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Without Freedom of Information, Who Will Keep the Regulators Honest?

Posted by Larry Doyle on September 16, 2010 7:36 AM |

Information is everything.

Without access to information, how can we ever learn the full and true stories currently buried beneath our financial and economic landscape? Unearthing information through every means possible is a tedious — but necessary — pursuit if we are ever to learn our mistakes and failings of the past so that we can improve our economic standing in the future.

While those in Washington would maintain that they are charged with unearthing this information, there is little doubt that the American populace at large has little confidence in the rigor of that pursuit. The greatest of Jesuit principles instilled in me from my days at Holy Cross is the ‘never ending pursuit of the truth.’ That pursuit brings us today to a story which has received significant coverage here at Sense on Cents, but not nearly enough coverage elsewhere. Let’s navigate as The Wall Street Journal writes, SEC Looks to Allay Fears on FOIA Limits:

The Securities and Exchange Commission will limit its staff’s ability to keep certain documents from public hands, a bid to appease members of Congress who say a new law allows too much secrecy.

Which documents? If we knew the exact documents, wouldn’t we learn the true intent and desires of the SEC and those in Congress who passed the initial legislation?

The financial-regulation law passed in July allows the SEC to keep private information it gathers from brokers and investment advisers for purposes such as surveillance and risk assessment.

Critics say the law’s limits on Freedom of Information Act requests could shield thousands of documents from public scrutiny, and lawmakers have introduced four bills in Congress to narrow the SEC’s ability to reject requests.

Here we go. Ms. Schapiro, President Obama, and so many others in Washington can talk all they want about how they believe in greater transparency and disclosures, but this is where the rubber meets the road. Have we ever experienced a situation in which we say we learned too much information? In light of the financial meltdown on Wall Street and the resulting economic crisis throughout our nation, how can our regulators and legislators remain focused on shielding documents rather than releasing them? For whom do these regulators work? Wall Street, or our nation at large? Let’s navigate further.

SEC Chairman Mary Schapiro on Wednesday released new guidance for the SEC’s staff a day before she is set to testify at a House committee hearing.

How timely. Mary ‘beats the clock’ so she can ‘grab cover’ in front of Congress. Call me suspect.

The SEC has said that the law was intended to codify existing practice and was meant to ensure that protection already afforded to financial institutions will extend to other entities in the financial industry that may not be clearly recognized as “financial institutions.”

Like who?

The guidance says staff should use the new law only for information the SEC obtains through examinations of entities it regulates, and only in cases where the information would already be protected if the entity was clearly a financial institution.

Oh boy, here we go. Let’s stop right here.  The guidance says staff should use the new law only for information the SEC obtains through examinations of entities it regulates”…!!

Hey now!! Who might this be? Can you say the Financial Industry Regulatory Authority, or FINRA? Yes, that very entity formerly run by Mary Schapiro herself. Who on the House Committee will have the balls and the backbone to ask Mary if the new law literally and effectively provides cover for FINRA and in turn Mary herself? Anybody? Anybody? Bueller…?

Sense on Cents is asking.

Larry Doyle

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I have no affiliation or business interest with any entity referenced in this commentary. As President of Greenwich Investment Management, an SEC regulated privately held registered investment adviser, I am merely a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

  • Where’s Barack?

    Sunlight Is the Best Disinfectant
    Barack Obama: “I firmly believe what Justice Louis Brandeis once said, that sunlight is the best disinfectant, and I know that restoring transparency is not only the surest way to achieve results, but also to earn back the trust in government without which we cannot deliver the changes the American people sent us here to make.”

    Barack….words? Mere words? Come on now…let’s see action and compel Mary Schapiro, Congress, and financial regulators to provide the transparency and earn back that trust you propose.

  • Lou

    Will Gary Aguirre be allowed to present a cross examination of Ms. Schapiro or at the very least be a witness for those screaming for greater transparency and a full utilization of Freedom of Information?

    • Transparency

      Interesting commentary and dialogue here. For those who care, Rep. Frank has invited the poster-girl and boy for the rotating door to explain why the SEC needs 929I.

      One of today’s witnesses, Harvey Pitt, is the poster boy for the rotating door. He goes in and out of the SEC to renew his credentials and connections. When he’s out of the SEC, his client list has included some of the biggest crooks in the financial industry, e.g., Ivan Boesky, according to James Stewart’s Den of Thieves, a Pulitzer Prize winner. Pitt testifies that he was with Fried Frank after he left the SEC in 1978. Fried Frank was later instrumental in getting the SEC to derail the Pequot investigation which was driven by access to records through FOIA. When the New York Times broke the story of the SEC’s preferential treatment of John Mack, he was the first to come to the SEC’s rescue on CNBC.

      When Pitt went back into the SEC as its chairman, the media had concern that he had cut a deal with the big banks over the financial analysts scam. Bloomberg FOIAed the SEC and then filed a suit to get the records of his meetings with the big banks, but got nowhere.

      With the rotating door, people go in and out of the SEC and then to the financial industry. The Dodd-Frank Act bill did not prohibit this practice, as Senator Grassley sought. It merely requires a GAO inquiry.

      The problem with transparency for the SEC and the financial industry is that it creates the possibility that a FOIA requester may get records showing how the Harvey Pitts of the world get favors from the SEC.

      The other industry witness, Susan Merrill, is the poster girl for the rotating door. She most recently rotated back into private practice from a regulatory post in April 2010., according to Invest News (see: “Finra top cop Susan Merrill joins law firm this week” in the April 12 edition).

  • disenchanted

    As I have repeatedly expressed, with Mary Schapiro at the helm, we will never get the transparency we are looking for. She has too many people in her pocket,( sounds like the President for one), and will not allow any legislation destroy her career. In my opinion, that is why she moved from Finra to the SEC, protection. Our only hope is to get to someone above her with influence and understanding of the issues.






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