SEC Seeks to End “No Admit, No Deny” Rule

On May 8, 2026, the SEC submitted a request to the White House Office of Management and Budget to end its policy regarding denials in settlements of enforcement actions, also known as the “gag rule” or “no admit, no deny rule.” 

The rule prohibits a party from consenting to a judgment or order that imposes a sanction while denying the allegations in the complaint or order for proceedings. Although no details of the SEC’s request are available currently, ending the rule would be a sea change for defendants and respondents in SEC civil lawsuits and administrative proceedings. 

The no admit, no deny rule was adopted in 1972. For over 50 years, the language “without admitting or denying” has been a cornerstone in enforcement action settlements.

The Commission has adopted the policy that in any civil lawsuit brought by it or in any administrative proceeding of an accusatory nature pending before it, it is important to avoid creating, or permitting to be created, an impression that a decree is being entered or a sanction imposed, when the conduct alleged did not, in fact, occur. Accordingly, it hereby announces its policy not to permit a defendant or respondent to consent to a judgment or order that imposes a sanction while denying the allegations in the complaint or order for proceedings. In this regard, the Commission believes that a refusal to admit the allegations is equivalent to a denial, unless the defendant or respondent states that he neither admits nor denies the allegations.

 17 C.F.R. § 202.5(e). 

This is not the first time the rule has faced scrutiny. In January 2024, the Commission denied a Petition to Amend the rule. The Petition argued that the rule violates the First Amendment and due process rights of defendants and respondents. In then-Chairman Gary Gensler’s denial of the Petition, he reasoned that in settling a case, the Commission “relinquish[es] the opportunity to present the case in court,” while “the defendant [] relinquishes the right to defend the case in court, in the press, and in the eyes of the public.” Further, he explained that “an essential component of settlements is the public recitation of the facts,” which informs the market of conduct that violates the securities laws. By allowing defendants or respondents to deny the allegations, it risks undermining the allegations and “muddles the message to the public.” Recently, the Ninth Circuit upheld the rule when faced with First Amendment challenges in Powell, et al. v. SEC (9th Cir. Aug. 6, 2025). The Supreme Court granted an extension to file both a petition for a writ of certiorari, which was filed on March 16, 2026, and a response, which must be filed by May 20, 2026. 

If the rule is adopted, the resolutions landscape could change in some of the following ways:

• More attractive settlements for defendants and respondents. Parties could resolve SEC matters while still disputing the allegations. This could reduce reputational harm to defendants and respondents.
• Defending parallel litigation. Defendants and respondents could have greater leverage in defending parallel litigation if they can deny allegations in a settlement.
• Advancement, indemnification, and D&O insurance. Allowing a defendant or respondent to resolve an SEC matter without admitting wrongdoing could create an easier path for advancement of fees and indemnification. Additionally, it may avoid triggering certain exclusions for misconduct in D&O insurance policies.
• Possible increase in settlements. Parties that may have otherwise litigated an enforcement action may be more prone to settle if they can deny the allegations.
• Complex settlement negotiations. Parties may spend more time negotiating the nature of the denial in a settlement.

We will continue to monitor changes to the rule and the related impact.