Senators Patrick Leahy (D-VT), Charles Grassley (R-IA), John Cornyn (R-TX), and Ted Kaufman (D-DE) just introduced a bipartisan bill to repeal the unnecessary FOIA exemptions for the Securities and Exchange Commission (SEC) in the newly enacted financial overhaul legislation.
The bill introduced today strikes exemptions that give the SEC a blanket authority to withhold records on the companies it regulates. The bill also clarifies that an existing FOIA exemption will protect against the release of confidential information contained in the records of hedge funds and other firms that will now be regulated by the SEC under the financial reform legislation, eliminating the need for any new blanket exemptions.
Our statement on the bill is available here.
Earlier this week, POGO and other good government groups wrote to Senator Christopher Dodd (D-CT) and Barney Frank (D-MA) raising concerns that the FOIA exemptions contained in Section 929I of the Dodd-Frank Wall Street Reform and Consumer Protection Act could severely limit the public’s ability to monitor the SEC’s oversight activities. We called on Congress to repeal the unnecessary FOIA exemptions, and to examine the SEC’s overall record on withholding vital information from the public.
We applaud Senators Leahy, Grassley, Cornyn, and Kaufman for their leadership in pushing the SEC to be more transparent and accountable, and for clarifying that the financial reform bill was not intended to give the SEC any more authority to withhold records from the public. Representative Frank also announced yesterday that the House Financial Services Committee will be holding a hearing next month to “explore concerns raised” about Section 929I.
In the meantime, an SEC administrative law judge ruled this week that the agency can’t use its expanded authority under Section 929I to withhold records on cases that were open before the Dodd-Frank bill took effect. SEC Chairman Mary Schapiro claimed last week that Section 929I was only necessary for the agency to conduct confidential examinations of newly regulated entities such as hedge funds. But in the administrative case, which had nothing to do with FOIA or the SEC’s new powers, the agency had attempted to invoke Section 929I to avoid releasing documents related to past examinations. The SEC’s aggressive attempt to withhold these records highlights why POGO and others are so concerned about Section 929I.
In addition, the administrative law judge pointed out that “Section 929I may require revision to various Commission regulations,” but that “no such notice-and-comment rulemakings have yet commenced.” Chairman Schapiro states that she has asked the SEC to “issue and publish on our website guidance to our staff that ensures the provision is used only as it was intended,” but she stopped short of using the public process of rulemaking, which would include making the SEC’s proposed guidance on the application of Section 929I part of the Federal Register and incorporating public comments.
Ultimately, Congress needs to strike the unnecessary FOIA exemptions found in Section 929I. But in the meantime, we would urge the SEC to commit to an official rulemaking process so that the public has a chance to weigh in on the agency’s expanded authority to keep its records under a veil of secrecy.
-- Michael Smallberg