[Congressional Record: September 23, 2010 (House)]
[Page H6952-H6955]
FREEDOM OF INFORMATION ACT AMENDMENTS
Mr. FRANK of Massachusetts. Madam Speaker, I move to suspend the
rules and pass the bill (S. 3717) to amend the Securities Exchange Act
of 1934, the Investment Company Act of 1940, and the Investment
Advisers Act of 1940 to provide for certain disclosures under section
552 of title 5, United States Code, (commonly referred to as the
Freedom of Information Act), and for other purposes.
The Clerk read the title of the bill.
The text of the bill is as follows:
S. 3717
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. APPLICATION OF THE FREEDOM OF INFORMATION ACT TO
CERTAIN STATUTES.
(a) Amendments to the Securities and Exchange Act.--Section
24 of the Securities Exchange Act of 1934 (15 U.S.C. 78x), as
amended by section 929I(a) of the Dodd-Frank Consumer
Financial Protection and Wall Street Reform Act (Public Law
111-203), is amended by striking subsection (e) and inserting
the following:
``(e) Freedom of Information Act.--For purposes of section
552(b)(8) of title 5, United States Code, (commonly referred
to as the Freedom of Information Act)--
``(1) the Commission is an agency responsible for the
regulation or supervision of financial institutions; and
``(2) any entity for which the Commission is responsible
for regulating, supervising, or examining under this title is
a financial institution.''.
(b) Amendments to the Investment Company Act.--Section 31
of the Investment Company Act of 1940 (15 U.S.C. 80a-30), as
amended by section 929I(b) of the Dodd-Frank Consumer
Financial Protection and Wall Street Reform Act (Public Law
111-203), is amended--
(1) by striking subsection (c); and
(2) by redesignating subsections (d) and (e) as subsections
(c) and (d), respectively.
(c) Amendments to the Investment Advisers Act.--Section 210
of the Investment Advisers Act of 1940 (15 U.S.C. 80b-10), as
amended by section 929I(c) of the Dodd-Frank Consumer
Financial Protection and Wall Street Reform Act (Public Law
111-203), is amended by striking subsection (d).
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
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Massachusetts (Mr. Frank) and the gentleman from Alabama (Mr. Bachus)
each will control 20 minutes.
The Chair recognizes the gentleman from Massachusetts.
General Leave
Mr. FRANK of Massachusetts. Madam Speaker, I ask unanimous consent
that all Members have 5 legislative days to revise and extend their
remarks on this matter and to insert therein extraneous material.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Massachusetts?
There was no objection.
Mr. FRANK of Massachusetts. Madam Speaker, this is a bill that
reflects cooperation not just between the parties but, sometimes even
harder to achieve, between committees. This is a joint product of
deliberations among the gentleman from Alabama, the ranking member of
the Financial Services Committee; myself; and other members--Mr.
Campbell of California, for example, and the chairman and ranking
member of the Committee on Government Reform and Oversight, Mr. Towns
and Mr. Issa.
This goes back to 2006. In that year, Christopher Cox, then the chair
of the Securities and Exchange Commission and our former colleague,
sent to the Congress a request that we give an amendment to the SEC law
dealing with freedom of information. And it was an entirely reasonable
request.
What they said was, the SEC from time to time obviously gets
information from private entities that they are investigating. What
they were afraid of was the company saying, But, you know what, if you
take our data, it will then be a matter of public record, and we may
have proprietary information; we may have information that we have
every legal right to keep confidential, competitive reasons to keep
confidential; and, therefore, unless you can assure us that this will
not be made public, we're going to fight you. And that made it harder
for the SEC to get this. So it was particularly the enforcement arm of
the SEC that asked for it.
When Mr. Cox asked for it in 2006, no action was immediately taken.
But in 2008, the House did unanimously pass the bill on a voice vote in
a suspension granting that power. It never got acted on in the Senate.
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Last year, 2009, both the House and the Senate included that
provision in our versions of the financial reform bill. Although the
financial reform bill was obviously heavily debated between the
parties, no one on either side raised any objection to that provision,
which had been out there in plain sight, because it was seen as
enabling enforcement.
Subsequently, a lawsuit was brought by Fox Business News against the
SEC involving information as to how they handled the Madoff case. Of
course, the answer, as we all know, is the way they handled the Madoff
case is they didn't until far too late. What happened then was Fox News
brought a lawsuit. And someone at the SEC inappropriately cited this
provision, which had been enacted in the financial reform bill, as a
reason why they couldn't go along with the lawsuit.
