SEC Neither Admit Nor Deny Settlements Explained.

Last Updated on: 4th August 2026, 01:33 am

No, not exactly. It became clear that the SEC rescinded its categorical no-deny policy, when it announced the rescission of Rule 202.5(e) on May 18, 2026, and then issued a press release the same day clarifying that “the rescission of Rule 202.5(e) does not cancel any existing judgments, sanctions, or other obligations created by Rule 202.5(e) or applicable law.” The SEC’s press release also clarified that “the SEC will not enforce any no-deny clauses in settlements that went into effect prior to the rescission,” although it also stated that “rescinding Rule 202.5(e) does not mean that the SEC will not enforce the terms of all applicable settlements.” In short, while the SEC decided not to enforce no-deny clauses that were in effect prior to the effective date of its rescission on May 21, 2026, and while it also has no intention of enforcing any no-deny clauses in judgments, sanctions, and other settlement obligations that predated its rescission, this does not mean the SEC has approved of neither-admit-nor-deny settlements, or that it has ended neither-admit-nor-deny settlements themselves. As the SEC explains:

“The SEC will continue to maintain the option of seeking a defendant’s admission of liability under applicable law and regulation. Defendants are advised that they will still be subject to the same risks that they have always faced when challenging the truthfulness of the SEC’s allegations in court, including the risk of civil penalties or other enforcement actions.”

In other words, by allowing defendants to deny allegations while seeking no admissions, the SEC is merely making it easier for defendants to test the validity of its allegations in court, while also relying on the prospect that such public denials could raise issues in subsequent litigation, as detailed below.

What changes in existing and future SEC settlements?

The immediate effect of the SEC’s rescission of Rule 202.5(e) is that defendants who settle enforcement actions without admitting liability can (and are not prohibited from) publicly denying the allegations set forth in the SEC’s Complaint. But the SEC does not require defendants to deny the allegations set forth in the SEC’s Complaint, and it will continue to resolve cases without admitting or denying, as appropriate. The SEC will also continue to negotiate admissions in settlement agreements as appropriate, and the rescission of Rule 202.5(e) gives the SEC’s negotiators greater flexibility to work with defendants to craft terms and conditions of settlement that are in the defendants’ best interests.

Additionally, the SEC’s rescission of Rule 202.5(e) did not prescribe the mandatory replacement language for future settlement documents. Also, the rescission did not categorically eliminate negotiated confidentiality or cooperation provisions, so defendants who are negotiating settlements with the SEC can expect all of the same issues to be at play in future settlement negotiations.

What are the risks for individuals and companies that go on the record denying the SEC’s allegations?

As a matter of fact, the former rule expressly prohibited defendants from going on the record denying the allegations. Rule 202.5(e) previously provided that a refusal to admit the allegations is equivalent to a denial, unless the defendant or respondent states that it neither admits nor denies the allegations. At the time, it was apparent to many defendants, and their defense counsel, that going on the record denying allegations set forth in an SEC Complaint would be a violation of the terms of their settlement agreements and that enforcement of these no-deny provisions was a very real possibility. While the SEC has indicated that it no longer intends to enforce these no-deny provisions, the legal risks of making a public denial are still there. As the SEC warned:

“Defendants are advised that they will still be subject to the same risks that they have always faced when challenging the truthfulness of the SEC’s allegations in court, including the risk of civil penalties or other enforcement actions.”

What should defendants do if they want to deny the SEC’s allegations but also don’t want to get in trouble with the SEC?

In the same vein as before, the best advice for defendants here would be to make sure that their settlement agrees-to-the-extent-necessary admission. In other words, the best approach is to admit to certain facts, and then explain why the remaining allegations are not supported by the evidence.

In other words, for defendants facing SEC enforcement actions:

• Never assume that making a public denial is a smart move
• Always rely on experienced defense counsel before making a public statement that challenges the validity of allegations in an SEC Complaint

Can a public denial create new securities liability?

The short answer is: yes. As mentioned above, just because the SEC has decided not to enforce no-deny clauses doesn’t mean that a public denial is completely safe. For example, the language that defendants include in their settlement agreements to neither admit nor deny the allegations set forth in the SEC’s Complaint does not qualify as an admission, and it does not constitute an exoneration of the defendant either. So, without an admission, the permitted post-settlement denial will still be treated as an assertion by the defendant, not a factual adjudication by the SEC.

