Rescission of Policy Regarding Denials in Settlements of Enforcement Actions

SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 202

[Release Nos. 33-11417; 34-105504; IC-6965; IA-36158] RIN 3235-AN77

Rescission of Policy Regarding Denials in Settlements of Enforcement Actions

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

SUMMARY: The Securities and Exchange Commission (“Commission”) is rescinding a rule of informal procedure that concerns settlements in judicial or administrative proceedings.

DATES: Effective May 21, 2026.

FOR FURTHER INFORMATION CONTACT: Samuel Waldon, Principal Deputy Director, Division of Enforcement, (202) 551-6000, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549.

SUPPLEMENTARY INFORMATION: Since 1972, the Commission has maintained a policy, codified in Rule 202.5(e) of its rules of informal procedure, 17 CFR 202.5(e), that when it chooses to settle an enforcement action in which a sanction is imposed, it will not settle unless the defendant or respondent also agrees not to publicly deny the allegations in the complaint or administrative order. For the reasons explained below, the Commission now rescinds this policy and repeals Rule 202.5(e).

I. Background

When the Commission exercises its authority to investigate and bring enforcement actions,[1] it does not litigate every action to judgment. Like all parties to litigation, the Commission and a litigant against whom it brings a district court action or agency adjudication may agree to settle.[2] The Commission's decision to settle depends on a range of factors, including the Commission's judgment that obtaining an immediate result by consent better serves the public interest than expending the resources and accepting

the risk that comes with fully litigating a matter.[3] Similarly, a defendant's decision to settle turns on numerous factors.

[1] 15 U.S.C. 77t(b), 78u(a), (d)(1), 80a-41(d), 80b-14(a).

[2] We use the term “settlement” to refer to the resolution of enforcement actions by consent in which the Commission and a party against whom it has brought an action agree to terms to end that action, including agreed-upon sanctions. Settlements can include entry into consent judgments in district court and the acceptance of settlement offers in an order issued in an administrative adjudication.

[3] SEC v. Citigroup Glob. Mkts., 752 F.3d 285, 295 (2d Cir. 2014) (“[The] factors that affect a litigant's decision whether to compromise a case or litigate it to the end include the value of the particular proposed compromise, the perceived likelihood of obtaining a still better settlement, the prospects of coming out better, or worse, after a full trial, and the resources that would need to be expended in the attempt.” (cleaned up)).

In a typical Commission settlement, a defendant in Federal district court signs a consent that describes the terms on which the parties have agreed to settle, or, in an administrative action, a respondent signs an offer of settlement that contains those terms.[4] These documents reflect the defendant's (or respondent's) agreement and representation that the defendant (or respondent) is entering into the settlement knowingly and voluntarily. For actions in Federal district court, the Commission (sometimes jointly with the defendant) will then ask the court to enter a consent judgment that incorporates the terms of the consent and to retain continuing jurisdiction.[5] For administrative adjudications, when the Commission accepts an offer of settlement, the terms are incorporated into an order instituting proceedings.

[4] The consent is a contractual agreement, signed by the parties, that reflects the terms of the settlement. It is a separate document from a judgment entered by a court, and its terms are usually repeated in the judgment or incorporated into that judgment by reference.

[5] Consent judgments are “compromises in which the parties give up something they might have won in litigation and waive their rights to litigation.” United States v. ITT Cont'l Baking Co., 420 U.S. 223, 235 (1975). They “embod[y] an agreement of the parties and thus in some respects [are] contractual in nature,” but they are also “enforceable as * * * judicial decree[s].” Texas v. New Mexico, 144 S.Ct. 1756, 1764 (2024).

In 1972, the Commission adopted Rule 202.5(e), which sets out a policy regarding settlements and is one of several “informal and other procedures” that concern enforcement activities.[6] The policy stated the Commission's view at the time that in any civil lawsuit or in any administrative proceeding of an accusatory nature, “it is important to avoid creating, or permitting to be created, an impression that a decree is being entered or a sanction imposed, when the conduct alleged did not, in fact occur.” [7] Accordingly, the Commission announced a “policy not to permit a defendant or respondent to consent to a judgment or order that imposes a sanction while denying the allegations in the complaint” or administrative order.[8] By limiting the circumstances under which the Commission will accept a settlement offer, the policy binds the staff of the Commission's Division of Enforcement (Enforcement) in settlement negotiations.