As I noted, this had been in both Houses' versions. It was in the
conference report. It sat there. So I want to be very clear nothing
about the adoption of this exemption from FOIA was underhanded or
secretive. It was out there and publicly debated. None of us knew,
perhaps could have known, what the implications were.
Once that became clear, a consensus developed that this was an
exemption that was far too broad. We then talked about what to do about
it. But as Members know, we are in a short session now, with only
another week after this to go. Doing this right is somewhat complex
because there are some subtleties.
Here is the point we want to make clear: we don't want the SEC at any
point to be able to shelter information about what it's doing. On the
other hand, we don't want a situation where if company A is suing
company B because company B's data had been requested by the SEC for
some unrelated purpose, we don't think company A should be able to get
easy access to that data when they otherwise could not have gotten it
under our law.
We all talked about this, but we also thought it was very important
to set the principle that there were no exemptions from the SEC. In
defense of Chairman Schapiro, she promulgated rules that made it very
clear that the SEC would never invoke it. And when she testified before
our committee, she made a point of saying that it would never be used
in the Fox lawsuit. But it was not enough for us. Even those who agreed
with the guidance subsequently pointed out it could be changed in a
further period.
So we all agreed it was important to act. While we were deliberating,
something which we are not used to, frankly, happened. The Senate moved
quickly. Let me repeat that: the Senate moved quickly. Last night, the
Senate adopted a version of a fix for this, an amendment substantially
narrowing it, sponsored by the gentleman from Vermont (Mr. Leahy), the
chairman of the Judiciary Committee. Over there the Judiciary Committee
did it.
The bill he got the Senate to pass is substantially similar to a bill
that was drafted by, or introduced by, our colleague, the gentleman
from New York (Mr. Towns), the chairman of the Government Reform
Committee. The gentleman from California (Mr. Issa) had another very
vigorous approach to this.
We had a useful hearing in which it became clear to us that the
exemption went much too far, but there was this issue that we talked
about of not allowing this to be a way around legitimate protections
for business A and for business B. Making it very clear that the SEC
would never be protected by it, that whistleblowers would not be harmed
by it, but we had that narrow fix.
What we decided to do, and I know the gentleman from California (Mr.
Issa), the gentleman from Alabama (Mr. Bachus) are here, Mr. Towns has
agreed with us, the four of us agreed, of the two committees of
jurisdiction, that the best thing to do in this climate was to accept
the Senate bill. Yes, we would make some changes if we could, but this
is a very important issue for public confidence. We did not want to
risk this bill dying in a House-Senate disagreement.
So what we are proposing to do here today is to accept the bill that
Senator Leahy put forward, send that to the President, which we hope he
will sign. We will then begin, among the two committees, and in a
totally bipartisan way and involving both committees, come up with
language that will do the one thing that we think needs to be done to
prevent this from being a pawn in an intercompany lawsuit, and at the
same time that will, we think, serve the SEC's legitimate purpose of
not engendering resistance to their request.
I note we have been joined by the gentleman from New York (Mr.
Towns).
I reserve the balance of my time.
Mr. BACHUS. Madam Speaker, I yield myself such time as I may consume.
Madam Speaker, I rise in support of S. 3717. At the risk of some
political damage, I associate myself with the remarks of Chairman
Frank.
Mr. FRANK of Massachusetts. Will the gentleman yield?
Mr. BACHUS. I yield to the gentleman.
Mr. FRANK of Massachusetts. I think on that you will get cover from
the gentleman from California (Mr. Issa).
Mr. BACHUS. I thank the chairman.
This amendment repeals section 929I of the Dodd-Frank bill that
grants the Securities and Exchange Commission a broad exemption for
disclosure under the Freedom of Information Act.
A hearing that the Financial Services Committee held on this
provision last week yielded a bipartisan agreement that the section
needed to be tailored more narrowly. And this was consistent with what
Chairman Ed Towns and Ranking Member Darrell Issa had determined in the
Oversight and Government Reform Committee. I want to commend Chairman
Towns and Ranking Member Darrell Issa for their leadership on this
matter and for their draftsmanship on amendments which we think are
actually more proper than the Senate amendment. But as Chairman Frank
said, the Senate amendment is an improvement over the existing
provision. I think it merits bipartisan support.
Additionally, I want to thank SEC Chairman Mary Schapiro, who
expressed her willingness early on to
[[Page H6954]]
work with the committee in a spirit of cooperation to address the
concerns that we had raised about the section.
