08.05.10

Senators Leahy, Cornyn, Kaufman, and Grassley Introduce Bill To Strike SEC FOIA Exemptions

WASHINGTON (Thursday, August 5, 2010) – Leading members of the Senate Judiciary Committee Thursday introduced legislation to strike Freedom of Information Act (FOIA) exemptions for the Securities and Exchange Commission that were included in the recently enacted Wall Street Reform bill.  The bipartisan legislation is sponsored by Senators Patrick Leahy (D-Vt.), John Cornyn (R-Texas), Ted Kaufman (D-Del.), and Chuck Grassley (R-Iowa).

The bill introduced Thursday will eliminate the FOIA exemption for certain records provided to the Securities and Exchange Commission (SEC) in the Wall Street Reform and Consumer Protection Act, which was signed into law on July 21.  The bill also clarifies that hedge funds and other new entities that the SEC will regulate under the Wall Street reform law will be considered “financial institutions” for the purposes of applying FOIA Exemption 8.  The bill will ensure that the SEC can treat sensitive information provided by hedge funds to the Commission in connection with the SEC’s examination and surveillance activities in the same manner as the Commission treats such information when it is provided by other financial institutions.

“When Congress enacted these exemptions, it sought to ensure that the SEC had access to the information that the Commission needed to carry out its new enforcement powers and to protect American investors – not to shield information from the public,” said Leahy.  “I have been 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.  This legislation would amend the law to eliminate several broad FOIA exemptions for SEC records that were recently enacted as part of the Wall Street reform law.”

“If anything, the financial crisis and the wave of financial frauds we have seen over the past few years call for more transparency at the SEC, not less,” said Cornyn.  “I am alarmed that the financial regulatory reform bill appears to have excluded the SEC from the Freedom of Information Act’s (‘FOIA’) disclosure requirements.  The FOIA strikes a careful and workable balance between the need for confidentiality and the American people’s right to know about the workings of their government.  The SEC should play by the same rules of transparency as every other government agency.”

“This bill promotes greater transparency at the SEC and in our financial markets by narrowing an overly broad FOIA exemption in the Dodd-Frank Wall Street Reform Act,” said Kaufman.  “This is the sort of fine tuning that follows every piece of major legislation.”

“By exempting the SEC from Freedom of Information Act requirements, the new law lets Wall Street and the SEC continue to avoid scrutiny and accountability,” Grassley said.  “Our legislation will help plug this glaring hole in the new financial regulation law.”

The Senators are members of the Senate Judiciary Committee.  Leahy and Cornyn are longtime leaders in strengthening and protecting the Freedom of Information Act, the nation’s premier open government and transparency law.

On Wednesday, Leahy, Cornyn, Kaufman and Grassley also joined together to send a letter to Mary Schapiro, the chair of the SEC, urging her to issue guidelines narrowly interpreting the FOIA exemptions included in the Wall Street reform law.  A PDF of the letter is available online.

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Statement Of Senator Patrick Leahy (D-Vt.),

Chairman, Senate Committee On The Judiciary,

On Introduction Of “Freedom of Information

Act Amendments to the Securities and Exchange Act,

Investment Company Act and Investment Advisers Act Of 2010”

August 5, 2010

MR. PRESIDENT.  Today, I am pleased to introduce an important bipartisan bill to ensure that the Freedom of Information Act (FOIA) remains an effective tool to provide public access to critical information about the stability of our financial markets.  This legislation would amend the Securities and Exchange Act, Investment Company Act, and Investment Advisers Act to eliminate several broad FOIA exemptions for Security and Exchange Commission (SEC) records that were recently enacted as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act.   I thank Senators Cornyn, Kaufman and Grassley for cosponsoring this important open government bill.

I am a proud supporter of the historic Wall Street reform law because it takes significant strides toward enhancing transparency and accountability in our financial system.  But, I am concerned that the FOIA exemptions in Section 929I of that law, which was originally drafted in the House of Representatives and included in the final legislation, could be interpreted and implemented by the SEC in a way that undermines this very important goal.  

The Freedom of Information Act has long been the people’s window into their Government, showing where the Government is doing things right, but also where Government can do better.  The Freedom of Information Act has also long recognized the need to balance the Government’s legitimate interest in protecting confidential business records, trade secrets and other sensitive information from public disclosure and the public’s right to know.   To accomplish this, care must always be taken to ensure that exemptions to FOIA’s disclosure requirements are narrowly and properly applied.

When Congress enacted these exemptions, it sought to ensure that the SEC had access to the information that the Commission needed to carry out its new enforcement powers and to protect American investors – not to shield information from the public. 

I have been troubled by the Commission’s attempts in recent weeks to retroactively apply these exemptions to pending FOIA matters.  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. 

This week, I called on the Commission to promptly issue guidelines that interpret the FOIA exemptions in Section 929I in a manner that is both consistent with congressional intent and with the President’s January 21, 2009, Executive Memorandum on the Freedom of Information Act.  I look forward to the public release of those guidelines.  Given the overwhelming public interest in restoring stability and accountability to our financial system, Congress must also take steps to address concerns about the exemptions in Section 929I.

I thank the many open government organizations, including OpenTheGovernment.org, the Project on Government Oversight, the American Library Association and the Sunlight Foundation for their support of this bill. 

I have said many times that open government is neither a Democratic issue, nor a Republican issue – it is truly an American value and virtue that we all must uphold.  It is in this bipartisan spirit that Senators from both sides of the aisle have joined me in supporting this bill.   I look forward to working with them and others in Congress to ensure that the American public has access to important information about the SEC’s oversight of our financial markets.  I ask that a copy of a support letter from several open government groups be included in the record after my full statement.

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