For more than five decades, the SEC had required defendants and respondents in enforcement actions to agree as a condition of settlement that they would not publicly deny the agency’s allegations. That requirement is now gone, meaning companies and individuals who settle SEC enforcement actions can do so without waiving their right to publicly contest the charges against them.
The SEC framed the change as a pragmatic one, noting that the overwhelming majority of federal agencies operate without such a rule. By eliminating it, the Commission gains greater flexibility in resolving enforcement matters, which it expects will conserve agency resources, provide greater certainty to settling parties, and potentially speed up the return of funds to harmed investors. The Commission also acknowledged that the old policy may have created a misleading public impression that the SEC was more concerned with protecting itself from criticism than with achieving outcomes that serve investors and the public interest.
From a practical standpoint, this change could meaningfully alter the calculus for companies and individuals weighing whether to settle SEC enforcement actions. Previously, the no-deny requirement could be a sticking point in negotiations, particularly for defendants concerned about the reputational and litigation exposure that comes with being unable to push back against government allegations. With that barrier removed, settlement discussions may proceed more smoothly and quickly in many cases.
Companies and their counsel should take note of this development when evaluating their exposure in ongoing or potential SEC investigations. While the change does not affect the substantive standards the SEC applies in enforcement, it removes a procedural constraint that has shaped settlement dynamics for generations. We will continue to monitor how this policy shift affects enforcement trends and settlement practices going forward.
Click here to see the official press release about this policy change.
