In the second quarter of 2026, the SEC continued to reshape its enforcement and regulatory agenda. This edition examines three significant developments – the end of the “gag rule,” intensified enforcement and rulemaking directed at investment managers, and a proposed shift from quarterly to semiannual public-company reporting – and offers practical guidance for managing the resulting regulatory risk. 

 The “gag rule”: restrictions on public denials by settling parties

On May 18, 2026, the SEC rescinded Rule 202.5(e) of its rules of informal procedure – the “gag rule” – ending a policy in place since 1972 that barred a defendant or respondent settling an enforcement action from publicly denying the SEC’s allegations. Combined with the agency’s customary practice of not requiring admissions, this produced the familiar “no-admit, no-deny” framework used in thousands of settlements over five decades. 

The rescission includes three significant changes:

• No prospective condition. The SEC will no longer condition settlement on a party’s agreement not to deny the allegations; settling parties may now contest the agency’s account after a matter resolves.
• Retroactive relief. The SEC will not enforce no-deny provisions in prior settlements and will not ask a court to vacate a settlement or reopen a proceeding based on a breach.
• Admissions practice unchanged. The SEC retains discretion to seek admissions of fact or liability, which it has historically required only rarely.  

Chairman Paul Atkins framed the rescission in First Amendment terms, observing that “[s]peech critical of the government is an important part of the American tradition.” The Commission reasoned that the policy’s public-interest benefit was minimal, left the SEC out of step with other federal agencies, and risked appearing to shield the agency from criticism. The timing is notable: in Powell v. SEC, the Ninth Circuit upheld Rule 202.5(e) in 2025, and a certiorari petition was pending before the Supreme Court when the SEC acted – raising the prospect that the rescission may moot the case. 

The practical implications cut both ways. A company can now settle while stating that it disagrees with the SEC’s findings and resolved only to avoid the cost and distraction of litigation – useful for investor relations and follow-on private litigation. But denials carry new risk: a public statement disputing settled conduct could be used in collateral proceedings, complicate dealings with auditors, insurers, and other regulators, and prompt the SEC to press for admissions or higher penalties in future matters. Parties should weigh case by case whether a denial actually advances their interests. 

Enforcement and rulemaking focused on investment managers  

Investment managers remain a clear enforcement and examination priority under Chairman Atkins. The Division of Examinations’ fiscal year 2026 priorities emphasize advisers’ fiduciary duties of care and loyalty, conflicts of interest, Marketing Rule compliance, and the adequacy of compliance programs – with particular attention to retail-facing advice and alternative investments such as private funds, complex products, and high-cost or illiquid strategies. Failure to disclose material conflicts remains a recurring enforcement theme. 

Recent matters illustrate the focus. The SEC has pursued advisers for inadequate conflict disclosures – including those tied to compensation and incentive structures, affiliated-product recommendations, and cash-sweep arrangements – and for Marketing Rule deficiencies involving testimonials, third-party ratings, and unsubstantiated performance claims in violation of Rule 206(4)-7. It has also charged advisers for using boilerplate hedge, indemnification, and assignment clauses that are inconsistent with their fiduciary duties to retail clients. Notably, the current Commission has often resolved these matters with narrower undertakings than its predecessor, favoring remediation commitments over independent consultant mandates. 

On rulemaking, an April 28, 2026 order raised the “qualified client” thresholds under Advisers Act Rule 205-3 – the inflation adjustment Dodd-Frank requires every five years. Effective June 29, 2026, an investor generally must have at least $1.4 million in assets under management with the adviser (up from $1.1 million) or net worth over $2.7 million (up from $2.2 million, excluding a primary residence) before the adviser may charge performance-based fees. Existing arrangements are generally grandfathered, but the new thresholds apply to any new client or fund investor on or after the effective date. Advisers charging performance fees – especially Section 3(c)(1) fund sponsors – should update subscription documents, investor questionnaires, and advisory agreements. 

Proposed rule: transition to semiannual reporting 

On May 5, 2026, the SEC proposed amendments that would let public companies elect to file a single semiannual report on a new Form 10-S in place of the three quarterly Form 10-Q reports required since 1970. The election would be optional – companies that do not opt in would continue quarterly reporting, and electing companies could still furnish first- and third-quarter information through Form 8-K earnings releases. The proposal would also amend Regulation S-X so that a semiannual filer’s financial statements are not treated as “stale” in registration statements. 

Chairman Atkins cast the proposal as part of a broader “Make IPOs Great Again” agenda to reduce the cost and burden of being public. The release frames quarterly reporting as a one-size-fits-all regime whose costs – management time, legal and accounting fees, and pressure toward short-term decision-making – may outweigh its benefit for some issuers. The Commission also acknowledged countervailing research suggesting that issuers moving to semiannual reporting without voluntary supplementation may experience reduced analyst coverage and a weaker information environment. 

If adopted, this would be the most significant structural shift in public-company periodic reporting in roughly 75 years, though its reach may be uneven – likely most attractive to smaller, newer, or development-stage companies, while larger issuers, facing investor and index expectations, may keep the quarterly cadence. A company would elect by checking a box on the cover of its Form 10-K, with the election applying to the following fiscal year. The comment period runs through July 6, 2026; any final rule is months away but could take effect in time for calendar-year companies deciding whether to elect for fiscal 2027.

Practical action items for in-house counsel and corporate leaders

These developments call for concrete steps in the near term:

• Revisit settlement and communications strategy. With the no-deny condition gone, settlement planning should include whether to publicly contest allegations – after weighing the collateral litigation, disclosure, auditor, insurer, and regulatory consequences first.
• Preserve the litigation record. Because a public denial is far weaker than a win on the merits, develop the factual and legal record early in any matter that may be resolved on former no-deny terms.
• Tighten adviser conflict and Marketing Rule compliance. Review conflict-of-interest disclosures (compensation, affiliated products, cash sweeps) and advertising practices (testimonials, ratings, performance claims) against current SEC expectations, and confirm Rule 206(4)-7 policies are reasonably designed and followed.
• Update qualified-client documentation before June 29, 2026. Advisers charging performance fees should conform subscription documents, investor questionnaires, and advisory agreements to the new $1.4 million and $2.7 million thresholds, and brief onboarding staff.
• Begin the semiannual reporting analysis now. Assess whether a semiannual cadence fits your investor base and capital-raising plans, model the disclosure and earnings-release implications, and consider submitting a comment before the July 6, 2026, deadline.