Madam Speaker, the Dodd-Frank Act confers significant new
supervisory, rulemaking, and investigative powers on the SEC. Combining
these broad powers with the existing powers, and then with the
provision that appears to insulate the SEC, or could be interpreted as
insulating the SEC, from public scrutiny has caused an understandable
alarm and angst among Members on both sides of the aisle.
Congress must support a legislative fix; but as Chairman Frank said,
they must support one that not only ensures proper accountability at
the SEC, but also doesn't undermine the agency's ability to effectively
exercise supervision over the thousands of companies that it's
responsible for overseeing in a post-Dodd-Frank world.
Now, someone might ask, well, why wouldn't they disclose all
information? To give you an example a little closer to home, the IRS
requires us to file documentation every year, our income tax returns,
and they have a proper motive behind that. But, obviously, I think most
of us would agree that the general public does not have a right to that
information in a carte blanche way. That's also true of our health
records. We place great value on the confidentiality and our privilege
that our health records won't be disclosed. And we have faced those
matters before in this House.
And that's true of companies that have confidential, proprietary, or
sensitive information, that they have some assurance that that
information will not be shared. Because the purpose of the SEC is not
to share that information. The purpose is to investigate and enforce
their rules. To her credit, as I said, Chairman Schapiro has been
forthright with Congress and the American people in acknowledging past
failures at the SEC in protecting investors and regulating large
investment banks.
We can all agree that the agency that presided over the collapse of
some of the largest financial institutions on Wall Street and allowed
Bernie Madoff to perpetrate the largest financial fraud in American
history must be fully transparent in its operations, and that any
statutory departures from that general rule of openness must be
narrowly defined because they should be accountable to the American
people, and also to scrutiny of the media and the press, which can be
an important governor or safeguard.
{time} 1710
While this bill coming over from the Senate makes some improvements
to section 929I, it's not a perfect solution. As I said, we would have
preferred something more in line with what Chairman Towns and in my
mind Ranking Member Issa have proposed; and we look forward to working
with Chairman Frank and Chairman Schapiro of the SEC as well as
Chairman Towns.
However, we are sensitive to the fact that an outright repeal of the
section could result in the SEC being compelled to release proprietary
information in response to subpoenas issued in litigation to which the
commission is not a party; and as Chairman Frank said, it could
actually result in an increase in litigation of companies not willing
to disclose certain information or gaining injunctions by courts, and
there would be some basis without some information being privileged. I
commend Chairman Frank for also acknowledging their legitimate concern,
and that is the SEC's legitimate concern during the committee's hearing
on the issue last week when he stated that whatever amendment we
propose for section 929I should not provide an opportunity for third
parties to engage in an SEC ``fishing expedition'' seeking a company's
proprietary information; and I think that was a very succinct
description of what we want to avoid.
In closing, Madam Speaker, the challenge for this Congress is to
strike a proper balance, one that ensures that the SEC has real-time
access to the kind of sensitive, proprietary information it needs to
catch the next Bernie Madoff, while also giving the public the tools it
needs to hold the agency accountable when it fails to fulfill its
mission of protecting investors and policing our financial markets.
Acknowledging the amendment we are considering is an important and
significant improvement over the status quo--and as Chairman Frank we
are actually very encouraged that our colleagues on the other side of
this Capitol have acted in a speedy manner--it will still be necessary
to revisit this issue. With Chairman Schapiro's cooperation, I am
confident that we, working in a bipartisan way, can arrive at a
solution that achieves a proper balance between disclosure and
protection of sensitive proprietary information in the next Congress.
The American people, and those dealing with the SEC, deserve nothing
less.
I reserve the balance of my time.
Mr. FRANK of Massachusetts. Madam Speaker, I yield such time as he
may consume to my colleague and coworker on this, the chairman of the
Oversight and Government Reform Committee, the gentleman from New York
(Mr. Towns).
Mr. TOWNS. Let me begin by thanking you, Mr. Chairman, for a hearing
and arranging for us to be where we are here today.
I rise in strong support of S. 3717, a bill to improve transparency
at the Securities and Exchange Commission. I introduced a companion
bill, H.R. 6086, on August 10, 2010.
The landmark Dodd-Frank Wall Street Reform and Consumer Protection
Act made significant improvements to the accountability and
transparency of our Nation's financial system. But the Dodd-Frank Act
includes a secrecy provision that I believe undermines the purposes of
the act. This provision allows the SEC to avoid disclosing virtually
any information it obtains under its examination authority.
