Amicus Curiae Brief — Thomas Joseph Powell, et al., Petitioners v. Securities and Exchange Commission

Supreme Court briefApr 20, 2026

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No. 25-1100

In the Supreme Court of the United States

THOMAS J. POWELL, et al.,

Petitioners,

SECURITIES AND EXCHANGE COMMISSION,

Respondent.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

BRIEF OF AMICUS CURIAE

AMERICAN SECURITIES ASSOCIATION

IN SUPPORT OF PETITIONERS

J. Michael Connolly

Counsel of Record

Paul R. Draper

CONSOVOY MCCARTHY PLLC

1600 Wilson Blvd., Ste. 700

Arlington, VA 22209

(703) 243-9423

mike@consovoymccarthy.com

April 20, 2026

Attorneys for Amicus Curiae

TABLE OF CONTENTS

Table of Cited Authorities .......................................... ii

Interest of Amicus Curiae ..........................................1

Summary of Argument................................................2

Argument .....................................................................4

The SEC’s outlier Gag Rule hurts

defendants and the public. .............................4

II. The SEC uses its burdensome

enforcement process to force defendants

to settle. ........................................................15

III. The Gag Rule is a straightforward First

Amendment violation. ..................................20

Conclusion .................................................................25

TABLE OF CITED AUTHORITIES

Cases

Agency for Int’l Development v. Alliance for Open

Soc’y Int’l,

570 U.S. 205 (2013) ............................................. 24

Alexander v. United States,

509 U.S. 544 (1993) ............................................. 21

ASA v. SEC,

2026 WL 621432 (M.D. Fla. Mar. 5, 2026)......... 19

Associated Press v. Meltwater U.S. Holdings,

931 F. Supp. 2d 537 (S.D.N.Y. 2013) .................. 13

Axon Enterprises v. FTC,

598 U.S. 175 (2023) ................................... 3, 15, 17

Cassava Sciences v. Quintessential Capital Mgmt.,

2024 WL 554042 (S.D.N.Y. Jan. 23, 2024)......... 12

Chiles v. Salazar,

146 S.Ct. 1010 (2026) .......................................... 22

Citizens United v. FEC,

558 U.S. 310 (2010) ................................... 3, 10, 21

Davies v. Grossmont Union High Sch. Dist.,

930 F.2d 1390 (9th Cir. 1991) ............................. 24

First Nat’l Bank of Boston v. Bellotti,

435 U.S. 765 (1978) ............................................. 10

Hi-Craft Clothing v. NLRB,

660 F.2d 910 (3d Cir. 1981) .................................. 6

In re Dan Farr Productions,

874 F.3d 590 (9th Cir. 2017) ............................... 22

iii

Jarkesy v. SEC,

34 F.4th 446 (5th Cir. 2022) ............................... 15

Kleindienst v. Mandel,

408 U.S. 753 (1972) ......................................... 3, 10

Kokesh v. SEC,

581 U.S. 455 (2017) ............................................. 15

Koontz v. St. Johns River Water Mgmt. Dist.,

570 U.S. 595 (2013) ......................................... 4, 23

Landmark Communications v. Virginia,

435 U.S. 829 (1978) ............................................. 22

Lorenzo v. SEC,

587 U.S. 71 (2019) .......................................... 1, 13

Louisiana v. Becerra,

577 F. Supp. 3d 483 (W.D. La. 2022) ................... 4

Maguire Financial v. PowerSecure Int’l,

876 F.3d 541 (4th Cir. 2017) ................................. 7

Miller v. Basic Research, LLC,

750 F.3d 1173 (10th Cir. 2014) ............................. 5

Mills v. Alabama,

384 U.S. 214 (1966) ............................................. 11

Nebraska Press Ass’n v. Stewart,

427 U.S. 539 (1976) ......................................... 4, 21

NFIB v. Sebelius,

567 U.S. 519 (2012) ............................................... 5

NRA v. Vullo,

602 U.S. 175 (2024) ............................................. 23

Overbey v. Mayor of Baltimore,

930 F.3d 215 (4th Cir. 2019) ............................... 22

Perry v. Sindermann,

408 U.S. 593 (1972) ............................................. 23

Pickering v. BOE of Twp. High Sch. Dist.,

391 U.S. 563 (1968) ............................................. 11

Red Lion Broadcasting v. FCC,

395 U.S. 367 (1969) ............................................. 11

Reed v. Town of Gilbert,

576 U.S. 155 (2015) ....................................3, 20-21

Ronnie Van Zant, Inc. v. Cleopatra Records,

906 F.3d 253 (2d Cir. 2018) ................................ 22

Rosenberger v. University of Virginia,

515 U.S. 819 (1995) ............................................. 21

SEC v. Citigroup Global Mkts.,

827 F. Supp. 2d 328 (S.D.N.Y. 2011) .................. 14

SEC v. Moraes,

2022 WL 15774011 (S.D.N.Y. Oct. 28,

2022) ..............................2, 5-6, 9, 11, 17, 21, 23-24

SEC v. Novinger,

40 F.4th 297 (5th Cir. 2022) ......................... 18, 22

SEC v. Vitesse Semiconductor Corp.,

771 F. Supp. 2d 304 (S.D.N.Y. 2011) .................. 13

United States v. Jackson,

390 U.S. 570 (1968) ............................................. 24

United States v. Scott,

450 F.3d 863 (9th Cir. 2006) ............................... 23

United States v. Spaeth,

69 F.4th 1190 (10th Cir. 2023) ........................... 24

Upstate Jobs Party v. Kosinski,

106 F.4th 232 (2d Cir. 2024) ............................... 21

Statutes & Regulations

15 U.S.C. §80b-3 ........................................................ 16

17 C.F.R. §202.5 ................................. 2, 7-8, 10, 13, 20

17 C.F.R. §229.103 ...................................................... 7

