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Powell et al. v. SEC: A Fight for Free Speech and Accountability

By Thomas J. Powell, LP.D, senior adviser, The Brehon Group

Since September 2021, Publius has appeared in these columns as an anonymous critic of the U.S. Securities and Exchange Commission’s continuous regulatory overreach. From the commission’s whistleblower program to its internal failures, the columns have endeavored to expose the hypocrisy and inequality fostered by the SEC Enforcement Division. Many readers have shared their experiences and thoughts on the SEC, reinforcing the need for transparency and accountability. Today, I reveal my identity as Thomas J. Powell, one of the many individuals unjustly impacted by the SEC’s unconstitutional policies.

I am unveiling my identity because I have joined forces with the New Civil Liberties Alliance and several brave business owners, including the Reason Foundation and The Cape Gazette, to challenge the commission’s unjust and draconian Gag Rule. Together, we have filed a petition—Powell et al. v. SEC – with the U.S. Court of Appeals for the Ninth Circuit to review and overturn the SEC’s illegal Gag Rule, a petition which was recently supported by 16 research organizations, advocacy groups, and law firms who filed 11 amici curiae briefs.

In 1972, the SEC deceptively implemented the Gag Rule, falsely portraying it as an internal “housekeeping” measure that would not impact third parties. In a recent Law Review article, Rodney Smolla, dean and professor of law at Delaware Law School of Widener University, thoroughly discusses these points, highlighting the SEC’s lack of transparency and legal overreach. The agency never had statutory authority to implement such a substantive rule and bypassed Administrative Procedure Act requirements to publish, provide notice, and allow comment before promulgating a rule binding on third parties. The commission never had – and could never have – the legal authority to enact such a significant rule, as this violates the Constitution. The SEC has never since offered a valid justification for permanently silencing those who settle enforcement actions.

In place for more than 50 years, the SEC’s Gag Rule has always been a blatant infringement on our First Amendment rights. The First Amendment was designed to allow United States citizens the freedom to criticize their government. This amendment distinguishes our country from many others, making it a bastion of hope for immigrants. However, the SEC’s Gag Rule contradicts everything our First Amendment represents. As Ronnie Abrams, U.S. district judge, wrote in response to the SEC’s decades-old “No-Admit-No-Deny” provision, “What is the SEC so afraid of? Any criticism apparently or rather anything that may even ‘create the impression’ of criticism of that governmental agency.”

The fundamental principle at stake is that the people, not the Constitution or any amendment, confer limited powers upon the U.S. federal government. The Bill of Rights outlines the limits of these powers, guaranteeing certain inalienable rights that no government can revoke. The SEC’s Gag Rule egregiously violates this foundational principle.

I have experienced firsthand how the SEC uses its power to coerce settlements, forcing individuals to sign away their right to free speech in exchange for resolution. I have experienced how the SEC has gone back on its agreements, publishing a press release accusing me of various untruths to which I could not respond due to the Gag Rule. This is not justice; this is a perversion of our fundamental rights. It is a system that benefits only the SEC at the expense of the people.

The SEC’s Gag Rule has drawn prominent judicial criticism over the years, and with the Supreme Court’s recent landmark decisions in cases such as SEC v. Jarkesy and its overturning of the 40-year-old Chevron deference (in which the NCLA played a significant role), it seems as if the court is finally prioritizing the rule of law over regulatory agendas. I believe this renewed emphasis on statutory authority and due process signals a turning point in revisiting the Gag Rule’s lack of validity.

I am proud to be part of this fight as I, the NCLA, and the other petitioners work together to restore the First Amendment rights that have been denied to too many for too long. We are not just fighting for ourselves; we are fighting for every person who believes in the power of free speech and the importance of holding our government accountable.

To others in our industry who may have been the focus of the SEC and its Gag Rule, I say this: You are not alone. Your voices matter, and your stories deserve to be heard. Please share your views and join us as we work toward justice and freedom.

The SEC Gag Rule is a stain on our democracy. It is time to end this unconstitutional practice and embrace true transparency and accountability. People in the United States deserve nothing less.

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To learn more about Powell et al. v. SEC, visit the NCLA.

Dr. Thomas J. Powell is a highly accomplished professional with over three decades of experience in banking, finance, and legal strategy. He holds a Doctor of Law and Policy, an MBA, and an MLS and is driven by his entrepreneurial spirit. This spirit has led him through a successful 35-year career spanning commercial banking, private equity, and alternative asset management. Today, Powell serves as a senior adviser of The Brehon Group, utilizing his extensive knowledge and wealth of experience to help businesses scale and succeed in a global market. As an entrepreneur and financier, he has continuously sought knowledge through academia to build upon his real-life experiences.

Founded in 2008, The Brehon Group is an elite hybrid of a boutique international consulting company and a public policy think-tank dedicated to addressing the distinct challenges faced by maturing startups, raising capital, and ensuring compliance with federal and state securities laws. The group’s team of accomplished professionals – including experts in banking, venture capital, private equity, and asset protection – aims to guide clients through foreign direct investment, regulatory enforcement actions, crisis management, litigation fatigue management, and negotiations to empower them to emerge more robust and more resilient.

The views and opinions expressed in the preceding article are those of the author and do not necessarily reflect the views of The DI Wire.

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