SEC Rescinds Policy Regarding Denials of Settlements in Enforcement Actions

What Changed

• - The SEC has rescinded the policy in Rule 202.5(e) of its informal Rules of Practice that conditioned settlements involving sanctions on the respondent’s agreement not to publicly deny the Commission’s allegations.
• Settling parties in SEC enforcement actions may now have greater scope to make public statements that deny or contest aspects of the SEC’s allegations, subject to the specific language of each settlement order and other applicable legal constraints (
• The traditional “neither admit nor deny” construct will no longer automatically include a built‑in prohibition on denials, which means the SEC staff will need to negotiate any desired limitations on post‑settlement public statements on a case‑by‑case
• Communications and disclosure provisions in SEC settlement papers (including “undertakings” and clauses governing press releases and investor communications) are likely to become more tailored and heavily negotiated to address the scope of permissibl
• The rescission increases the importance of alignment between legal, compliance, and communications teams when crafting public statements following an SEC settlement, because statements that deny allegations could affect parallel civil litigation, ins
• The change may affect collateral consequences analyses, including whether and how denials in public statements are considered by other regulators, self‑regulatory organisations, and counterparties in the context of statutory disqualifications, waiver

Suggested Considerations

• Review existing internal playbooks for handling SEC investigations and settlements and update them to reflect the rescission of Rule 202.5(e), including how settlement language on admissions, denials, and public statements is negotiated.
• For matters currently under SEC investigation or in active settlement negotiations, direct outside and in‑house counsel to reassess settlement strategy, including whether to seek greater flexibility for post‑settlement denials or clarifications in the consent language and undertakings.
• Conduct an inventory of significant historical SEC settlements that included “no‑deny” provisions and identify where ongoing communications plans, disclosure narratives, or litigation strategies may be constrained by legacy language.
• For high‑impact historical orders with restrictive “no‑deny” clauses, obtain legal advice on whether and how to approach the SEC about potential modification or clarification of those provisions in light of the Commission’s changed policy.
• Train senior management, board members, and spokespersons on the revised SEC posture, emphasising that while denials may now be more permissible, inaccurate or overly aggressive denials could adversely affect ongoing private litigation, insurance recoveries, or relationships with other regulators.
• Coordinate with D&O insurers and indemnification providers to assess whether more robust denials in public statements following SEC settlements could impact coverage positions, cooperation clauses, or reservation‑of‑rights strategies.

Key Dates

Who is Affected