Ron Paul Goes After The SEC's FOIA Exclusivity, Introduces SEC Transparency Act

[Joanne98]

Just because being the most corrupt organization in the world was not enough, the SEC decided, courtesy of Donk (aka Frankendodd), that it is beyond accountability to anyone, even the constitution, after it was recently made public that the world's most incompetent and bribed regulators will continue watching kiddie porn, instead of regulatoring, only do so in complete opacity from now on, as in the future the SEC would be exempt from FOIA responses. And with retail investors saying "no more" to trading stocks in a rigged casino that shares the same level of integrity as its regulator, and is programmed to generate profits for the house and the computers on 99.9% of trades (except of course for those newsletter and subscription peddlers who catch every single inflection point ever, and can predict what the market will do not only tomorrow but a week, a month and a year from now) the market will soon be a ghost town. Recent attempts by Senator Kaufman to bring some honesty to stocks have so far been met with failure as the Sisyphean task is far too great for any one individual. Which is why we are glad to learn that Ron Paul has joined those few who still hold the long-forgotten dream that the market should be fair and impartial for all (and yes, that means eliminating discount window access for the chosen few Bank Holding Company hedge funds out there) and has introduced the SEC Transparency Act of 2010 (HR 5970), a bill designed to force greater transparency in the Securities and Exchange Commission. Little by little, every single "intervention" by the world's two most corrupt politicians is being overturned: first the rating agency accountability provision which nearly destroyed the shadow market with a complete lockup of all new ABS issuance, and now the SEC's exclusion from that simple concept known as "checks and balances." Soon FinReg will finally be exposed for the fraud it has been since its inception - the much touted Obama financial regulatory reform is nothing but a scam designed to allow Wall Street to steel what middle class wealth remains faster, bolder and in ever greater amounts, as the point where the system breaks is now months away, and the Wall Street-DC joint venture is all too aware. As a result all must be done to allow theft to be bigger than ever, all the while the "regulator" is no longer held responsible for looking the other way.

From Ron Paul:

Congressman Ron Paul yesterday introduced the SEC Transparency Act of 2010 (HR 5970), a bill designed to force greater transparency in the Securities and Exchange Commission. The bill is designed to repeal the amendments made by section 929I of the Dodd-Frank Wall Street Reform and Consumer Protection Act relating to the confidentiality of materials submitted to the Securities and Exchange Commission.

Recent news reports have publicized the little-noticed provision in the recently-passed financial reform package that the Securities and Exchange Commission has used to deny requests for information under the Freedom of Information Act. Paul’s bill would repeal the provision in the newly-passed legislation the SEC has used to deny FOIA requests.

“It is unfortunate, yet not unexpected, that legislation touted as fixing problems with the banking system actually makes them worse and provides more cover and power for organizations that failed us like the SEC and the Fed,” Paul said in introducing the bill. “I expect in the coming weeks and months that many more harmful provisions like this will come to light and it will take quite a bit of work to undo the damage from this massive and misguided legislation.”

http://www.zerohedge.com/article/ron-paul-goes-after-secs-foia-exclusivity-introduces-sec-transparency-act

I'm going to support this. Fuck Frank and Dodd!

[Gothmog]

1. This fox news talking point is stupid

You got to be kidding. The new rules on the SEC and the FOIA only exempt materials obtained in investigations. These rules mirror the same rules that exist for bank regulators. Media Matters has a good discussion of this stupid talking point http://mediamatters.org/research/201007290008

BTW, Ron Paul is an idiot. That should be a hint as to whether this fox news talking point makes any sense

[Joanne98]

2. Kaufman's remarks ..........

Full remarks, as entered into the Congressional Record:

Mr. President, I rise to discuss a provision in the Dodd-Frank Wall Street Reform and Consumer Protection Act, Section 929I, that is attracting a lot of attention today – and for good reason. The SEC cited it in seeking to block a Freedom of Information Act (FOIA) action brought by Fox Business News.

