Agency Rule 202.5(e) has been eliminated, marking a significant change in how the U.S. Securities and Exchange Commission (SEC) resolves civil enforcement actions. Under the former rule, a defendant or respondent could settle an SEC matter without admitting the allegations, but only if that party also agreed not to publicly deny the allegations afterward. In practice, this meant that even where a party chose settlement for business, cost, or risk-management reasons, it was still bound by a “no-deny” provision that restricted post-settlement public statements.
With the SEC’s rescission of Rule 202.5(e), settling parties no longer need to accept that gag as a condition of settlement and may have greater flexibility to respond publicly to the allegations after a case is resolved. The SEC has also stated that it will not enforce existing no-deny provisions in prior settlements. That said, this change is specific to SEC enforcement matters and does not extend to state securities regulators or Financial Industry Regulatory Authority (FINRA), each of which operates under its own rules, procedures, and settlement frameworks.
For any questions regarding general securities regulations, contact Andrew May or Molly Brown.