[6] 37 FR 25224 (Nov. 29, 1972), codified at 17 CFR 202.5(e). Congress bestowed upon the Commission “the power to make such rules and regulations as may be necessary or appropriate to implement the provisions of this title for which [it is] responsible or for the execution of the functions vested in them by this title.” 15 U.S.C. 78w(a); accord 15 U.S.C. 77s, 80a-37, 80b-11; see also id. at 78u. The Commission has exercised this authority to adopt formal rules of procedure, 17 CFR 201.100 et seq., as well as informal procedures, such as Rule 202.5(e).

[7] Id.

[8] Id.

The no-deny provisions that appear in settlements pursuant to this policy are usually paired with a statement that a defendant is not admitting the allegations (or liability). While the precise language has varied over time, defendants and respondents typically agree that they are entering into a consent without admitting or denying the allegations. More specifically, defendants and respondents agree, among other things, not to make “ `any public statement denying, directly or indirectly, any allegation in the complaint or creating the impression that the complaint is without factual basis.' ” [9] The no-deny provisions do not, however, apply to testimonial obligations by defendants and respondents, and they do not affect their ability to take legal or factual position in litigation and other legal proceedings to which the Commission is not a party, including parallel civil actions.

[9] Powell v. SEC, 149 F.4th 1029, 1045 (9th Cir. 2025). The usual language states that a defendant “will not take any action or make or permit to be made any public statement denying, directly or indirectly, any allegations in the complaint or creating the impression that the complaint is without factual basis” and “will not make or permit to be made any public statement to the effect that Defendants does not admit the allegations of the complaint, or that th[e] Consent contains no admissions of the allegations, without also stating that the Defendant does not deny the allegations.” SEC v. Novinger, No. 4:15-cv-358, Dkt 33-1, at ] 12 (N.D. Tex. June 3, 2016).

For the most part, the Commission does not require settling defendants to make admissions.[10] Together, these two components of settlement language have been referred to as the “no admit/no deny policy.” Thus, for over fifty years, when the Commission has settled on a no-admit basis, it has only agreed to cede its ability to prove its claims where the defendant has also agreed not to publicly deny the allegations in the complaint. Settlement brings certainty and closure without the risks and expenses of litigation, and often accelerates the Commission's ability to collect and, if feasible, distribute collected monetary sanctions to injured investors.

[10] See infra n.26 (discussing admissions).

When the Commission agrees to settlements that contain no-deny provisions, the Commission has only a limited judicial remedy in the event a defendant breaches the settlement agreement by publicly denying allegations. In the event of a public denial, the Commission's only recourse, pursuant to the agreement, is to ask a court to vacate the settlement, returning the case to active litigation and permitting the Commission to prove its claims.[11] And, as with all parties to a contract who are faced with a breach, the Commission may forgo this remedy, opting not to dedicate resources to reviving a once-settled case. Moreover, district courts have discretion to deny the Commission's request to return a case to the active docket in the event the Commission does seek relief in the wake of a breach. We are not aware of any instance where the Commission has sought to reopen a district court action or administrative adjudication following a violation of a no-deny provision, and there are no reported opinions where a court has ruled upon such a motion.

[11] There is a parallel procedure in administrative adjudications. In that context, when the Commission has accepted offers to settle, it has done so pursuant to Rule 202.5(e). Respondents have agreed not to publicly deny the allegations in the order instituting proceedings, and they further agreed that if they breached that agreement, Enforcement staff could ask the Commission to reopen the action against them.