Other Authorities

25 Steinberg et al., Securities Practice: Federal and

State Enforcement (2025) .............................. 15-16

8 Miller, Business and Commercial Litigation in

Federal Courts (5th ed. 2022) ............................. 16

A Catalyst: Statement on Qatalyst Partners LP, SEC

(Sept. 24, 2024) ................................................... 19

Agency and Mission Information, SEC (2014) ......... 13

Amendments to Exchange Act Rule 10a-1 and Rules

201 and 200(g) of Regulation SHO,

SEC (May 21, 2008) .............................................. 9

Brummer et al., Regulation By Enforcement,

96 S. Cal. L. Rev. 1297 (2024) ............................ 12

Enforcement & Litigation, SEC (archived Apr. 15,

2026) ...................................................................... 6

Examining U.S. Securities and Exchange

Commission Enforcement, Chamber of Commerce

(July 2015) ........................................................... 16

Fierce Competition Ahead as Less Than 100 Asset

Managers Secure Two-Thirds of Industry Asset

Flows, Broadridge (Oct. 21, 2022) ........................ 8

Johnson, SEC Settlement: Agency Self-Interest or

Public Interest,

12 Fordham J. Corp. & Fin. L. 627 (2007) ......... 18

Marvell Technology Group Ltd., Form 10-K (filed

2009) ...................................................................... 8

Mission, SEC (archived Apr. 15, 2026) ..................... 13

Rajat Gupta on the Financial Crisis, CNBC,

(Mar. 22, 2019) .................................................... 10

Raymond, U.S. Judge Criticizes SEC Use of

In-House Court for Fraud Cases, Reuters

(Nov. 5, 2014) ...................................................... 12

Ryan, Get the SEC out of the PR Business, WSJ

(Nov. 30, 2014) ...................................................... 6

SEC Announces Enforcement Results for Fiscal

Year 2025, SEC (Apr. 7, 2026) ............................ 14

SEC Levies More Than $3.8 Million in Penalties,

SEC (Sept. 25, 2024) ............................................. 7

Steinway, SEC “Monetary Penalties Speak Very

Loudly,” But What Do They Say?,

124 Yale L.J. 209, 228 (2014) ................... 8, 17, 19

Stevenson, Falcone Accused of Using Company

Assets in Cash Crunch, N.Y. Times

(Mar. 27, 2014) ...................................................... 7

Vollmer, Four Ways to Improve SEC Enforcement,

43 Sec. Regul. L.J. 333 (2015) ...................... 16-17

INTEREST OF AMICUS CURIAE *

The American Securities Association is a nonprofit trade association that represents small and regional financial services companies that operate

across the United States. ASA’s members advise

Americans how to create and preserve wealth; provide

Main Street businesses with access to capital and advisory services; raise capital for schools, hospitals, cities, and states; and work with institutional investors

to increase investment returns. ASA’s mission is to

promote trust and confidence among investors, facilitate capital formation, and support efficient and competitively balanced capital markets.

This case directly impacts ASA’s members and its

mission. Federal securities law in America is built on

transparency, Lorenzo v. SEC, 587 U.S. 71, 81 (2019),

and financial markets operate most efficiently when

institutions and investors have access to a free exchange of information. The SEC’s Gag Rule, which

prohibits open discussion about the propriety of the

agency’s enforcement practices and obscures the truth

about whether defendants in SEC enforcement actions have actually violated the law, runs contrary to

those principles. ASA’s members, moreover, are regulated by the SEC and have firsthand experience navigating the hardships imposed by the SEC’s Gag Rule.

* Per Rule 37.2, amicus curiae gave sufficient notice of its

intention to file this brief to counsel for all parties. No counsel for

a party authored this brief in whole or in part, and no person

other than amicus curiae, its members, or its counsel made a

monetary contribution to its preparation or submission.

SUMMARY OF ARGUMENT

For the past half-century, the SEC has stifled public criticism of its enforcement practices using what is

commonly known as the Gag Rule. The agency requires every defendant that settles an enforcement action to agree that they will never deny the truth of the

SEC’s allegations against them, give the “impression”

that those allegations aren’t true, or even “permit”

such statements to be made. 17 C.F.R. §202.5(e); SEC

v. Moraes, 2022 WL 15774011, at *2 (S.D.N.Y. Oct. 28,

2022). This practice silences the voices of those who

are in the best position to comment on the wisdom of

the SEC’s enforcement decisions.

The SEC’s rule is an outlier—only one other federal agency silences defendants as a matter of

course—which is reason enough to doubt its utility.

More importantly, the Gag Rule inflicts tremendous

harm on the individuals and businesses it silences.

The SEC touts settled cases as victories, suggesting

with not-so-subtle language that defendants are

guilty of wrongdoing even if they never admitted liability. But under the terms of the Gag Rule, defendants are not allowed to present their side of the story,

even if their version of events is true. That makes it

harder for those defendants to do business in the future: With their reputation tarred, wary clients and

investors may choose to withdraw funds, vendors may

terminate contracts, insurance providers may raise

premiums, and so on.

