Since 1972, the SEC used what people called the "no admit, no deny" rule. If you settled an enforcement case, you agreed not to deny the regulator's claims publicly. That changed in May, when the SEC dropped that policy.
Now Deccan Value Investors, a hedge fund based in Greenwich, Connecticut, is taking advantage of its new freedom. The firm issued a statement saying it "categorically rejects" the findings it agreed to back in 2022. Deccan asserted that its conduct was lawful, ethical, and in line with client duties both then and now. The settlement, it explained, was simply a way "to avoid greater legal expenses and distractions from operating its business."
Peggy Little, a lawyer at the New Civil Liberties Alliance who pushed for the rule change, told reporters that other firms are already signaling interest. "Informally we're aware of people who want to tell their side of the story," she said.
The SEC's original case against Deccan centered on how the fund handled redemption requests from two university endowments. In 2019, two universities wanted to pull out a combined $566 million - about 19% of Deccan's $3 billion in assets under management at the time. One university wanted $146 million. The other wanted $470 million from a separately managed account.
The SEC said the firm used questionable valuations to make that process harder. At the center was an unlisted Indian company. According to the regulator, the founder Vinit Bodas had received bids for the shares at 875 rupees and 880 rupees per share (about $9.08 and $9.13).
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But the fund advised the universities to sell at 840 rupees ($8.72) - a lower valuation - to other clients. The SEC also quoted Bodas saying he "loved" the company, and that he wanted to "take our sweet time" with the redemption, seeking "max price for portfolio and min price to" pay the universities.
Deccan defended itself, saying it valued the shares that way "to prevent adverse price effects" and "to account for illiquidity and protect non-redeeming clients." It argued that selling at a bid price that was "conditional and highly uncertain" would not be fair to other investors.
Separately, a former COO's lawsuit against Deccan ended largely in the fund's favor; a Connecticut judge threw out remaining claims last month.
Deccan might not be alone for long. With the gag rule eliminated, any past SEC settler can now challenge the agency's narrative publicly. Benjamin Schiffrin, from the advocacy group Better Markets, isn't a fan of that idea. "Defendants in SEC enforcement actions need not settle," he said. "If they do settle . . . they should not be allowed to also deny the wrongdoing."
But the legal picture is still shaky. In late June, the Supreme Court decided not to hear a challenge to the old gag rule that sought to have it declared unconstitutional. Thomas Powell, a businessman who pushed that challenge, wrote in the Wall Street Journal that "no court ruling will bind the next administration, and the agency could reimpose the gag rule tomorrow."
For investors, this is worth watching because it changes the information you get. When a firm settles with the SEC, you used to hear only one side of the story. Now firms like Deccan can fight back publicly, which might give you a fuller picture of what really happened.
At the same time, the rule can be reinstated at any moment by a future SEC. So this transparency window could close just as fast as it opened. Deccan's numbers tell a story too.
The firm managed about $3 billion before the redemption requests hit. Today it runs roughly $1.4 billion. That drop shows how much a regulatory fight - and the redemptions that come with it - can reshape a fund.
Whether you agree with Deccan or the SEC, the lesson is simple: settlements come with costs that go well beyond the fine. And now, at least for a while, the people paying those costs can finally talk about it.
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