It looks like the SEC’s “neither admit nor deny” settlement policy may at last be on its way to the ash heap of history.  On Friday, the SEC filed a document with OIRA titled “Rescission of Policy Regarding Denials in Settlements of Enforcement Actions.” While the document itself isn’t publicly available, its title doesn’t leave much to the imagination.

The SEC’s so-called “gag rule” and the repeated efforts to eliminate it has provided us with plenty of fodder for our blogs over the years, but we’d be happy to find something else to write about. Personally, I think Judge Ronnie Abrams of the SDNY was on the money in a 2022 opinion slamming the SEC’s neither admit nor deny policy. In her opinion, she noted that the effect of the policy was to ensure that the public would never know whether the government’s charges were true, and said that this ability to draw a curtain down over governmental action was precisely the kind of societal harm that the First Amendment was intended to protect against:

The dominant purpose of the First Amendment was to prohibit the widespread practice of governmental suppression of embarrassing information . . . . Secrecy in government is fundamentally anti-democratic, perpetuating bureaucratic errors. Open debate and discussion of public issues are vital to our national health.

Of course, some – including former SEC commissioners and Enforcement chiefs – have contended that the “neither admit nor deny” policy is in many instances too lenient, and have pushed for the SEC to require admissions of wrongdoing in more cases. As this Bloomberg Law article on the move to repeal the gag rule notes, its elimination won’t preclude the SEC from negotiating for admissions as part of a settlement.

– John Jenkins