For more than 50 years, the SEC’s settlement playbook came with a built-in gag clause: companies settling an SEC enforcement action had to promise not to publicly deny the allegations, or there was no deal. Chairman Paul S. Atkins changed that yesterday, rescinding Rule 202.5(e) effective upon Federal Register publication.
The rule required defendants to sign away their right to public denial as a condition of settlement. Rescinding it puts the SEC in line with, per the agency’s own release, “the overwhelming majority of federal agencies” that don’t have a similar requirement. The SEC also confirmed it won’t enforce existing no-deny clauses already in prior settlements, and won’t seek to reopen any proceeding over past violations of those clauses.
One thing doesn’t change: the SEC can still negotiate for admissions, and defendants still don’t have to admit wrongdoing to settle. The rescission is narrower than it sounds — it’s about speech rights, not culpability findings.
The real shift is in the PR battle inside enforcement negotiations. Companies and executives settling with the SEC can now push back publicly, contest the narrative, and run counter-messaging while keeping the deal intact. That changes how defense counsel price the value of settlement, especially for high-profile cases where reputational damage, not the dollar fine, is the real exposure.
Commissioner Hester Peirce, a long-standing critic of the no-deny rule, called the result “a substantial step forward.” The rescission takes effect upon Federal Register publication.
— Marcus Webb