Summary
The Securities and Exchange Commission has rescinded Rule 202.5(e) of its informal rules of procedure, effective immediately upon publication in the Federal Register on May 18, 2026. Rule 202.5(e), which had been in place since 1972, required defendants or respondents settling enforcement actions to agree not to publicly deny the allegations in the complaint or administrative order. As a result, defendants settling SEC enforcement actions will no longer be required to accept a no-deny restriction as a condition of settlement, and will be free to publicly comment on or contest the allegations following resolution.
In addition to repealing the rule on a going-forward basis, the Commission stated that it will not enforce existing no-deny provisions in settlements that have already been entered. The rescission does not affect the Commission’s existing discretion regarding admissions in settlements.
Key Aspects of the SEC’s Rescission of Rule 202.5(e)
The rescission of Rule 202.5(e) reflects a reassessment by the Commission of a policy that has governed the settlement of enforcement actions for over half a century. The key elements of the rescission are as follows:
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- Repeal of the No-Deny Requirement. Since 1972, the Commission has maintained a policy, codified in Rule 202.5(e), that when it chose to settle an enforcement action in which a sanction was imposed, it would not settle unless the defendant or respondent also agreed not to publicly deny the allegations in the complaint or administrative order. The no-deny provisions were typically paired with a statement that the defendant was not admitting the allegations, together referred to as the “no admit/no deny policy.” The Commission has now rescinded Rule 202.5(e), concluding that the no-deny requirement is no longer a necessary condition of settlement.
- Rationale for the Rescission. The Commission identified four reasons for the rescission. First, the Commission stated that the benefits of the policy and its sole remedy, asking a court to vacate a settlement, have been limited over time. The Commission noted that it is not aware of any instance in which it sought to reopen a district court action or administrative adjudication following a violation of a no-deny provision, and that a built-in temporal disincentive further reduces the remedy’s practical value as cases age. Second, the Commission observed that technological changes, particularly the rise of social media, have made the policy more difficult to implement, as the line between public and private statements has become less clear and the language of some consents could sweep more broadly than Rule 202.5(e) itself. Third, the Commission noted that the rescission aligns it with the majority of federal agencies, including the Department of Justice, that do not have a comparable no-deny policy. Fourth, the Commission stated that rescinding the rule provides it with additional flexibility in settling enforcement actions.
- Non-Enforcement of Existing No-Deny Provisions. The Commission stated that it will not enforce existing no-deny provisions in settlements that have already been entered. 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 a settlement or to reopen an adjudicatory proceeding in connection with the terms of the settlement agreement. This applies to past settling defendants who remain subject to no-deny obligations under prior consent judgments and administrative orders.
- Admissions Practice Unchanged. The rescission does not affect the Commission’s existing discretion with respect to admissions in settlements. The Commission may continue to settle with defendants who decline to admit facts or liability, and may also negotiate for admissions as part of a settlement, including in cases involving parallel criminal proceedings where the defendant has pleaded or is expected to plead guilty or has been convicted, to ensure consistency between the Commission settlement and the resolution of the parallel matter.
Implications
The rescission of Rule 202.5(e) has practical consequences for companies and individuals involved in SEC enforcement matters, both prospectively and retroactively.
Settlement Dynamics. The removal of the no-deny requirement eliminates a term that certain defendants may have viewed as a barrier to settlement. As the Commission noted, the rule “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.” For companies evaluating the costs and benefits of settlement versus litigation, settlement no longer requires agreeing to a perpetual restriction on public commentary about the underlying allegations.
Public Statements Following Settlement. Going forward, defendants who settle enforcement actions with the Commission will not be restricted from publicly denying the allegations against them. For publicly traded companies, this may affect how companies communicate with investors, analysts, and the public about settled regulatory matters. Companies and individuals settling with the Commission should, however, be mindful that public statements may have implications in parallel private litigation, regulatory proceedings by other agencies, and other contexts.
Previously Settled Defendants. The Commission’s decision not to enforce existing no-deny provisions applies to defendants who have been subject to such obligations under prior consent judgments and administrative orders, in some cases for decades. Although the Commission stated it is not aware of any instance in which it sought to reopen a proceeding as a consequence of a no-deny violation, the formal announcement removes any residual uncertainty regarding enforcement of those provisions. Companies and individuals who settled SEC enforcement actions under the prior regime should nonetheless consider other legal implications, including the potential impact of public statements in other litigation, before commenting publicly on the underlying allegations.
Admissions. The rescission does not alter the Commission’s existing practice or discretion with respect to admissions. In cases involving parallel criminal proceedings, the Commission may continue to negotiate for admissions or otherwise address admissions and denials to ensure consistency with the criminal resolution. The distinction between the right to deny (now unrestricted) and the obligation to admit (unchanged, and still at the Commission’s discretion) will be a relevant feature of settlement negotiations going forward.
Regulatory Alignment. The Commission stated that the rescission aligns the SEC with the majority of federal agencies that do not impose a comparable no-deny requirement. The analogy has limits: the Department of Justice, for example, typically requires admissions in corporate deferred prosecution and non-prosecution agreements and bars settling companies from denying the underlying allegations. Nonetheless, the rescission removes a restriction that was distinctive to the SEC’s enforcement practice.