SEC’s settlement gag rule ‘undermines regulatory integrity’ — Hester Peirce

Settlements are the “most common” way the SEC resolves enforcement actions, but this stops defendants from speaking out, says Hester Peirce.

A United States Securities and Exchange Commission rule forbidding defendants from criticizing the agency’s claims when settling enforcement actions “undermines regulatory integrity” and free speech, says one of its commissioners.

In a Jan. 30 statement, SEC commissioner Hester Peirce disagreed with her agency’s denial of a petition to amend its 1972 “gag rule” — which forbids defendants from denying or refusing to admit to the SEC’s allegations following a settlement.

“The policy of denying defendants the right to criticize publicly a settlement after it is signed is unnecessary, undermines regulatory integrity, and raises First Amendment concerns,” Peirce wrote.

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