The SEC rescinded its 54-year-old no-deny settlement rule, freeing defendants to publicly dispute allegations after settling enforcement actions, effective May 21.
The Securities and Exchange Commission has rescinded Rule 202.5(e), the agency's longstanding prohibition on public denials in settled enforcement actions [1]. The rule, adopted in 1972 and often called the "SEC gag rule," required defendants to agree, as a condition of settlement, that they would not publicly deny the allegations against them [2]. The rescission took effect May 21, 2026, and the agency announced it will not enforce existing no-deny provisions in prior settlements, giving the change retroactive practical effect [1].
Rule 202.5(e) was a codified agency policy, not a statute, and the SEC amended its Rules of Practice to remove it [1]. No adjudicative proceeding or court ruling drove the change. The Commission acted unilaterally through its internal rulemaking authority, with Secretary Vanessa A. Countryman attesting to the amendment [1]. The rescission applies across all pending and previously concluded administrative and civil enforcement settlements, meaning defendants who accepted no-deny language under prior agreements are no longer bound by SEC enforcement of those terms [3].
The strategic implications are substantial. For decades, the no-deny requirement operated as a quiet tax on settlement: defendants who believed the allegations were false or misleading faced a binary choice between litigating to vindication or settling and accepting a permanent obligation of public silence [2]. Removal of that constraint reduces a significant non-monetary cost of settlement and may encourage earlier resolution of enforcement matters [3]. The change also opens a new front in parallel private litigation. Securities class action plaintiffs have long benefited, indirectly, from the no-deny rule's suppression of post-settlement defense narratives. Companies can now contest the factual record publicly without triggering SEC enforcement consequences, potentially undermining the evidentiary atmosphere in which related civil suits proceed [2].
First Amendment advocates had challenged the no-deny policy for years, arguing it compelled silence on matters of public concern as a condition of avoiding prolonged litigation [3]. The SEC's rescission removes the need for any such constitutional adjudication. Whether courts presiding over parallel private actions will allow defendants to exploit the new freedom, or whether settlement agreement language in those cases independently bars public denials, will be the next battleground for defense and plaintiffs' counsel alike [2]. Practitioners expect the rescission to reshape standard settlement negotiation postures at the SEC almost immediately.