WASHINGTON, May 18 (Reuters) – The U.S. Securities and Exchange Commission on Monday ended its longstanding practice requiring that people and companies who settle allegations of wrongdoing refrain from publicly refuting the case against them, a practice that some conservative critics had said violated defendants’ freedom of speech.
The change, which the SEC had rejected considering under former President Joe Biden, marks a further softening of the regulator’s enforcement posture under President Donald Trump.
“Speech critical of the government is an important part of the American tradition,” SEC Chair Paul Atkins said in a statement. The change “ends the policy prohibiting such criticism by settling defendants,” he added.
Since 1972, SEC regulations required that, when settling enforcement actions, defendants who do not admit to the agency’s accusations also refrain from denying them or causing others to do so. The agency said at the time it wanted to prevent the impression that the allegations could be false.
In the decades since, such neither-admit-nor-deny settlements became standard practice in settling SEC enforcement matters and continued even after former Chair Mary Jo White pledged in 2013 to reduce the agency’s reliance on them in the wake of the 2008 financial crash.
At that time, some advocates for tougher policing of Wall Street instead called on the agency to extract admissions of responsibility from alleged wrongdoers.
After the SEC declined a previous request to consider ending the policy, Republican Commissioner Hester Peirce said in 2024 there was little evidence that denials of responsibility had caused problems for the agency and that other regulators had not adopted similar policies.
In Monday’s announcement, the SEC also said it would not seek to reopen previous enforcement actions if the defendants violated the no-deny provisions to which they had agreed.
Chris Iacovella, president of the American Securities Association, welcomed the news, saying in a statement that under its previous policy the SEC had sought to “extinguish” the free speech rights of every individual who felt “forced to settle rather than fight.”
Ben Schiffrin of the organization Better Markets, which advocates for stronger enforcement of financial regulations, said the SEC had adopted the change without first seeking comment from the public.
“The SEC should want the public to have no doubt that its sanctions are based on violations of the securities laws,” he said in a statement.
(Reporting by Douglas Gillison, Jasper Ward and Daphne Psaledakis; Editing by Sonali Paul)
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