Over five years ago, the New Civil Liberties Alliance (“NCLA”) petitioned the Securities and Exchange Commission (“SEC”) to amend 17 C.F.R. § 202.5(e) (the “Gag Rule”, “Gag” or “Rule”). Adopted 51 years ago as a so-called housekeeping rule and thus without the benefit of notice-andcomment rulemaking procedures in violation of the APA, § 202.5(e) has gagged countless enforcement targets in perpetuity. SEC justifies its en masse silencing as “important to avoid creating, or permitting to be created, an impression that a decree is being entered or a sanction imposed, when the conduct alleged did not, in fact, occur.” SEC does “not permit a defendant or respondent to consent to a judgment or order that imposes a sanction while denying the allegations in the complaint or order for proceedings.” It enforces this Rule through mandatory provisions in its settlement agreements which gag defendants and respondents. As a result, SEC routinely and systematically demands silence and suppresses speech based on its content and viewpoint as a non-negotiable condition of settlement.
Today, Petitioners—NCLA now joined by Barry D. Romeril, Raymond J. Lucia, and Christopher A. Novinger—renew the pending Petition for Rulemaking (No. 4-733) and ask the Commission to repeal its unconstitutional Gag Rule once and for all.
Click here to read the full document
On January 30, 2024, SEC denied NCLA’s petition. Read SEC’s full letter here.