Last week, the New Civil Liberties Alliance announced that it had filed a petition asking the US Supreme Court to hear a challenge the SEC’s “gag rule.” As we’ve shared in the past, the gag rule – more neutrally known as the “no-admit/no-deny policy” – says that defendants settling civil claims with the Commission can’t go out afterwards and deny the allegations. The policy is codified in 17 CFR § 202.5(e).

The NCLA filed the petition on behalf of a group that lost a case in the 9th Circuit last summer, which was premised on a First Amendment challenge. The way the appellate court saw it, the policy isn’t facially invalid because defendants are voluntarily waiving their First Amendment rights when they agree to a settlement. But as Meredith noted at the time, the policy may not feel “voluntary” to enforcement targets – and the court even left the door open to the possibility that the policy may be unconstitutional as applied.

Not surprisingly, the NCLA announcement leans into that perspective. Here’s an excerpt from their press release:

The Bill of Rights explicitly forbids Congress from abridging Americans’ freedom of speech or press. Yet the SEC, a mere agency, claims power Congress itself lacks. The rule is not narrowly tailored, serves no legitimate or compelling government interest, restricts speech based on content and viewpoint, and restrains future speech, violating the First Amendment. Criticizing this policy, SEC Commissioner Hester Peirce has said it is designed to improperly hide agency actions from the public.

The petition is the latest in a string of efforts to overturn this rule. In late 2023, the NCLA submitted a rulemaking petition on the topic, which it previously submitted in 2018. The NCLA is the same organization that orchestrated the end of the Chevron defense, as well as challenges to the SEC’s use of administrative law judges. We don’t know yet whether the “gag rule” challenge will make it onto SCOTUS’s docket – but it’s not NCLA’s first rodeo.

– Liz Dunshee