What SEC Sources Say About FinReg and FOIA

Original Article from Fox Business EMac’s Stock Watch

The impetus for the Securities and Exchange Commission to seek broader exemptions from public-disclosure law in the new Dodd-Frank financial-reform law came from a concern that the SEC must keep confidential the proprietary data it picks up in its examinations of financial concerns, SEC sources say.

The SEC intends for the provision only to be used to protect the confidentiality of data the agency gets when it examines financial companies. The SEC sources say the clause is needed now because the Dodd-Frank bill forces the SEC to audit more financial companies than ever before—including new audits of hedge funds, private equity funds, and venture capital funds.

The fear is that these funds have threatened to not comply with their new SEC audits required under the Dodd-Frank bill if the SEC did not protect their proprietary trading information—and the SEC says it could not catch the “bad guys” if they balked.

As first reported by FOX Business, the law, signed last week by President Obama, exempts the SEC from disclosing records or information derived from “surveillance, risk assessments, or other regulatory and oversight activities.” Given that the SEC is a regulatory body, the provision could cover almost every action by the agency, some lawyers say. Congress and federal agencies can request information, but the public cannot.

In letters to Sen. Christopher Dodd, (D-Conn.), and Rep. Barney Frank, (D-Mass.), SEC chairman Mary Schapiro said FOIA requirements needed to be tightened. 

“This provision does not provide a ‘blanket’ SEC exemption from FOIA and is not designed to protect the SEC as an agency from public oversight and accountability,” Schapiro wrote. ”Existing FOIA exemptions were insufficient to allay concerns due in part to limitations in FOIA (including that certain existing exemptions may not apply to all registrants) and the fact that FOIA exemptions are not applicable when the SEC must respond to a subpoena (as either a party or non-party),” she wrote. “The Commission’s resulting inability to obtain this information hindered our capacity to enforce the securities laws and protect investors.”

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