The U.S. Securities and Exchange Commission (SEC) has repealed a non-disclosure rule known as the 'gag rule,' which prohibited defendants agreeing to settle disputes from publicly denying, contesting, or criticizing the regulator's allegations after the case was resolved. This was reported by Bloomberg.
"Criticism of the government is an important part of American tradition," said Commission Chairman Paul Atkins.
Bloomberg notes that billionaire Elon Musk, a frequent subject of SEC investigations, has actively advocated for the repeal of the rule. Attempts to repeal the 'gag rule' have been made several times. In 2024, the SEC rejected a petition demanding a change in its non-disclosure policy.
In a statement announcing the repeal of the rule, the Commission stated that it aligns the SEC with the overwhelming majority of federal agencies that do not have a similar rule, and gives the Commission more flexibility in taking enforcement actions.
The rule (Rule 202.5 (e)) was introduced in 1972. Critics argue that it deprived defendants before the Commission of their right to free speech guaranteed by the First Amendment to the U.S. Constitution.
Under this provision, the SEC will not enter into a settlement until the other party to the dispute agrees not to publicly contest the allegations set forth in the complaint or administrative order.
