CASE
SUMMARY
NCLA challenges the Securities and Exchange Commission’s denial of our long-standing petition to amend the agency’s “Gag Rule.” In place for over five decades, this pernicious rule forbids every American who settles a regulatory enforcement case with SEC from even truthfully criticizing their cases in public, violating their First Amendment rights. SEC ignored NCLA’s initial petition challenging the Gag Rule for more than five years, only issuing a denial after NCLA filed a renewed petition in December 2023.
SEC enacted the 1972 Gag Rule without notice and comment after falsely framing it as an internal “housekeeping” measure that would not affect third parties. The agency never had statutory authority to implement such a substantive rule, and it bypassed Administrative Procedure Act requirements to publish, provide notice and allow comment before promulgating a rule binding on third parties. Speech bans must be narrowly tailored, serve a compelling government interest, and adopt the least restrictive means to protect that interest. SEC has never provided a legitimate much less a compelling reason for silencing for life all enforcement targets who wish to settle.
The Gag Rule infringes on news organizations’ First Amendment rights to Freedom of the Press to hear and report the views SEC enforcement targets wish to express about their cases. It conceals vital information about SEC enforcement policies. SEC Commissioner Hester Peirce issued a stinging dissent from SEC’s denial decision, powerfully arguing that “the American public, not government censors” must be the arbiters of the validity of speech.