In recent years, there have been several challenges to no-deny settlements. Some defendants made unsuccessful efforts to alter no-deny provisions years after they agreed to consent judgments, arguing that the no-deny provisions violated their First Amendment rights and that the Commission did not comply with the Administrative Procedure Act in adopting the policy.[12] Other parties have challenged the use of no-deny provisions because they claimed they wanted to publish the speech of those who agreed to no-deny provisions.[13] In a petition for rulemaking submitted to the Commission in 2018 and renewed in 2023, a petitioner asked the Commission to amend Rule 202.5(e) to provide that a defendant can consent to a judgment in which the defendant admits, denies, or neither admits nor denies the

allegations in the complaint.[14] The Commission denied the petition (with one Commissioner issuing a statement dissenting from the denial).[15]

[12] SEC v. Romeril, 15 F.4th 166 (2d Cir. 2021); SEC v. Novinger, 40 F.4th 297 (5th Cir. 2022); SEC v. Novinger, 96 F.4th 774 (5th Cir. 2024).

[13] E.g., Powell v. SEC, 149 F.4th 1029 (9th Cir. 2025) (3 of 12 petitioners were described as media outlets that sought to report on defendants who signed no-deny provisions); Cato v. SEC, 4 F.4th 91 (D.C. Cir. 2021) (holding that plaintiff lacked standing to seek declaratory judgment that Rule 202.5(e) was unconstitutional).

[14] Petition for Rulemaking, File No. 4-733 (Oct. 30, 2018), available at https://www.sec.gov/files/rules/petitions/2018/petn4-733.pdf; Renewed Petition for Rulemaking, File No. 4-733 (Dec. 20, 2023), available at https://www.sec.gov/files/rules/petitions/2023/petn4-733-renewed-petition-rulemaking-122023.pdf.

[15] Letter to Margaret A. Little, File No. 4-733 (Jan. 30, 2024) (Rulemaking Letter), available at https://www.sec.gov/files/rules/petitions/2024/4-733-letter-013024.pdf. Commissioner Peirce filed a statement dissenting from the denial of the rulemaking petition. Commissioner Hester M. Peirce, Unsettling Silence: Dissent from Denial of Request for Rulemaking to Amend 17 CFR 202.5(e), available at https://www.sec.gov/newsroom/speeches-statements/peirce-nand-013024.

The Second and Ninth Circuits have held that the no-deny policy is constitutional.[16] However, two judges in the Fifth Circuit (in a concurring opinion) have questioned whether the no-deny policy is constitutional.[17] And while the Ninth Circuit rejected a facial challenge to the no-deny policy, declining to hold that the no-deny policy is per se unconstitutional, it also noted that the policy, as applied, could “present different issues” if the facts and circumstances of particular settlements “sweep more broadly than Rule 202.5(e) itself,” which could implicate the “important values associated with permitting criticism of the government.” [18] Additionally, the policy has been subject to criticism in the district courts.[19]

[16] Powell v. SEC, 149 F.4th 1029 (9th Cir. 2025); SEC v. Romeril, 15 F.4th 166 (2d Cir. 2021).

[17] SEC v. Novinger, 40 F.4th 297, 308 (5th Cir. 2022) (Jones, J., joined by Duncan, J., concurring).

[18] Powell, 149 F.4th at 1045, reh'g pet. denied, 2025 U.S. App. Lexis 27114 (9th Cir. Oct. 17, 2025). The petitioners have filed a petition for a writ of certiorari, which is currently pending. Powell v. SEC, No. 25-1100 (U.S.), available at https://www.supremecourt.gov/DocketPDF/25/25-1100/401007/20260316161817049_2026-03-16%20Powell%20et%20al.%20-%20Cert%20Petition%20with%20appendix.pdf.

[19] SEC v. Moraes, 2022 WL 15774011, *3 (S.D.N.Y. Oct. 28, 2022); SEC v. Vitesse Semiconductor Corp., 771 F.Supp.2d 304, 309 (S.D.N.Y. 2011).

