|Copyright:||The Canadian Press|
|Source:||Canadian Press DataFile|
WASHINGTON _ The head of the Securities and Exchange Commission said Thursday the public shouldn’t be able to see details of the SEC’s policing of financial firms because it could make the agency’s job more difficult.
SEC Chairman Mary Schapiro told a House panel that the agency needs an exemption from public records requirements for some cases because firms won’t provide information voluntarily if they know it could be viewed by anyone, including competitors.
Some lawmakers say they want to close a loophole in the financial overhaul law that allows the SEC to withhold from public view records related to its monitoring of firms such as hedge funds and investment advisers.
“I am convinced that it went too far,” Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, said at a hearing. “It is clear that legislation is required.”
But Schapiro testified that the exception to Freedom of Information Act requirements “is central to our ability to develop a robust examination program that better protects investors.”
The SEC understands that firms can be hurt if their investment strategies and trading formulas are made public, Schapiro said.
The agency has been assailed for failing to catch a number of high-profile fraud schemes before the financial crisis, including the stunning multibillion-dollar Ponzi scheme operated by Bernard Madoff. Critics say they fear the open records loophole would help the agency withhold information related to other failures.
The FOIA federal public access law is aimed at promoting openness and transparency in government. It requires that government records be released to anyone who asks, unless they fall under one of nine exceptions to the law. The overhaul law broadened the SEC’s ability to invoke these exemptions.
A bipartisan group of senators, including Senate Judiciary Committee Chairman Patrick Leahy, D-Vt., has introduced legislation designed to close the SEC loophole. A similar measure has been proposed in the House by Rep. Darrell Issa, R-Calif.
Lawmakers from both parties are concerned about exempting the SEC from oversight just as it flexes new powers it gained under the landmark financial overhaul enacted in July. The law gives the SEC new powers to oversee hedge funds, derivatives and other aspects of the financial industry.
The legislation mostly reverts to the old disclosure rules. But it lets the SEC protect some information by treating all the companies it regulates as if they were banks. Information produced as part of bank supervision by the Federal Deposit Insurance Corp. and other regulators is already exempt from the public access law.
If enacted, it would be the first law designed to close a loophole in the landmark financial overhaul law, which includes sweeping new powers for regulators and puts the stiffest requirements on Wall Street since the 1930s Great Depression.