The U.S. Securities and Exchange Commission has rescinded a long-standing rule that limited how defendants could speak after settling enforcement actions. The change ends a policy that required parties to avoid publicly denying the agency’s allegations as a condition of settlement.
The decision, announced on May 18, removes Rule 202.5(e) from the SEC’s informal rules of procedure. The provision dated back to 1972 and applied to both civil and administrative cases where sanctions were imposed.
Shift allows public disagreement after settlements
Under the previous framework, individuals and companies that chose to settle with the SEC could not deny the allegations in public statements. The rule also restricted indirect denials made through third parties. The SEC originally adopted the policy to avoid situations where settlements could appear inconsistent with the alleged misconduct.
With the rescission in place, settling parties may now publicly dispute the claims without risking enforcement action tied to their settlement terms. The SEC confirmed that it will not enforce existing no-deny clauses that remain in prior agreements.
The agency stated that it will not seek to reopen cases or ask courts to vacate settlements if parties breach those earlier provisions.
Leadership frames decision around speech and flexibility
SEC Chairman Paul S. Atkins addressed the policy change in the official release. He stated:
"For more than 50 years, the Commission has conditioned settlement on a defendant’s promise not to publicly deny the Commission’s allegations. I am pleased that we are rescinding the no-deny policy today."
He added:
"Speech critical of the government is an important part of the American tradition. This recission ends the policy prohibiting such criticism by settling defendants."
The SEC said the change aligns its practices with most federal agencies, which do not impose similar restrictions. It also noted that removing the rule could improve efficiency in enforcement proceedings and support faster resolution of cases.
Enforcement approach remains intact
The rescission does not alter how the SEC approaches admissions in settlements. The agency stated that it generally does not require defendants to admit wrongdoing. That practice remains unchanged.
At the same time, the SEC retains discretion to negotiate admissions when it considers them appropriate. The updated framework allows settlements where parties neither admit nor deny allegations, while also preserving the option for stricter terms in specific cases.
The agency emphasized that the previous rule may have created the impression that it sought to shield itself from criticism. The updated approach aims to remove that perception.
Internal and external reactions emerge
SEC Commissioner Hester Peirce supported the decision and addressed the transparency concerns linked to the earlier rule. In a separate statement, she said:
"Settlements shrouded in forced silence by the non-governmental party do not serve either the markets or the Commission’s investor-protection mission."
She added:
"Transparent enforcement of the securities laws helps create the environment in which free markets thrive, and enabling both parties in an enforcement action to speak freely contributes to transparency."
Peirce had raised concerns about the policy before the change, including during earlier enforcement activity that targeted digital asset firms.
Not all responses aligned with the SEC’s position. Benjamin Schiffrin, director of securities policy at Better Markets, criticized the decision in a statement. He said:
"The inescapable conclusion is that the SEC is more concerned with protecting defendants who violated the securities laws than the investors who are the victims of those violations."
Legal and market implications take shape
The removal of the rule introduces a new dynamic in how settlements may be perceived. Legal resolution and public messaging can now diverge, since defendants may dispute allegations after agreeing to penalties.
The SEC indicated that the impact on public interest from such denials may remain limited. It also noted that there is no known instance where it sought to reopen a case solely due to a violation of a no-deny clause.
The policy change follows years of criticism from defendants and legal advocates. High-profile figures such as Elon Musk and Mark Cuban had previously challenged the restriction and supported efforts to end it.
The SEC had rejected a petition to revise the rule in 2024. The current reversal comes after the agency informed the White House of its intent to eliminate the provision and submitted the proposal earlier this month.
Broader enforcement context
The update arrives after a period of active enforcement, including actions involving digital asset firms. In 2023, the SEC brought 46 crypto-related cases and collected $281 million in penalties through settlements.
More recently, the agency has resolved or dropped several cases initiated in prior years. One notable settlement involved Ripple Labs, which agreed to pay $50 million in May 2025.
The SEC stated that rescinding the rule will conserve resources and provide greater certainty in enforcement outcomes. It also pointed to the potential for faster returns of funds to harmed investors.
Roman Zaika
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