The Gag Rule hurts the public too. The First

Amendment protects the right to speak and the right

to receive information. Kleindienst v. Mandel, 408

U.S. 753, 762 (1972). But because the SEC silences

those who are in the best position to comment on and

possibly criticize its enforcement practices, the public

is deprived of a valuable perspective. The Gag Rule

thus undermines the democratic accountability at the

core of the First Amendment. See Citizens United v.

FEC, 558 U.S. 310, 339 (2010).

The SEC says this is all okay because defendants

“agree” to the gag provisions when they settle. SEC

Br. (CA9.Dkt.61.1) at 7. But for most, the choice to settle is far from voluntary. Indeed, defending against an

SEC enforcement action is a losing proposition for all

but the most well-resourced and well-regarded companies. Litigation is prohibitively expensive and invites

bad publicity. And the majority of defendants who litigate to final judgment lose their case. Axon Enterprises v. FTC, 598 U.S. 175, 215-16 (2023) (Gorsuch,

J., concurring). Thus, the very process of enforcement

is itself a punishment. The only realistic option for

most defendants is to settle.

And the SEC knows this. “Aware” that “few” defendants will be able to “outlast or outspend” it, the

SEC uses its sweeping powers as “leverage to extract

settlement terms [it] could not lawfully obtain any

other way.” Id. at 216. Then it deploys its non-negotiable Gag Rule to stop defendants from criticizing the

process.

This sweeping speech ban is unconstitutional. The

First Amendment does not allow the government to

prohibit speech based on its content. Reed v. Town of

Gilbert, 576 U.S. 155, 163 (2015). Nor does it allow

prior restraints on speech. Nebraska Press Ass’n v.

Stewart, 427 U.S. 539, 559 (1976). But the Gag Rule

does both, proactively barring speech that denies or

questions the truth of the SEC’s allegations against a

defendant. That restriction—which serves no interest

other than protecting the SEC’s reputation—cannot

survive strict scrutiny. And it makes no difference

that defendants purportedly “agree” to surrender

their speech rights in exchange for settlement; the

government cannot condition public benefits on the

forfeiture of constitutional rights. Koontz v. St. Johns

River Water Mgmt. Dist., 570 U.S. 595, 604 (2013).

ARGUMENT

I. The SEC’s outlier Gag Rule hurts defendants and the public.

The SEC is one of only two federal agencies with

a rule that bars everyone who settles from ever questioning the agency’s decision to charge them. Its Gag

Rule, though an outlier, inflicts real harm on the individuals and companies whose speech it curtails. It

tars their reputation and makes it harder (and more

expensive) to do business. It also hurts the public,

which is deprived of hearing the valuable insight into

the SEC enforcement process that gagged defendants

could provide if they were allowed to exercise their

speech rights.

A. “There are hundreds of federal agencies.” Louisiana v. Becerra, 577 F. Supp. 3d 483, 495 (W.D. La.

2022). But of those hundreds of agencies, the SEC is

one of only two that—as a matter of course—require

defendants who settle enforcement actions to surrender their First Amendment right to question the basis

of the agency’s allegations against them. In other

words, “[a]mong federal agencies, the SEC virtually

stands alone … in its compulsory use of such a provision.” Moraes, 2022 WL 15774011, at *2.

The Gag Rule’s outlier status is reason enough to

doubt its legality. See NFIB v. Sebelius, 567 U.S. 519,

549 (2012) (“[S]ometimes the most telling indication

of a severe constitutional problem is the lack of historical precedent.” (cleaned up)). If nothing else, the fact

that the SEC is one of only two agencies with such a

rule certainly disproves the agency’s claim that gagging defendants is necessary to avoid “undermin[ing]

confidence in the Commission’s enforcement program.” Pet.App.37a-38a. Indeed, other federal agencies regularly settle, or win, civil and criminal actions

without asking courts to silence their opponents. Even

other agencies that regulate financial markets—like

the Department of Justice, which prosecutes criminal

securities-law violations, and the Federal Trade Commission, which enforces antitrust and consumer-protection laws—do not impose gag rules as a non-negotiable condition of settlement. And of course, “parties

regularly settle disputes without stipulating liability”

at all. Miller v. Basic Research, LLC, 750 F.3d 1173,

1178 (10th Cir. 2014).

Yet no one doubts that the many federal agencies

without blanket gag rules have extended their regulatory power over American life. In any event, even if

the SEC’s contention were true as a factual matter,

“undermining confidence in the government is an inevitable result of our robust First Amendment protections for speech critical of the government.”

Pet.App.24a.

If the Ninth Circuit’s decision in this case is allowed to stand, however, the consensus in favor of preserving regulated parties’ First Amendment rights

may change. Emboldened by the panel’s opinion blessing the SEC’s practice, other federal agencies may follow suit and adopt their own gag rules to thwart criticism of their enforcement practices. See Hi-Craft

Clothing v. NLRB, 660 F.2d 910, 916 (3d Cir. 1981)

(“[G]overnment agencies have a tendency to swell, not

to shrink, and are likely to have an expansive view of

their mission.”).

B. Though the SEC’s Gag Rule is (for now) an outlier, it has disastrous consequences for individuals

and businesses who settle cases. The SEC is allowed

to—and frequently does—encourage the perception

that those individuals and businesses are guilty of

wrongdoing, but they are not allowed to defend themselves, which hurts their reputation, their bottom

line, and their ability to engage in policy debates. And

because the SEC imposes “lifetime gag orders,” defendants who agree to settle must suffer these consequences forever. Moraes, 2022 WL 15774011, at *1.

