SEC Commissioner Hester Peirce has voiced her strong opposition to the United States Securities and Exchange Commission’s (SEC) long-standing “gag rule,” which prevents defendants from criticizing the agency’s claims in the aftermath of settling enforcement actions.
In her statement issued on January 30, Peirce argued that this policy not only hinders free speech but also erodes regulatory integrity.
The 1972 “gag rule” compels defendants to refrain from making public statements that deny any allegations in the SEC’s complaint or insinuate that the complaint lacks a factual basis.
Peirce asserted that this rule is overly broad and effectively shields the SEC’s allegations from any form of criticism.
She also expressed concern about the clause that requires defendants to prevent others from denying the allegations, as it implies a broader censorship of opinions that challenge the SEC’s judgment.
Furthermore, Peirce emphasized that the “no-deny policy” is an obligatory and non-negotiable component of SEC settlements, which are the most common resolution for enforcement actions. Violating this policy can result in defendants being brought back to court by the SEC.
In 2023, the SEC witnessed a surge in crypto-related enforcement actions, with 46 cases against crypto firms and $281 million collected in penalties from settlements.
READ MORE: Robert F. Kennedy Jr. and Donald Trump Unite Against Central Bank Digital Currency
Peirce argued that the SEC’s justifications for the “gag rule” are unfounded, as prior to its adoption in 1972, the SEC had successfully settled cases for decades without imposing such restrictions.
Other federal agencies, like the Federal Trade Commission, allow settling defendants to deny allegations of wrongdoing.
Peirce contended that settling a lawsuit with the SEC is often the most economical option, given the substantial financial resources required for SEC investigations and the legal complexities of challenging the agency in court.
However, she raised concerns that the policy allows the SEC to avoid proving its claims in court and secures a “permanent silence” from defendants, which it could never achieve through litigation.
Peirce’s stance is grounded in the belief that if the SEC is confident in its investigative work and analysis, it should not require defendants to remain silent and should instead permit them the freedom to express their views after settling enforcement actions.
This, she argues, would ensure a fair and transparent regulatory environment while upholding the principles of free speech and accountability.
Discover the Crypto Intelligence Blockchain Council