Press freedom is a subject that is very important to me and many other members of Congress, and one which our country is keen to stress as important around the world. It would be ironic if the Dodd-Frank bill substantially diminished our own press freedoms. This is particularly the case in the aftermath of a devastating financial crisis when we now hope that greater
into our financial institutions, markets and regulatory agencies will help ensure that systemic risks do not emerge and grow undetected.

Section 929I deals with “records of registered persons,” that is, information received by the SEC in the course of its oversight duties with respect to any person or entity registered under the Securities and Exchange Act and other applicable laws, such as the Investment Company Act and Investment Advisers Act. I am concerned that this provision has been written far too broadly. Indeed, it appears to have the effect of exempting from FOIA requests virtually all information received by the Securities and Exchange Commission from “registered persons.” An overbroad exclusion from public disclosure undermines the strong public interest in transparency. Narrowing or eliminating this new exclusion should be at the top of the list for a bill designed to amend the Dodd-Frank Act.

Section 929I reads in part: “The Commission shall not be compelled to disclose records or information obtained pursuant to section 17(b), or records or information based upon or derived from such records or information, if such records or information have been obtained by the Commission for use in furtherance of the purposes of this title, including surveillance, risk assessments, or other regulatory and oversight activities.”

Let me repeat: The Commission shall not be compelled to disclose records or information if such records or information have been obtained by the Commission for use in furtherance of the purposes of this title, including surveillance, risk assessments or other regulatory and oversight activities.

This provision is overly broad. I understand how it could help the SEC obtain information from the firms they examine when those firms are reluctant to turn over proprietary information that might later be subject to FOIA requests. But FOIA already has exemptions in it to deal with such concerns. If those exemptions need to be broadened, we should have done so with a scalpel.

For example, the provision fails to differentiate between proprietary information that might be turned over to the SEC during an examination, financial information a firm may simply prefer not to provide, and market data collected through standard surveillance activities by the Commission. It is not difficult to imagine why hedge funds and other trading firms would be reluctant to turn over proprietary algorithms: Quite simply, those computer programs likely contain loads of historical data, analysis, pattern recognition code and other tools that comprise a trading firm’s “special sauce.” Just as Coca-Cola Heinz 57 have strong motivations to keep their recipes a secret, and have done so for generations, so too do proprietary traders have strong incentives to guard their carefully written algorithms.

But data collected by the SEC as part of everyday surveillance activities – including the data set to be pending the Commission’s approval of “large trader” tagging and a consolidated audit trail – should fall into an entirely different category.

And as the Financial Crisis Inquiry Commission and the Senate’s Permanent Subcommittee on Investigations have learned, financial companies are often reluctant to turn over extensive financial records that permit the public to better understand complex financial transactions and accounting practices.

As written, the exemption throws a cloak over all information received by the Commission from the entities the SEC regulates. It is too broad; it does not serve the public interest; it is not consistent with the general goal of greater transparency – as President Obama has emphasized both with respect to FOIA and financial regulatory issues – and it should be reevaluated by the SEC and Congress.

As I understand it, the SEC has a legitimate concern now that it must examine thousands of additional entities, including private equity and hedge funds that must for the first time must register under the Investment Advisers Act. In the course of those examinations, a hedge fund may be reluctant to turn over information of a proprietary nature because it is concerned that despite the existing exemptions written into the FOIA statute, the hedge fund can’t be certain whether a judge will uphold the exemption. And so the hedge fund will be reluctant to turn over the information, and the SEC examiner may be stymied from receiving it unless he or she turns the matter into an enforcement.

It may be that Congress needs to give the SEC some additional ability to compel documents in such a situation, or perhaps provide some narrowly tailored clarification to a FOIA exemption for financial information of a particularly sensitive proprietary nature. But this provision as signed into law drops a net over such information that is far too wide.

