SEC chief: Investigations outrank media

NEW YORK (CNNMoney.com) -- The chairman of the Securities and Exchange Commission says the ability to conduct confidential investigations into securities activity trumps the media's need to know.

In prepared testimony for a House hearing Thursday, SEC chief Mary Schapiro plans to defend a controversial measure limiting her agency's need to comply with Freedom of Information Act requirements that internal documents be available to requests from news organizations.

The Financial Services Committee is focusing on a provision of the Wall Street reform law recently signed by President Obama. That section provides certain protections to the SEC, shielding it from the Freedom of Information Act.

The section inspired not only the wrath of Fox Business, which first reported the new provision, but sparked the introduction of four different bills to repeal the measure.

The committee released Schapiro's prepared testimony on Wednesday, in which she lays out her defense for the provision, called Section 929I.

"Section 929I is central to our ability to develop a robust examination program that better protects investors," wrote Schapiro. "Though we recognize the competing policy interests it raises, a return to the pre-Section 929I status quo will perpetuate circumstances that have limited the efficacy of our examination program."

Schapiro also expresses her concern that if the bills pass and the provision is removed, it would undercut "the Commission's ability to obtain in a timely manner the sensitive or confidential information needed for comprehensive examinations."

Also on Wednesday, the SEC released guidance for the provision in an effort to dispel the suggestion of some critics that the section is a blanket exemption of the Freedom of Information Act.

In the guidance, the SEC insists that the section should only be invoked "in a manner that recognizes the importance of both open government and an effective examination process."

In letters to key committee chairmen in July, the SEC said 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.

An earlier version of this story reported that a FOIA request filed by Fox Business was rejected by the new SEC provision, but an SEC spokesman denies that this happened.