Bipartisan members of the Senate Judiciary Committee introduced a bill Thursday that would remove exemptions for the Securities and Exchange Commission to a law that promotes openness at federal agencies.
Bipartisan members of the Senate Judiciary Committee introduced a bill Thursday that would remove exemptions for the Securities and Exchange Commission to a law that promotes openness at federal agencies.
Recently enacted Wall Street reform legislation includes a provision that said the SEC “shall not be compelled to disclose records or information obtained” while conducting “surveillance, risk assessments or other regulatory and oversight activities.”
A growing number of lawmakers and interest groups are concerned that the language would allow the SEC to ignore Freedom of Information Act requests, and escape the accountability and transparency the law was designed to ensure.
“I have been deeply troubled by the commission's attempts in recent weeks to retroactively apply these exemptions to pending FOIA matters,” Sen. Patrick Leahy, D-Vt., chairman of the Senate Judiciary Committee, said in a statement. “I am also troubled by the sweeping interpretation that the commission has expressed, to date, that these exemptions would shield all information provided to the commission in connection with its broad examination and surveillance activities.”
Mr. Leahy introduced his bill, which scuttles the FOIA exemption language in the financial-regulatory-reform law, with three other colleagues, Sens. John Cornyn, R-Texas, Ted Kaufman, D-Del., and Charles Grassley, R-Iowa.
In a July 30 letter to Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, SEC Chairman Mary Schapiro defended the exemptions. She cited other parts of the reform bill that give the SEC new authority over hedge, private-equity and venture capital funds to monitor their activities and reduce systemic risk.
“In order for our efforts to be successful, it is important that registered entities be able to provide us with access to confidential information without concern that the information will later be made public,” Ms. Schapiro wrote. The section of the reform bill that provides FOIA exemptions “is critical to our ability to develop a robust examination program that better protects investors.”
Ms. Schapiro wrote that the SEC often gathers “customer information, trading algorithms, internal-audit reports, trading strategy information, portfolio manager trading records, and exchanges' electronic trading and surveillance specifications and parameters” as it investigates potential misconduct.
“Protecting the confidentiality of this information makes sense, as the non-public or proprietary nature of those documents should not be lost simply because registrants provide the documents to the commission in connection with oversight responsibilities,” Ms. Schapiro wrote.
In a letter to Mr. Frank and Sen. Christopher Dodd, D-Conn., and chairman of the Senate Banking Committee, a group of information and watchdog organizations wrote that that FOIA “already provides sufficient exemptions to protect against the release of sensitive and proprietary information. Furthermore, the SEC has a troubling history of being overly aggressive in withholding records from the public.”
Mr. Frank announced Wednesday that he will hold a Sept. 23 hearing on the matter. “This should provide ample time to take corrective legislation action if it is needed,” Mr. Frank said in a statement.
