A U.S. Administrative Court judge ruled Tuesday the controversial clause in the recently enacted financial regulation legislation that may allow the Securities and Exchange Commission to deny Freedom of Information Requests cannot be applied retroactively.

While a narrow decision, it's one of the first cases a judge has ruled on regarding the section of the Dodd-Frank bill known as 929I, which the SEC has interpreted as a way to deny a broader array of FOIA requests than was previously allowed.

SEC officials have said repeatedly the 929I section in the Dodd-Frank bill will not impede FOIA requests and is for enforcement only, but some lawmakers and major journalism organizations disagree.

Administrative Judge James Kelly, in a case involving brokerage firm Morgan Keegan, ruled the SEC's Office of Compliance Inspections and Examinations - the office that investigates brokerage firms and produces examination reports - in that case "fails to address the threshold question of whether Section 929I should be construed to apply prospectively or retroactively."

The U.S. Supreme Court and other lower courts have previously ruled legislation can be written to be applied retroactively in certain cases. However, Judge Kelly ruled in his decision that the language in the Dodd-Frank bill applies the new 929I rule only prospectively.

Administrative judges rule on procedural matters inside government agencies and can be appealed to a broader U.S. judicial court.

The concerns over the SEC's new broader rights related to FOIA requests have unleashed a wave of public concern from journalism organizations and lawmakers alike. FOX Business was the first news organization to raise concerns over the SEC provision after the SEC denied a records request citing 929I.

Several lawmakers, including Rep. Darrell Issa R-Calif. and Sen. Patrick Leahy D-Vt., have expressed concerns on 929I Section in the Dodd-Frank Act and are moving forward to legislation to possibly revise it.

Kelly's ruling is not a FOIA case, but instead a complaint brought by the SEC alleging Morgan Keegan intentionally misled investors related to funds the brokerage firm ran that were allegedly over-exposed to subprime mortgages. The defendants - Morgan Keegan - filed a request for SEC examination records to help with their defense against the SEC, but the agency delayed and later denied those records.

“By not complying with this records request, it is hampering in this case the ability for the defendants from defending themselves,” said Steven Mintz, partner with the law firm Mintz & Gold, who represents FOX Business in its FOIA case against the SEC.

Originally, Kelly ordered on July 20 that the SEC had to comply with Morgan Keegan's record request to help with the brokerage firm’s defense.

However on July 21, a day after Kelly's original ruling, President Barack Obama signed the Dodd-Frank bill into law and the SEC then claimed that it did not have to honor Kelly's request because the new law could be applied retroactively. Kelly ruled against that decision.

"The delayed effective date of the Dodd-Frank Act constitutes 'statutory direction' that Section 929I is to be applied prospectively only," Kelly wrote in his opinion.

Cases like this are why lawmakers, journalism organizations and the public have concerns about the recently-enacted provision, Mintz notes.

“The SEC is using this new law as a weapon from keeping both the public, and parties trying to defend themselves from this agency’s allegations, from getting the documents they need,” Mintz said.

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