Wynnefield Questions Why SEC is Stonewalling Info Requests

As Senate Passes Bill to Codify Government’s “Presumption of Openness,” SEC Refuses to Provide a Single Page in Response to Wynnefield’s FOIA Request

NEW YORK--()--As the U.S. Senate passed bipartisan legislation to improve the government’s Freedom of Information Act (“FOIA”), Wynnefield Capital today questioned why the U.S. Securities and Exchange Commission (“SEC”) has refused to release a single page of materials related to the SEC’s unsuccessful campaign against Wynnefield Capital (“Wynnefield”) and its principal, Nelson Obus.

“Why is the SEC stonewalling here? They need to provide us the materials concerning our case promptly and fully”

“Of what is the SEC afraid? If sunlight is the best of disinfectants, let the light shine in – small firms can’t afford to let over-reaching bureaucrats use the cover of darkness to try to extract wrongful settlements for their own purposes,” said Nelson Obus, Founding Partner of Wynnefield. “Given small firms’ central role in our economy, these types of cases are an essential national issue.

“Why is the SEC stonewalling here? They need to provide us the materials concerning our case promptly and fully,” Obus concluded.

In May, Wynnefield and Obus, among others, beat the SEC on all counts in a civil enforcement case, capping a 13-year battle. Questions have been raised about the circumstances under which the SEC filed the case, as well as how and why the SEC conducted itself.

In the wake of its victory, Wynnefield filed FOIA requests for information from the SEC. The SEC notified Wynnefield that it had identified more than six boxes of materials responsive to these requests. In an attempt to expedite the SEC’s review process, Wynnefield narrowed the scope of its requests. Last week, the SEC notified Wynnefield that it had identified approximately 2,000 pages of materials responsive to the requests… but that the SEC would not provide Wynnefield with a single page of material beyond what it had already provided to Wynnefield at trial.

Yesterday, the U.S. Senate passed and sent to the U.S. House for passage S. 2520, the “FOIA Improvement Act of 2014,” which among its most significant provisions would codify the Obama Administration’s “presumption of openness” when agencies consider requests for federal government information under FOIA. Wynnefield has not taken a position on the full legislation, but supports efforts to enhance government transparency and access to government information.

Many prominent commentators and experts in these issues have questioned the SEC’s conduct in FOIA matters. As reported in The New York Times by author and journalist William D. Cohan, who has written about the SEC’s FOIA shortcomings over a period of years, a 2009 audit by the SEC Inspector General found that the SEC’s compliance with FOIA was marked by “a presumption of nondisclosure,” and Columbia law professor Robert J. Jackson, Jr. found that the SEC’s compliance with FOIA has deteriorated in the years since that audit.


Established in 1992, Wynnefield Capital, Inc. is a value investor specializing in U.S. small cap situations that have company- or industry-specific catalysts.


Kekst and Company
Eric Berman, (212) 521-4894