The American Securities Association filed a lawsuit against the SEC for its lack of transparency surrounding imposed penalties.
The American Securities Association (ASA) has filed a lawsuit against the Securities and Exchange Commission (SEC) for its enforcement actions and noncompliance with the Freedom of Information Act.
Moreover, the lawsuit originates from regulatory actions by the Commission, which provided stakeholders with limited information.
Currently, consumers have questioned the Commission’s lack of transparency on social media platforms.
ASA Sues The SEC
In a June 6 filing, the Securities Association requests that the Commission provide disclosures regarding its previous regulatory actions in which it imposed sanctions.
According to court documents, the action is to enforce compliance with the Freedom of Information Act.
“In our democratic system, transparency is a two-way street. Federal law also demands transparency from the government. Under the Freedom of Information Act, the public is entitled to documents created by federal agencies so the people can learn about their government’s actions and policies.”
In 2021, the SEC looked into broker-dealer retention of communications on personal devices.
The financial regulator received numerous documents without any indication of a violation of the rules.
However, this resulted in the SEC imposing billions in penalties without an explanation on the decision-making process.
The ASA sought clarification on the mechanisms by which penalties were determined and the rationale behind the targeting of defaulters.
Moreover, they observed that the regulator did not fulfill its obligations, citing the comments of previous SEC Commissioners regarding the penalty regime as a means for generating end-of-year statistics rather than for enhancing market integrity and protecting investors.
Regulator Cites Exception
The SEC cited Exception 7(a) in response to ASA’s request for information under the Freedom of Information Act, which states that documents may reasonably impede ongoing enforcement proceedings.
However, the Commission is unable to withhold the requested information from ASA, as it is seeking documents for settled proceedings.
“And even if the SEC could withhold documents on these grounds, it has fallen woefully short of its high burden to justify the withholding, as it has provided nothing but general, boilerplate statements for refusing to comply with ASA’s FOIA requests,” they added.
