Notice & Comment

The CFTC and SEC Are Demanding Unconstitutional Speech Bans in Their Settlement Agreements, by James Valvo

JVheadshotMany federal agencies have the authority to bring civil complaints against individuals accused of violating applicable statues or regulations. Those agencies also have the authority to enter into settlement agreements with the accused defendants. The Commodity Futures Trading Commission (“CFTC”) and Securities and Exchange Commission (“SEC”) both have a policy of requiring a provision in their settlement agreements that bars defendants in perpetuity from publicly disputing the validity of the charges against them or the facts underlying those charges. These speech bans are unenforceable, violate the First Amendment, and are bad public policy because they hinder oversight. Both agencies should stop demanding the inclusion of these provisions in their settlement agreements. It does not appear that anyone has yet raised a legal challenge to the imposed restrictions on speech, but the time is ripe to do so.

The CFTC and SEC Settlement Agreement Policies

Both the CFTC and the SEC require defendants, as a condition of settlement, to refrain from ever making a public statement that would cast doubt on the truth and validity of the charges against them. I have heard from both former SEC enforcement staff and former defendants in SEC enforcement actions that the provision is non-negotiable; former enforcement staff have also expressed doubts about the propriety of the agency’s demand. I have no firsthand information regarding the flexibility of the CFTC’s policy in practice, but the agency has stated in its regulations that it will not settle without the speech ban.[1]

The CFTC put its settlement-agreement policy into its regulations in October 1998, requiring that any “proposed offer of settlement, consent or consent order must include a provision” that bars the defendants from “mak[ing] any public statement denying, directly or indirectly, any allegation in the complaint or findings or conclusions in the order[.]”[2] As an example, in its 2017 settlement agreement with John Corzine, the CFTC required “that neither [Mr. Corzine] nor any of his agents or employees under his authority or control shall take any action or make any public statement denying . . . any allegation in the amended Complaint or the Findings of Fact or Conclusions of Law in th[e] Consent Order, or creating or tending to create the impression that . . . [it] is without a factual basis[.]”[3] Similarly, the SEC requires defendants to agree “not to take any action or to make or permit to be made any public statement denying, directly or indirectly, any allegation in the complaint or creating the impression that the complaint is without factual basis[.]”[4] This provision is in addition to the much-discussed neither-admit-nor-deny policy that the SEC has used in recent years.[5]

Both agencies include language in their settlement agreements exempting testimonial obligations from the speech ban; they also does not prevent the defendant from taking legal or factual positions in litigation or other legal proceedings to which the agencies are not a party.[6] These are strategic exemptions for the agencies to include because they prevent the settlement agreements from coming to the attention of a judge in a future proceeding who would have the power to object to and invalidate the restraint on speech.[7] A hypothetical example is not hard to construct. Imagine a witness called to testify or sitting for a deposition in a case and responding to a question by stating that he is barred from discussing an event or transaction because it may run afoul of a settlement agreement he made with the SEC or CFTC. The judge assigned to that case likely would dig into the particulars and validity of the speech ban, scrutiny the agencies undoubtedly would prefer to avoid.

As noted, the CFTC has put its settlement-agreement policy into its regulations. When doing so, it grounded that policy on the position that it would “not to accept any offer of settlement in an administrative or civil proceeding if the respondent or defendant wished to continue to deny the allegations of the [CFTC’s] complaint[.]”[8] As the agency explained in responding to a commenter who asked for further explanation of the policy, when “accepting a settlement and entering an order finding violations of the Act or the regulations, the [CFTC] makes uncontested findings of fact and conclusions of law. The [CFTC] does not believe that it would be appropriate for the agency to be making such uncontested findings of violations if the party against whom the uncontested findings are to be entered is continuing to deny the alleged misconduct.”[9] The SEC has no parallel regulatory provision and appears to simply borrow the speech ban from the CFTC’s regulations.[10]

As I argue below, neither the policy of settling while allowing the defendant to neither admit nor deny the allegations nor the CFTC assertion about making uncontested findings of fact or law provides a basis that passes First Amendment muster for a temporally unbounded ban on all public statements that may call into question the allegations in the complaint. Further, this attempted speech ban creates an obstacle to agency oversight.

