SEC Ends Long-Standing No-Admit/No-Deny Policy

On May 18, 2026, the U.S. Securities and Exchange Commission (SEC or Commission) announced the rescission of its decades-long policy of requiring settling defendants/respondents to agree not to deny the allegations or findings contained within the Commission’s charging documents while, at the same time, generally not requiring the settling party to admit the wrongdoing.¹

In addition to bringing an end to this policy going forward, the Commission announced that it will not enforce existing no-admit/no-deny provisions that have already been entered.

Often referred to by the policy’s detractors as the “Gag Rule,” the no-admit/no-deny policy has been subject to regulatory and legal challenges, including a pending petition before the U.S. Supreme Court. Rather than wait for the policy’s fate to play out in the courts, the Commission decided to intervene and rescind the rule.

“Speech critical of the government is an important part of the American tradition. This recission ends the policy prohibiting such criticism by settling defendants,” SEC Chairman Paul S. Atkins said of the decision.²

History of the Rule

The SEC codified Rule 202.5(e) in 1971.³ The rule put in place a “policy not to permit a defendant or respondent to consent to a judgment or order that imposes a sanction while denying the allegations in the complaint or order for proceedings. In this regard, the Commission believes that a refusal to admit the allegations is equivalent to a denial, unless the defendant or respondent states that he neither admits nor denies the allegations.”⁴

Ever since, consent judgments and offers of settlements in administrative proceedings have typically included language that the parties consent to entry of the judgment or order “without admitting or denying the allegations” in the complaint or findings in an order instituting proceeding (except as to personal and subject matter jurisdiction).

The policy was designed to “avoid creating, or permitting to be created, an impression that a decree is being entered or a sanction imposed, when the conduct alleged did not, in fact, occur.”⁵ Prior to the inception of the rule, parties could settle allegations of securities law violations and accept the benefits of settlement, only to later deny the allegations or findings.

Notably, the policy applied only to public statements (although that was not defined in the rule) but did extend to prohibit third parties from denying the allegations on behalf of the defendant or respondent. Under the policy, even a defendant’s or respondent’s, or third-party’s, statement that defendants did not admit to the allegations would amount to an impermissible denial without also saying, at the same time, that they did not deny the allegations either. The policy also did not restrict a defendant’s/respondent’s “testimonial obligations” or “right to take legal or factual positions in litigation or other regulatory or legal proceedings in which the Commission is not a party.”

In 2012, the Commission carved out an exception to the policy for settlements involving parallel criminal convictions or prosecution agreements where defendants admitted criminal wrongdoing. Those defendants would no longer be permitted to include the no-admit/no-deny language in their settlements with the Commission, as such language may be construed as inconsistent with the admissions or findings already made in the criminal cases.⁶ In 2013, then SEC Chair Mary Jo White announced further changes to the policy. First, defendants may not be allowed to benefit from the no-admit/no-deny language even in cases without any parallel criminal case “where there is a special need for public accountability and acceptance of responsibility.”⁷ Second, admissions of wrongdoing would be required in the settlement agreements of certain types of cases:

• Cases where a large number of investors have been harmed or the conduct was otherwise egregious.
• Cases where the conduct posed a significant risk to the market or investors.
• Cases where admissions would aid investors deciding whether to deal with a particular party in the future.
• Cases where reciting unambiguous facts would send an important message to the market about a particular case.⁸

Recent Challenges

This so-called “Gag Rule” regularly drew the ire of critics, who asserted that its broad restrictions infringed on defendants’ constitutional rights to free speech and due process. Still, the policy survived multiple regulatory and legal challenges in recent years:

• In 2018, the New Civil Liberties Alliance (NCLA) filed a petition, later renewed in 2023, asking the SEC to amend the rule to allow only for the parties to consensually agree to the neither-admit-nor-deny language, rather than require what it called a sweeping and unconstitutional prior restraint on free speech.⁹ In January 2024, SEC Chair Gary Gensler, along with a majority of the commissioners, denied the petition. Gensler said petitioner’s proposal “would alter the impact of enforcement settlements if defendants could deny any wrongdoing in the court of public opinion and dismiss sanctions as the cost of doing business without the Commission being able to revive its ability to have its day in court,” having relinquished its rights to do so via the settlement.¹⁰ He added that “[a] settlement that allows the denial of wrongdoing undermines the value provided by the recitation of the facts, and it muddies the message to the public.”¹¹ This decision was not without its detractors, even within the Commission. In a strongly worded dissent, Commissioner Hester M. Pierce said the policy “is unnecessary, undermines regulatory integrity, and raises First Amendment concerns.”¹²
• SEC v. Romeril: The Second Circuit upheld the rule in 2021, rejecting a challenge from an SEC defendant who argued that the rule violated his constitutional rights to due process and free speech.¹³ The court reasoned that the rule does not violate the constitution because parties can knowingly waive these rights in consent decrees and other settlements of judicial proceedings if they want to avoid the risks of litigation, comparing the settlement process to plea bargaining.¹⁴ The Supreme Court declined to take up the case.
• SEC v. Powell: In August 2025, the Ninth Circuit likewise upheld the policy as facially valid on similar grounds — there is “longstanding precedent permitting the voluntary waiver of constitutional rights,” though it did leave the door open for the viability of “as-applied challenges” to the rule based on individual facts and circumstances.¹⁵ In March 2026, petitioners in this case, which again include NCLA, filed a petition for a writ of certiorari, which remains pending before the Supreme Court.¹⁶

The Commission’s Decision to Rescind the Policy

In announcing the recission of the no-admit/no-deny policy, the Commission stated that it had concluded, contrary to previous concerns about the dilution of the message to the public and the impact of enforcement settlements, that the “negative effect on the public interest from such denials may be minimal” and that it no longer wanted to create the impression that the SEC was “trying to shield itself from criticism.”¹⁷

The Commission further cited four additional reasons for its decision to amend the rule:

1. The benefits to the Commission and the public from the policy have proven to be limited over time, given that the SEC has apparently never once exercised the option to seek to vacate a settlement or reopen an adjudicatory proceeding over a settling defendant or respondent’s violation of the provision via a later public denial of the allegations.
2. Technological changes in communication have made the policy more challenging to implement, as social media blurs the line between public and private statements and would further require the Commission to potentially parse through less-than-direct statements denying allegations.
3. The majority of federal agencies do not have a similar rule, and settle enforcement actions “without noticeable consequence.”
4. Absent this requirement, the SEC has more flexibility in settling enforcement actions, allowing it to better structure settlements resulting in collectible sanctions that can be returned (where feasible) to injured investors with fewer resources expended.¹⁸

Critically, the Commission also announced that it will no longer enforce existing no-admit/no-deny provisions.¹⁹ It remains to be seen how this will play out, but we can certainly expect denials going forward and some with regard to previous actions.

Implications

Abandonment of this over 50-year-old policy inevitably changes the calculus for all parties involved in a settlement.

Practically speaking, elimination of the rule may make settlements easier to achieve. Defendants might be more willing to settle if they know it does not stop them from publicly denying the wrongdoing alleged to have prompted the investigation and the settlement. Defendants can instead assert that they settled the matter to reduce or avoid the costs and other burdens of an extended battle with the SEC.

Nevertheless, the SEC maintains that elimination of the no-admit/no-deny mandate will “not affect the Commission’s practice related to admission in settlements,” suggesting that the SEC does not intend to be more aggressive in seeking admissions in cases as a result. It remains to be seen whether this change will otherwise affect the nature of settlements, including whether the SEC will draft more detailed settlement orders to withstand potential public contradictions from defendants.