From SEC v. Moraes, decided today by Judge Ronnie Abrams (S.D.N.Y.):
In its normal practice of settling enforcement actions, the SEC routinely demands that defendants sacrifice the ability to ever deny the allegations against them—indefinitely silencing them from speech otherwise protected by the First Amendment. The threat held over the head of defendants by this so-called "No-Admit-No-Deny Provision" (the "Provision") is not easily overstated. Should they ever publicly refute the accusations against them, or even so much as "create the impression" that the SEC got something wrong, the Commission may reopen their cases or seek to hold them in contempt, thereby subjecting them to the risk of enormous financial and professional penalties, if not imprisonment. Truth is no defense. No matter how weak, or strong, the allegations in the complaint may be—indeed, even if the testimony of key witnesses proves to be false—if defendants ever consider publicly defending themselves, the No-Admit-No- Deny Provision prevents them from doing so.
Unsurprisingly, then, the non-negotiable inclusion of the Provision in consent decrees by an arm of the federal government is as rare as it is severe. Of all the federal agencies that broker settlements, the SEC stands nearly alone in its requirement, as a matter of agency policy, that defendants agree to the Provision in order for an enforcement action to be dismissed. And because nearly every one of the hundreds of cases brought by the SEC each year is settled, the Commission relies on the Provision with alarming frequency.
Perhaps most concerning, the federal judiciary is made complicit in this practice— normalizing lifetime gag orders in the process. Courts are called upon to turn a blind eye to First Amendment rights being used as a bargaining chip; to endorse consent decrees, giving No-Admit- No-Deny Provisions the imprimatur of judicial sanction; and to enforce them should defendants ever step out of line. This is troubling indeed. "There is no greater safety valve for discontent and cynicism about the affairs of Government than freedom of expression." This "has been the genius of our institutions throughout our history," and it is "one of the marked traits of our national life that distinguish us from other nations under different forms of government."
Before the Court is one such Consent Agreement containing the Provision, which Defendant has willingly signed. Consistent with Second Circuit precedent, see SEC v. Romeril (2d Cir. 2021), the Court will approve the Agreement, but it will not do so silently….