The CFTC and SEC Speech Bans are Void for Public Policy because they Violate the First Amendment

Any challenge to the speech ban in a consent agreement, or an agency attempt to enforce it, would have to resolve the tension between two positions. On one hand, the defendant voluntarily agreed to refrain from speaking to secure the settlement and, as a general rule, individuals can waive their constitutional rights.[11] On the other hand, consent agreements are construed under contract law and a provision cannot be enforced that is void for public policy.

A consent decree is “a court order that embodies the terms agreed upon by the parties as a compromise to litigation.”[12] “A consent decree is treated like a contract for enforcement purposes.”[13] Generally speaking, “[c]ontracts that are contrary to public policy are void because they have no legal sanction and establish no legal bond between the parties. To be void as matter of public policy, the contract must have a bad tendency or contravene the established interests of society. . . . To determine whether a contract violates public policy courts must look to established law, primarily to statutes and secondarily to decisions of the courts.”[14]

The speech bans in the CFTC and SEC settlement agreements constitute prior restraints on speech (see below). To pass constitutional muster, a prior restraint must be narrowly tailored and serve a compelling government interest.[15] As written, the speech bans, are not limited in time; they appear to apply forever and thus may run afoul of the requirement to be narrowly tailored. Other areas of law look disfavorably on unlimited waivers of rights in contracts. For example, non-compete clauses are often considered unreasonable and unenforceable if they do not contain a time limit.[16] To date, it does not appear that a court has considered this issue as directly applied to settlement agreements and waiver of First Amendment rights. If and when a court does consider the issue, the decisive factor should be that since one party to the consent agreement is a government actor, it should not be permitted to impose a permanent waiver of a defendant’s First Amendment rights to speak about his case.

Prior restraint occurs when the government takes a preemptive action to prevent speech, such as denying a publishing license or bringing an injunctive action against a speaker. The Supreme Court, however, has “not confined the application of the prior restraint doctrine to its simpler forms, [such as] outright licensing or censorship before speech takes place.”[17] Instead, when “considering governmental measures deviating from the classic form of a prior restraint yet posing many of the same dangers to First Amendment freedoms, [the Court has] extended prior restraint protection with some latitude, toward the end of declaring certain governmental actions to fall within the presumption of invalidity.”[18]

The Supreme Court has said that “prior restraints on speech and publication are the most serious and the least tolerable infringement on First Amendment rights. . . . A prior restraint . . . has an immediate and irreversible sanction. If it can be said that a threat of criminal or civil sanctions after publication ‘chills’ speech, prior restraint ‘freezes’ it at least for the time.”[19] Such restraints are permissible under only the most extreme circumstances.[20]

The speech bans in the SEC and CFTC’s settlement agreements can be analogized to the situation in Near v. Minnesota.[21] In that case, a state statute authorized judicial proceedings to abate the nuisance of scandalous news publications. A state district court entered an injunction against Near and The Saturday Press, but the Supreme Court ultimately held that the statute was an unconstitutional prior restraint. In a separate case, the Court later summarized the significance of its holding in Near as follows:

In one sense the injunctive order, which paralleled the nuisance statute, did nothing more than announce the conditions under which some later punishment might be imposed, for one presumes that contempt could not be found until there was a further violation in contravention of the order. But in Near, the publisher, because of past wrongs, was subjected to active state intervention for the control of future speech. We found that the scheme was a prior restraint because it embodied “the essence of censorship.”[22]

The same situation applies with respect to defendants subject to the CFTC and SEC speech bans. By virtue of their alleged past wrongs, the agencies are trying to assert active control over the defendants’ future speech. Just because the consequences for the defendants’ violation of the consent agreement would not come until after they violated it (i.e., the risk that the agency would revoke the consent agreement and reopen enforcement proceedings), does not make the speech-restricting provision any less of a prior restraint. Worse still, these provisions are content-based restrictions on speech, which “are presumptively invalid” and subject to the highest level of judicial scrutiny.[23]

