SEC Rescinds Its Gag Rule Policy
The SEC yesterday rescinded its so-called gag rule policy prohibiting parties from denying the allegations in no admit/no deny settlements. The SEC also announced it would not enforce gag rule provisions in existing settlements (which it pointed out was not enforced previously). Even with this policy change, the SEC can still agree to no admit/no deny settlements, and it noted that it may continue to require admissions in some cases.
The practical effects of this policy change remain uncertain, but we can predict at least two possible consequences despite the fact that this will be a welcome change for some settling parties. First, the SEC staff may seek to include more detailed allegations in settled orders to make it more difficult for settling parties to deny the allegations. Second, some settling parties have viewed the gag rule as helpful because it constrained their public statements after a settlement. Without the ability to rely on the “no deny” language, those parties may now face pressure to say more, which could introduce new risks.
This post is as of the posting date stated above. Sidley Austin LLP assumes no duty to update this post or post about any subsequent developments having a bearing on this post.
