No Takebacks: SEC Refuses to Vacate Settled Insider Trading Bar

The SEC (or Commission) on October 27, 2026, issued an order denying a motion by an individual seeking to vacate a permanent investment adviser bar that he had agreed to more than a decade ago as part of an insider trading settlement. In In the Matter of Rajarengan (a/k/a Rengan) Rajaratnam (Advisers Act Release No. 7029), the Commission reaffirmed that a movant must show "compelling circumstances" to undo a settled order and that neither the passage of time, good behavior nor a perceived shift in the enforcement winds will suffice. For those hoping that SEC Chairman Paul Atkins' emphasis on fairness and process would open a door out of old bars, this order is a clear answer: The Rule 193 reentry process is the way.

The Order

In a November 2014 settled order, the SEC found that Rajaratnam participated in insider trading schemes over more than two years, generating more than $3 million in profits, and barred him from associating with an investment adviser with the right to apply for reentry after five years. He argued that he settled as a result of stress, health issues and legal costs (shortly after his criminal acquittal), that he could not find work in part because of confusion with his brother, that he had 12 years of clean compliance and that he mistakenly believed the bar would last only five years. The Commission rejected each argument, emphasizing that he settled "with his eyes wide open" and with counsel, that his own settlement offer acknowledged reentry was not guaranteed and that he had never applied under Rule 193. Notably, the Commission rejected arguments advanced by an amicus that 1) the Commission had abandoned the "extraordinary circumstances" test, holding that the change applies to Rule 193 applications, not motions to vacate, and 2) SEC v. Jarkesy¹ undermines the bar, finding that by consenting, Rajaratnam forfeited any constitutional challenge.

When Will the Commission Vacate a Bar?

A survey of historical SEC orders in which the Commission has vacated a bar reveals a consistent pattern. First, the Commission applies the "compelling circumstances" standard invoked in these two orders. Second, it has found that the standard was satisfied essentially only where a court has reversed or vacated the underlying criminal conviction or civil injunction on which the bar rests – in other words, where the legal basis for the bar no longer exists.

In seeking to vacate the bar, Rajaratnam pointed to no such developments. The injunction underlying his bar remains in place, the Division of Enforcement opposed the motion, and his arguments (that years of compliance, good works, hardship and a changed enforcement climate) were determined to be about the fairness of the bar rather than its foundation. The lesson for practitioners is straightforward: The one viable basis for vacating a bar appears to be a court setting aside the conviction or injunction on which it rests; equitable arguments, however sympathetic, have not carried the day.

Consistent with Chairman Atkins' Priorities? Yes, with a Twist

At first glance, the order may seem at odds with an SEC that has rescinded its decades-old "no-deny" settlement policy, permitted simultaneous consideration of settlement offers and waiver requests, and signaled more flexibility on collateral consequences. But read together, they fit a coherent philosophy under Chairman Atkins:

• First, the Commission is drawing a sharp line between process reforms going forward and relitigating the past. The order echoes the Commission's April 2025 refusal to modify pre-2025 off-channel communications settlements to match later, more favorable terms. There, the Commission addressed so-called "settlor's remorse" noting, among other things "… the decision to settle early carries both an inherent risk and potential benefit … it avoids the time and expense of further negotiation and litigation. Settlor's remorse – and a desire to revisit that risk calculus – does not justify upsetting a final, agreed-upon settled order." Finality, it turns out, is a feature, not a bug, and the Commission expressly warned that granting such relief would "inundate[]" it with similar requests and "disrupt" the enforcement program.
• Second, insider trading remains squarely within the "back to basics" fraud focus that Chairman Atkins and Enforcement Director David Woodcock have championed.
• Third, the Commission pointed the movant to Rule 193 rather than vacatur. Put another way, the relief valve exists; it simply requires reentering the industry under SEC supervision rather than erasing the bar.

The Rule 193 Path: An Open Door, Not a Guarantee

Rule 193 of the SEC's Rules of Practice permits an individual barred by Commission order to apply for consent to associate with a registered entity, either where the bar order expressly provides a right to reapply after a set period (as in Rajaratnam's case) or where the individual seeks to associate with an entity that is not a member of a self-regulatory organization. The applicant bears the burden of showing that the proposed association "would be consistent with the public interest," and the application must describe the proposed role, the supervision to which the applicant will be subject and the new employer's compliance history, supported by statements from individuals who can attest to the applicant's character and by a showing that the proposed supervisory procedures are reasonably designed to prevent a recurrence of the misconduct.

Historically, success was rare: The Commission required applicants subject to permanent bars to show "extraordinary circumstances," a standard the Commission itself later described as an "insurmountable hurdle." That changed in April 2025, when the Commission granted an application to associate with a registered investment adviser despite a permanent bar, roughly 2.5 years after the application was first filed, and announced it would no longer apply the "extraordinary circumstances" test on consideration of motions to vacate bars and separately granted relief from a penny stock bar, itself a rare occurrence.

Importantly, however, the order does not promise Rajaratnam reinstatement, reminding him that his settlement offer acknowledged that applying "does not guarantee reentry" and that any denial by the Division of Enforcement (which has delegated authority over Rule 193 applications) could be appealed to the Commission. In short, the Commission is pointing to the door without saying whether it will open, but applicants with long compliance records, strong supervisory arrangements and a specific proposed role may find it more accessible than in years past.

Key Takeaways

• Settle with Eyes Wide Open: Settled bars (and other outcomes) are durable. Arguments about duress, cost, health or misunderstanding of terms will not undo them, particularly where the respondent was represented by counsel and the offer of settlement recites the terms.
• Don't Count on "Regime Change" Relief: Lesser sanctions obtained by others, whether in litigated cases or later settlements, are not a basis to revisit one's own deal. Counsel should negotiate the best terms available at the time rather than banking on a future softening.
• Rule 193 Is the Way: For barred clients seeking to return to the industry, a well-supported Rule 193 application is far more promising than a motion to vacate. Rajaratnam's failure to apply was fatal to several of his arguments.
• Preserve Constitutional Arguments Before Consenting: Post-Jarkesy challenges to administrative proceedings are forfeited by consent. Clients who wish to preserve such arguments must weigh that before settling.
• Follow-On Bars Remain a Live Risk: With the Commission continuing to impose associational bars in insider trading matters, individuals should assess collateral consequences early and seek simultaneous consideration of any related relief at the settlement stage.

Holland & Knight's Securities Enforcement Defense Team will continue to monitor developments. For more information or questions, please contact the authors.

Notes

¹ 603 U.S. 109 (2024).