On October 4, 2010, President Obama signed into law a bill amending Section 929I of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”). As originally enacted, section 929I provided expansive protections from public disclosure of information produced to the Securities and Exchange Commission (the “SEC”) by regulated entities. Specifically, Section 929I protected documents and information produced to the SEC in connection with its examination and surveillance functions in furtherance of, among other things, its regulatory and oversight actions. After Section 929I of the Act was enacted, lawmakers became concerned that the provision could be read broadly enough to shield documents and information acquired by the SEC in many contexts.
The amended law removes the broad authority of the SEC to keep confidential information it obtains pursuant to its regulatory oversight activities. The amended law does, however, extend some level of FOIA protections for documents related to examining, operating or conditions reports prepared by, on behalf of or for the use of an agency responsible for the regulation or supervision of “financial institutions.” Such documents are exempted from public disclosure under FOIA, and the amended Section 929I expressly defines the SEC as an agency responsible for the regulation or supervision of financial institutions, and further defines any entity that the SEC is responsible for regulating, supervising or examining as a financial institution. Importantly, however, the amended law eliminated Section 31(c) of the Investment Company Act of 1940 (the “1940 Act”), apparently because it was considered superfluous with the addition of Section 929I. Section 31(c) had afforded investment companies additional protections with respect to information provided to the SEC for the purposes of the SEC’s surveillance, risk assessment, and other regulatory and oversight activities. However, when Congress amended Section 929I, it did not reinstate Section 31(c), theoretically leaving investment companies with fewer protections than they had before the enactment of the Act. The Investment Company Institute is currently working with Congress to restore Section 31(c) to provide additional protections for records given to the SEC pursuant to the 1940 Act. In the meantime, the fund industry may still rely on the FOIA exemption regarding protections for documents related to examining, operations or conditions reports obtained by the SEC. Entities such as registered broker-dealers and investment advisers have long held the view, and the courts have agreed with the view, that the exemption applies to them. Because the amended law only applies to the FOIA exemption for examining, operating or conditions reports, many other documents that are collected during an examination may be subject to public disclosure. Furthermore, the SEC has taken the position that it may disclose documents that are covered by the FOIA exemption in situations where the need for confidentiality is outweighed by the public’s interest in accountability and transparency.