Key Takeaways
- On May 18, the Securities and Exchange Commission (SEC) announced that it is rescinding the policy regarding denials of settlements in enforcement actions.[1] This policy change will allow the SEC to settle enforcement actions without requiring defendants to agree not to publicly deny the agency’s allegations.
- In its press release announcing the change, the SEC also stated that it will not enforce existing no-deny provisions previously entered, and in the event of a breach of an existing no-deny provision, the SEC will take no action to ask a district court to vacate a settlement or reopen an adjudicatory proceeding in connection with the terms of the settlement agreement.
- The week prior to this announcement, the new Director of the SEC’s Division of Enforcement, David Woodcock, made his first public remarks, in which he emphasized the Division’s focus on identifying and stopping manipulation in all its forms, including offering frauds, accounting and disclosure fraud, insider trading, market manipulation, fraud by foreign actors targeting U.S. markets and investors and breaches of fiduciary duties by advisers misusing client assets.
No-Deny Settlements
On May 18, the Securities and Exchange Commission (SEC) rescinded a policy, codified in Rule 202.5(e) of its informal rules of procedures, stating that when it chooses to settle an enforcement action in which a sanction is imposed, it will not settle unless the defendant or respondent also agrees not to publicly deny the allegations in the complaint or administrative order. The SEC’s press release announcing the change noted that rescission of this rule aligns the SEC with the overwhelming majority of federal agencies that do not have a similar rule and gives the Commission more flexibility in settling enforcement actions. By rescinding this policy, the SEC recognizes that the effect on the public interest from such denials may be minimal and that the policy itself may have created an incorrect impression that the SEC is trying to shield itself from criticism.
Though the SEC’s press release announcing its policy change stated that there is no known instance of the SEC seeking to reopen an administrative or civil proceeding as a consequence of a defendant or respondent violating a no-deny provision, defendants and respondents have historically consented to such a provision to settle enforcement actions.[2]
The rescission of the no-deny policy does not affect the SEC’s practice related to admissions in settlements. With some notable exceptions, the SEC generally does not require settling defendants or respondents to admit to allegations. The rescission also does not affect the SEC’s discretion to settle with defendants who decline to admit facts or liability or its discretion to negotiate for admissions as part of a settlement.
In connection with this significant policy development, Paul S. Atkins, SEC Chairman, stated that “[s]peech critical of the government is an important part of the American tradition. This rescission ends the policy prohibiting such criticism by settling defendants.” Commissioner Hester M. Peirce also made a statement, noting that she feels the no-deny policy rescission is good and brings the SEC into alignment with nearly every other part of the federal government.[3] “[P]eople’s freedom to speak against the government contributes to its ability to govern well,” she stated, and “[t]ransparent enforcement of the securities laws helps create the environment in which free markets thrive, and enabling both parties in an enforcement action to speak freely contributes to transparency.”
Enforcement Priorities
The week prior to this significant announcement, David Woodcock made his first public remarks as the new Director of the SEC’s Division of Enforcement. After about a week in the role, he explained how he intends to lead the Division and set out priority areas for enforcement.[4] He noted that his goals are aligned to those of Chairman Atkins’: “to return the enforcement program back to basics. That means vigorously protecting investors and safeguarding markets, while also providing transparency and certainty to those we regulate.” Director Woodcock also addressed the recent attention that has been paid to the decline in the number of cases brought over the past several years and confirmed that this Commission has deliberately shifted toward an emphasis on quality over quantity, and he fully supports that direction.
Director Woodcock explained that the Enforcement Division’s focus is, and will remain, protecting investors and safeguarding markets from real harm. This means identifying and stopping manipulation in all its forms, including offering frauds, accounting and disclosure fraud, insider trading, market manipulation, fraud by foreign actors targeting U.S. markets and investors and breaches of fiduciary duties by advisers misusing client assets.
Director Woodcock highlighted several recent matters and emphasized the focus on addressing the most harmful conduct. The Division continues to bring cases involving offering frauds that cause significant losses to investors. The Division is also prioritizing financial reporting matters that are important to ensure good corporate accounting and disclosures. Safeguarding markets necessarily involves addressing market manipulation and insider trading, he noted. He also discussed the private fund space and how the Division must remain vigilant when it comes to private investment markets. The Division is attuned to potential risks relating to liquidity, fees, valuations and conflicts of interest – not only at the private fund adviser level but also throughout the distribution chain. The Division will also remain active in the investment adviser space and continue to pursue matters involving misappropriated client assets, inadequate safeguarding of assets, misleading strategy disclosures, undisclosed fees and expenses, fraudulent valuations and mismarking, prohibited trading practices and undisclosed conflicts of interest. Director Woodcock also specifically mentioned private credit, that there are stresses in some portfolios and developments playing out more broadly across this sector and that the Division is monitoring the situation.
