June 23, 2022

SEC Sidesteps "Gag Order" Constitutional Challenge … for Now

Holland & Knight SECond Opinions Blog
Scott Mascianica
Gavel and scale resting on desk

Earlier this month, a Holland & Knight alert discussed several constitutional challenges facing the SEC, including a petition for certiorari filed with the U.S. Supreme Court seeking review of the SEC's longstanding "no admit, no deny" requirement for settling with the agency in Romeril v. SEC1 (see previous Holland & Knight alert, "SEC in Constitutional Danger Zone Following Several Recent Decisions," June 3, 2022). This week, the Supreme Court denied that petition without comment, leaving intact the Second Circuit's holding that parties can waive First Amendment rights in resolving legal proceedings.2 But an analogous challenge before the Fifth Circuit may ultimately raise the issue to the high court once more.

Barry Romeril petitioned the Supreme Court to review the constitutionality of his two-decades-old settlement with the SEC. Romeril argued the "no deny" policy violates the First Amendment because it places unconstitutional prior restraints on defendants' right to speak candidly about their experience with the SEC and is an unconstitutional content- and viewpoint-based restriction on free speech. Romeril also advanced due-process arguments as to the adequacy and fairness of the process surrounding the consent agreement.3 The Supreme Court denied the petition without comment.

But constitutional challenges on the SEC's "gag order" policy are far from over. Indeed, an analogous challenge is under consideration in the circuit where the SEC has faced its most recent significant constitutional issues. In June 2016, a district court in the Northern District of Texas entered final judgment against Christopher Novinger and ICAN Investment Group on the basis of a settlement agreement that included a "no admit, no deny" provision. Similar to Romeril, Novinger later petitioned the district court for relief from the judgment under Federal Rule of Civil Procedure 60(b), claiming he wanted to "engage in truthful public statements concerning the SEC's case against him and ICAN." The district court denied the motion,4 and Novinger appealed to the Fifth Circuit late last year.

Earlier this month, the Fifth Circuit heard oral argument in the case. Judge Edith Jones pressed SEC counsel on the provision that "that binds a party to a consent decree to never voice opposition to the underlying facts." The SEC argued – as it did successfully before the Second Circuit in Romeril – that in the course of resolving legal proceedings, parties can waive certain constitutional rights.5

It remains to be seen how the Fifth Circuit will rule on Novinger's appeal. However, given the recent Cochran and Jarksey decisions, the story isn't over just yet on the constitutional challenges to the "no admit, no deny" provisions. Rather, Novinger's appeal sits in a court that has been amenable to constitutional challenges of longstanding SEC practice.

If the Fifth Circuit were to rule in favor of Novinger and find the "gag order" policy unconstitutional under the First Amendment, the SEC would almost surely seek Supreme Court review. Under that scenario, a grant of certiorari is far more likely than in Romeril, as it would not only disrupt the constitutional status quo with regard to SEC practice, but also create a circuit split in an important area of First Amendment law.6 Though much has to happen before now and then, one thing is certain: Romeril will not be the final say on this issue.

The Holland & Knight SECond Opinions Blog will continue to monitor this space and provide updates as to future developments. If you need any additional information on this topic – or anything related to SEC enforcement or internal investigations – please contact the authors or another member of Holland & Knight's Securities Enforcement Defense Team.


1 Petition for Writ of Certiorari, Romeril v. SEC, No. 21-1284 (U.S., May 23, 2022).

2 SEC v. Romeril, 15 F.4th 166, 172–73 (2d Cir. 2021) (citations omitted).

3 See generally Petition for Writ of Certiorari, supra note 1.

4 SEC v. Novinger, No. 4:15-CV-00358-O, 2021 WL 4497672, at *3 (N.D. Tex. Aug. 10, 2021).

5 See Town of Newton v. Rumery, 480 U.S. 386, 393 (1987).

6 See Sup. Ct. R. 10(a).

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