Angela Canterbury, Director of Public Policy at the Project On Government Oversight (POGO), is testifying tomorrow before the House Financial Services Committee regarding a troubling provision in the financial overhaul legislation that has given the Securities and Exchange Commission (SEC) a sweeping authority to withhold vital records from the public.
SEC Chairman Mary Schapiro is also scheduled to testify at the hearing, which will be webcast starting at 10:00 a.m. tomorrow on the Committee’s website.
“As Americans continue to suffer from the failure of regulators to prevent the recent financial crisis, the SEC apparently wants to operate with even less public scrutiny,” said Canterbury. “We commend the Committee for its willingness to revisit this important issue in order to strike the right balance between business confidentiality and the public’s right to know.”
The SEC claims it needs the blanket exemptions in Section 929I of the Dodd-Frank Wall Street Reform and Consumer Protection Act so that it can assure regulated entities that their confidential records will not be disclosed to the public. Canterbury’s testimony makes the case that these records are already protected by existing exemptions to the Freedom of Information Act (FOIA).
POGO is particularly concerned that the SEC will try to use the blanket exemptions in Section 929I to circumvent the due process provided under FOIA; to protect not just confidential business information, but also SEC records showing how the agency botched investigations; and to refuse nearly all subpoenas from civil litigants.
In addition, Canterbury points out that the SEC has an alarming track record of abusing FOIA exemptions to withhold records from the public. A recent audit conducted by the SEC’s Office of Inspector General found that the SEC’s improper FOIA practices had created a presumption of withholding, despite President Obama’s mandate that FOIA be implemented with a presumption of disclosure.
Chairman Schapiro has now issued internal guidance instructing staff to narrowly apply the blanket exemptions in Section 929I. However, POGO is concerned that the agency has been given too much discretion to apply the exemptions, when it should be up to Congress to determine the specific criteria for withholding information. Entrusting the SEC with internal guidance is also risky given the agency’s track record of abusing the existing FOIA exemptions. In addition, the agency should not be given the discretion and authority to block subpoenas—these decisions should be made by the courts on a case-by-case basis. Despite Chairman Schapiro’s guidance, the blanket exemptions in Section 929I are still much too broad, and the SEC still hasn’t demonstrated a need for this sweeping secrecy measure.
POGO supports legislation to repeal the unnecessary blanket exemptions in Section 929I. For instance, bipartisan legislation introduced by Representative Edolphus Towns (H.R. 6086) and Senators Patrick Leahy, Charles Grassley, John Cornyn, and Ted Kaufman (S. 3717) would strike the blanket exemptions, and clarify that an existing FOIA exemption will protect against the release of information contained in the records of any entity that falls under the SEC’s regulatory authority.