To start, being forced to remain silent severely

hampers defendants’ ability to conduct business. The

SEC issues public “announce[ments]” when it settles

cases. Enforcement & Litigation, SEC (archived Apr.

15, 2026), perma.cc/EJ4M-TLY3; Ryan, Get the SEC

out of the PR Business, WSJ (Nov. 30, 2014),

bit.ly/4teNRbN. And it often frames those settlements

as victories, noting that defendants were hit with

“charges” and “penalties,” even if they never “ad-

mit[ed]” wrongdoing. SEC Levies More Than $3.8 Million in Penalties, SEC (Sept. 25, 2024),

perma.cc/ZW4T-XX4B. In some circumstances, corporations who settle with the SEC may even be required

to affirmatively disclose that fact to investors through

public filings. See Maguire Financial v. PowerSecure

Int’l, 876 F.3d 541, 545 (4th Cir. 2017); 17 C.F.R.

§229.103(a).

And news of a settlement can scare business

away. Clients and investors are naturally wary of entering or maintaining relationships with individuals

and firms who have been accused of wrongdoing and

hit with heavy fines by the SEC. E.g., Stevenson, Falcone Accused of Using Company Assets in Cash

Crunch, N.Y. Times (Mar. 27, 2014) (“In the weeks after [an] S.E.C. settlement,” one fund “was confronted

with a flurry of requests from investors to return their

money.”). A firm that chooses to settle not because it

was guilty but for prudential reasons—e.g., to avoid

the cost of litigation—would want to reassure clients

that their investments are safe and reiterate the

firm’s belief that it has not committed any wrongdoing. But the Gag Rule prohibits such speech; defendants who settle cannot insist upon their innocence to

clients or otherwise explain their conduct and decision

to settle in a way that gives the “impression” that the

SEC’s allegations are not true. 17 C.F.R. §202.5(e).

And competitors to these businesses are aware of

the disadvantage that the Gag Rule places on those

who choose to settle. Competition for clients and customers in the securities and financial services industries can be “fierce.” Fierce Competition Ahead as Less

Than 100 Asset Managers Secure Two-Thirds of Industry Asset Flows, Broadridge (Oct. 21, 2022),

perma.cc/MC34-WS7K. Other firms have a strong incentive to peel away clients and business opportunities from gagged firms, knowing they can’t fight back.

The Gag Rule, in other words, forces those subject to

its speech prohibitions to compete with one hand tied

behind their back, after they have already paid hefty

fines in their settlement.

There are collateral consequences too. Regulated

parties who settle with the SEC have to communicate

that fact to vendors, insurance providers, lenders, and

others. But the Gag Rule, again, prohibits them from

publicly explaining the circumstances behind that settlement in a manner that “refus[es] to admit the”

truth of the SEC’s “allegations.” 17 C.F.R. §202.5(e).

Left with only the SEC’s version of events—which insists upon the settling party’s guilt—vendors may

choose to withdraw contracts, insurers may hike premiums, lenders may raise interest rates, and banks

may shut down accounts, increasing the cost of doing

business (or making business altogether impossible)

across the board. Steinway, SEC “Monetary Penalties

Speak Very Loudly,” But What Do They Say?, 124 Yale

L.J. 209, 228 (2014). Indeed, many companies report

that their “settlement with the SEC” negatively impacts their “relationships” with “suppliers and business partners” and their “ability to obtain director and

officer insurance coverage” and “access debt and equity markets.” Marvell Technology Group Ltd., Form

10-K (filed 2009), perma.cc/4PKA-4TKH. Unable to

tell their side of the story, companies have no way to

mitigate the damage that has been done.

Being subject to a gag provision also frustrates a

settling party’s ability to advocate for policy change.

There are few people better positioned to opine on the

value of our securities regulations than those who

have been subjected to them. But to the extent advocating for changes to regulations could be perceived as

disputing the propriety of the SEC’s charges based on

those regulations, such speech is arguably prohibited

by the Gag Rule. Indeed, settlement provisions implementing the Gag Rule typically bar settling parties

from making “any public statement” that even “indirectly” undermines the basis of the SEC’s allegations

in their case. Moraes, 2022 WL 15774011, at *2. In an

abundance of caution, parties subject to such a provision may choose to refrain from participating in the

public discourse rather than risk invoking the

SEC’s ire.

In fact, the SEC compels silence even after the law

has changed. Because the SEC imposes “lifetime gag

order[s],” id. at *1, defendants who settle cases can

never question the SEC’s charges against them. That

remains true even if subsequent amendments to securities laws and regulations mean that the SEC could

not bring those same charges against the defendant

today. And to be sure, the SEC has reversed course on

many of its regulations. E.g., Amendments to Exchange Act Rule 10a-1 and Rules 201 and 200(g) of

Regulation

SHO,

SEC

(May

21,

2008),

perma.cc/QSY4-NSAG (SEC largely eliminated its

ban on short selling securities during a downtick). Put

simply, many defendants are forever barred from publicly criticizing the SEC’s enforcement decisions, even

if everyone agrees that their alleged conduct is perfectly legal now.

If these consequences weren’t bad enough, the

SEC’s Gag Rule adds insult to injury by treating defendants who settle worse than defendants who litigate their case to final judgment. Parties that settle

civil cases with the SEC are strong-armed into abandoning their speech rights, see 17 C.F.R. §202.5(e) (the

SEC does “not … permit” settlements without a gag),

but those who lose at trial—and even those who are

convicted of criminal securities violations—are allowed to publicly deny wrongdoing and criticize the

SEC’s handling of their case, see, e.g., Rajat Gupta on

the Financial Crisis, CNBC (Mar. 22, 2019),

bit.ly/487Pa42 (former McKinsey CEO gave interviews and wrote a book “shar[ing] his side of the story”

after serving 19 months in prison for insider trading

conviction). In other words, the SEC treats settlement

not as a compromise but as a punishment.

