Claiming The Narrative Before The SEC Files Charges

Republished with permission by Law360

For more than 50 years, settling a U.S. Securities and Exchange Commission enforcement action came with a significant communications constraint: Accept the penalty, decline to admit wrongdoing and agree not to deny the allegations either. The company got finality. The SEC got its order. And the agency’s account of what happened became, in effect, the public record.

That constraint is now gone. On May 18, the SEC formally rescinded Rule 202.5(e), the provision that had conditioned settlement on a defendant’s promise not to publicly deny the agency’s allegations. SEC Chairman Paul Atkins framed it in First Amendment terms, saying the prior policy had prohibited speech critical of the government, and that such speech is an important part of the American tradition.