Tracking FinReg’s SEC provision: Subtle word changes make a big difference

Between the legislative record for the SEC FOIA exemption in the Dodd-Frank financial reform law and the recent written statement of Mary Schapiro, chair of the Securities and Exchange Commission, we have been able to clarify the origin and evolution of the three confidentiality provisions that became law in Section 929I.  And despite Schapiro’s descriptions of the provisions in terms that downplay the importance or effect of changes in the language, we have observed the addition of two phrases, in two stages, to the FOIA exemptions in what would become Section 929I of the financial reform legislation.

The first change took place between the introduction of H.R. 3817 (Investor Protection Act of 2009) on October 15, 2009, which included provisions exempting various forms of information relating to “an examination of a person…” (Section 409), and the introduction of H.R. 4173 (Wall Street Reform and Consumer Protection Act) on December 2, 2009, which incorporated the language of H.R. 3817 as Section 7409. The latter bill applied the provisions to various forms of information relating to “an examination, surveillance, or risk assessment of a person…”

The second change took place between House referral of H.R. 4173 to the Senate after passage on December 11, 2009, and the release of the base text for the Conference Committee on June 10, 2010 (after which the language, now “Section 929I,” did not change). During that time, the three provisions of Section 7409 were condensed – and each added the phrase “or other regulatory and oversight activities” to the references to “surveillance” and “risk assessments.”

Schapiro testified that the “operative language” from her predecessor had referred to “an examination of a person…” in 2006/07/08. She added that “the operative language” from her July 2009 legislative proposal to the relevant committees had included a reference to various forms of information “including without limitation surveillance, risk assessments, or other regulatory and oversight activities.”

We admit these changes may be small – but we think those changes had a big impact on the reading of Section 929I and its application.

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