What Is Neither Admit Nor Deny?

If you are under investigation by the U.S. Securities and Exchange Commission (SEC) or another federal regulatory or law enforcement agency, one of the options on the table may be to negotiate a settlement. While settling can provide a desirable path forward in many cases, it is important to make sure that your settlement agreement contains all of the necessary language to protect you against future legal exposure. In many cases, this means including “neither admit nor deny” language in your settlement agreement.

“NAD” stands for “neither admit nor deny.” When an individual or company enters into a settlement agreement or consent decree with the SEC or other federal authorities, it is common for the agreement to state that the individual or company, “neither admits nor denies,” the government’s allegations.

Why Include “Neither Admit Nor Deny” Language in a Settlement Agreement?

Typically, the agreement will recite that the government’s allegations are only allegations, and the agreement will include a clause stating that its inclusion of “neither admit nor deny” language is not an admission of liability. These clauses are important, as they:

• Make clear that the individual or company is not admitting to wrongdoing
• Make clear that the government’s allegations are simply allegations
• Prevent the government’s allegations from being used against the individual or company in subsequent civil or criminal litigation

Additionally, as the SEC and other federal authorities routinely note in their press releases, “neither admit nor deny” settlement agreements and consent decrees are “not a finding of fault.” They simply represent a conclusion to a matter that both parties — the government and the individual or company under investigation — have agreed to in order to mitigate the costs and risks of litigation.

Is it Worthwhile to Pursue a “Neither Admit Nor Deny” Settlement?

Here are some key considerations:

• Litigating Against the Government is Expensive and Time-Consuming — Even if you are able to successfully defend yourself against criminal allegations, doing so could take years and cost hundreds of thousands of dollars in legal fees.
• Litigating Against the Government Can Present Reputational Risks — Defending against criminal allegations can present reputational risks, particularly in cases involving allegations of financial crimes such as securities fraud, accounting fraud, and insider trading.
• The Government May Be Willing to Accept a Settlement — In many cases, even if the government’s investigation has progressed to the point of a criminal complaint, it may still be willing to accept a settlement with “neither admit nor deny” language.
• You Lose All Control Over the Process Once You Go to Court — If you go to court, you lose control over the outcome. There are no guarantees you will avoid conviction.

7 Key Components of an Effective “Neither Admit Nor Deny” Settlement Agreement

• The Agreement Clearly States that You Are Not Admitting to Any Violations
• The Agreement Clearly States that You Are Not Denying Any Violations
• The Agreement Clearly States that the Government’s Allegations are Only Allegations
• The Agreement Includes a Term that Limits the Possibility of Charges Being Filed in the Future
• The Agreement Includes a Term that Limits the Possibility of Private Litigation
• The Agreement Clearly States that the Agreement Is Not an Admission of Liability
• The Agreement Includes Provisions that Protect You from Administrative, Civil, and Criminal Liability