Letters to the Editor

SEC Hides Behind Reform Law

Editor's note: The following editorial appeared last week in the Chicago Tribune.

Federal agencies don't like the Freedom of Information Act, and no wonder.

It's the law of choice for journalists and other watchdogs who suspect that public officials might be covering up corruption or incompetence. Government bureaucrats like to breeze along without your eyes prying into their -- ah, your -- business.

Isn't it ironic that the U.S. Securities and Exchange Commission, which is making lots of noise about forcing more transparency on business, wants to keep its own secrets?

Congress went along like a lapdog in the new financial reform law.

That law specifies that the SEC need not disclose records it gets when it examines businesses that register with the agency. The law is written so broadly that it could exempt almost all the agency's work from the Freedom of Information Act.

SEC Chairwoman Mary Schapiro told Congress that her agency needed the broad exemption to gather confidential business data from industry insiders who otherwise would fear that trade secrets would be spilled. She said the new law was not designed to avoid public accountability.

Don't buy it. The new language is not narrowly tailored to protect legitimate trade secrets. It gives big cover for an agency that has a track record of failure in its regulatory efforts.

No one expects the SEC to be a completely open book. With passage of the financial reform law, the agency's jurisdiction has broadened to hedge funds, private-equity firms and other institutions that do have an interest in keeping information from their competitors.

Those firms worry about disclosing their investment techniques, customer data and other sensitive material. Their concerns are understandable, but confidentiality needs to be safeguarded in a manner consistent with the public interest.

The SEC has convinced Congress to set the agency above a law -- the Freedom of Information Act -- that has proven its value time and again in protecting the public interest.

The public interest -- that was supposed to be the reason for approving a broad financial reform law. Yet that law, and the SEC, show an unhealthy drive to keep secrets from the public.

Transparency? It's good for the financial sector -- and the SEC.