June 28, 1999
Mr. Jonathan G. Katz
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Amendments to Freedom of Information Act, Privacy Act and Confidential Treatment Rules, File No. S7-14-99
Dear Mr. Katz:
The Securities Industry Association ("SIA") 1 appreciates the opportunity to provide comments to the Securities and Exchange Commission ("SEC" or "Commission") regarding the proposed amendments to the Commission's Freedom of Information Act, Privacy Act, and Confidential Treatment Rules in Release Nos. 34-41288; FOIA-190; and PA-27. SIA supports the Commission's efforts to conform the rules to current statutory and case law and administrative practice. However, SIA has serious concerns about the proposal's handling of confidential treatment requests and voluntary submissions.
The proposal's provisions regarding confidential treatment requests and voluntary submissions would impose undue burdens on the securities industry. First, the proposal's imposition of a five-year expiration period on confidential treatment requests would require the establishment throughout the industry of systems designed specifically to monitor such expiration period. Second, the proposal's requirements to describe the circumstances under which information is being voluntarily submitted, and to stamp every page voluntarily submitted with a designation noting such are both extremely onerous. Furthermore, there are less burdensome ways of achieving the Commission's stated objectives.
The SEC's confidential treatment rules provide an important mechanism by which firms provide information needed by the Commission but at the same time safeguard the privacy and other interests of clients and proprietary information of firms. The rationale stated in the SEC's Release for the proposed amendments does not justify shifting further burdens in this process to the securities industry. Thus, SIA urges the SEC to reconsider these proposals.
The securities industry would incur substantial administrative burdens and expense in implementing procedures to account for the five-year expiration period on confidential requests proposed in the new 17 CFR 200.83(c)(8). Firms would have to develop computer or other systems and assign personnel to track each confidential treatment request. Many firms make countless requests for confidential treatment each year in response to hundreds of information requests made by the Commission. The expense for the systems and personnel to account for the running of the five-year period for each such request would be considerable. Firms that could not justify the costs of implementing a system would have to expend enormous personnel time in manually tracking each request. Furthermore, additional time and expense would be incurred in preparing and submitting the required renewal requests.
There are less burdensome approaches to addressing the Commission's concern that it is required to administratively respond to confidential treatment requests that may have become stale with the passage of time. The Commission could return information to requesters when no longer needed; or alternatively, the Commission could routinely discard such information. Either approach could be easily implemented by the Commission and would resolve the problem caused by out-dated confidential treatment requests without imposing additional burdens on the securities industry.
While the Release states that the expiration period is also designed to alleviate the burden on the staff in attempting to contact confidential treatment requesters that can no longer be located, the confidential treatment rules require that requesters maintain current identifying information with the Commission. Specifically, Rule 200.83(c)(4) requires the confidential treatment requester to inform the Office of Freedom of Information and Privacy Act Operations "promptly of any changes in address, telephone number, or representation." Commission staff should be under no obligation to track down requesters who fail to satisfy the rule's requirement of updating their contact information. Thus, imposing further burdens on the entire securities industry to maintain systems to track confidential treatment requests is not justified by the few instances when requesters cannot be found.
The SEC's proposal in the new 17 CFR 200.83(c)(3) imposes unreasonable burdens on voluntary submissions. Requesters would have to "describe the circumstances under which the records were submitted to the Commission in sufficient detail to support the claim that they were voluntarily submitted." See Release, Supplementary Information Section. However, the court's holding in Critical Mass Energy Project v. Nuclear Regulatory Commission, 975 F.2d 871 (D.C. 1992), which the SEC relied on in forming this proposal, imposes no such requirement on voluntary submissions. Rather, Critical Mass requires that a requester demonstrate that the voluntarily submitted information is not customarily disclosed by the requester to the public. The proposal, on the other hand, imposes the burden of describing the circumstances of the voluntary submission on every submission even though a Commission determination on a voluntary submission will only be made in the rare instance when such information is requested and the documents are not protected by one of the other statutory FOIA exemptions. Permitting submitters to provide factual support after a FOIA request is made in order to substantiate that the submission was made voluntarily provides the Commission with sufficient information for its determination. In short, requesters should only have to satisfy the Critical Mass standard, when and if, the information is requested, but not protected from disclosure by one of the other FOIA exemptions.
The proposal to require requesters to stamp every page voluntarily submitted with a designation noting as such is also extremely burdensome. Submissions routinely amount to hundreds of pages, and often comprise thousands of pages. Given all of the other legends and codes required to be placed on each page by 17 CFR 200.83(c)(2) -- an identifying number and code, as well as the legend "Confidential Treatment requested by [name]" -- the further requirement to designate each page that is voluntarily submitted is onerous. Moreover, the request to stamp each page with a "voluntarily submitted" stamp is unnecessary because the written request for confidential treatment could set forth that the submission is made voluntarily.
Accordingly, SIA does not support the proposed five-year expiration on confidential treatment requests, and the requirements to describe the circumstances under which information is being voluntarily submitted and to stamp every page voluntarily submitted. SIA urges the SEC to reconsider these proposals in light of the substantial burdens that would be placed on the industry.
Alan E. Sorcher
Assistant Vice President and Assistant General Counsel
-- The Securities Industry Association brings together the shared interests of more than 740 securities firms throughout North America to accomplish common goals. SIA member firms (including investment banks, broker-dealers, and mutual fund companies) are active in U.S. and foreign markets and in all phases of corporate and public finance. The U.S. securities industry manages the accounts of more than 50-million investors directly and tens of millions of investors indirectly through corporate, thrift and pension plans. The industry generates more than $300 billion of revenues yearly in the U.S. economy and employs more than 600,000 individuals. (More information about SIA is available at our Internet web site, http://www.sia.com.)