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Hester Peirce, Commissioner of the United States Securities and Exchange Commission (SEC), disagreed with the agency's denial of a request to change a rule that prevents defendants from denying any allegations in connection with actions to execute a regulation.
According to a official statement According to the commissioner, commonly known in the digital assets community as “Crypto Mom,” the ban on defendants' denials prohibits the American public from voicing criticism of the government and assessing its credibility.
SEC rejects petition to change gag rule
The gag rule is part of SEC policy adopted in 1972, which requires defendants to agree not to take any action or make public statements denying any allegations contained in complaints filed against them.
Essentially, the rule does not permit defendants to consent to a judgment or order imposing a penalty while denying the allegations in the complaint; otherwise, the SEC may ask the court to vacate the settlement. This is to ensure that they do not give the impression that complaints are without factual basis.
Peirce explained that the result of the rule is that the defendant agrees to rescind previous statements in court challenging the truth of the regulator's allegations, promising never to do so or to allow others to challenge the accusations so that the matter remains settled.
The petition, filed by the New Civil Liberties Alliance (NCLA), asked the agency to change the rule to allow a defendant to consent to a judgment in which he or she admits, denies, or neither admits nor denies the allegations contained in the complaint.
However, the SEC denied petition on the grounds that NCLA's arguments have no merit and that the gag rule is “an appropriate exercise of the Commission's power to decide how it will pursue its enforcement mission and resolve cases.”
Undermining regulatory integrity
Despite the SEC's claims, Crypto Mom thinks otherwise.
“I agree with the petitioner that this issue deserves a place on our rulemaking agenda. One thing I love about this country is that Americans can and often do criticize their government… This freedom to speak out against the government and its representatives is essential in a free society committed to the rule of the people.” , she said.
The commissioner insisted that the policy of denying defendants the right to criticize a regulation after it is publicly signed undermines regulatory integrity and raises First Amendment concerns.
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