Consumer Watchdog Bars the Door
By Yuka Hayashi, Wall St. J., June 8, 2016
For years, Wall Street firms have used the federal open-records system to seek information relevant to investment decisions. Now, the relatively young Consumer Financial Protection Bureau is also fielding requests from analysts, and they aren’t happy with the agency’s response.
The CFPB, which was created after the financial crisis and began operation in 2011, is the latest federal agency to reject requests using a “Glomar response,” named after the Glomar Explorer, a Cold War-era ship used by intelligence officials to retrieve sunken Soviet submarines.
Often, when agencies turn down a Freedom of Information Act request, they cite one of nine exemptions, including one saying the information could “reasonably be expected to interfere with enforcement activities.”
With a Glomar response, in contrast, an agency says it can “neither confirm nor deny” the existence of the requested record, a step that lawyers and academics said is supposed to be reserved for cases in which officials determine that even acknowledging a document in its files could compromise national security or damage someone’s privacy.
The CFPB’s use of Glomar has sparked a dispute with a financial newsletter publisher who combs through regulatory records to identify companies that may face investigation for potential misconduct, seeking scoops for his business. For example, if the publisher finds out that an agency is investigating a company, he can inform his subscribers, who then can use that information to bet against the stock.
John Gavin, the Minneapolis-based publisher of Probes Reporter, sends thousands of FOIA requests every year to the Securities and Exchange Commission and fought the regulator in court over its Glomar responses in the middle part of the last decade. Since the court case ended in 2007, Mr. Gavin said the SEC has stopped denying his requests for information using Glomar responses.
Mr. Gavin is now taking that same battle to the CFPB.
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