II. Discussion

A. The Commission Is Rescinding Rule 202.5(e)

After further consideration of the existing policy, the Commission is rescinding Rule 202.5(e). The Commission initiates enforcement actions only after determining that information obtained in an investigation indicates that a violation of the securities laws occurred or is about to occur.[20] The commencement of such an enforcement action in district court (or institution of an administrative proceeding) reflects the Commission's intention to prove the facts of the case as alleged based on the results of that investigation.[21] When the Commission chooses settlement to serve the public interest by obtaining a more certain and faster result with fewer expenditure of resources and less risk, it forecloses its ability to obtain findings of fact and conclusions of law.

[20] 15 U.S.C. 78u(a), (d).

[21] In an administrative proceeding, the Commission serves in an adjudicatory capacity.

The Commission adopted Rule 202.5(e) on the view that it benefits the public interest “to avoid creating, or permitting to be created, an impression that a decree is being entered or a sanction imposed, when the conduct alleged did not, in fact, occur.” [22] More specifically, a defendant who later denies the allegations can create the incorrect impression that there was no basis for the Commission's enforcement action, but only after the Commission yielded its opportunity to prove in court, under the rules of procedure and evidence, the facts that led it to commence the enforcement action in the first place.[23] We conclude, however, that the negative effect on the public interest from such denials may be minimal. Moreover, we recognize that the policy itself may create the incorrect impression that the Commission is trying to shield itself from criticism, even though the main thrust of the policy was to allow the Commission, in the wake of a denial, to ask for the ability to test its allegations and legal theories.[24]

[22] 37 FR at 25224; see also Rulemaking Letter, at 4 (stating that when “a defendant settles without admissions and then later denies the allegations, that turnabout can negatively impact the public interest”).

[23] Id. at 4-5.

[24] In Powell, the Ninth Circuit wrote that “to the extent the SEC's letter addressing [the] request to amend Rule 202.5(e) advances the broader rationale that it is necessary to silence defendants in order to promote public confidence in the SEC's work, this rationale would be improper.” Powell, 149 F.4th at 1044. The Ninth Circuit further stated that “a defendant who denies the SEC's allegations may well undermine confidence in the SEC's enforcement programs. But undermining confidence in the government is an inevitable result of our robust First Amendment protections for speech critical of the government. The SEC's valid interest in Rule 202.5(e) is thus more mechanical: that if a defendant wants to deny the allegations, the SEC wants to be able to prove those allegations in a particular forum, i.e., in court, with the benefits and protections of the judicial process.” Id.; see also Moraes, 2022 U.S. Dist. Lexis 196811, at *12 (expressing view that the Commission's policy exists to shield the agency from criticism).

Four additional reasons support the Commission's recission of Rule 202.5(e).

First, the benefits to the Commission and the public from the policy, and the only remedy available under the policy, have proven to be limited over time. Under Rule 202.5(e), as implemented, if a settling defendant who has agreed to a no-deny provision then publicly denies the allegations, the Commission's only recourse is to ask a district court to vacate the settlement (or to reopen an adjudicatory proceeding).[25] Thus, the policy existed in large part to ensure that the Commission did not irrevocably cede its ability to prove the allegations as part of a settlement. However, there is no known instance of the Commission exercising this option for administrative proceedings in the wake of a breach since Rule 202.5(e) was adopted,[26] and the Commission is not aware of any instances in which the Commission asked a court to vacate a settlement in the wake of a breach, or that a court has agreed to such a request and reopened an enforcement action in the wake of a public denial.

[25] The Commission cannot seek an injunction for a violation of a no-deny provision, which is contractual in nature, and we are not aware of any instance in which the Commission sought injunctive relief for a claimed breach.

[26] Powell, 149 F.4th at 1036.

Moreover, there is a built-in temporal disincentive to invoking this limited remedy. As the gap in time between the settlement and a (hypothetical) denial grows, the Commission will be less likely to dedicate resources to reopen a case where the allegations will be harder to prove due to the passage of time and the concomitant fading of memories and loss of evidence. Similarly, as more time elapses from the entry of a consent judgment containing a no-deny provision, a court may be less likely to grant the Commission's request to reopen an older case because of comparable procedural and evidentiary concerns. Particularly given that the Commission has not sought to use this remedy, any of its benefits do not justify retaining the rule.

