Prologue to a Farce

Section 9291 of the Dodd-Frank financial reform act exempts the SEC from disclosures related to its "surveillance, risk assessments, or other regulatory and oversight activities."

Since March of 2009, the SEC has been resisting a Freedom of Information Act (FOIA) request from the Fox Business Network. Fox is seeking internal documents relating to the Commission’s investigations of the Bernie Madoff and R. Allen Stanford Ponzi schemes. We understand the SEC is embarrassed, but transparency is called for.

On Tuesday, the Commission took this dispute in a troubling direction, citing a little-noticed provision in the new Dodd-Frank financial regulatory reform act. Section 9291 exempts the SEC from disclosures related to its “surveillance, risk assessments, or other regulatory and oversight activities.”

The provision seems intended to clarify existing law, which allows the SEC to not disclose private information corporations disclose to the Commission in the course of routine examinations or audits. The sweeping interpretation the SEC appears to be embracing might conceivably cover almost any disclosure related to their regulatory actions. This has journalists and media organizations up in arms. Fox is taking the matter to court.

James Madison wrote that “a popular government, without popular information or the means of acquiring it, is but a prologue to a farce or a tragedy, or perhaps both.” Over the past two years, suspicions have mounted about the SEC being both.

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