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. 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 <http://judiciary.senate.gov/resources/documents/111thCongress/upload/080410Leahy-Cornyn-Grassley-KaufmanToSchapiro.pdf> , 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.