C. The SEC’s Gag Rule doesn’t just hurt the people it silences. It also undermines the public interest

by stifling important conversations about the wisdom

of the agency’s enforcement practices.

“The First Amendment … serves significant social

interests.” First Nat’l Bank of Boston v. Bellotti, 435

U.S. 765, 776 (1978). It protects not only the right to

speak, but also “the right to receive information and

ideas.” Kleindienst, 408 U.S. at 762 (emphasis added).

That right—to “hear” and to “use information to reach

consensus”—is an “essential mechanism for democracy.” Citizens United, 558 U.S. at 339. And it is “the

means to hold officials accountable to the people.” Id.

This “right may not constitutionally be abridged.” Red

Lion Broadcasting v. FCC, 395 U.S. 367, 390 (1969).

But that is precisely what the Gag Rule does. It

silences a whole category of speakers and prevents the

public from hearing their insight into the SEC’s enforcement decisions and procedures. Worse, it silences

those who are “most likely to have informed and definite opinions as to” whether and how the SEC’s enforcement practices ought to be reformed. Pickering v.

BOE of Twp. High Sch. Dist., 391 U.S. 563, 572 (1968).

It is “essential that” those who have faced the full

weight of the SEC’s enforcement powers “be able to

speak out freely on such questions without fear of” reprisal, id., but thanks to the Gag Rule, the public only

ever hears one side of the story: the SEC’s.

The First Amendment framework, in other words,

is flipped on its head. Instead of “protect[ing] the free

discussion of governmental affairs” so that “abuses of

power by governmental officials” can be exposed, Mills

v. Alabama, 384 U.S. 214, 218-19 (1966), the SEC’s

Rule ensures that only the government is able to

speak on this issue of public importance.

Compounding the problem, the Gag Rule’s prohibitions aren’t limited to false claims. On the contrary,

the Rule punishes defendants even if they make accurate and true statements. Pet.9; Moraes, 2022 WL

15774011, at *1 (“Truth is no defense.”). The public is

thus deprived of even concededly true information

about how its government is enforcing securities law

and doling out punishments to alleged violators.

The public’s interest in hearing information about

SEC enforcement practices, and the harm to the public caused by being deprived of such information, is especially strong because the SEC appears to be pursuing a strategy of regulation by enforcement. Hoping to

avoid the procedural hassle (and democratic accountability) of “legislative or administrative rulemaking,”

the agency instead uses “litigation to introduce or test

out novel legal theories.” Brummer et al., Regulation

By Enforcement, 96 S. Cal. L. Rev. 1297, 1298 (2024).

And because almost all enforcement actions settle before trial, the SEC can avoid scrutiny from the courts

as well.

The playbook is clear: Use the weight of the enforcement process to “extract negotiated settlements”

without “ever having to go to court,” then “publiciz[e]

the terms of the settlement” to “shape the public perception as to what the law ‘is.’” Id. at 1319. And deploy

the Gag Rule to stop the defendants from speaking out

against the process. This framework, as at least one

federal judge has pointed out, empowers the “SEC to

become, in effect, a law onto itself.” Raymond, U.S.

Judge Criticizes SEC Use of In-House Court for Fraud

Cases, Reuters (Nov. 5, 2014), bit.ly/4cnv3A4.

This forced silence has consequences for the marketplace too. “Public markets operate most efficiently

when there is a free exchange of information.” Cassava Sciences v. Quintessential Capital Mgmt., 2024

WL 554042, at *8 (S.D.N.Y. Jan. 23, 2024). Transparency builds trust and promotes fair dealing. That’s

one reason why courts have recognized “a strong pub-

lic interest in preserving … efficient access to information.” Associated Press v. Meltwater U.S. Holdings,

931 F. Supp. 2d 537, 553 (S.D.N.Y. 2013). The Gag

Rule, however, undermines transparency and distorts

public markets by locking information behind the

terms of a settlement agreement. What we get instead

is a “stew of confusion” in which “the public will never

know whether the S.E.C.’s charges are true.” SEC v.

Vitesse Semiconductor Corp., 771 F. Supp. 2d 304, 309

(S.D.N.Y. 2011).

The SEC’s preference for silence over speech

doesn’t just run contrary to general principles of free

speech and democratically accountable government.

It contradicts the agency’s own stated principles. The

SEC claims, for example, that it “strives to promote a

market environment that is worthy of the public’s

trust and characterized by transparency and integrity.” Agency and Mission Information, SEC, at 9

(2014), perma.cc/E5QR-54CS. It agrees that “everyone should have access to certain facts about investments and those who sell them,” and that participants

in the securities market “must tell the truth about

their business.” Mission, SEC (archived Apr. 15,

2026), perma.cc/7PKA-FAMV. Securities law, after

all, is founded on “‘a philosophy of full disclosure.’” Lorenzo, 587 U.S. at 81. But the Gag Rule denies the

very transparency that the SEC claims to promote.

