Fox hosts are falsely claiming that a provision in the financial reform legislation gives a "complete pass" to the Securities and Exchange Commission from complying with the Freedom of Information Act. In fact, the provision reportedly only protects proprietary information gathered from regulated firms during the course of examinations or investigations, which mirrors exemptions that exist for bank regulators.
Fox fabricates "complete pass" for SEC FOIA requests
Beck: "Now the SEC doesn't have to answer any questions from anybody? What?" On the July 28 edition of his Fox News show, Glenn Beck claimed that financial reform included "a nice little treat for the SEC." Beck claimed, "Reports and other information provided to the SEC, or any other self-regulatory organization, will be excluded from the scope of Freedom of Information Act." After reading from an SEC statement, Beck asked, "How in the world did we arrive here, America?" He later claimed he had a "theory" about "where we're headed next," and said, "Now the SEC doesn't have to answer any questions from anybody? What?"
Asman: SEC "no longer has to comply with the Freedom of Information Act when requests are made for information." During the July 28 edition of Fox Business' Bulls & Bears, host David Asman stated that "financial reform" included "a little-noticed provision" under which the "Securities and Exchange Commission no longer has to comply with the Freedom of Information Act when requests are made for information." Fox Business' Elizabeth MacDonald repeatedly noted that "what we're talking about here" is the release of information related to "active ongoing investigations. They can't disclose [that] information." However, Fox Business' Adam Shapiro insisted that MacDonald was wrong, stating, "No, that's not what we're talking about," and "It's a simple issue of nope, not going to comply."
Cavuto: SEC "gets a complete pass." During the July 28 edition of Fox News' Your World, Neil Cavuto claimed that "the SEC gets a complete pass" from complying with FOIA under financial regulatory reform. Guest and Fox News host Mike Huckabee added, "It's absurd. This is not government of the people, by the people, and for the people. This is a government of the government, by the government, and for the government."
Fox Biz's Adam Shapiro: SEC "essentially" has "a pass on Freedom of Information Act requests." During the July 28 edition of Fox Business' Countdown to the Closing Bell, host Adam Shapiro claimed that "the new financial regulatory law" contained a provision that "essentially gives the Securities and Exchange Commission a pass on Freedom of Information Act requests." He continued, "In other words, the commission can now just blanket say 'no' if you, a citizen of the United States, file an FOIA requesting documents." Shapiro also claimed that the "new law, the financial regulatory reform law, now allows the SEC to absolutely say, 'Don't bother us. Go away.' "
Varney and Shapiro: "According to this new rule, you cannot file a Freedom of Information Act and find out what [the SEC] did wrong." During the July 28 edition of Fox Business' Varney & Company, host Stuart Varney asked Shapiro, "[I]f the SEC has messed up, you cannot file -- according to this new rule -- you cannot file a Freedom of Information Act and find out what they did wrong?" Shaprio responded, "Bingo. You can file it, and they can say, 'Sorry. Not complying.' "
Malkin: "[T]he 'financial reform' bill...exempts the SEC from FOIA requests. The transparency farce continues." In a July 28 post on her website, Fox News contributor Michelle Malkin seized on Fox Business' false reporting to claim that "The story from Fox Business on how the 'financial reform' bill championed by Obama exempts the SEC from FOIA requests. The transparency farce continues." Malkin claimed this story was further evidence "of the Democrats' reign of darkness."
Provision reportedly limited to proprietary information and mirrors exemptions for bank regulators
Reuters: Lawmakers "gave the SEC a privacy mandate similar to bank regulators," but it "still has to comply with requests for other types of information requested under" FOIA. A July 28 Reuters article reported, "New financial reform legislation exempts U.S. securities regulators from having to turn over to the media information it gathers from financial institutions in its expanded supervisory role, but does not limit the disclosure of other agency data." Reuters further reported:
As part of that, lawmakers also gave the SEC a privacy mandate similar to bank regulators, who do not have to disclose the results of examinations of specific firms.
The SEC still has to comply with requests for other types of information requested under the Freedom of Information Act.
"The new provision applies to information obtained through examinations or derived from that information," said SEC spokesman John Nester in a statement.
Wash. Post's Goldfarb: Provision "only concerns documents obtained through examinations of broker-dealers and investment advisers." In a July 28 WashingtonPost.com blog post, Zach Goldfarb wrote that "it may not be time to take up arms over the latest charge by Fox Business News that 'the Securities and Exchange Commission no longer has to comply with virtually all requests for information releases from the public" under the new financial regulation law.'" Goldfarb further wrote:
While, as Fox notes, the law exempts the SEC from disclosing records derived from "surveillance, risk assessments, or other regulatory and oversight activities," this only concerns documents obtained through examinations of broker-dealers and investment advisers -- periodic or targeted reviews of financial firms.
People and organizations can still use FOIA to obtain a range of SEC information, such as inspector general reports; communications with Congress and the business community; and officials' calendar, salary and conflict-of-interest information.
Information from investigations into potential wrongdoing has never been obtainable through FOIA.
John Nester, SEC spokesman, said:
"We are expanding our examination program's surveillance and risk assessment efforts in order to provide more sophisticated and effective Wall Street oversight. The success of these efforts depends on our ability to obtain documents and other information from brokers, investment advisers and other registrants. The new legislation makes certain that we can obtain documents from registrants for risk assessment and surveillance under similar conditions that already exist by law for our examinations. Because registrants insist on confidential treatment of their documents, this new provision also removes an opportunity for brokers, investment advisers and other registrants to refuse to cooperate with our examination document requests."
So, consider this. If the SEC's exam team decides to take a look at a hedge fund's records, it may need to contact the hedge fund's broker for data on trades. That data could be subject to FOIA under the old law, and the broker, fearful that the private data would become public, might refuse to hand over the data.
Under the new law, such data is not subject to FOIA. The SEC hopes that, since it will be seeking data and documents from a broad range of financial players, it won't face resistance from firms concerned that their data might leak to the public through FOIA.