
SEC Reauthorizes Defendants to Condition Enforcement Settlement Offers on Receiving Waivers of Statutory Disqualifications
In Short
The Situation: The U.S. Securities and Exchange Commission ("SEC") has reinstated the practice of simultaneously considering settlement offers and related waiver requests from automatic disqualifications and other collateral consequences arising from SEC enforcement actions.
The Result: Parties may now condition settlement offers on receipt of critical waivers (e.g., WKSI status, PSLRA safe harbors, private-offering exemptions, and Investment Company Act Section 9(a) relief), improving efficiency and certainty in resolving enforcement matters.
Looking Ahead: Even under the new policy, the SEC may accept a settlement but deny a waiver; in that case, respondents will be promptly notified and will typically have five business days to decide whether to proceed with the settlement. The change is part of broader process recalibrations signaled by the administration's SEC leadership.
Citing the need for greater transparency and efficiency, SEC Chairman Paul Atkins announced on September 26, 2025, that the SEC will again allow parties settling SEC enforcement actions to condition settlements upon receipt of waivers of various statutory disqualifications—such as loss of well-known seasoned issuer status, loss of forward-looking statement safe harbors under the Private Securities Litigation Reform Act, and loss of private offering exemptions under Regulations A, D, and Crowdfunding—that are often a consequence of the remedies the SEC obtains in enforcement settlements. These conditional offers will be presented by the staff to the commissioners for consideration simultaneously with waiver requests.
Under the SEC's previous long-standing practice, which was readopted in 2021 by then-Acting Chair Allison Herren Lee, enforcement settlements and waiver requests were handled separately, and the SEC would not allow parties to hinge settlement offers on receipt of waivers. The SEC reasoned that the two processes served distinct purposes; the enforcement settlement addressed prior misconduct and was influenced by the evidence and law of the case, while the waiver process looked forward to determine whether disqualification was in the public interest, taking all factors into account. But this forced parties to evaluate an enforcement settlement without knowing whether the SEC would grant their simultaneous waiver requests. Because the consequences of statutory disqualification can dwarf the sanctions in an enforcement case, parties that rely on certain safe harbors and exemptions—such as public companies and financial institutions—had to approach settlement cautiously.
Under the new policy, which is consistent with the policy adopted in 2019 under then-Chairman Jay Clayton but reversed in 2021, the SEC will assess the full package—settlement terms and the requested waiver—in light of the relevant facts, conduct, and consequences, and with the benefit of analysis from the Divisions of Enforcement, Corporation Finance, and Investment Management. This policy should accelerate SEC enforcement settlements because it acknowledges the reality that settling parties view enforcement settlements as a universal resolution with the SEC rather than a piecemeal process. Indeed, in many cases, it would make little sense to settle an enforcement case without receiving a waiver.
Chairman Atkins cautioned that the SEC remains free to accept settlement offers in part but to reject waiver requests. But parties who submit settlements conditional on waivers will be promptly notified of these circumstances so that they can decide how to proceed. Chairman Atkins asked that respondents notify the staff within five business days of its decision. If they choose not to go forward with settlement, the SEC can continue to engage in settlement discussions or file a litigated enforcement action.
This policy change is just one of several the new administration seems poised to make to the SEC's enforcement process, such as refining the SEC's no-admit/no-deny settlement policy; modernizing and opening the Wells process; and requiring that staff get commissioner preapproval for formal orders of investigation and any subsequent settlement negotiations. Any of these could significantly alter how the SEC goes about its enforcement business.
Three Key Takeaways
- Increased certainty. Simultaneous consideration of settlement terms and waivers should reduce uncertainty and facilitate more timely and comprehensive resolutions of enforcement matters.
- Tailored strategy needed. Parties should align settlement and waiver strategies early, including identifying necessary waivers and preparing supporting materials to meet applicable standards.
- SEC discretion remains. Even under the new policy, the SEC may accept a settlement but deny a waiver. Therefore, parties should plan for that outcome and be ready to decide quickly whether to proceed.