S. 3717 repeals that provision. This legislation strikes a careful
balance to address concerns raised by the SEC without compromising the
goals of transparency and accountability that are at the heart of the
Dodd-Frank Act.
In a letter supporting this legislation, a coalition of over 30
public interest organizations wrote that ``this bill sends a clear
message that public access is vital to accountability.'' I would like
to thank Senator Leahy, I would like to thank Congressman Issa, I would
like to thank Congressman Bachus, and I want to thank Chairman Frank,
first of all for giving us a hearing and his support in bringing this
bill to the floor and, of course, his consideration of doing that has
made the difference in the reason why we are here today.
I urge my colleagues to support this legislation. This is good
government legislation. And, of course, we need good government
legislation.
Mr. BACHUS. Madam Speaker, I yield such time as he may consume to the
very capable ranking member of the Oversight and Government Reform
Committee, the gentleman from California (Mr. Issa).
Mr. ISSA. I thank my friend and fellow ranking member.
Chairman Frank, I am perfectly happy to work with you on this. I'm
perfectly happy to be associated with you. When people who are
considered at least in their own districts as smart come together and
realize that we reached the wrong conclusion, we allowed a bill that we
worked on hard, in which each of us had victories and failures, each of
us would say something was flawed, to have a flaw that was not picked
up by any of us or by countless staff. That is what Senate bill 3717 at
least partially undoes.
The Dodd-Frank Act was not envisioned to cause the problem that it
clearly caused. We can find no evidence of anybody deciding that we
would simply shut down the ability for FOIA, and yet that was the
effect it had. When this was brought to congressional awareness,
multiple bills, including one that myself dropped and also one that
Chairman Towns put, plus Senate bills, all were feverishly put in in
order to unring the bell. I would say today that we are considering an
A version of the unring-the-bell type bill; but I am particularly
pleased that on numerous occasions, working with Ranking Member Bachus
and with Chairman Frank, we have agreed that this is only a first step.
It's the one you can do in the latest days of a Congress, knowing that
in fact follow-on legislation is required.
This is in addition to the promise that Chairman Frank made me in
open session when we were unable to get some of the provisions that
Chairman
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Towns and I had offered, had been accepted, that were rejected by the
Senate. So I am pleased today that when we look and realize that we
have, as Ranking Member Bachus said, we have the chairwoman of the SEC
on our side, we have the chairman of both the committee that I serve
on, the Government Oversight Committee and the Financial Services
Committee, plus both of us as ranking members saying that sometimes you
just have to take ``yes'' for an answer. The Senate has moved and moved
quickly. This is a step in the right direction. For all those entities
who have historically filed and believed in good faith they were
entitled to freedom of information delivery, we're taking a step back
to where we were.
I might note that only a fraction of those applications are ever
granted and the SEC is but once ever reversed when they deny FOIA. So
we believe this does not open Pandora's box, that section 929I will in
fact still be intact for purposes of privacy, something that we think
is important.
We do note, and I think we're noting in every single statement, that
we need to ensure that additional work is done to make certain that no
one uses FOIA as a backdoor way to receive information in litigation or
other matters that they would otherwise not receive. We certainly do
not want to have the SEC be a place that you withhold by any means
possible information even when you have nothing to hide because, of
course, as we know, voluntary compliance is what allows the SEC to do
what they should do which is look for those who are not following the
rules.
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So in my support of Senate 3717, I certainly would say it's a big
step in the right direction. It's one in which I believe all four of
us, as chairmen and ranking members, are here today to say we support
it. We are glad that it will be in front of the President in a matter
of days.
In the next Congress, we will put together, with all four of our
staffs, the kind of additional follow-on legislation that the American
people expect after any large piece of legislation. I, for one, would
like to thank Chairman Frank. I do want to be associated with his
intellect and hard work and immediate grasp that this and other matters
need to be followed on.
I don't know about the gentleman from Alabama, but I am happy to
believe that smart people don't always reach the same conclusion. But
if they are smart, they work on common solutions whenever possible.
Mr. BACHUS. I yield back the balance of my time.
Mr. FRANK of Massachusetts. Madam Speaker, I yield back the balance
of my time.
The SPEAKER pro tempore (Ms. Chu). The question is on the motion
offered by the gentleman from Massachusetts (Mr. Frank) that the House
suspend the rules and pass the bill, S. 3717.
The question was taken; and (two-thirds being in the affirmative) the
rules were suspended and the bill was passed.
A motion to reconsider was laid on the table.
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