Washington, D.C. — The New Civil Liberties Alliance (NCLA) today filed a petition asking the U.S. Securities and Exchange Commission to amend its controversial “Gag” Rule, 202.5(e). Adopted in 1972, SEC uses its Gag Rule to require settling parties to agree that they will never make any public statement that either directly or indirectly questions the accuracy of any allegations made in the SEC’s complaint—even when the agency’s allegations are false.

NCLA contends that the SEC lacked authority to issue the Gag Rule, that the Rule directly infringes upon the First Amendment rights of Americans, and that it hides the agency’s enforcement practices from public scrutiny. The Gag Rule’s terms also never expire, so its unconstitutionally mandated silence amounts to a life sentence for embattled defendants.

NCLA’s proposed amendment would keep in place the portion of Rule 202.5(e) that permits SEC to accept a consent order in which the defendant “neither admits nor denies” some or all allegations. It would also allow defendants in negotiations with SEC to admit or deny specific allegations, while no longer forcing them to surrender their future free speech rights as the price for obtaining a settlement.

New Civil Liberties Alliance Senior Litigation Counsel, Peggy Little:
“It is hard to imagine a policy better designed to suppress truth than the Gag Rule. It is unconstitutional, unauthorized, unjustified, and it shields the government from public oversight and criticism by the very people best situated to level it. The government should never be in the business of silencing anyone, especially those whom it prosecutes.”

New Civil Liberties Alliance General Counsel, Mark Chenoweth:
“The SEC has been illegally silencing defendants for more than 45 years. It is high time for the Commission to restore the First Amendment’s guarantees of free speech, free press and the right to petition.”

NCLA is requesting prompt consideration of this Petition to Amend the Gag Rule.

About the New Civil Liberties Alliance
NCLA is a nonprofit civil rights organization founded by prominent legal scholar Philip Hamburger to protect constitutional rights from violations by the administrative state. NCLA’s pro bono public-interest litigation and other advocacy strive to tame the unchecked power of state and federal agencies and to foster a new civil liberties movement that will help restore Americans’ fundamental rights.

Media Contact:
Judy Pino

SOURCE New Civil Liberties Alliance