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Yesterday’s NY Times contained an opinion piece from Adam Liptak discussing the First Amendment issues surrounding the SEC’s “neither admit nor deny” settlement policy. Liptak notes that a cert petition for review of a case challenging that policy has recently been filed with the SCOTUS. The case, Romeril v. SEC, involves a former Xerox executive’s efforts to obtain relief from a 2003 “neither admit nor deny” settlement with the SEC.  In September 2021, the 2nd Circuit upheld the SDNY’s decision to deny the plaintiff’s motion for relief from judgment.

This excerpt from the cert petition’s “Questions Presented” section notes that the constitutional issues associated with the policy are front and center:

1. Does it violate the First Amendment for the Securities and Exchange Commission to impose a requirement that any party with whom it settles must agree to a lifelong prior restraint barring any statement, however truthful and whenever and however expressed, that even suggests that any allegation in a Securities and Exchange Commission Complaint is insupportable?

2. Does the Securities and Exchange Commission violate the Due Process Clause when it requires that any party with whom it settles must sign an SEC-drafted Consent Form waiving his due process rights and agree to a lifelong prior restraint barring any statement, however truthful and whenever and however expressed, that even suggests that any allegation in a Securities and Exchange Commission Complaint is insupportable?

Liptak notes that the Court grants very few petitions for cert, but that this one might have a shot because of the divergent approaches that lower courts have taken when it comes to gag orders imposed by the government. Okay, fair enough, but the cynic in me says there’s another reason the SCOTUS might take this case – given the present ideological makeup of the Court, there are likely several justices who wouldn’t mind the chance to bloody a federal agency’s nose when it comes to what they perceive as overreaching conduct.

Personally, I’ve come to really dislike the “neither admit nor deny” policy. I’ve seen situations where the agency has announced the filing of aggressive & career-damaging complaints on its website, only to settle for significantly less years later. To add insult to injury, the SEC routinely issues statements on its website trumpeting all of its settlements as victories, while the other parties can merely grit their teeth & hold their tongues.

– John Jenkins