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Project on Government Oversight




A Win for Transparency in Financial Reform

June 18, 2010 


This week, the conference committee tackled reforming the Securities and Exchange Commission (SEC), and replaced a poison pill secrecy provision in that title with a much narrower exemption to protect the identity of whistleblowers who provide the agency with tips. Although POGO and other groups found an exemption to the Freedom of Information Act (FOIA) to be unnecessary to achieve whistleblower confidentiality, we are pleased that House Financial Services Committee Chairman Barney Frank (D-MA) offered a far more acceptable compromise between the House and Senate language.

The committee also adopted an amendment offered by Senate Judiciary Committee Chairman Patrick Leahy (D-VT) requiring the SEC Inspector General to study the impact of the exemption on incentivizing disclosures by whistleblowers and on public access to information. Notably, this and another amendment passed to require a study of a FOIA exemption at the Federal Reserve are perhaps the first impact studies ever included as a companion to a FOIA exemption in legislation.

The initial conference bill, adopted from the Senate bill, actually contained two gag orders tucked into otherwise excellent provisions to strengthen and expand whistleblower reward programs. The conference committee has improved on the poison pill secrecy provision in the SEC title, but there is a very similar provision that still needs to be replaced in a section that would create an identical whistleblower reward program at the Commodity Futures Trading Commission (CFTC).

Both secrecy provisions were offered under the guise of whistleblower confidentiality, but would exempt from FOIA all of the information pertaining to investigations, preventing the public from ever being able to know what happened – even if no action was taken due to inept bureaucracy, fraud, collusion, or worse (not surprisingly, POGO heard the language for these secrecy provisions originated at the SEC). While perhaps inadvertent, whistleblowers also would not be able to access government records, even when needed to prove their status as a whistleblower. These provisions were like putting the whistleblower and the investigations in solitary confinement when a seal on the identity of the whistleblower was all that was needed.

An amendment introduced by Senator Leahy to the original Senate bill would have removed the blanket gag orders and achieved the appropriate balance between preserving government accountability and providing whistleblowers with the confidentiality to come forward with tips. POGO and more than 20 groups from across the political spectrum strongly supported this amendment.

Although that amendment didn’t make it into the bill, Senator Leahy’s amendment to study the FOIA exemption did. It and the SEC compromise passed in the conference strikes a far better balance between accountability and confidentiality than in the original Senate version. We strongly urge the conferees to apply the same provision to the reward program at CFTC, with one caveat: disclosure of the identity of a whistleblower to entities registered as members of a securities exchange must be removed.

POGO applauds Senator Leahy and his diligent staff for fighting to maintain the public’s ability to access crucial information and protect whistleblowers, and would also like to thank Representative Frank and House Oversight and Government Reform Committee Chairman Edolphus Towns (D-NY) and their staff for producing a careful compromise supported by the conferees.

Founded in 1981, the Project On Government Oversight (POGO) is a nonpartisan independent watchdog that champions good government reforms. POGO's investigations into corruption, misconduct, and conflicts of interest achieve a more effective, accountable, open, and ethical federal government.

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