Yesterday, the Senate unanimously approved a bill, S. 3717, to strike language from Section 929I of the Dodd-Frank Wall Street Reform and Consumer Protection Act that would provide the Securities and Exchange Commission (SEC) with overly broad Freedom of Information Act (FOIA) exemptions and a blanket authority to withhold records.
“We applaud the Senate for its vote to repeal this unnecessary and threatening accountability shield for the SEC,” said POGO Executive Director Danielle Brian. “The champions of this legislation, Senators Patrick Leahy, D-Vt.; Charles Grassley, R-Iowa; John Cornyn, R-Tex.; and Ted Kaufman, D-Del., showed real leadership and bipartisanship as they and their dedicated staff addressed this problematic provision once it was brought to light.”
Section 929I empowers the SEC to withhold in court cases and in response to FOIA requests a wide range of records related to its examinations of regulated entities by enacting a broad privilege provision and three new blanket exemptions to FOIA. S. 3717 would repeal 929I, and clarify 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. A companion bill, H.R. 6086, has been introduced by House Oversight and Government Reform Committee Chairman Edolphus Towns, D-N.Y, and was considered along with Ranking Member Darrell Issa’s, R-Ca., bill H.R. 5924 in a hearing held by the House Financial Services Committee last week.
POGO’s Angela Canterbury testified at the hearing where both Chairman Barney Frank, D-Mass., and SEC Chairman Mary Schapiro agreed that the SEC secrecy provision is too broad. Chairman Frank further committed to fixing it legislatively. Canterbury testified that the best fix is to simply repeal the secrecy provision.
However, the SEC has continued to argue that it needs the ability to block subpoenas from civil litigants—a solution to a problem the agency has not shown to exist.
“The SEC has not provided any evidence that confidential proprietary information has been made public through civil litigation,” said Canterbury. “And yet, there is great potential harm to whistleblowers, defrauded investors, and others who may rely upon and have a right to information at the SEC if the SEC is given more power to block the release of this information.”
The SEC issued internal guidance regarding 929I that would give the agency very broad and unique powers to block subpoenas. POGO also has learned that the U.S. Chamber of Commerce has been shopping legislative language that would give the SEC another tool to hide information of wrongdoing by brokerage firms, hedge funds, financial advisors, and all other financial entities it regulates—or incompetency by the SEC.
“I am very encouraged by Chairman Frank’s willingness to revisit this issue and address the problem of secrecy at the SEC,” said Canterbury. “I hope with his support the House will move swiftly to pass S. 3717/H.R. 6086. We can’t afford for the lights to go out at the SEC while Congress recesses for the elections.”