Can a public denial reach the level of a violation of the Securities Exchange Act?

It is certainly possible that a permitted post-settlement denial could reach the level of a violation of the Securities Exchange Act of 1934 ( Exchange Act ), such as if it is material, and if it makes the defendant liable under Section 10(b) and Exchange Act Rule 10b-5. There is also a risk of liability under Exchange Act Rule 12b-20 if the SEC determines that the permitted post-settlement denial was not accompanied by the information required to prevent previous filings from becoming materially misleading. Even though the SEC says, “Defendants are advised that they will still be subject to the same risks that they have always faced when challenging the truthfulness of the SEC’s allegations in court,” the truth is that the risks of making a public denial have increased.

Do SEC admissions establish liability in private securities litigation?

Generally speaking, a defendant’s admission of liability in a settlement agreement with the SEC should be sufficient to establish liability under a private securities fraud claim. If a defendant admits that it committed, for example, a violation of Section 10(b) or Rule 10b-5 under the Securities Exchange Act of 1934, this admission is not necessarily binding. However, the defendant’s admission might not be the only piece of evidence the plaintiff needs to prove a claim. Other evidence may also be required, such as the amount of the plaintiff’s losses.

Can settled allegations be used in private lawsuits?

The allegations set forth in a Complaint do not constitute established facts unless they are either judicially determined or expressly admitted to by the defendant (or respondent). When defendants settle their enforcement actions without admitting liability, the resulting judgments and orders do not typically treat the Complaint’s allegations as adjudicated facts, even though those judgments and orders will often refer to the Complaint’s allegations for descriptive purposes.

Similarly, settled administrative orders may state Commission findings that are contrary to a respondent’s position, even where the respondent neither admits nor denies the allegations. Even in this case, the findings announced in the settled administrative order may not necessarily be findings of fact adjudicated after a contested hearing.

As a result, defendants that settle enforcement actions with the SEC should generally be able to avoid issue preclusion (or collateral estoppel) in related private securities litigation. Issue preclusion generally requires that (i) the party against whom preclusion is sought actually litigated the issue in question, and (ii) the issue was necessarily determined in the prior proceeding.

Neither-admit-nor-deny resolutions, by definition, ordinarily do not involve actually litigating the allegations in the SEC’s Complaint. As a result, those resolutions should not involve actual litigation of the allegedly-violated section(s) of federal securities law.

So, generally speaking, issue preclusion is not available in private securities litigation where the defendant (or respondent) neither admitted nor denied liability in its settlement with the SEC. In contrast, express admissions made by defendants and respondents that settle enforcement actions with the SEC can, of course, be offered as evidence in related private litigation (but do not automatically establish liability through issue preclusion).

Generally, these are the primary risks of having the SEC formally pursue an enforcement action, even if it leads to a settlement or a dismissal without trial. And, again, as a result, defendants and respondents that are facing the SEC should not rush to settle. They must make informed decisions based on their own assessment of the risks they are facing, and they must decide not only their willingness to pay the SEC’s penalties, but also their willingness to take on additional liability exposure under the Securities Exchange Act, the Securities Act, and other federal law.

Todd Spodek is the managing partner of Spodek Law Group, a second generation criminal defense firm that has been practicing since 1976.

Can I contest facts during later remedies proceedings?

As mentioned above, the former rule did not restrict defendants’ (or respondents’) obligations to testify. Defendants (or respondents) who entered into neither-admit-nor-deny settlements could contest the SEC’s allegations to the extent that, in non-SEC enforcement actions, this was both necessary and permissible. So, the former rule did not present any issues in these circumstances.

But, there are some issues with what we call “bifurcated settlements” in the context of the SEC’s enforcement actions. In a bifurcated settlement, the parties resolve liability first, and then they leave it to the court (or to the Commission) to determine the appropriate remedy. Some of these bifurcated agreements include language treating the Complaint’s allegations as if they had been established at trial. For example, some agreements state that the allegations in the Complaint “be and are hereby accepted as true for purposes of the Court’s determination of appropriate remedies.” While these agreements should not necessarily restrict a defendant’s (or respondent’s) ability to contest the Complaint’s allegations in subsequent litigation, there are still risks.

