SEC Rescinds Policy Regarding Denials of Settlements in Enforcement Actions

Key dates

18 May 2026

- The SEC issues the press release announcing rescission of its “no‑deny” policy codified in Rule 202.5(e), signalling immediate policy change for new enforcement settlements

TBD

- Any subsequent SEC guidance, FAQs, or amendments to the Rules of Practice or Enforcement Manual that clarify how post‑settlement denials will be treated in future cases may be issued at a later date

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.

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• - The SEC has rescinded the policy in Rule 202.5(e) of its informal Rules of Practice that conditioned settlements involving sanctions on the respondent’s agreement not to publicly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

Who is affected

• SEC‑registered broker‑dealers subject to enforcement actions under the Securities Exchange Act of 1934.
• SEC‑registered investment advisers and exempt reporting advisers subject to enforcement actions under the Investment Advisers Act of 1940.
• SEC‑registered investment companies and their advisers subject to enforcement actions under the Investment Company Act of 1940.
• Public companies and other issuers subject to SEC reporting obligations under the Securities Exchange Act of 1934 (including sections 13(a), 14(a), and 15(d)) that may settle disclosure, accounting, or internal‑controls enforcement matters.
• Underwriters, municipal advisors, and other intermediaries that enter into settlements with the SEC in connection with offerings, market‑abuse, or disclosure‑related cases.
• Public company directors and officers, registered representatives, associated persons of broker‑dealers, and supervised persons of investment advisers who settle individual SEC enforcement actions.
• Legal, compliance, investor‑relations, and corporate‑communications teams at SEC‑regulated firms that design and approve public statements about SEC enforcement investigations, settlements, and remedial measures.
• D&O insurers, indemnification providers, and litigation‑defence counsel whose evaluation of coverage, reservation‑of‑rights, or defence strategies may be affected by the ability of insureds to deny SEC allegations post‑settlement.