The Freedom of Information Act is supposed to make it easier for journalists and ordinary Americans to obtain documents and other information about how the federal government conducts its business. As such, it is one of the bedrocks of our democracy. “It is often described as the law that keeps citizens in the know about their government,” boasts FOIA.gov, a website dedicated to the law.
Unfortunately, as has been woefully apparent for years, the law is not particularly user-friendly, and instead of making information more accessible, its application has resulted too often in information that should be made public becoming nearly impossible to obtain. In a May 2010 column for The New York Times, I wrote about my own difficulties in obtaining public documents from the Securities and Exchange Commission and the Federal Reserve.
I also recounted President Obama’s determination, on his first full day in office, to change FOIA’s bad reputation by issuing an executive order to make the law easier to use by encouraging bureaucrats to err on the side of releasing information. His optimism was palpable.
“A democracy requires accountability, and accountability requires transparency,” Mr. Obama argued. “As Justice Louis Brandeis wrote, ‘Sunlight is said to be the best of disinfectants.’ In our democracy, the Freedom of Information Act, which encourages accountability through transparency, is the most prominent expression of a profound national commitment to ensuring an open government. At the heart of that commitment is the idea that accountability is in the interest of the government and the citizenry alike.”
“The Freedom of Information Act should be administered with a clear presumption: In the face of doubt, openness prevails,” he added.
But Mr. Obama’s soaring words were no match for the Washington bureaucracy, which continues to thwart the intent of the law through sheer obfuscation. A 60-page audit of the S.E.C.’s compliance with the law found in 2009 that the agency had a “presumption of nondisclosure.”
The audit said: “There are inadequate or incorrect procedures for determining whether potentially responsive documents exist and how exemptions are applied, which have the effect of creating a presumption of withholding, rather than disclosure, as required by the FOIA.”
Apparently, according to Robert J. Jackson Jr., a Columbia University law professor, the S.E.C.’s compliance with FOIA has only deteriorated over the last five years. In 2008, the S.E.C. denied 56 percent of FOIA requests, contending it did not have documents that were “responsive” to the request being made. In 2013, the S.E.C. rejected 63 percent of the requests on that basis.
In an Oct. 23 letter to Carl W. Hoecker, the S.E.C. inspector general who wrote the 2009 report, Mr. Jackson documented his own continuing frustration with trying to extract data from the agency on investment advisers so that he could conduct empirical research. He has a theory that fraud is more likely to have taken place when investment advisers show a stream of steady returns — think Bernie Madoff — or if assets under management fall suddenly. He wanted access to the publicly filed data to test his hypothesis.
Starting in December 2013, Mr. Jackson requested that the S.E.C. provide him with the data that investment advisers are required to file with the agency (on form “ADV”) that explains various aspects of an investment professional’s business — assets managed, fees charged, ownership, clients, conflicts of interest and disciplinary record, among other things.
“In my request,” Mr. Jackson wrote, “I noted that the commission already reviews and discloses limited information contained in those forms, so producing the forms would be straightforward, and also offered to pay the commission’s costs in producing the forms.”
According to FOIA rules, the S.E.C. is required to respond to each request in 20 days. That did not happen. Forty days later, Mr. Jackson received a letter saying — of course — the S.E.C. had no documents responsive to his request. But Mr. Jackson knew better.
Not only was Mr. Jackson aware of the forms, but a simple Google search showed that others had used the same information he sought to write papers in economic journals and then boasted about their exclusive access to the information. Mr. Jackson cited a 2012 essay in the Journal of Financial Economics by two professors, Stephen G. Dimmock and William C. Gerken. “These data are not publicly accessible,” Mr. Dimmock and Mr. Gerken wrote, “and, to our knowledge, no other researchers have examined them.”
He then found another paper online, written by these same two authors, plus a third, Jennifer Marietta-Westberg, the deputy director of the division of economic and risk analysis, who was also given access to the data that he was being denied. In other words, the S.E.C. was making the information available to others, including its own senior executives, for research purposes but not to him.
Mr. Jackson was incredulous. “It is unsurprising that the division of economic and risk analysis encouraged FOIA officials to deny a request regarding public disclosure of form ADV,” Mr. Jackson wrote to the S.E.C. inspector general. “That is because officials in that division have regularly used information from those and other sources, accessible through their employment at the commission, in their private research. This monopoly over important information about our financial markets is doubtless a valuable employment benefit for commission staff. But it is contrary to federal law — and the S.E.C.’s regulatory objectives.”
Since the 2009 audit, he added, “economists at the S.E.C. have published several papers making use of information that is available to S.E.C. employees but not made public — or, more frequently, not made public in a fashion that would allow other researchers to use the data. Indeed, the S.E.C.’s economists — or their favored co-authors, with whom S.E.C. insiders often share data — usually take pains to note in published work that the information used in their papers is not made available to the public in a way that would allow competing research.”
During the summer of 2014, Mr. Jackson continued his crusade against the S.E.C. He wrote letters explaining that the S.E.C.’s own staff was given access to the same data he wanted. He spoke with Ms. Marietta-Westberg, “who confirmed,” he wrote, “that she personally extracted the data from form ADV filings, accessible through her employment at the commission.” On Aug. 12, the S.E.C. reversed course. Now, it told Mr. Jackson, the S.E.C. had too many documents responsive to his request and that fulfilling it was “unduly burdensome.” The earliest the S.E.C. could possibly provide the data was December 2015.
The same day that Mr. Jackson wrote his letter to the S.E.C. inspector general — in which he encouraged Mr. Hoecker to conduct another audit of the agency’s handling of FOIA requests — he also wrote to Barry Walters, the S.E.C.’s chief FOIA officer, appealing the agency’s decision not to make the ADV data available to him, even though he had clearly demonstrated that top S.E.C. officials were receiving access to it. His appeal is still pending. His research has been thwarted.
“The reason your colleagues have delayed this request has nothing to do with its merits,” he wrote to Mr. Walters. “Instead, it is motivated by the longstanding practice of the S.E.C., repeatedly denounced by the commission’s own inspector general and the federal courts, to ‘presume … in favor of withholding, rather than disclosure, as FOIA requires.’ Rather than seek ways to satisfy the request, your colleagues have lurched from one basis for denial to another, finally settling on the absurd notion that obtaining data that the S.E.C. already has would take significant staff time.”
It is bad enough that federal agencies like the S.E.C. and the Fed continue to thumb their noses at FOIA in direct defiance of President Obama’s executive order. But when the S.E.C. makes information available to its own staff members and then will not release the same information publicly, then it is time for a little sunlight to be shined, as Justice Brandeis would say.
“It’s hard for the public to have confidence in our markets where our central securities agency gives favorable treatment to insiders over the public,” Mr. Jackson told me in an interview last week.
An earlier version of this column misstated the affiliation of Stephen G. Dimmock and William C. Gerken, the authors of an essay in the Journal of Financial Economics. They are professors, not officials of the Securities and Exchange Commission.