The U.S. Securities and Exchange Commission rescinded a rule last month, ending its longstanding practice of conditioning settlements in enforcement actions on a defendant’s agreement not to publicly deny the agency’s allegations. As a result, settling parties may now resolve SEC actions without undertaking a no-deny obligation, and the commission has stated that it will not enforce existing no-deny provisions or seek to reopen cases based on alleged breaches of those provisions.

The SEC framed the change to rule 202.5(e) as a practical and policy-driven adjustment: it aligns SEC practice with most other federal agencies, reflects the agency’s view that post-settlement denials may have limited public-interest consequences, and removes a policy that could be perceived as insulating the commission from criticism.

The change became effective May 21, 2026.

The no-deny policy was adopted in 1972 and the SEC has spurned efforts to get rid of it in the recent past, arguing that no-denial settlements allow the commission its day in court should those who violate the nation's securities laws publicly disparage the claims the SEC has brought against them.

The policy stated that defendants who settled with the SEC could not deny the allegations against them, but that they also did not have to admit to them either. It has been heavily criticized in recent years by those who have settled claims brought by the agency, and who have argued that the rule prohibiting public denial of the allegations was an unconstitutional restriction on free speech rights. However, rulings from the Federal Circuit Court of Appeals in 2022 and the Ninth Circuit Court of Appeals in 2024 held that the policy is constitutional.

"To the extent a settling defendant has previously agreed to a no-deny provision as part of a consent judgment entered in federal court or administrative adjudicative order before the commission, and the defendant then breaches the terms of that no-deny provision, the commission will not seek or attempt to reopen an otherwise settled case," according to the SEC’s final rule rescinding the policy. In light of the rescission, however, the agency said it will not continue enforcing current no-deny provisions.

Critically, the rescission does not alter the SEC’s separate practice regarding admissions. The agency still generally may settle on a neither-admit-nor-deny basis, but it retains discretion to require admissions where it deems appropriate.

For companies, the principal implications include:

• Respondents and defendants should have greater latitude in negotiating settlement-related communications, including characterizing or disputing the SEC’s allegations publicly, but these parameters should be detailed as part of the terms of the settlement documents and adhere to other applicable legal restrictions.
   
• The elimination of the no-deny requirement may reduce one juggernaut in settlement negotiations, increasing the range of cases that can be resolved without litigation.
   
• Because the SEC will not enforce legacy no-deny provisions, parties operating under prior settlements may have the opportunity to comment on past settlements, but should weigh doing so carefully. Companies should consider partnering with legal counsel to review the full settlement package and any parallel obligations before making public statements.
   
• Although rescinding the rule may be read as pro-defendant, it does not foreclose the SEC from demanding admissions in selected cases. Parties should not assume that this affects the SEC’s settlement leverage overall. Companies and their legal teams should reassess settlement advice, public-relations planning, and collateral-litigation risk for clients looking to negotiate. Post-settlement statements could bear on private civil suits, regulatory follow-on proceedings, insurance positions, or reputational strategy and require careful considerations.

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