On July 12, 2022, the U.S. Court of Appeals for the Fifth Circuit in S.E.C. v. Novinger rejected the latest in a number of legal challenges to the Securities and Exchange Commission’s (SEC) practice of using “no-deny” consent agreements in civil enforcement actions. See S.E.C. v. Novinger, _ F.4th _, No. 21-10985, 2022 WL 2688620 (5th Cir. 2022). Although the court refused to vacate this particular agreement, two members of the three-judge panel signaled that, under the right circumstances, they may vote to strike down similar agreements in the future.

Longstanding SEC policy allows defendants to settle civil actions without admitting or denying wrongdoing, but requires that they agree not to publicly deny the SEC’s allegations. In recent years, litigants have mounted serious challenges to the constitutionality of the no-deny requirement, principally on First Amendment grounds. While to-date none of the attempts to undo existing consent decree provisions has succeeded, courts have nonetheless expressed concern as to the requirement’s validity. It remains to be seen whether litigants can formulate a more attractive procedural posture to litigate these claims and whether the SEC, which along with the CFTC, is one of only two federal agencies to mandate no denial settlements, will reevaluate its rule in light of these criticisms and concerns.