US SEC goes back to court after being sued by Virtu Financial over FOIA

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Virtu Financial, an electronic market maker from the US, recently filed a lawsuit against the Securities and Exchange Commission (SEC), claiming that it failed to provide information about its rulemaking process. The lawsuit is based on the Freedom of Information Act (FOIA), and it requires the regulator to reveal information not only about rulemaking but also the interactions between the SEC Chair, Gary Gensler, and other interested parties.

Douglas Cifu, Virtu’s CEO, commented on the lawsuit noting that the SEC is the company’s primary regulator and that the firm does not take this step lightly. However, the company has found that the current SEC Chair is focused more on “politics and regulation by innuendo and hypothesis” than on an extremely valuable industry that has created one of the fairest and most competitive equity markets for retail investors around the world.

SEC fails to respond to repeated FOIA requests

The company found itself in this situation after submitting a FOIA request to the regulator last June. It requested details about new proposals for stock order handling and execution for retail investors. According to the company, its goal was to determine if the SEC’s rulemaking procedure included an evaluation of possible harm to investors and market risks, which is legally required to be made.

On top of that, the firm was also interested in learning if the SEC had considered objected data, and if it sourced feedback from broader sources. Essentially, the idea was to use the FOIA to reveal details of the SEC’s moves and whether it consulted with the industry, the nature of data and meetings, and how it influenced the rulemaking process.

What the company did not expect was for the SEC to ignore the request completely and fail to produce any response. Virtu kept sending requests for six months, and the regulator did not respond to any of them. The firm then decided that it has no other choice but to take the regulator to court, as it developed concerns that the SEC is attempting to conceal basic information regarding its rulemaking.

The lack of transparency within the SEC

The company’s CEO said that FOIA requests are nothing out of the ordinary — in fact, they are highly routine in nature. However, they are also among the important procedures that allow companies to check on the government and the processes that are typically taking place in the background. However, the SEC Chair kept delaying the responses, leading to a massive lack of transparency, which raised concerns within the company.

So far, the SEC has not responded to the firm, nor did it issue an official statement regarding the lawsuit. It is also unknown why the regulator failed to comply with the FOIA requests, for now, a lot remains unclear regarding the case and the regulator’s behavior.

About Ali Raza PRO INVESTOR

Ali is a professional journalist with experience in Web3 journalism and marketing. Ali holds a Master's degree in Finance and enjoys writing about cryptocurrencies and fintech. Ali’s work has been published on a number of leading cryptocurrency publications including Capital.com, CryptoSlate, Securities.io, Invezz.com, Business2Community, BeinCrypto, and more.