In 1972, the U.S. Securities and Exchange Commission (SEC) adopted Rule 202.5(e), which sets forth its “no-admit/no-deny” policy for settlements of enforcement actions. 17 C.F.R. §202.5(e). The rule allows defendants or respondents (hereinafter “defendants”) to settle the SEC’s claims against them by agreeing to certain sanctions or remedies without admitting the SEC’s allegations.

However, this provision also operates as a gag rule by prohibiting the defendant from publicly denying the allegations contained in the consent judgment or order. The SEC typically requires defendants to agree in the settlement document not to take any action or make any public statement denying, “directly or indirectly, any allegation in the complaint or creating the impression that the complaint is without factual basis.” Nor may a defendant state that she does not admit the allegations without also stating that she does not deny the allegations.