Second, technological changes in communication, particularly use of social media, have made the policy more challenging to implement. The no-deny provisions that implement Rule 202.5(e) cover public denials of allegations.[27] The line between public and private statements, however, is not always clear, particularly for social media interactions that are intended for a private, self-selected community, but nonetheless are visible to dozens of individuals. Moreover, as the Ninth Circuit noted in upholding the no-deny policy against a facial constitutional challenge, the language of some consents “could be read to sweep more

broadly than Rule 202.5(e) itself,” by covering public statements that are “ indirectly' ” denying allegations or “ creating the impression' ” that the allegations are without a factual basis.[28] Rather than have to parse whether such statements would trigger a no-deny provision, the Commission chooses to repeal Rule 202.5(e).

[27] See, e.g., n.7 (quoting sample no-deny provision from a consent in the Novinger action, which, by its terms, only applies to a “public statement” of denial).

[28] Powell, 149 F.4th at 1044.

Third, eliminating Rule 202.5(e) aligns the Commission with the majority of Federal agencies that do not have a similar rule.[29] Most Federal agencies have not adopted a comparable no-deny policy, including the Department of Justice. Because nearly all other Federal agencies can settle enforcement actions without noticeable consequence even though the parties with whom they settle may deny the allegations against them after the time of settlement, we conclude that rescinding Rule 202.5(e) will not harm the public interest.

[29] See Verity Winship & Jennifer K. Robbennolt, Admissions of Guilt in Civil Enforcement, 102 Minn. L. Rev. 1077 (2018) (discussing differences in settlement practices between Federal regulators).

Fourth, rescinding Rule 202.5(e) gives the Commission more flexibility in settling enforcement actions, which conserves resources, provides certainty, and may speed the return of money to injured investors (when feasible).[30] The rule precludes the Commission from accepting settlements that lack a no-deny provision, and thus necessarily precludes settlements with defendants who do not wish to waive their rights by signing a no-deny provision that imposes a contractual obligation regarding denials that continues into the future beyond the time of settlement. The rescission of the rule will eliminate this restriction, allowing the Commission to better structure settlements resulting in collectible sanctions that can be returned (where feasible) to injured investors with fewer resources expended.[31]

[30] Armour, 402 U.S. 673 at 681 (parties settle “after careful negotiation” produce “agreement on [a consent's] precise terms,” saving “themselves the time, expense, and inevitable risk of litigation,” but also giving “up something they might have won had they proceeded with the litigation”); Citigroup, 752 F.3d at 295 (settlement provides “parties with a means to manage risk”).

[31] There is no rule equivalent to Rule 202.5(e) regarding admissions. The Commission's rescission of Rule 202.5(e) does not affect its discretion to settle with defendants who decline to admit facts or liability, or its discretion to negotiate for admissions as part of a settlement. Moreover, there is a subset of cases where the Commission settles (or plans to settle) with a defendant or respondent that is the subject of a parallel criminal proceeding arising from the same or similar conduct, and where the defendant or respondent has pleaded, or is expected to plead, guilty, or been convicted. In those instances, there have been admissions (via an allocution) or a finding of criminal liability. For these types of cases, the Commission may continue to address admissions and denials in settlement agreements to ensure consistency between the Commission settlement and the resolution of the parallel matter.

B. The Commission Will Not Seek To Enforce Existing No-Deny Provisions

In light of the rescission of Rule 202.5(e), and for the same reasons, the Commission will not enforce existing no-deny provisions in settlements that have already been entered. To the extent a settling defendant has previously agreed to a no-deny provision as part of a consent judgment entered in Federal court or administrative adjudicative order before the Commission, and the defendant then breaches the terms of that no-deny provision, the Commission will not seek or attempt to reopen an otherwise settled case. Rather, 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 the settlement (or to reopen an adjudicatory proceeding) in connection with the settlement agreement and the limited relief the Commission has pursuant to its terms.