On the other hand, as a general rule, there is “[l]ong standing precedent evinc[ing] a strong public policy against judicial rewriting of consent decrees. . . . Where they are unambiguous, the court must uphold a decree as written”[24] The Ninth Circuit has summarized that the “Supreme Court has recognized that constitutional rights may ordinarily be waived if it can be established by clear and convincing evidence that the waiver is voluntary, knowing and intelligent.”[25] In the context of a settlement agreement, a party’s waiver is valid if “he was represented by counsel during settlement negotiations[,] . . . the settlement agreement which he signed stated that he had been advised of the consequences of its terms and knowingly entered into the agreement[, and] . . . it seems evident that [the party], a highly educated person must have understood the plain meaning of the term” to which he was agreeing.[26] A federal district court in Arizona found that “a party may waive its First Amendment right by contract. The mere fact that a contract abrogates a First Amendment right therefore does not provide a basis for the Court to declare it void for public policy.”[27] However, the Arizona case was a copyright claim between two private parties and therefore may be distinguished from an enforcement action where one party is a government agency.

The Speech Bans Hinder Oversight

The CFTC and SEC speech bans raise concerns not only about their impact on First Amendment rights but also about the oversight of those agencies. Defendants who have been through an agency’s enforcement process are often the most informed and in the best position to raise red flags about that process. By ensuring that anyone who settles an enforcement action is unable to provide information that would contribute to that oversight process, the agencies insulate themselves from criticism and the public scrutiny that accountability demands.


Both the CFTC and the SEC should reform their settlement policies and stop demanding the inclusion of the offending speech bans. Alternatively, the agencies should cabin the length of time that these bans are in place. Asking a defendant not to publicly dispute a charge for a period of one or two years would seem a reasonable accommodation for the agency while also protecting First Amendment rights and ensuring that proper oversight could occur after that time. In the meantime, a judicial challenge to these policies is sorely needed. It would be instructive to see how the federal courts would respond to a permanent ban on all public speech that would call into question the validity of a government enforcement action.


Mr. Valvo is Counsel & Senior Policy Advisor at Cause of Action Institute. His work focuses on administrative law and government oversight and transparency. You can follow him on Twitter: @JamesValvo.


[1] See 17 C.F.R. § Pt. 10, App. A.

[2] Id.; see also Commodity Futures Trading Comm’n, Rules of Practice, 64 Fed. Reg. 30902 (June 9, 1999) (promulgating current version).

[3] See, e.g., Consent Order for Permanent Inj., Civil Monetary Penalty, and Other Equitable Relief Against Def. Jon S. Corzine ¶ 10, Commodity Futures Trading Comm’n v. MF Global Holdings Ltd., No. 11-7866 (S.D.N.Y. signed Jan. 4, 2017) [hereinafter Corzine Consent], available at

[4] See, e.g., Consent of Def. Goldman, Sachs & Co. ¶ 15, Sec. & Exch. Comm’n v. Goldman, Sachs & Co., No. 10-3229 (S.D.N.Y. signed July 14, 2010) [hereinafter Goldman Sachs Consent], available at

[5] See id. ¶ 15 (“Defendant understands and agrees to comply with the [SEC’s] policy ‘not to permit a defendant or respondent to consent to a judgment or order that imposes a sanction while denying the allegations in the complaint or order for proceedings.’”) (citing 17 C.F.R. § 202.5); see also Priyah Kaul, Admit or Deny: A Call for Reform of the SEC’s “Neither-Admit-Nor-Deny” Policy, 48 U. Mich. J.L. Reform 535 (2015).

[6] See, e.g., Corzine Consent ¶ 10; Goldman Sachs Consent ¶ 15.

[7] See CFTC, Rules of Practice, 64 Fed. Reg. at 30903 (recognizing that absent these exemptions the policy “has the potential to conflict with the legal obligation of a respondent or defendant to testify truthfully”).