The SEC’s rescission of Rule 202.5(e) by itself does not address this issue. If you are considering entering into a bifurcated settlement with the SEC, our lawyers can ensure that your agreement expressly allows you (or your company) to challenge allegations set forth in the Complaint during the remedies proceedings and in any later proceedings. But, given the risks associated with making a public denial, the best approach is generally to negotiate with the SEC for a settlement that reflects the truth to the fullest extent possible, while remaining consistent with your obligations under the law.

Do insurance, indemnification, and collateral consequences still apply?

In short, yes. Many times, the SEC has imposed sanctions on defendants and respondents without first adjudicating the truthfulness of the underlying allegations. In these cases, the SEC’s sanction was entered without an admission of liability. The SEC’s rescission of Rule 202.5(e) did not change the situation, and it does not determine whether any particular sanction should be covered by the defendant’s or respondent’s liability insurance. Insurance coverage for the cost of SEC sanctions continues to be governed by the applicable policy terms and applicable state law.

Can companies still refuse to indemnify their executives after SEC settlements?

Again, in short, yes. The SEC’s rescission of Rule 202.5(e) does not override statutory or contractual limits on corporate indemnification. Companies are required to follow applicable laws and policies and the SEC’s recent action does not change their ability to refuse to indemnify their executives when it is not required.

Does the rescission change the consequences of a final SEC order or judgment?

Again, in short, no. With respect to the SEC’s rescission of Rule 202.5(e), any other consequences of an SEC injunction or order must be analyzed based on the language of that injunction or order and the relevant statute, regulation, rule, or contractual term. With respect to statutory disqualification and other other adverse consequences, the SEC’s rescission of Rule 202.5(e) is not going to remove those consequences from a final order or judgment. Rather, those consequences will still be analyzed on an as-set-by-set basis.

Why and how did the SEC rescind Rule 202.5(e)?

The SEC explains that it rescinded Rule 202.5(e) in light of “the risks to defendants and respondents and the increased difficulty of distinguishing between statements that are public and statements that are private.” In other words, with the advent of the Internet and social media, it has become more difficult for defendants to make statements that would not be seen as “public.” With this in mind, the SEC considered not the idea of adopting new “no-deny” language, but the idea of reopening the issue of how to address prohibited denials. Instead of reopening the issue, however, it decided to rescind the former rule instead.

Additional reasons for the rescission were:

• “The standard ‘neither admit nor deny’ clause in a settlement does not require a settlement to expressly prohibit making denials. As result, the existence of a no-deny clause depends upon the specific settlement agreement. While the SEC believes that these no-deny clauses are consistent with Rule 202.5(e) as then interpreted, the Commission acknowledges that some may argue that these no-deny clauses could, in certain cases, exceed Rule 202.5(e). “
• “The Justice Department, which also often pursues civil enforcement action against public and private companies, does not have a counterpart to Rule 202.5(e).”
• “The Commission concludes that the harm to the public from permitting a defendant or respondent to make a public statement that doesn’t commit the defendant or respondent to the truthfulness of the allegations set forth in the SEC’s Complaint is minimal.”

The SEC rescinded the rule pursuant to the exception in 5 U.S.C. § 553(b)(A). Additionally, the SEC believed that the Administrative Procedure Act’s 30-day delay would not apply in this case. The former policy did not appear to establish an actionable obligation, and the notice that the former policy set forth was not a rule but rather a policy statement in the context of the SEC’s rule-making procedures.

The former policy was adopted in 2011, and was included in the section of the Federal Register titled “Notices of Proposed Rulemaking... And Policies... That do not require a notice-and-comment period before taking effect.” The former rule also appeared in 17 C.F.R. § 202.5(e).

Speak With a Federal Defense Lawyer

If you are dealing with any part of what this article describes, the next step is a conversation with a lawyer who handles these cases. Spodek Law Group is a second generation criminal defense firm practicing since 1976, representing clients nationwide from offices in New York, Brooklyn, Queens and Los Angeles. Call 212-300-5196 to speak with our team.