Are activist investors using the Freedom of Information Act (FOIA) to obtain information about your company in order to guide their investment or engagement decisions? Thanks to recently proposed amendments to the SEC's regulations on FOIA requests, companies may have more clarity on who is asking for the information and under what circumstances the SEC will deny requests.
The proposed amendments aim to strike a balance between the public's need for information about companies and the need for companies to keep the information private. According to the SEC's Freedom of Information Act Reference Guide, any individual or organization in the private (nongovernment) sector can request a copy of any SEC record. From the agency's fiscal year 2011 through 2016, it processed an average of 13,532 requests. This is only a fraction of the FOIA universe. A U.S. government central portal for FOIA requests has generated some 700,000 requests made to 142 government agencies over the past 11 years alone, according to a recent blog on research funded by the Knight Foundation. According to data shown in this blog, most requests from businesses go to the SEC. A notable example would be hedge funds that use the information for trading, according to this biotech blog.
Under the proposed amendments, the SEC would require requesters to include their full names and addresses in their requests, ending anonymity. The amendments also state that a request for records may be denied if the SEC staff reasonably foresees that disclosure would harm an interest protected by an applicable exemption.
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