[8] CFTC, Rules of Practice; Final Rules, 63 Fed. Reg. 55784-01, 790 (Oct. 19, 1998).

[9] Id.

[10] See Goldman Sachs Consent ¶ 15 (citing 17 C.F.R. § 202.5 for the neither-admit-nor-deny policy but providing no citation for the speech ban).

[11] Nebraska Press Ass’n v. Stuart, 427 U.S. 539, 592 (1976) (quoting Near v. State of Minnesota ex rel. Olson, 283 U.S. 697, 714 (1931); New York Times v. Sullivan, 403 U.S. 713, 714 (1971)).

[12] United States v. Alshabkhoun, 277 F.3d 930, 934 (7th Cir. 2002) (citing United States v. Witco Corp., 76 F. Supp. 2d 519, 525 (D. Del. 1999)).

[13] Officers for Justice v. Civil Serv. Comm’n of City & Cty. of San Francisco, 403 F. App’x 164, 165 (9th Cir. 2010) (citing United States v. Asarco, Inc., 430 F.3d 972, 980 (9th Cir. 2005)); see also Segar v. Mukasey, 508 F.3d 16, 22 (D.C. Cir. 2007) (“Since a consent decree or order is to be construed for enforcement purposes basically as a contract, reliance upon certain aids to construction is proper, as with any other contract.”) (citing United States v. ITT Cont’l Baking Co., 420 U.S. 223, 238 (1975)).

[14] Neiman v. Provident Life & Accident Ins. Co., 217 F. Supp. 2d 1281, 1286 (S.D. Fla. 2002) (citing United Ass’n of Journeymen & Apprentices v. Henley & Beckwith, Inc., 66 So.2d 818, 823 (Fla. 1953); Thomas v. Atlantic Coast Line R. Co., 201 F.2d 167, 169 (5th Cir. 1953)).

[15] See Burk v. Augusta-Richmond Cnty., 365 F.3d 1247, 1250–51 (11th Cir. 2004) (discussing differences between prior restraints; time, place, and manner restrictions; and content-based speech restrictions).

[16] See, e.g., Diversified Fastening Sys., Inc. v. Rogge, 786 F. Supp. 1486, 1492 (N.D. Iowa 1991) (“The failure to limit the time period and geographical restriction essentially make the [non-compete] contract one imposing a restrictive covenant of unlimited time and space. Such an unlimited covenant is clearly unreasonable and unenforceable.”).

[17] Alexander v. United States, 509 U.S. 544, 569 (1993).

[18] Id.

[19] Stuart, 427 U.S. at 559.

[20] Near v. State of Minnesota ex rel. Olson, 283 U.S. 697, 716 (1931).

[21] Id. at 716.

[22] Alexander, 509 U.S. at 570 (citing Near, 283 U.S. at 713).

[23] R.A.V. v. City of St. Paul, Minn., 505 U.S. 377, 382 (1992); see Simon & Schuster, Inc. v. Members of New York State Crime Victims Bd., 502 U.S. 105, 118 (1991) (“The Son of Sam law establishes a financial disincentive to create or publish works with a particular content. In order to justify such differential treatment, ‘the State must show that its regulation is necessary to serve a compelling state interest and is narrowly drawn to achieve that end.’”) (citing Arkansas Writers’ Project Inc. v. Ragland, 481 U.S. 221, 231 (1987)).

[24] Reynolds v. Roberts, 207 F.3d 1288, 1300–01 (11th Cir. 2000) (citing King v. Allied Vision, Ltd., 65 F.3d 1051, 1058 (2d Cir.1995)).

[25] Davies v. Grossmont Union High Sch. Dist., 930 F.2d 1390, 1394–95 (9th Cir. 1991) (citing D.H. Overmyer Co. v. Frick Co., 405 U.S. 174, 185 (1972)).

[26] Id.

[27] Shoen v. Symons, No. 09-1548, 2011 WL 1641760, at *2 (D. Ariz. May 2, 2011) (citing Davies, 930 F.2d at 1394–95 & n. 4).

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