It seems that the only interest served by the Gag

Rule is to protect the SEC’s reputation. In fact, that’s

the exact justification offered by the agency itself. See

Pet.App.37a-38a (claiming the Rule preserves “confidence” in the agency); 17 C.F.R. §202.5(e) (claiming

the Rule “avoid[s]” giving the wrong “impression”

about the agency’s enforcement practices). But there

is no exception to the First Amendment for preserving

the SEC’s good name.

The cause for concern over the Gag Rule’s effect

on public discourse is especially great given the scope

of the problem. The SEC brings hundreds of enforcement actions every year and collects billions of dollars

in monetary relief. E.g., SEC Announces Enforcement

Results for Fiscal Year 2025, SEC (Apr. 7, 2026),

perma.cc/HW58-QE2C (“During fiscal year 2025, the

Commission filed 456 enforcement actions, including

303 standalone actions and 69 ‘follow-on’ administrative proceedings” and “obtain[ed] orders for monetary

relief totaling $17.9 billion.”). And most of those end

in settlements that permanently gag the SEC’s targets. “Between 2017 and 2023,” for example, “the SEC

settled with—and gagged—an estimated 2,700 individuals and businesses.” Pet.30.

“[T]here is an overriding public interest in knowing the truth.” SEC v. Citigroup Global Mkts., 827 F.

Supp. 2d 328, 335 (S.D.N.Y. 2011), vacated and remanded on other grounds, 752 F.3d 285 (2d Cir. 2014).

And “the S.E.C., of all agencies, has a duty, inherent

in its statutory mission, to see that the truth

emerges.” Id. The Gag Rule betrays that mission and

obscures important information about the securities

industry and the agency that regulates it. This Court

should not sanction such a scheme.

II. The SEC uses its burdensome enforcement

process to force defendants to settle.

The SEC doesn’t—nor could it—dispute the devastating consequences that its Gag Rule has on the

businesses and professionals who settle cases. Instead, the SEC says those consequences are irrelevant

because defendants “voluntarily agree” to the terms of

their settlements. SEC Br. (CA9.Dkt.61.1) at 7. But

the experiences of those who have been targeted by

the agency’s enforcement arm—including ASA’s members—prove otherwise. For most, the financial cost

and reputational harm associated with litigating

against the SEC, and the slim chance of victory, make

settlement the only realistic option.

“As the agency charged with enforcing the federal

securities laws, the SEC is vested with sweeping investigatory and prosecutorial powers.” 25 Steinberg et

al., Securities Practice: Federal and State Enforcement

§9:16 (2025). It “wields tremendous power over those

it seeks to investigate,” id., and “its decisions have

broad consequences for personal liberty and property,” Jarkesy v. SEC, 34 F.4th 446, 449 (5th Cir.

2022). “Aware, too, that few” have the resources to

“outlast or outspend” it, the SEC uses its sweeping

powers “as leverage to extract settlement terms [it]

could not lawfully obtain any other way.” Axon Enterprises, 598 U.S. at 216 (Gorsuch, J., concurring).

Of course, the SEC has “an arsenal of punishing

weapons” at its disposal to penalize those who the

agency believes have violated securities regulations.

Pet.2; see Kokesh v. SEC, 581 U.S. 455, 459 (2017)

(The SEC has “a full panoply of enforcement tools: It

may promulgate rules, investigate violations of those

rules and the securities laws generally, and seek monetary penalties and injunctive relief for those violations.”); 15 U.S.C. §80b-3(f) (the SEC can bar people

from working in the securities industry).

But the enforcement process is itself a form of punishment. For one thing, the SEC is a powerful agency

with a massive budget and the patience to litigate for

years if need be. See 8 Miller, Business and Commercial Litigation in Federal Courts §92:2 (5th ed. 2022)

(“The primary disincentive to litigating against the

SEC is the enormous resources that the SEC has at

its disposal.”). For private entities, by contrast, the

cost of defending an SEC enforcement action can be

crushing. “[T]he [average] cost of responding to a formal investigation” runs into the millions, and many

companies defending against SEC enforcement pay

tens of millions of dollars in legal fees alone. Examining U.S. Securities and Exchange Commission Enforcement, Chamber of Commerce, at 40 (July 2015),

perma.cc/HDK4-RZQE. These hefty fees make “the

pressure to settle … overpowering even when the SEC

case lacks merit.” Vollmer, Four Ways to Improve SEC

Enforcement, 43 Sec. Regul. L.J. 333, 336 (2015).

Being targeted by the SEC brings reputational

harm as well. “Investigations, even if merely inquisitory, are not innocuous. They are inherently accusatory and can have injurious effects on both personal

and business reputations.” Steinberg et al., supra, at

§ 9:16. For those who fear “adverse publicity” and do

not wish to have their reputation tarnished, continued

litigation is not a serious option. Vollmer, supra, at

336. And these reputational harms can themselves

have financial consequences. “‘[T]he pendency of an

investigation places a cloud over the corporation that

may inhibit its access to capital markets, chill relationships with vendors and customers, and distract

and demoralize management.” Steinway, supra, at

228. In other words, the very fact of “pending litigation can be disastrous” for accused parties. Id.

If the accused does choose to put up a fight, the

odds of victory are daunting. The SEC wins the vast

majority (69%, by one count) of contested actions that

it brings in federal court and an even greater majority

of cases that it litigates through its in-house administrative proceedings. Axon Enterprises, 598 U.S. at

215-16 (Gorsuch, J., concurring). No surprise, then,

that “nearly every one of the hundreds of cases

brought by the SEC each year is settled.” Moraes,

2022 WL 15774011, at *1; see Axon Enterprises, 598

U.S. at 216 (Gorsuch, J., concurring) (the “‘vast majority’ of SEC cases settle”). Between crushing litigation

costs, reputational harm, long odds of victory, and

“the threat of significant monetary fines,” settlement

often seems the only sensible choice. Axon Enterprises, 598 U.S. at 204 (Thomas, J., concurring).

