Subscribe: RSS Feed | Twitter | Facebook | Email
Home | Contact Us

Transparency at the SEC? Why Would They Want to Do That?

Posted by Larry Doyle on July 29, 2010 7:10 AM |

Is the SEC’s Inspector General David Kotz looking for a new job? How about SEC Head Mary Schapiro? Is she also looking for a new job?

Why do I ask? Is America aware that the new Financial Regulatory Reform bill, recently passed by Congress and signed into law by President Obama, will effectively close the doors and shut the blinds at the SEC in terms of people being allowed to gain access to information? Why and how do situations like this happen? Let’s navigate.

Fox News highlighted this travesty yesterday in writing, SEC Says New Financial Regulation Law Exempts It from Public Disclosure:

So much for transparency.

Under a little-noticed provision of the recently passed financial-reform legislation, the Securities andExchange Commission no longer has to comply with virtually all requests for information releases from the public, including those filed under the Freedom of Information Act.

The law, signed last week by President Obama, exempts the SEC from disclosing records or information derived from “surveillance, risk assessments, or other regulatory and oversight activities.” Given that the SEC is a regulatory body, the provision covers almost every action by the agency, lawyers say. Congress and federal agencies can request information, but the public cannot.

That argument comes despite the President saying that one of the cornerstones of the sweeping new legislation was more transparent financial markets. Indeed, in touting the new law, Obama specifically said it would “increase transparency in financial dealings.”

The SEC cited the new law Tuesday in a FOIA action brought by FOX Business Network. Steven Mintz, founding partner of law firm Mintz & Gold LLC in New York, lamented what he described as “the backroom deal that was cut between Congress and the SEC to keep the  SEC’s failures secret. The only losers here are the American public.”

First off, if I am David Kotz, I would feel totally neutered by this development and I would immediately start looking for another job.

In regard to Mary Schapiro, my reference to her looking for employment is made in jest but the reason I make it is because I recall the seemingly very gratuitous comments she made in support of transparency and disclosure during her testimony provided to the Financial Crisis Inquiry Commission this past January.

After reading Ms. Schapiro’s testimony that day, I wrote “Mary Schapiro and Mark McGwire” and highlighted:

Schapiro makes reference to the SEC approximately 110 times in her opening statement. She references the NASD (FINRA) once, and that being a comment regarding the ‘uptick rule’ in 1994.

What about your past, Mary? You present yourself as a fan of greater transparency and disclosure. You reference disclosure or the need for greater disclosure approximately 25 times in your statement. You reference transparency or the need for greater transparency approximately 15 times in your statement.

Was Mary just paying the American public lip service? Was Obama doing the same? Were those in Congress also pandering to the American public? Has Wall Street just shut the door? American investors should be very concerned with this development.

Do you trust Wall Street? Do you trust our financial regulators to be able to properly oversee the financial industry? Why do I ask? For the very simple reason that none other than Harry Markopolos highlighted that the one real lesson more than any other that he learned throughout his ten plus year ordeal chasing down the Madoff scam was, “Don’t Trust the Government.”

While Wall Street will maintain that the SEC needs this new rule in place if it wants to collect information from the financial industry, for whom does the SEC work? Let’s listen to what others have to say:

“It allows the SEC to block the public’s access to virtually all SEC records,” said Gary Aguirre, a former SEC staff attorney-turned-whistleblower who had accused the agency of thwarting an investigation into hedge fund Pequot Asset Management in 2005. “It permits the SEC to promulgate its own rules and regulations regarding the disclosure of records without getting the approval of the Office of Management and Budget, which typically applies to all federal agencies.”

Aguirre used FOIA requests in his own lawsuit against the SEC, which the SEC settled this year by paying him $755,000. Aguirre, who was fired in September 2005, argued that supervisors at the SEC stymied an investigation of Pequot – a charge that prompted an investigation by the Senate Judiciary and Finance committees.

“It is hard to imagine how the bill could be more counterproductive,” Aguirre added.

Freedom of information is a core principle to truly good governance and a civil society. My initial gut instinct tells me that the industry and the SEC are aware that there are other frauds buried in the system, or there are other angles to the Madoff and Stanford scams, and the industry and regulators want to keep them buried.

If this regulation is allowed to stand, I believe it is a clear indication that the Wall Street-Washington incestuous relationship is alive and well, and truly getting stronger.

Without transparency, there can be no real accountability. Without accountability, there can be no real integrity.

What happened to our country? America deserves so much better.


Thanks to the friends of Sense on Cents who brought this story to my attention. Please subscribe to all my work via e-mail, an RSS feed, on Twitter or Facebook. Thanks you.

