paul S. Atkins stated that speech critical of the government is an important American tradition and that rescinding the rule ends the policy prohibiting such criticism by settling defendants.
The SEC further stated that there is no known instance of the Commission seeking to reopen an administrative or civil proceeding because a defendant or respondent violated a no-deny provision to which it had consented.
In other words, the SEC concluded that the public-interest benefit of the policy may have been limited, while the policy itself carried reputational and constitutional baggage.
What Happens to Existing SEC No-Deny Provisions?
The SEC’s announcement addressed existing no-deny provisions directly. In light of the rescission of Rule 202.5(e), the Commission stated that it will not enforce existing no-deny provisions that have already been entered.
If a settling party breaches an existing no-deny provision, the SEC stated that it will take no action to ask a district court to vacate a settlement or to reopen an adjudicatory proceeding based on the terms of the settlement agreement.
This is a major practical development for parties that previously settled SEC enforcement actions. While other settlement obligations remain in place, the SEC has announced that it will not use the no-deny provision as a basis to reopen the matter.
What Did Not Change: The SEC’s Admissions Policy
The rescission of Rule 202.5(e) does not mean that every SEC settlement will now include denials. It also does not prevent the SEC from negotiating for admissions in appropriate cases.
The Commission stated that it generally does not require settling defendants to admit allegations. The rescission does not affect the SEC’s practice related to admissions in settlements, its discretion to settle with defendants who decline to admit facts or liability, or its discretion to negotiate for admissions as part of a settlement.
Put differently: the no-deny policy is gone, but the SEC’s settlement leverage is not.
How the Change May Affect SEC Enforcement Settlements
The rescission of the SEC’s no-deny settlement policy may affect enforcement settlement negotiations in several ways:
- Settling parties may have more flexibility when making public statements after the settlement.
- Defendants may be better able to resolve matters economically while preserving the ability to dispute the SEC’s factual narrative.
- Settlement language may become more negotiated, especially where public statements, investor communications, or collateral litigation are important.
- Companies may need to revisit disclosure controls for statements made after SEC settlements.
- Counsel may place greater emphasis on consistency between the settlement order, public disclosures, press statements, and litigation strategy.
This change may be especially relevant in cases where defendants have disputed the SEC’s allegations but settled to avoid the cost, uncertainty, and distraction of litigation.
Impact on Public Companies and Regulated Entities
For public companies and regulated entities, SEC enforcement settlements often create consequences beyond the settlement order itself. A settlement may affect Form 8-K disclosure, risk factors, financing transactions, officer and director considerations, bad actor disqualification analysis, exchange or OTC market issues, insurance coverage, private litigation, and reputational strategy.
The end of the no-deny policy may give respondents more room to explain their position publicly. However, companies and individuals should not treat the policy change as permission to make careless public statements.
Even without Rule 202.5(e), public statements remain subject to the federal securities laws. Statements to investors, customers, counterparties, regulators, or the market can create separate liability if they are false, incomplete, or materially misleading.
Post-Settlement Communications Still Require Caution
The SEC’s rescission of Rule 202.5(e) may allow more speech, but it does not eliminate risk. Public companies and regulated entities should coordinate post-settlement communications with securities counsel before issuing press releases, investor updates, website statements, social media posts, or litigation-related comments.
A carefully drafted statement may explain the settlement, preserve the company’s position, and avoid unnecessary admissions. A poorly drafted statement may create new problems, including investor confusion, securities fraud allegations, or regulator scrutiny.
For issuers, the key is balance: do not overstate, do not mislead, and do not ignore the record created by the settlement documents.
Key Takeaways
- The SEC rescinded Rule 202.5(e), ending its long-standing no-deny settlement policy.
- The SEC may now settle enforcement actions without requiring defendants to agree not to publicly deny the agency’s allegations.
- The Commission stated that it will not enforce existing no-deny provisions already entered.
- The rescission does not change the SEC’s ability to negotiate admissions in appropriate settlements.
- Public companies and regulated entities should still carefully review post-settlement statements for securities law risk.
FAQ: SEC No-Deny Settlement Policy
What is the SEC’s no-deny settlement policy?
The SEC no-deny settlement policy was a rule that generally required settling defendants and respondents not to publicly deny the SEC’s allegations after settling an enforcement action involving sanctions.
What is SEC Rule 202.5(e)?
Rule 202.5(e) was the informal SEC rule that codified the agency’s no-deny settlement policy. The SEC rescinded that rule on May 18, 2026.
Can settling defendants now deny SEC allegations?
The SEC may now settle enforcement actions without requiring defendants to agree not to publicly deny the agency’s allegations. However, public statements must still comply with the securities laws and should not be false or misleading.
Does the SEC still require admissions in some settlements?
Yes. The rescission does not affect the SEC’s discretion to negotiate for admissions as part of a settlement or to settle with defendants who decline to admit facts or liability.
Will the SEC enforce old no-deny provisions?
The SEC stated that it will not enforce existing no-deny provisions that have already been entered and will not seek to vacate settlements or reopen proceedings based on a breach of those provisions.
The Takeaway
The SEC’s rescission of Rule 202.5(e) ends a more than 50-year-old settlement policy and changes the dynamics of SEC enforcement resolutions. The agency may now resolve enforcement actions without requiring settling parties to agree not to publicly deny the allegations.
That is an important shift for defendants, respondents, issuers, regulated entities, and securities counsel. But the practical message is not “say anything.” The practical message is “settle carefully, disclose accurately, and coordinate public communications with counsel.”
The no-deny policy may have gotten the boot, but securities law liability did not leave the building.
This securities law blog post is provided as a general informational service. If you have any questions about this article, Hamilton & Associates Law Group, P.A. is ready to help.
Since 1998, our Founder, Brenda Hamilton, has been a leading voice in corporate and securities law, representing both domestic and international clients across diverse industries and jurisdictions.
To speak with a Securities Attorney, please contact Brenda Hamilton at 200 E Palmetto Rd, Suite 103, Boca Raton, Florida, (561) 416-8956, or by email at [email protected].
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