The SEC has articulated guidance designed to allay the fears of Congress that the FOIA exemption provided by Sec. 929I is overly broad, The guidance says that, in responding to FOIA requests, the staff may rely on 929I only when there is an absence of case law holding that the firm at issue is a financial institution could restrict the application of FOIA Exemption 8 in protecting materials obtained by the SEC pursuant to an examination. FOIA Exemption 8 protects from disclosure information contained in or related to examinatio, operating or condition reports about financial institutions regulated by the SEC. But FOIA Exemption 8 does not define financial institution.
The SEC guidance also states that, in responding to discovery requests, the staff will not rely on 929I in any non-FOIA case in which the SEC is a party and in other cases will use 929I only with respect to information gathered by the SEC pursuant to its examination authority and that would be withheld pursuant to a FOIA request. Section 929I goes beyond FOIA and codifies reasonable limits on the SEC's obligation to disclose information in the context of third party subpoenas.
The fact that FOIA Exemption 8 does not define financial institution has troubled SEC Chairs. The SEC has been given jurisdiction over a number of new entities and there is no presumption that the courts will find that every firm the SEC examines is a financial institution. Hence, Ms. Schapiro praised Sec. 929I for eliminating any uncertainty concerning FOIA Exemption 8 by clarifying that information obtained in examination from any covered regulated entity would be exempt.
Former Chairman Pitt noted that the impact of 929I is greatest in the area of non-FOIA document requests or third=party subpoenas pursuant to litigation. The need for Sec. 929I is grea t because refusing third-party subpoenas for sensitive information belonging to regulated entities has presented the SEC with significant difficulties. When confronted with a subpoena, in order to protect a firm's confidential information, the SEC has had to challenge the subpoenas on common law grounds such as relevance. Chairman Schapiro pointed this out in letters this past July to Chairmen Dodd and Frank.