On May 18, 2026, the Securities and Exchange Commission issued a final rule rescinding Rule 202.5(e), the longstanding provision commonly known as the 'no-deny' policy . For…
On May 18, 2026, the Securities and Exchange Commission issued a final rule rescinding Rule 202.5(e), the longstanding provision commonly known as the 'no-deny' policy. For decades, that rule required defendants resolving SEC enforcement actions to agree not to publicly deny the Commission's allegations as a condition of settlement. The rescission became effective on May 21, 2026, and formally removes the no-deny requirement from the SEC's informal rules of procedure governing enforcement settlements.
The practical significance of this change is substantial. Under the prior framework, defendants who entered into consent judgments or administrative settlements were effectively prohibited from publicly contesting the factual allegations underlying the resolution, even where reputational or commercial considerations made silence costly. The rescission lifts that restriction, allowing settling parties to resolve SEC enforcement matters while preserving the ability to publicly respond to, contextualize, or contest the Commission's allegations after the settlement is in place.
For clients facing, anticipating, or currently negotiating SEC enforcement matters, this development warrants a meaningful reassessment of settlement strategy. The decision to settle has historically required weighing the certainty and finality of resolution against the inability to publicly defend one's record. With that constraint removed, parties may approach negotiations with greater flexibility regarding the timing, scope, and public framing of a resolution. Companies and individuals whose business, professional licensing, or market standing depends on reputational integrity may find settlement materially more attractive than it was under the prior regime.
At the same time, the newly available latitude is not without complexity. Public statements contesting allegations after settlement may carry collateral consequences in parallel proceedings, including private securities litigation, parallel state or foreign regulatory matters, indemnification disputes, and insurance coverage analyses. Coordinated planning across enforcement counsel, litigation counsel, communications advisors, and compliance functions will be increasingly important. Clients should also be mindful that the terms of any specific consent decree or settlement agreement may continue to impose obligations independent of the rescinded rule.
This update is provided for general informational purposes only and does not constitute legal advice. Clients facing SEC enforcement matters or considering related public communications should consult counsel for guidance tailored to their specific circumstances.