And just as they lack the resources to litigate in

the first place, accused parties often lack the relative

bargaining power to meaningfully negotiate the terms

of settlement. “Unlike settlements between private

parties who may be in equal positions of strength, during an SEC settlement the SEC has more bargaining

power than most of its opposition. The parties are not

equals.” Johnson, SEC Settlement: Agency Self-Interest or Public Interest, 12 Fordham J. Corp. & Fin. L.

627, 660 (2007). The SEC has a “‘take all’ approach to

settlement.” Id. Its punitive drive and its disproportionate bargaining power mean that it often “receives

as much in terms of sanctions as it does” when it wins

“a contested proceeding, without as many work

hours.” Id. at 661.

As one former SEC enforcement attorney explained, defendants “cannot realistically walk away

from the settlement.” Id. “SEC settlements,” in other

words, “are not the result of a good faith negotiation

between two equal parties” but a Hobson’s choice imposed on parties with no real options. Id. Especially so

when the defendant is an “individua[l]” or a “small to

mid-sized enterprise.” Id. The only viable path forward for these defendants is to accept the settlement

as crafted by the SEC—Gag Rule and all.

In the words of one court of appeals panel, the

SEC puts defendants between a rock and a hard place:

Either “continue litigating with the SEC” and “get

bankrupted,” or settle the case, be gagged, “[h]old your

tongue, and don’t say anything truthful—ever.” SEC

v. Novinger, 40 F.4th 297, 308 (5th Cir. 2022) (Jones

and Duncan, JJ., concurring).

To make matters worse, the SEC appears to decide who to target based in part on how much money

they have to spare or how much publicity a case

against them would generate. Because “[t]he SEC has

considerable latitude to prioritize its enforcement

agenda,” there is a “possibility that the SEC will select

targets not because they are the worst violators, but

for improper reasons [like] self-aggrandizement.”

Steinway, supra, at 224. And “empirical evidence suggests that the SEC targets ‘deep pockets’ for whom

large-dollar fines will not induce insolvency, as well

as” unlikeable “violators whose cases will engender

positive press” for the agency. Id.

Recent enforcement sweeps underscore the concern, In the SEC’s “off-channel” communications

cases, for example, the agency investigated a series of

large financial institutions for supposed record-keeping failures. The conduct was allegedly “prevalent

across the securities industry,” but—as two sitting

SEC Commissioners with “deep reservations” about

the agency’s priorities explained—the enforcement initiative focused on well-capitalized firms capable of

absorbing extraordinary fines and generating “headline-making” settlements. A Catalyst: Statement on

Qatalyst Partners LP, SEC (Sept. 24, 2024),

perma.cc/H7BW-M66H. The result was a series of

high-dollar resolutions, which reinforced the perception that the SEC’s enforcement priorities are shaped

by visibility and ability to pay rather than relative culpability. And, with little regard for the obvious double

standard, the SEC later refused to disclose records on

how it calculated penalties for the targeted firms, until a federal court ordered it to disclose the information. See ASA v. SEC, 2026 WL 621432 (M.D. Fla.

Mar. 5, 2026).

In other words, the SEC picks a mark with “deep

pockets” or an unsympathetic story, id., accuses them

of violating securities laws, forces them into a crush-

ingly expensive and reputationally harmful investigation and enforcement process, uses that process to

pressure them to settle, extracts massive payments in

the settlement, and then imposes a gag that prevents

the accused party from ever questioning the SEC’s allegations, to anyone, even if their criticisms are true

and they never actually violated the law. That is the

antithesis of responsible regulation.

III. The Gag Rule is a straightforward First

Amendment violation.

The Gag Rule compels regulated entities to promise to never question the SEC’s decision to prosecute

them. That is an impermissible content-based speech

restriction and a prior restraint. The SEC cannot circumvent that straightforward conclusion with an argument that defendants “agree” to abandon their

First Amendment rights. The agency cannot achieve

an unconstitutional end (gagging criticism) through

indirect means (requiring a gag as a condition of settlement).

A. The Gag Rule runs afoul of the First Amendment in at least two ways. First, it is a content-based

restriction on speech. Governments have “‘no power to

restrict expression because of its message, its ideas,

its subject matter, or its content.’” Reed, 576 U.S. at

163. But the Gag Rule does exactly that. It prohibits

defendants from expressing two kinds of messages:

(1) statements that “den[y]” or give the “impression”

of denying the truth of SEC allegations, and (2) statements that “refus[e] to admit the allegations.” 17

C.F.R. §202.5(e). Because this prohibition restricts

speech based on “the topic discussed” and the “message expressed,” it “is content based.” Reed, 576 U.S.

at 163.

Worse yet, the Gag Rule prohibits speech based

not only on its subject matter, but on its viewpoint. A

defendant is not allowed to criticize the SEC for investigating and suing him, but “he is perfectly free to

praise the SEC for its enforcement tactics” or “confess

his culpability in violating the securities laws.”

Moraes, 2022 WL 15774011, at *5. This viewpointbased restriction is an especially “egregious form of

content discrimination.” Rosenberger v. University of

Virginia, 515 U.S. 819, 829 (1995).

