The SEC Ends Its No-Deny Policy: What Happens Next?

Authors
Linda Broocks, Georgia N. Ainsworth

For more than fifty years, settling a U.S. Securities and Exchange Commission (SEC) enforcement action came with an additional price: silence. That changed on May 21, 2026, when the SEC formally rescinded Rule 202.5(e), ending the Commission’s longstanding practice of prohibiting settling respondents from publicly denying its allegations. The Commission also announced that it would not enforce comparable provisions contained in prior settlements, effectively freeing past and future respondents alike to speak publicly about allegations they continue to dispute. The change does not erase past settlements, remove disclosures, or alter reporting obligations. But it does eliminate a restriction that many respondents viewed as one of the most consequential terms of settlement. The practical significance of the rescission may not be found in what must be disclosed. It may be found in who gets to explain those disclosures.

The End of the SEC’s No-Deny Policy

For decades, respondents settling SEC enforcement actions typically neither admitted nor denied the Commission’s allegations. At the same time, Rule 202.5(e) prohibited them from publicly denying those allegations after settlement. As a result, many respondents faced a difficult choice: litigate or settle and surrender the ability to publicly contest the SEC’s version of events.

That Hobson’s choice no longer exists. Respondents remain free to settle. They remain free to avoid the expense, uncertainty, and disruption of litigation. But they are no longer required to remain silent about allegations they continue to dispute.

What the Rescission Does Not Change

The rescission is significant, but it is not a reset button. SEC settlements remain part of the public record. Regulatory reporting obligations remain intact. Form U4, Form U5, and BrokerCheck disclosures are not disappearing because Rule 202.5(e) was rescinded. The historical fact of a settled SEC enforcement action remains just that: a historical fact. What has changed is the ability of respondents to publicly explain their side of the story.

Why Disclosure Narratives Matter

The most interesting developments may emerge not from the disclosures themselves, but from the narratives that accompany them. Industry participants are already familiar with customer-dispute disclosures that include statements denying wrongdoing and explaining that a settlement was reached solely to avoid the costs, risks, and uncertainties of continued litigation. Those explanations do not erase the underlying event. They provide context. The SEC’s rescission may encourage respondents to pursue similar opportunities when discussing settled regulatory matters.

To be clear, the existence of a settlement remains reportable. The question is whether respondents will increasingly seek to supplement those disclosures, either by filing retroactive U4 amendments for prior settlements or by drafting new entries to explain why they settled and why they continue to dispute the underlying allegations. Whether regulators embrace these efforts—and whether member firms will agree to submit them on behalf of their advisors—remains to be seen. But the conversation is now possible in a way that it was not before May 21.

A New Reputational Landscape

The rescission may ultimately have less impact on settlement mechanics than on reputation management. Many respondents settle cases for reasons that have little to do with conceding liability. Litigation is expensive. Regulatory proceedings are disruptive. Business considerations often favor resolution over prolonged litigation. And, for the first time in decades, respondents who made that calculation can openly say so.

That does not change the outcome of the settlement. It does not rewrite regulatory history. But it does allow respondents to challenge the narrative that often accompanies that history.

Looking Ahead

The SEC has removed a longstanding restriction on post-settlement speech. What happens next will depend on how respondents, firms, and regulators respond. Watch disclosure narratives. Watch amendment requests. Watch for guidance from FINRA and other regulators. The most important consequence of the rescission may not be that settled matters can now be discussed differently. It may be that respondents can finally participate in the discussion at all.

Special thanks to Collin Hecht, South Texas College of Law Class of 2027, for his assistance in researching and drafting this article.

Linda Broocks and Georgia Ainsworth, are members of Kean Miller’s Commercial Litigation team, representing clients in complex disputes involving securities, regulatory enforcement, commercial litigation, and high-stakes business matters. Linda advises clients on securities regulatory issues and represents individuals and businesses before FINRA and other administrative bodies, while Georgia counsels clients through complex litigation and risk management strategies. Together, they help clients navigate evolving regulatory developments, enforcement risks, and reputational challenges.

Kean Miller LLP

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