C. Administrative Law and Other Matters

The Administrative Procedure Act (APA) generally requires an agency to publish notice of a proposed rulemaking in the Federal Register and provide an opportunity for public comment.[32] This requirement does not apply, however, to “interpretive rules, general statements of policy, or rules of agency organization, procedure, or practice.” [33] The Commission finds that the rescission of the no-deny policy constitutes a general statement of policy and relates solely to agency organization, procedure, or practice, and therefore notice and comment are not required.[34] Similarly, the provisions of the Regulatory Flexibility Act of 1980, which apply only when notice and comment are required by the APA or another statute, are not applicable.[35] Additionally, rescission of the no-deny policy does not impose or change any collection of information requirements as defined by the Paperwork Reduction Act of 1995.[36]

[32] 5 U.S.C. 553.

[33] 5 U.S.C. 553(b).

[34] The Commission made a similar finding in 1972 in adopting the no-deny policy without notice and comment. See 37 FR 25224 (Nov. 29, 1972); see also Powell, 149 F.4th at 1046 (holding that the Commission acted properly under the APA when it adopted Rule 202.5(e) without notice and comment).

[35] 5 U.S.C. 601(2). 604(a).

[36] 5 CFR 1320.3(c).

The Office of Management and Budget (“OMB”) has determined that this action is a significant regulatory action under Executive Order 12866, as amended, and the action has been reviewed by OMB. This action is an Executive Order 14192 deregulatory action. For purposes of Subtitle E of the Small Business Regulatory Enforcement Fairness Act of 1996 (also known as the Congressional Review Act),[37] OMB has determined the final rule is not a “major rule.”

[37] 5 U.S.C. chapter 8.

The rescission of this policy statement does not impose any new rules, regulations, or other requirements on non-agency parties, but it could expand the range of possible settlements in Commission enforcement actions compared to when the policy was in place. Different parties have different goals when approaching possible settlement, and it is difficult to estimate how important the ability to deny allegations may be to certain parties or whether parties may change their approach to settlement negotiations following this rescission. To the extent that more parties enter into settlements with the Commission as a result of the rescission, those settlements could reduce litigation costs for such parties and the Commission and help to conserve judicial resources.

The APA generally requires that an agency publish an adopted substantive rule in the Federal Register 30 days before it becomes effective.[38] This requirement, however, does not apply to “interpretative rules and statements of policy,” nor does it apply if the agency finds good cause for making the rule effective sooner.[39] For the reasons discussed in section II as to why we are rescinding the no-deny policy, and because delaying the effective date could create a period of time in which parties have an incentive to delay settlement until the rescission is in effect, we find delaying the effective date of this rescission is unnecessary and would be contrary to the public interest, and thus we find good cause to make the rescission effective [upon publication in the Federal Register]. For the same reasons, this rescission may take effect [upon publication in the Federal Register] pursuant to 5 U.S.C. 808(2).

[38] 5 U.S.C. 553(d).

[39] Id.

Statutory Authority

This release is being adopted pursuant to section 19 of the Securities Act of 1933, sections 21 and 23(a) of the Securities Exchange Act of 1934, section 38 of the Investment Company Act of 1940, and section 211 of the Investment Advisers Act of 1940.

List of Subjects in 17 CFR Part 202

Administrative practice and procedure.

For the reasons set out in the preamble, the Commission is amending title 17, chapter II of the Code of Federal Regulations as follows:

PART 202—INFORMAL AND OTHER PROCEDURES

0 1. The authority citation for part 202, continues to read in part as follows:

Authority: 15 U.S.C. 77s, 77t, 77sss, 77uuu, 78d-1, 78u, 78w, 80a-37, 80a-41, 80b-9, 80b-11, and 7202, unless otherwise noted. * * * * *

0 2. Amend Sec. 202.5 by removing and reserving paragraph (e).

By the Commission.

Dated: May 18, 2026. Vanessa A. Countryman, Secretary.

[FR Doc. 2026-10132 Filed 5-20-26; 8:45 am]

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