SEC’s No-Deny Settlement Policy Faces Challenge as ‘Gag Order’

No-deny settlement provisions have the unconstitutional effect of imposing a gag order on parties who strike deals with the Securities and Exchange Commission, an appeal brief filed Wednesday says.

The SEC requires settling defendants to never publicly question charges brought against them, an “outlier practice” that the US Court of Appeals for the Fifth Circuit should curb, the brief says.

Christopher Novinger and ICAN Investment Group LLC faced an SEC suit for allegedly selling $4.3 million in securities by misleading investors, pocketing nearly $515,000 in commissions in violation of antifraud and registration laws.

The 2015 suit resulted in a settlement ...