The Securities and Exchange Commission has rescinded Rule 202.5(e) of its informal rules of procedure, effective immediately upon publication in the Federal Register on May 18,…
The Securities and Exchange Commission has rescinded Rule 202.5(e) of its informal rules of procedure, effective immediately upon publication in the Federal Register on May 18, 2026. The rule, which had been in place since 1972, required defendants settling SEC enforcement actions to agree, as a condition of resolution, not to publicly deny the allegations against them. With its rescission, that longstanding constraint on post-settlement speech has been removed.
For more than five decades, the so-called no-deny policy functioned as a structural feature of nearly every negotiated SEC resolution. Defendants who chose to settle, often to avoid the cost, duration, and uncertainty of litigation, accepted a permanent limitation on their ability to publicly contest the Commission's characterization of their conduct. That trade-off shaped not only the legal posture of settling parties but also the broader public record surrounding SEC enforcement activity.
Under the new framework, settling parties may publicly comment on or contest the SEC's allegations after resolution. This represents a material shift in how clients and their counsel should think about enforcement defense strategy. Reputational considerations, which were previously constrained by the binding silence imposed by Rule 202.5(e), can now be addressed more directly through public messaging, corrective statements, or ongoing advocacy following settlement.
The practical implications are significant. Settlement calculus will increasingly weigh not only monetary penalties, injunctive relief, and collateral consequences, but also the value of preserving the right to respond publicly. Companies and individuals facing SEC scrutiny may find that the ability to defend their reputation post-resolution alters the relative attractiveness of settling versus litigating, particularly in matters with substantial public visibility or stakeholder concern. Counsel will also need to consider how post-settlement statements interact with parallel proceedings, including private securities litigation, regulatory inquiries from other agencies, and disclosure obligations.
Defendants and their advisors should also anticipate that the SEC may respond to this change through other mechanisms, including adjustments to charging decisions, settlement terms, or admissions requirements in particular cases. Careful coordination between enforcement counsel and communications advisors will be increasingly important.
This update is provided for general informational purposes only and does not constitute legal advice. Clients facing SEC enforcement matters should seek tailored guidance from qualified counsel.