Friday, September 17, 2010

Leahy Legislation Repealing SEC Dodd-Frank FOIA Exemptions Reported Out of Judiciary Committee

The Senate Judiciary Committee has reported out bi-partisan legislation to repeal SEC exemptions from FOIA bestowed by Section 929I of the Dodd-Frank Act. The legislation is sponsored by Committee Chair Patrick Leahy (D-Vt) and has strong bi-partisan report. The committee believes that the blanket FOIA exemption given to the SEC by Dodd-Frank was overbroad. The legislation clarifies that hedge funds and other new entities that the SEC will regulate under Dodd-Frank will be considered financial institutions for purposes of applying the FOIA exemption. The bill will ensure that the SEC can treat sensitive information that hedge funds provide to the Commission in connection with SEC surveillence and examination activities in the same manner as the SEC treats such information when it is provided by other financial institutions.

Upon introducing the bill, S, 3717, Senator Leahy said that the Dodd-Frank FOIA exemptions were designed to ensure that the SEC had access to information that the Commission needs to carry out its enforcement powers and protect investors. But the Judiciary Chair is troubled by the SEC's attempts in recent weeks to reyroactively apply these exemptions to pending FOIA matters and by the sweeping interpretations the SEC has expressed that these exemptions would shield all information provided to the Commission in connection with its examination and surveillance activities. The Senator has called on the SEC to issue guidelines interpreting the FOIA Sec. 929I exemptions in a manner consistemt with congressional intent and the President's Jan 21,2009 executive memorandum on FOIA. (Cong Record, Aug 5, 2010, S6889).

Senator Leahy said that FOIA is the people's window into their government and care must be taken to ensure that exemptions from FOIA's disclosure mandates are narrowly applied.

There is a companion bill in the House, HR 6086, introduced by Rep. Edolphus Towns, Chair of the House Oversight and Government Reform Committee. In recent testimony before the House Financial Services Committee, Rep. Towns said that the FOIA exmeption in 929I is too broad since it allows the SEC to keep secret virtually any information it obtains under its examination authority.