The House voted today to repeal Section 929I of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which had provided the Securities and Exchange Commission (SEC) with sweeping new powers to hide its records from public scrutiny. The House’s passage of S. 3717 comes just one day after the Senate voted unanimously to strike the troubling secrecy measure, and is the first legislative correction to the new financial regulatory overhaul law.
See POGO’s press alert for our statement on today’s vote.
Section 929I would have given the SEC the blanket authority to block the release of records in response to Freedom of Information Act (FOIA) requests, and to withhold records in response to subpoenas filed by third-party civil litigants, even if such records were needed to expose corruption or incompetence at the agency. S. 3717 repeals these overly broad and unnecessary secrecy measures, and clarifies that an existing FOIA exemption, Exemption 8, will protect against the release of confidential information contained in the records of any entity that falls under the SEC’s regulatory authority.
Last month, POGO and other groups called on Congress to remove the broad and troubling secrecy measures in Section 929I. At a subsequent hearing before the House Financial Services Committee, POGO Director of Public Policy Angela Canterbury urged Congress to repeal Section 929I rather than allowing the SEC to issue its own internal guidance implementing the provision as it saw fit.
Members of Congress from both sides of the aisle responded immediately once it became clear that Section 929I had gone too far in allowing the SEC to withhold information. Several bills were introduced in the House to repeal Section 929I, including bills introduced by House Oversight and Government Reform Committee Chairman Edolphus Towns, D-N.Y., and Ranking Member Darrell Issa, R-Calif., both of whom testified at the Financial Services Committee hearing last week. On the Senate side, S. 3717 was introduced by Senators Patrick Leahy, D-Vt., Charles Grassley, R-Iowa, John Cornyn, R-Tex., and Ted Kaufman, D-Del., all of whom have been longtime champions of open government.
In a statement on the passage of the House bill, Senator Leahy remarked that "this new law will ensure that the Freedom of Information Act (FOIA) remains an effective tool to provide public access to information about the stability of our financial markets."
But while Congress has acted quickly to reverse the blanket secrecy measure sought by the SEC, more must be done to ensure the agency is following President Obama’s order to operate with a presumption in favor of disclosure.
POGO called on Congress to make the SEC more open and accountable moving forward. In her testimony last week, Canterbury highlighted a recent Office of Inspector General (OIG) audit which found that the SEC has one of the worst FOIA release rates of any agency in the federal government. She recommended follow-up audits by the OIG to ensure that the SEC is fully implementing its recommendations for complying with FOIA and the Obama Administration’s guidance on transparency and disclosure. She also urged Congress to review the SEC’s use of the existing FOIA exemptions, especially Exemption 8, which will be expanded with the enactment of S. 3717.
In addition, Canterbury raised concerns about the SEC’s practice of heavily redacting and withholding OIG reports, an issue that was also raised in yesterday’s Senate Banking Committee hearing on the failures of the SEC’s investigation into the Stanford Ponzi scheme.
-- Michael Smallberg