Schapiro Defends Denial of Freedom of Information Act Requests

Central to the controversy is the protection of confidential sources and informants in SEC enforcement actions, which Schapiro and former SEC Chairman Harvey Pitt said could be compromised without the provision.

“The existing confidentiality provisions of the federal securities laws did not address information the Commission can be expected to receive” from newly regulated agencies contained within the reform legislation, Pitt said.

He noted a number of benefits, including:

• Because 929I provides greater certainty that information submitted to the SEC can be protected from compulsory third-party disclosure, it encourages regulated entities to cooperate with SEC data requests.

• 929I promotes the effectiveness of the SEC by giving it timely access to the information it needs to properly perform its examination, enforcement and oversight duties.

• It promotes the SEC’s efficiency by improving its ability to quickly gather important information from regulated entities when performing examinations; the SEC no longer will need to expend time and resources to, for example, send staff on premises to review hard copies because a regulated entity fears public disclosure. This latter example is not a hypothetical, ne notes; it occurs frequently.

However, he noted potential drawbacks as well, including “the potential for rote invocation or for the SEC to use 929I beyond its intended purpose of encouraging regulated entities to cooperate with SEC data needs. Second, as is true of any statutory authority, the SEC theoretically could over-use or misapply 929I to avoid disclosing a broad range of documents, including information that is neither sensitive nor proprietary.”