Although the Gag Rule silences defendants, it lets

the SEC say whatever it wants. Nothing in the SEC’s

typical settlement agreements restrict the agency’s

ability to vigorously insist upon a defendant’s guilt,

even if the settlement contained no admission of liability by the defendant. “The First Amendment prohibits such distinctions, as ‘speech restrictions based

on the identity of the speaker are all too often simply

a means to control content.’” Upstate Jobs Party v.

Kosinski, 106 F.4th 232, 258 (2d Cir. 2024) (quoting

Citizens United, 558 U.S. at 340).

Second, the Gag Rule is a quintessential prior restraint on speech. “[P]rior restraints on speech … are

the most serious and the least tolerable infringement

on First Amendment rights.” Nebraska Press Ass’n,

427 U.S. at 559. The Gag Rule, which “actually forbid[s] speech activities” under threat of renewed litigation, is a “classic exampl[e] of” such a provision. Alexander v. United States, 509 U.S. 544, 550 (1993). A

“more effective prior restraint is hard to imagine.”

Novinger, 40 F.4th at 308 (Jones and Duncan, JJ.,

concurring) (discussing the Gag Rule).

Content-based speech restrictions and prior restraints are both presumptively unconstitutional and

must satisfy strict scrutiny to survive. Chiles v. Salazar, 146 S.Ct. 1010, 1021 (2026); In re Dan Farr Productions, 874 F.3d 590, 593 n.2 (9th Cir. 2017). But

the SEC doesn’t even try to argue that its rule passes

that test. See SEC Br. (CA9.Dkt.61.1) at 23-48. Nor

could it. Even assuming the SEC “has an interest in

protecting the good repute” of the agency’s enforcement practices, it is “firmly established” that protecting the government’s “institutional representation” is

“an insufficient reason ‘for repressing speech that

would otherwise be free.’” Landmark Communications v. Virginia, 435 U.S. 829, 841-42 (1978).

That’s why courts regularly deem gag clauses unconstitutional, even in contracts between private parties. E.g., Ronnie Van Zant, Inc. v. Cleopatra Records,

906 F.3d 253, 257 (2d Cir. 2018) (“[C]ourts should always be hesitant to approve” injunctions prohibiting

speech even if the injunction is “imposed as a result of

private contract rather than government censorship.”); Overbey v. Mayor of Baltimore, 930 F.3d 215,

224 (4th Cir. 2019) (declining to enforce a non-disparagement clause that was essentially “a governmentdefined and government-enforced restriction on government-critical speech”).

B. Refusing to engage the required strict scrutiny

analysis, the SEC (along with the Ninth Circuit below) tries to do an end run around the Constitution

altogether by arguing that its gag provisions are permissible because defendants voluntarily agree to

waive their First Amendment rights as a condition of

settlement. See Pet.App.2a.

As explained above, it is wrong to say that defendants in enforcement actions “voluntarily” agree to the

SEC’s non-negotiable settlement conditions. See supra II. But either way, the SEC cannot do indirectly

what the Constitution prohibits it from doing directly.

NRA v. Vullo, 602 U.S. 175, 190 (2024). And everyone

agrees—or should agree—that neither Congress nor

the SEC could enact a regulation that automatically

imposed a gag order as a penalty for anyone who is

found to have committed a securities violation. See

Pet.21. The agency therefore cannot “produce” the

same “result” by other means simply by using the

threat of enforcement to extract First Amendment

waivers out of regulated parties. Perry v. Sindermann,

408 U.S. 593, 597 (1972).

This straightforward principle is reflected in the

Supreme Court’s unconstitutional conditions doctrine. The government generally “may not deny a benefit to a person because he exercises a constitutional

right” or, conversely, use a benefit as an incentive to

induce a person “into giving … up” that right. Koontz,

570 U.S. at 604 (cleaned up). This is true even if “the

government is under no duty to grant” the benefit in

the first place, United States v. Scott, 450 F.3d 863,

866 (9th Cir. 2006), and even if the person “knowingly

and voluntarily consent[s]” to the condition, Moraes,

2022 WL 15774011, at *4.

The only circumstance in which the government

can impose otherwise unconstitutional terms as a condition for receiving a benefit is when there is “a close

nexus” between “the specific interest the government

seeks to advance” and “the specific right waived.” Davies v. Grossmont Union High Sch. Dist., 930 F.2d

1390, 1399 (9th Cir. 1991). The government can, for

example, require a criminal defendant to surrender

his trial rights in exchange for a plea deal because

pleading guilty “necessarily” requires foregoing a

trial. United States v. Spaeth, 69 F.4th 1190, 1198

(10th Cir. 2023). But there is no specific connection

between remedying a securities violation and indefinitely stripping a defendant of their right to speak

about the process that led to that remedy. Instead, the

SEC’s practice of gagging defendants looks much more

like an extra “penal[ty]” designed to “chill the assertion of constitutional rights.” United States v. Jackson, 390 U.S. 570, 581 (1968). And that is “patently

unconstitutional.” Id.

The rule against unconstitutional conditions has

particular force when free speech rights are involved.

“Indeed, the unconstitutional conditions doctrine specifically bars the government from” withholding benefits “to suppress ‘ideas thought inimical to the Government's own interest.’” Moraes, 2022 WL 15774011,

at *4. Simply put, the government “‘may not deny a

benefit to a person on a basis that infringes his … freedom of speech.’” Agency for Int’l Development v. Alliance for Open Soc’y Int’l, 570 U.S. 205, 214 (2013).

CONCLUSION

This Court should grant the petition for a writ of

certiorari.