In a July 30 letter to Frank and Senate Banking Chairman Chris Dodd (D-Conn.), SEC Chairman Mary Schapiro noted that former SEC Chairman Chris Cox first requested changes in 2006. The House passed a bill in 2008 with similar language and in July 2009 she provided lawmakers with proposals designed to better protect investors.
Schapiro said within the provision are specific carve-outs that "make clear that the commission might not use the provision to withhold information from Congress, other federal agencies or from a court in response to an order in an action brought by the commission or the United States."
As written, the law exempts the SEC from disclosing records or information derived from "surveillance, risk assessments, or other regulatory and oversight activities."
Republican and Democratic lawmakers in both chambers have questioned whether the exemption "could undermine the very important goal of bringing more transparency to Wall Street if improperly interpreted and implemented."
Members of the Senate Judiciary Committee — Sens. Patrick Leahy (D-Vt.), John Cornyn (R-Texas), Ted Kaufman (D-Del.), and Chuck Grassley (R-Iowa) — introduced legislation and wrote a letter to Schapiro last week expressing concern about the provision.
Kaufman said the provision is too broad and "it is not consistent with the general goal of greater transparency."
The Senate Banking Committee hasn't scheduled anything yet on the issue, according to an aide.
Schapiro argued in the July 30 letters that regulated firms have refused to provide needed documentation to examiners over concerns that it would eventually be publicly disclosed.
The new law is "critical to our ability to develop a robust examination program that better protects investors," she wrote.
"This provision does not provide a 'blanket' SEC exemption from FOIA and is not designed to protect the SEC as an agency from public oversight and accountability."