Battling SEC Secrecy

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May 29, 2006

The New York Times ran a long story Sunday on the ongoing court battle of SEC Insight, a small company which gives investors a window into the Securities and Exchange Commission (SEC) through Freedom of Information Act (FOIA) requests, against the SEC's stubborn refusal to disclose information in numerous cases. 

"It is a troubling paradox, Mr. [John] Gavin [President of SEC Insight] says. The S.E.C., which requires public companies to make full disclosure of all meaningful facts, has stopped granting most of Mr. Gavin's requests for regulatory correspondence. For his part, Mr. Gavin has sued the agency in federal district court in Minnesota, seeking to compel compliance with federal disclosure laws.

"The suit aims to force the S.E.C. to turn over records to Mr. Gavin on 12 companies, which the S.E.C. has so far flatly refused to do. The judge overseeing the case has given the S.E.C. a deadline of Thursday to prove that it has reviewed the documents that Mr. Gavin requested on six of those companies. The agency has appealed that ruling, arguing that the task is too onerous."

...

"[I]t is the S.E.C.'s flat-out refusal to supply correspondence with public companies that Mr. Gavin said he finds disturbing. These communications, known as comment letters, have been enormously useful in revealing potential problems at companies in the past, he says. The letters have pointed to aggressive accounting practices and pension problems, for example, long before those problems hit the headlines."

In our last post on SEC Insight, the company had just won a battle against the SEC's use of "glomar" responses.  Glomar responses are almost always used by national security-related government agencies such as the CIA.  Such responses typically say the following as a method of denial: The agency can "neither can confirm nor deny the existence or non-existence" of the documents requested.

Authors: Nick Schwellenbach

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