On May 18, the SEC announced the rescission of its longstanding policy, codified in Rule 202.5(e) of its informal rules of procedure, that required defendants settling enforcement actions to agree not to publicly deny the agency’s allegations. The policy, in place since 1972, prohibited defendants and respondents from consenting to a judgment or order imposing a sanction while denying the allegations in the complaint or administrative order. The SEC stated that the negative effect on the public interest from such denials may be minimal and that the policy itself may have created an inaccurate impression that the agency sought to shield itself from public criticism. According to the SEC, the rescission aligns the agency with the majority of federal agencies that do not maintain a similar rule and provides more flexibility in settling enforcement actions, which the agency said conserves resources, provides certainty, and may expedite the return of money to injured investors.

In support of the rescission, the SEC noted that there is no known instance of the agency seeking to reopen an administrative or civil proceeding because a defendant violated a no-deny provision. The agency further stated that changes in communication technology, particularly social media, made the policy more difficult to administer because the distinction between public and private statements has become less clear. The SEC stated it will not enforce existing no-deny provisions in settlements that have already been entered and will not ask a court to vacate a settlement or reopen an adjudicatory proceeding for a breach of such a provision. The rescission, effective immediately upon publication in the Federal Register, May 21, does not affect the SEC’s general practice of not requiring settling defendants to admit to allegations, nor does it affect the agency’s discretion to negotiate for admissions as part of a settlement.

Commissioner Hester Peirce issued a statement supporting the rescission, stating that settlements “shrouded in forced silence” by the non-governmental party do not serve markets or the agency’s investor-protection mission and that enabling both parties to speak freely contributes to transparency.