SEC Rescinds 54-Year No-Admit, No-Deny Gag Rule

The U.S. Securities and Exchange Commission formally rescinded its no-admit, no-deny settlement policy on May 18, 2026, ending an informal Rule of Practice — Rule 202.5(e) — that had been in force since 1972 and conditioned almost every SEC settlement on a defendant’s promise not to publicly deny the agency’s allegations.

The rescission was announced by SEC Chairman Paul Atkins with a statement framing the policy as a First Amendment issue.

What: The Policy and Its Repeal

Under Rule 202.5(e), settling defendants were required to neither admit nor deny the SEC’s allegations — and, more pointedly, were barred from publicly denying them under threat of having the settlement vacated. Critics across the political spectrum called it a “gag rule” and a content-based prior restraint on speech.

In rescinding the policy, the SEC said it will:

Not enforce existing no-deny provisions in prior settlements. “In the event of a breach of an existing no-deny provision, the Commission will take no action to ask a district court to vacate a settlement (or to reopen an adjudicatory proceeding) in connection with the terms of the settlement agreement.”
Retain discretion to demand admissions of fact or liability on a case-by-case basis. Settlements without admissions remain available.
Align with the practice of “most federal regulators, including the DOJ,” which do not impose comparable constraints.

Who: The Voices

Chairman Paul Atkins: “For more than 50 years, the Commission has conditioned settlement on a defendant’s promise not to publicly deny the Commission’s allegations… Speech critical of the government is an important part of the American tradition. This recission ends the policy prohibiting such criticism by settling defendants.”
Commissioner Hester Peirce, a longtime critic of the policy: “Settlements shrouded in forced silence by the non-governmental party do not serve either the markets or the Commission’s investor-protection mission.”
New Enforcement Director David Woodcock, in his first public remarks one week into the role, reinforced an enforcement tone focused on “quality over quantity” and “back to basics” — traditional fraud, financial reporting violations, insider trading, and individual accountability.

Where: The Litigation Context

The policy had been challenged repeatedly. The Ninth Circuit upheld it in August 2025 in Powell v. SEC — acknowledging “legitimate First Amendment concerns” but holding that defendants could voluntarily waive constitutional rights as part of a settlement. A certiorari petition is pending at the U.S. Supreme Court; the SEC’s response was due May 20, 2026 — just two days after the rescission was announced. The New Civil Liberties Alliance is pressing the Court to take the case anyway, “to ensure the policy cannot return.”

Mark Cuban and Elon Musk had publicly backed earlier legal challenges to the policy.

Why: What Changes for Settling Defendants

The repeal looks like a win, but securities lawyers warn the practical implications are mixed.

Defendants may speak more freely post-settlement, including under existing consent judgments — but the underlying court orders remain in place.
The SEC may push harder for explicit admissions, particularly in cases with parallel criminal investigations, now that the no-deny backstop is gone.
Charging documents may get longer and more pointed, with more unflattering factual recitals “baked in” to strengthen the SEC’s case against post-settlement refutation.
A future SEC could reinstate the policy under a different administration.

The CFTC’s Chairman Michael Selig signaled on May 12 that the agency is considering a similar rescission. Foot Locker’s $148,000 whistleblower-waiver penalty, announced the same week as the rescission, was a reminder that the SEC continues to police separation-agreement language even as it retreats from settlement-language constraints.