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Virtu Financial Sues SEC over Failed FOIA Requests

by Arnab Shome
  • The company sought details on the rulemaking process last June.
  • It is now concerned over the transparency of the regulator.
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Virtu Financial Inc (Nasdaq: VIRT) has launched a lawsuit against the Securities and Exchange Commission (SEC), which oversees the securities market in the United States.

Announced on Tuesday, the lawsuit is based on the Freedom of Information Act (FOIA). It aims to compel the federal regulator to provide information about its rulemaking process and the interaction of 'interested parties' with SEC Chair Gary Gensler.

“We do not take lightly the step of suing our primary regulator, but it has become clear that the Chair of the SEC is more focused on politics and regulation by innuendo and hypothesis than earnestly engaging with an industry that has created the most fair and competitive equity markets for retail investors globally,” said Virtu’s Chief Executive Officer, Douglas Cifu.

Lack of Transparency Led to Lawsuit

Virtu, an electronic market maker, submitted a FOIA request to the SEC last June for details about the new proposals for retail stock order handling and execution . It wanted to determine whether the regulator’s rulemaking process included the legally required evaluation of potential investor harm and market risks. Furthermore, the company wanted to know if the regulator sourced feedback from ‘broad’ sources and whether it had considered objected data.

The FOIA information would have revealed details of the SEC’s consultation with the industry and the nature of meetings and data that influenced the rulemaking proposals.

However, the SEC failed to produce any single response even after about six months of “detailed and compelling FOIA requests” by Virtu. The company took the regulator to court over concerns about concealing basic information on the rulemaking process.

“FOIA requests are highly routine in nature and among the important rules and procedures that provide a check on government, yet the Chair’s delays and lack of transparency raise serious concerns,” Cifu added.

The SEC is yet to release any official statement on the lawsuit against it.

Virtu Financial Inc (Nasdaq: VIRT) has launched a lawsuit against the Securities and Exchange Commission (SEC), which oversees the securities market in the United States.

Announced on Tuesday, the lawsuit is based on the Freedom of Information Act (FOIA). It aims to compel the federal regulator to provide information about its rulemaking process and the interaction of 'interested parties' with SEC Chair Gary Gensler.

“We do not take lightly the step of suing our primary regulator, but it has become clear that the Chair of the SEC is more focused on politics and regulation by innuendo and hypothesis than earnestly engaging with an industry that has created the most fair and competitive equity markets for retail investors globally,” said Virtu’s Chief Executive Officer, Douglas Cifu.

Lack of Transparency Led to Lawsuit

Virtu, an electronic market maker, submitted a FOIA request to the SEC last June for details about the new proposals for retail stock order handling and execution . It wanted to determine whether the regulator’s rulemaking process included the legally required evaluation of potential investor harm and market risks. Furthermore, the company wanted to know if the regulator sourced feedback from ‘broad’ sources and whether it had considered objected data.

The FOIA information would have revealed details of the SEC’s consultation with the industry and the nature of meetings and data that influenced the rulemaking proposals.

However, the SEC failed to produce any single response even after about six months of “detailed and compelling FOIA requests” by Virtu. The company took the regulator to court over concerns about concealing basic information on the rulemaking process.

“FOIA requests are highly routine in nature and among the important rules and procedures that provide a check on government, yet the Chair’s delays and lack of transparency raise serious concerns,” Cifu added.

The SEC is yet to release any official statement on the lawsuit against it.

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