A business journalists' group has condemned an overlooked clause in the new financial reform law that allows the SEC to deny information on companies to reporters and the public.
The Society of American Business Writers and Editors says this change may mean the financial regulators charged with preventing future economic collapses will be able to avoid public accountability.
The Securities and Exchange Commission, the federal agency primarily in charge of overseeing the US's financial system, has said that, thanks to the Dodd-Frank financial reform law, it no longer has to provide information gathered from corporations to reporters or members of the public under freedom of information laws.
It appears the media covering the fight over the financial reform bill overlooked that clause in the law until the SEC contacted Fox Business to tell the news network it will not get a response to a request for information filed this spring.
The relevant clause in the new law states that the SEC "shall not be compelled to disclose records or information" if that information was obtained for the purposes of "surveillance, risk assessments, or other regulatory and oversight activities." Fox Business described that as amounting to "almost every action by the agency."
That may be something of an overstatement. Reuters reported Thursday that the restrictions apply only to information gathered about companies the SEC is investigating; the public can still request data about the SEC's own operations.
Yet it's the SEC's investigations of possible wrongdoing in corporate entities that are generally of interest when it comes to the SEC's activities.
Rob Reuteman, president of the SABEW, said in a statement Wednesday that his organization's membership was "appalled" by the change to the law, which "appears to roll back 43 years of transparency in government under the Freedom of Information Act."
Thanks to freedom-of-information requests, "we now know that the SEC itself botched investigations of Bernie Madoff, who fleeced investors of tens of billions of dollars and now sits in prison," Reuteman said. "The SEC has been forced to institute internal reforms as a result of its own investigative shortcomings that came to light. ... But under the provisions in this new law, the SEC no longer has to comply with such requests for information."
Reuteman said that the SEC has argued that it needs to be exempt from FOIA requests because it will be easier to obtain documents needed to prosecute financial criminals.
"Don't fall for that line of reasoning," Reuteman said. "Government agencies have always been able to censor the documents they are forced to release, in order to withhold such sensitive information."
Critics of the Obama administration have wasted no time in criticizing the White House over the provision. Aaron Gee at American Thinker notes that President Obama sold the bill to the public by saying it "will finally bring transparency to the kind of complex and risky transactions that helped trigger the financial crisis."
"The stunningly bad idea of providing legal cover for a regulating body that has a history of getting it wrong is par for the course when it comes to 'financial reform'," Gee writes.