Gesmer Updegove Powell v. SEC No-Admit No-Deny Policy
The article provides a comprehensive legal analysis of the Ninth Circuit’s August 6, 2025 opinion in Powell v. SEC (No. 24‑1899), which rejected a facial constitutional challenge to the SEC’s long‑standing “no‑admit/no‑deny” settlement provision codified in Rule 202.5(e). The piece outlines the rule’s historical origins in the 1972 Wells Committee Report, explains the petition filed by the New Civil Liberties Alliance and the procedural history that led to the appellate review, and details the court’s reasoning that parties may voluntarily waive First Amendment rights in exchange for settlement benefits. While the decision affirms the rule’s facial validity, the court expressly limits its holding, leaving open the possibility of as‑applied challenges where the rule is used to suppress criticism of the SEC or its officials. The article discusses the SEC’s institutional interest in settlement efficiency, critiques the notion of “voluntary” consent—especially for smaller entities facing coercive pressures—and notes that the SEC is virtually unique among federal agencies in imposing such a gag provision. Potential avenues for future litigation, key takeaways, and broader policy implications regarding transparency and public discourse are highlighted. The analysis concludes that, for now, the rule remains intact, with any change requiring agency or legislative action.
Topics
Ninth Circuit Upholds SEC’s No‑Admit/No‑Deny Settlement Rule
The court’s August 6 2025 opinion in *Powell v. SEC* rejects a facial First Amendment challenge to Rule 202.5(e).
Rule 202.5(e): Historical Origin and Policy Rationale
Background on the SEC’s 1972 adoption of the no‑admit/no‑deny provision, its purpose to prevent post‑settlement re‑litigation and preserve deterrence.
Petition and Procedural History Leading to Powell v. SEC
Chronology of the New Civil Liberties Alliance’s 2018 petition, the SEC’s denial, and the subsequent Ninth Circuit review, including reference to earlier challenges (Romeril, Moraes, etc.).
Court’s Reasoning on Facial Validity and Voluntary Waiver of First Amendment Rights
The panel’s reliance on precedent (Town of Newton v. Rumery) to conclude that parties can voluntarily waive constitutional rights when settling, and its finding that the rule does not inherently suppress lawful speech.
Limitation of Holding and Prospects for As‑Applied Challenges
The decision’s narrow scope—no ruling on the wisdom of the policy—and the outlined scenarios where future courts might find First Amendment violations in specific applications.
SEC’s Institutional Interests in Settlement Efficiency
The court’s acknowledgment that the gag provision promotes settlement efficiency by giving defendants an “option” to resolve cases without protracted litigation.
Critiques of Voluntariness and Power Imbalance in Gag Provisions
Discussion of dissenting views (e.g., Commissioner Peirce) and scholarly criticism that the “choice” to accept the gag may be illusory for smaller entities facing coercive pressures.
SEC as a Policy Outlier Among Federal Agencies
Comparison showing that the SEC is nearly unique in mandating a no‑admit/no‑deny clause, with only occasional similar language at the CFTC and none at agencies like the FTC.