As previously discussed here, Section 929I (”PROTECTING CONFIDENTIALITY OF MATERIALS SUBMITTED TO THE COMMISSION”) of the Dodd-Frank Act provides that the SEC need not respond to certain requests for information under the Freedom of Information Act. Somehow, this provision escaped much notice until FOX Business News reported at the end of July that the SEC was relying on the provision as a defense to producing records to FOX under FOIA. This prompted members of Congress to hold a hearing yesterday to review the scope of the provision and obtain testimony from SEC Chairman Mary Schapiro on why the new provision is or is not necessary.

CNN reports that at the hearing, Schapiro stated that the SEC needs to protect "proprietary" information provided to the agency by finance companies, including "watch lists" that companies gather about other companies as well as the trading records of investment managers. Following the hearing yesterday, the Senate Judiciary Committee unanimously approved bipartisan legislation to repeal certain parts of Section 929I. Sen. Ted Kaufman stated that "any exemptions to the Freedom of Information Act, which empowers citizens to monitor their government, must be fashioned with a scalpel," said Kaufman. "The Dodd-Frank law unfortunately contains overbroad SEC exemptions to FOIA. The bill voted out of the Judiciary Committee today eliminates the exemptions while carefully addressing legitimate SEC concerns."

In a press release yesterday, Sen. Chuck Grassley added that the bill clarifies that hedge funds and other regulated entities will be considered "financial institutions" for the purposes of applying FOIA Exemption 8. "The bill will ensure that the SEC can treat sensitive information provided by hedge funds to the Commission in connection with the SEC's examination and surveillance activities in the same manner as the Commission treats such information when it is provided by other financial institutions," Grassley said.

The bill will now be referred to the full Senate for consideration.