Director Woodcock also discussed how a critical part of the Division’s overall approach is strong coordination with its federal partners, state securities regulators and foreign authorities, including the Department of Justice (DOJ), the Commodity Futures Trading Commission (CFTC), the Financial Crimes Enforcement Network, banking regulators and foreign counterparts. The Division is returning to a more collaborative posture with its enforcement partners and formalizing information-sharing protocols. Director Woodcock noted that this is already well underway with the CFTC as part of its harmonization efforts. The Division, however, is not looking for opportunities to “pile on,” as investors deserve a regulatory system that works together effectively.
Director Woodcock stated his commitment to continuing the important work of the SEC’s Cross-Border Task Force that was established last September. The current work of the task force includes investigating potential violations of the U.S. federal securities laws related to foreign-based companies, including potential market manipulation such as “pump-and-dump” and “ramp-and-dump” schemes. The task force is also looking at potential violations by underwriters, auditors and other gatekeepers who facilitate a foreign company’s access to U.S. markets for fraudulent purposes. Additionally, the task force is examining potential securities law violations related to companies from foreign jurisdictions, such as China, where governmental control and other factors pose unique risks to investors.
Consistent with these efforts, Director Woodcock announced that the Retail Fraud Working Group will be reinstituted. This group will focus specifically on protecting retail investors and strengthening coordination with the Division’s state and federal partners. He noted that reestablishing this group is one of his earliest priorities and there will be more to come on this in the coming weeks.
Director Woodcock closed his remarks with a word to practitioners: “When advising your clients operating in today’s enforcement environment, the message is both simple and demanding: we are not focused on prosecuting firms or individuals for honest mistakes that cause no investor harm. If your situation fits that profile, demonstrate it with evidence and facts.” “A company that self-reports, cooperates fully, and remediates will not be treated the same as one that conceals or obstructs.” Director Woodcock stated that the takeaway is simple: “engage early, engage seriously, and engage candidly.” If a client operates in a gray area, he recommends counsel take advantage of the Commission’s stated commitment to pre-enforcement dialogue. And if the Commission misunderstands the client’s business model, counsel should use the opportunity to clarify. “The days when a subpoena was our primary tool of communication are behind us,” he said. Director Woodcock hopes his tenure will be marked by a return of the SEC’s Enforcement Program to what he stated it was always intended to be: a targeted, principled, evidence-based response to conduct that harms real investors.
BakerHostetler’s White Collar, Investigations and Securities Enforcement and Litigation team is composed of dozens of experienced individuals, including attorneys who have served in the DOJ and at the SEC. Our attorneys also include former unit chiefs, partners who have served in the Division of Enforcement, former U.S. attorneys, former assistant U.S. attorneys and attorneys with extensive experience in regulatory investigations, litigation and enterprise compliance counseling. Please feel free to contact any of our experienced professionals if you have questions about this alert.
[1] Press Release 2026-45, “SEC Rescinds Policy Regarding Denials of Settlements in Enforcement Actions” (May 18, 2026), https://www.sec.gov/newsroom/press-releases/2026-45-sec-rescinds-policy-regarding-denials-settlements-enforcement-actions?utm_medium=email&utm_source=govdelivery.
[2] We are aware of one case where the Commission filed a motion to vacate a judgment entered against defendant Michael P. Angelos because of an alleged violation of the Commission’s no admit or deny policy. After the defendant withdrew any statement made on his behalf that was inconsistent with the policy, the Commission withdrew its motion to vacate. SEC v. Michael P. Angelos, Lit. Rel. No. 14886 (Apr. 22, 1996), https://www.sec.gov/files/litigation/litreleases/lr14886.txt.
[3] Commissioner Hester M. Peirce, “Somewhere Between Cacophony and Euphony” (May 18, 2026), https://www.sec.gov/newsroom/speeches-statements/peirce-statement-settlements-enforcement-actions-051826?utm_medium=email&utm_source=govdelivery.
[4] Director David Woodcock, Division of Enforcement, Remarks at the MFA Legal & Compliance 2026 Conference (May 13, 2026), https://www.sec.gov/newsroom/speeches-statements/woodcock-remarks-mfa-legal-compliance-2026-conference-051326?utm_medium=email&utm_source=govdelivery.
