NEW YORK (CNNMoney.com) -- The Securities and Exchange Commission was not seeking a blanket exemption from public information laws, when it asked Congress to include a little known provision in the Wall Street reform law, the agency said in a letter to lawmakers Friday.
Journalism industry groups have been up in arms about the wording of section 929I of the law, since Fox Business reported on Wednesday that the SEC tried to block one of its requests for internal documents invoking the new provision.
In what is widely considered to be a crucial part of the media's role as a check on government, journalists will often submit requests under the Freedom of Information Act, or FOIA, to obtain internal documents from federal agencies.
By partially exempting the SEC from FOIA, the new Wall Street reform law seemed to fly in the face of the so-called "transparency" championed by both President Obama and the legislators who wrote the law, journalism groups and Fox Business said.
But in letters to Sen. Christopher Dodd, D-Conn., and Rep. Barney Frank, D-Mass., who sponsored the bill, SEC chairman Mary Schapiro said the exemption is critical to the agency's ability to conduct compliance investigations.
Journalism groups including the Society of American Business Editors and Writers and the Reporters Committee for Freedom of the Press were concerned about the law's language that said it would exempt the SEC from disclosing documents related to its "surveillance, risk assessments, or other regulatory and oversight activities."
Since the SEC is a regulatory agency, that broad wording had those groups wondering if the agency could interpret the law to block essentially all requests for information.
The SEC responded to those concerns in its letters to Dodd and Frank on Friday, saying the exemption was merely meant to apply to documents related to routine examinations, in which companies will often reveal "sensitive and proprietary information" including customer records, trading algorithms and company strategies.
Without the exemption, the SEC said many companies would refuse to cooperate with such examinations out of fear that their private information may be made public. The FOIA exemption makes it harder for companies to refuse to participate in the examinations, the SEC.
"It will allow the SEC to gain access in a timely fashion to information and data that it otherwise may not receive, thereby further enhancing our ability to identify fraud and root out wrongdoing," Schapiro said in the letters.
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