  • coe

    It’s enough to make one’s blood boil, is it possible that this administration, this congress, in less than two years, mind you, has led us so far off course that we need a real compass, as well as a moral compass, to find our way back to true? This is yet another travesty in the bill, and I’m sure there are dozens and dozens of others buried in the fine print of some 2000+ pages…are we, as a people, so stupid, so gullible, so meek that we sit here and live with this assault on our freedoms and our spirit..I feel for Kotz, but at least he HAS A JOB – tell that to the 10% of Americans who don’ for Schapiro, you have consistently built the case that she is a hypocritical tool…enough is enough…let’s vote the bums out and shout from the rooftops – I’m mad as hell and not taking it anymore!

    • Duke


      Well done!! Washington wonders why America is enraged. Here you go!!

  • Randy

    Just one more “in our faces” example of how our Government could care less about what we want and has absolutely no intention of doing what is right.

    Either we join together and insist that this provision be stricken from the new law or else we should cower together in our little corners of life and simply whimper amongst ourselves about what has become of us.

    We simply cannot keep allowing this intentional abuse or America is finished, despite well intentioned positive thinking to the contrary.

    Have we not learned over the centuries that action, not talk, is the only thing that matters? If we all keep sitting around waiting for someone else to be first to stand up and take action to stop this flagrant abuse, then we are truly lost as a people and we will continue to be trampled by the corrupt politicians and power brokers until we have nothing left, not even our dignity.

    Also, no offense intended, but anyone who truly believes there’s only 10% unemployment here in the U.S. is clearly going through Life with blinders on and still accepting the Government’s lies as fact.

  • Issa

    Not that the Republicans are necessarily any better than the Dems when it comes to the incestuous nature of the Wall Street-Washington relationship but the word on the street is that if the Republicans retake the House that this SEC provision within FinReg will be targeted and ovreturned.

    What else might happen is anybody’s guess?

  • Randy

    There will be lots of promises about what might happen if only we vote this way or that come November. Frankly, I have lost all trust and respect for both sides of the aisle and am determined to simply vote out the worst of the incumbents, regardless of party, at every opportunity until they start listening to us and doing what is right rather than just paying us lip service to get elected and then moving on with their corrupt agendas.

    We need to sto allowing them to divide us up along party lines and instead pay attention to what each representative does and how they vote on legislation that affects our lives, regardless of party affiliation. As long as we continue to buy in to the “party” game.. they will continue to play us one against the other and we will continue to retain the worst crooks of both parties and suffer from the consequences.

  • Mike

    So this was the real purpose of FinReg I suppose… to make the untouchable even more untouchable.

    Dividing the country into a red side and blue side is the biggest trick the power elite have ever played on us. IT DOESNT MATTER!! The corporations give money to both parties, they own the damn country.

    Where are the REAL politicians who will stand up to the chosen few which hold America by a string on their finger? Is there such a thing????

    I’ve heard the phrase Love it or Leave it many times, and if things continue the way they do, I’m afraid the new trend will be to choose the latter. How much can the middle class take? This is the tip of the iceberg too, its only the beginning of the decade. 65% income tax is coming THIS DECADE. And slowly but surely we’ll see what happens when the Sh*t hits the fan.

  • fred

    The definition of a liberal: 1)someone who knows better than you do how you should live your life. 2)the ends (how we should live our lives), always justify the means.

    • Tycoon


      Along these lines, I have often heard it said that if you’re not a liberal when you are under 30, you have no heart. If you are not a conservative when you are over 30, you have no brain. And so it goes….

      • fred

        “Every sin, no matter how trite, shall be judged the same as the heinous”.

  • Bruce

    Without integrity (read as morals and ethics) financial shenanigans will accelerate and topple the financial system in short order. Once accomplished, following the money means a rapid exit out of the country by the perpetrators. International flights will be crowded for several days. They will leave behind a financial Armageddon in NY City. All of what has happened in the last two years is merely a warning to all of us for what is to come.

  • Lou

    If this rule were in place, does Art Samberg/Pequot get exposed. Do the massive failings of the Madoff scam get exposed. If not, then how does an institution like the SEC ever get truly held accountable (Congress??..HA HA!!) and how might it ever improve itself.

    I think Bill’s comment about scrapping it and starting over warrants real merit. While we’re at it, we may think about scrapping a lot of the incumbents in Washington via TERM LIMITS!! This crowd is killing us!!

  • bidrec

    I am betting they want to do this so that when short sellers are required to share their positions with regulators the regulators are not in turn required to share the short sellers positions with the public.

    • fred

      Intentions are not always born out by actions.

      If a short reporting exclusion was the intension, “whiteout” or “blackout” for the racially challenged, within the context of FOIA would have sufficed.

      • bidrec

        I would draw a distinction between the data you want to hide and the fact that you want to hide it and then say that the latter is as concerning as the former:

        • fred

          or, full disclosure, the former as concerning as the latter for that matter.

Recent Posts