Does the Freedom of Information Act Foil the Securities and Exchange Commission's Intent to Keep Investigations Confidential?

• 成果类型: Article
• 署名作者: Coleman, Braiden; Merkley, Kenneth; Miller, Brian; Pacelli, Joseph
• 署名单位: Indiana University System; IU Kelley School of Business; Indiana University Bloomington
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2020.3625
• 发表日期: 2021
• 页码: 3419-3428
• 关键词: Securities and Exchange Commission (SEC) investigations; Freedom of Information Act; exemption denials

摘要

The Securities and Exchange Commission (SEC) has a long-standing policy to keep formal investigations confidential. In this study, we examine the extent to which compliance with the Freedom of Information Act (FOIA) provides investors with information about ongoing SEC investigations. We exploit a unique empirical setting whereby the SEC denies FOIA requests because of ongoing enforcement proceedings (hereafter, exemption denials). We find that exemption denials predict a substantial number of ongoing and future SEC investigations. Exemption denials are also associated with significant negative future abnormal returns, which is consistent with exemption denials providing a noisy public signal that allows certain sophisticated investors to earn future abnormal returns. Overall, our findings suggest that information transparency laws such as FOIA have the potential to limit the SEC's ability to maintain effective and confidential investigations.