Somewhere Between Cacophony and Euphony

Today the Commission rescinded its decades-old no-admit/no-deny policy governing the settlement process.[1] Under this policy, settling defendants cannot publicly deny the allegations in a complaint or permit anyone else to do so. The Commission will no longer require and demand that defendants in its enforcement actions curtail their right to speak as a condition of settlement. For reasons I have explained before, this result is good and brings the Commission into alignment with nearly every other part of the federal government.[2] Settlements shrouded in forced silence by the non-governmental party do not serve either the markets or the Commission's investor-protection mission. To the contrary, people's freedom to speak against the government contributes to its ability to govern well.[3] Transparent enforcement of the securities laws helps create the environment in which free markets thrive, and enabling both parties in an enforcement action to speak freely contributes to transparency.

Ending this imprudent policy, of course, does not mean that the Commission will stop resolving cases through settlement. The excellent investigative work of our professional, dedicated staff stands on its own ground, notwithstanding a defendant's protestations of innocence. The public now will be able to assess the Commission's case in light of a defendant's denials. The result, I expect, will be what free speech often produces: somewhere between cacophony and euphony-neither terribly pleasing to the ear, not entirely unpleasant to hear. That the noise happens at all, however, is a substantial step forward for both the Commission and the right of a free people to speak their mind.