PANews , January 31, Cointelegraph reported that a U.S. Securities and Exchange Commission (SEC) rule prohibits defendants from criticizing the agency’s claims when resolving enforcement actions, which a commissioner of the Commission said “undermines regulatory integrity.” and freedom of speech. In a Jan. 30 statement, SEC Commissioner Hester Peirce disagreed with her agency's rejection of a petition to amend its 1972 "gag rule," which prohibits defendants from denying or refusing to acknowledge the SEC after a settlement. accusations. "A policy that deprives defendants of their right to publicly criticize a settlement after it is signed is unnecessary, undermines regulatory integrity, and raises First Amendment concerns," Peirce wrote.
The rule states that defendants must agree that they will not "make or permit others to make any public statement that directly or indirectly denies any allegation in the complaint or creates the impression that the complaint lacks a factual basis." "Defendants will not know the outcome of this language when they see it," Peirce said. "The rule effectively protects the committee's allegations from criticism." Peirce said the provision in which defendants agreed not to "permit" denials of the allegations was also problematic, Peirce said. Because this clause indicates that the defendant must prevent others from saying anything that may cast doubt on the SEC's judgment. This undeniable policy is a "mandatory, non-negotiable provision" in its settlement agreements and "the most common resolution in SEC enforcement actions." The SEC can also take defendants to court if violations occur.
Peirce said that because of the difficulty, time and legal costs of fighting government agencies in court, settling lawsuits is often the cheapest option to resolve SEC enforcement actions even for the “best-resourced corporate defendants,” however, when the U.S. When the SEC eventually settled, it no longer had to prove its claims in court, and its policy meant it "gained the benefit that it could never obtain through litigation, namely, the defendant's perpetual silence"; but if the SEC "had "confident in its investigative work and analysis," there is no need to "require the settling defendants to remain silent."