Indeed, in writing such a broad provision, Congress may have inadvertently encouraged entities to seek even more FOIA protection before cooperating with the SEC. That’s because the logical corollary of protecting confidential information is to insist on a wider scope of confidential information, which in turn further erodes both our press freedoms and market transparency.

In addition, the SEC may be legitimately concerned that it could be required to turn over sensitive proprietary information in response to a third-party subpoena issued in litigation to which the SEC is not even a party. Once again, however, Congress should carefully examine the appropriate contours of third-party discovery requests to the SEC. It should not categorically exclude information held by the SEC based only upon its status as having been obtained from a “registered person.”

Over the last few years, the credibility of our markets has been damaged. Only transparency can best restore that credibility; any exemptions to transparency should hence be narrowly crafted. Section 929I needs a “do-over.” In the coming weeks, I hope to work with the SEC and other Senators to craft a more reasonable approach that satisfies the concerns of the SEC without sacrificing the goals of transparency and public accountability.

U.S. Senator Ted Kaufman (D-DE) on Thursday expressed concern over Section 929I in the Dodd-Frank Wall Street Reform and Consumer Protection Act – signed into law last week – which appears to have the effect of exempting the Securities and Exchange Commission (SEC) from any Freedom of Information Act (FOIA) requests for information received by the SEC from registered entities.

“As written, the exemption throws a cloak over all information received by the Commission from the entities the SEC regulates,” said Kaufman. “It is too broad; it does not serve the public interest; it is not consistent with the general goal of greater transparency – as President Obama has emphasized both with respect to FOIA and financial regulatory issues – and it should be reevaluated by the SEC and Congress.”

While Kaufman understands the provision might allay the concerns of institutions reluctant to release sensitive proprietary information to the SEC that might later be subject to FOIA requests, he said: “FOIA already has exemptions in it to deal with such concerns. If those exemptions need to be broadened, we should have done so with a scalpel.” “Over the last few years, the credibility of our markets has been damaged,” Kaufman continued. “Only transparency can best restore that credibility; any exemptions to transparency should hence be narrowly crafted. Section 929I needs a ‘do-over.’”

In the coming weeks, Kaufman hopes to work with the SEC and other Senators to craft a more reasonable approach that satisfies the legitimate concerns of the SEC without sacrificing the goals of transparency and public accountability.

Full remarks, as entered into the Congressional Record:

Mr. President, I rise to discuss a provision in the Dodd-Frank Wall Street Reform and Consumer Protection Act, Section 929I, that is attracting a lot of attention today – and for good reason. The SEC cited it in seeking to block a Freedom of Information Act (FOIA) action brought by Fox Business News.

Press freedom is a subject that is very important to me and many other members of Congress, and one which our country is keen to stress as important around the world. It would be ironic if the Dodd-Frank bill substantially diminished our own press freedoms. This is particularly the case in the aftermath of a devastating financial crisis when we now hope that greater
into our financial institutions, markets and regulatory agencies will help ensure that systemic risks do not emerge and grow undetected.

Section 929I deals with “records of registered persons,” that is, information received by the SEC in the course of its oversight duties with respect to any person or entity registered under the Securities and Exchange Act and other applicable laws, such as the Investment Company Act and Investment Advisers Act. I am concerned that this provision has been written far too broadly. Indeed, it appears to have the effect of exempting from FOIA requests virtually all information received by the Securities and Exchange Commission from “registered persons.” An overbroad exclusion from public disclosure undermines the strong public interest in transparency. Narrowing or eliminating this new exclusion should be at the top of the list for a bill designed to amend the Dodd-Frank Act.

Section 929I reads in part: “The Commission shall not be compelled to disclose records or information obtained pursuant to section 17(b), or records or information based upon or derived from such records or information, if such records or information have been obtained by the Commission for use in furtherance of the purposes of this title, including surveillance, risk assessments, or other regulatory and oversight activities.”

Let me repeat: The Commission shall not be compelled to disclose records or information if such records or information have been obtained by the Commission for use in furtherance of the purposes of this title, including surveillance, risk assessments or other regulatory and oversight activities.

