US Federal Court Upholds SEC ‘Gag Rule’ Against Free Speech Claims

US federal court upholds SEC ‘gag rule’ against free speech claims

The US Court of Appeals for the Ninth Circuit on Wednesday upheld a Securities and Exchange Commission (SEC) policy prohibiting settlement defendants from publicly denying enforcement allegations. The court found that the SEC rule is constitutionally permissible despite free speech concerns. The court applied the “voluntary waiver” framework established in the 1987 Supreme Court ruling, Town of Newton v. Rumery. Judges held that the defendants h…

Court Upholds SEC 'Gag' Rule

A federal appeals court on Wednesday upheld the U.S. Securities and Exchange Commission’s so-called “gag rule,” rejecting a claim it illegally silences defendants who want to criticize the regulator after settling civil enforcement cases. In a 3-0 decision, the 9th U.S. Circuit Court of Appeals said the rule was not unconstitutional on its face, but could violate the First Amendment depending on how it is applied. The rule, reflecting SEC policy…