This provision is overly broad. I understand how it could help the SEC obtain information from the firms they examine when those firms are reluctant to turn over proprietary information that might later be subject to FOIA requests. But FOIA already has exemptions in it to deal with such concerns. If those exemptions need to be broadened, we should have done so with a scalpel.

For example, the provision fails to differentiate between proprietary information that might be turned over to the SEC during an examination, financial information a firm may simply prefer not to provide, and market data collected through standard surveillance activities by the Commission. It is not difficult to imagine why hedge funds and other trading firms would be reluctant to turn over proprietary algorithms: Quite simply, those computer programs likely contain loads of historical data, analysis, pattern recognition code and other tools that comprise a trading firm’s “special sauce.” Just as Coca-Cola
Heinz 57 have strong motivations to keep their recipes a secret, and have done so for generations, so too do proprietary traders have strong incentives to guard their carefully written algorithms.

But data collected by the SEC as part of everyday surveillance activities – including the data set to be pending the Commission’s approval of “large trader” tagging and a consolidated audit trail – should fall into an entirely different category.

And as the Financial Crisis Inquiry Commission and the Senate’s Permanent Subcommittee on Investigations have learned, financial companies are often reluctant to turn over extensive financial records that permit the public to better understand complex financial transactions and accounting practices.

As written, the exemption throws a cloak over all information received by the Commission from the entities the SEC regulates. It is too broad; it does not serve the public interest; it is not consistent with the general goal of greater transparency – as President Obama has emphasized both with respect to FOIA and financial regulatory issues – and it should be reevaluated by the SEC and Congress.

As I understand it, the SEC has a legitimate concern now that it must examine thousands of additional entities, including private equity and hedge funds that must for the first time must register under the Investment Advisers Act. In the course of those examinations, a hedge fund may be reluctant to turn over information of a proprietary nature because it is concerned that despite the existing exemptions written into the FOIA statute, the hedge fund can’t be certain whether a judge will uphold the exemption. And so the hedge fund will be reluctant to turn over the information, and the SEC examiner may be stymied from receiving it unless he or she turns the matter into an enforcement
.

It may be that Congress needs to give the SEC some additional ability to compel documents in such a situation, or perhaps provide some narrowly tailored clarification to a FOIA exemption for financial information of a particularly sensitive proprietary nature. But this provision as signed into law drops a net over such information that is far too wide.

Indeed, in writing such a broad provision, Congress may have inadvertently encouraged
entities to seek even more FOIA protection before cooperating with the SEC. That’s because the logical corollary of protecting confidential information is to insist on a wider scope of confidential information, which in turn further erodes both our press freedoms and market transparency.

In addition, the SEC may be legitimately concerned that it could be required to turn over sensitive proprietary information in response to a third-party subpoena issued in litigation to which the SEC is not even a party. Once again, however, Congress should carefully examine the appropriate contours of third-party discovery requests to the SEC. It should not categorically exclude information held by the SEC based only upon its status as having been obtained from a “registered person.”

Over the last few years, the credibility of our markets has been damaged. Only transparency can best restore that credibility; any exemptions to transparency should hence be narrowly crafted. Section 929I needs a “do-over.” In the coming weeks, I hope to work with the SEC and other Senators to craft a more reasonable approach that satisfies the concerns of the SEC without sacrificing the goals of transparency and public accountability.

http://kaufman.senate.gov/press/in_the_news/news/?id=2438AE02-5056-9502-5D54-5AC4FD845ED7

[westerebus]

3. We wouldn't want faux noose to gather any information, now would we?

After all, the next thing you know, they might find some thing embarrassing to our beloved and esteemed members of government. That in and of itself requires a broad and sweeping protection.

Do I need the sarcasm thingy?

[Gothmog]

4. This is a right wing talking point that is full of crap

Who cares what ron paul believes? He is wrong here. This is a stupid right wing talking point that has no merit or basis in reality. Read the Media Matters analysis