Another example of a troubling open question is a minor, but substantive issue that we may someday have to face. Exemption 10 permits an agency to close meetings dealing with its participation in a number of forums including for example, court and international tribunals. One forum not mentioned however is a case of formal adjudication before another agency. Recently the Commission has been involved in a formal proceeding before an administrative law judge of the ICC. Although the issues presented by that case never have been discussed in a Commission meeting, in other cases such participation might be of concern to the Commission. Virtually all of the reasons that underlie exemption 10 also would support closing such a meeting, yet the Act does not specifically provide for such closure. In this case we believe that the proper course is to follow the evident purpose of the Act and not to adopt an overly narrow reading of the exemption. The Sunshine Act has caused some problems in our handling of day-to-day administrative matters. Few if any of these administrative issues are of an "emergency" nature, so routine use of the short notice provision is section (e) (1) of the Act is inappropriate. However, the questions I have in mind are of a scale such that interposition of a week's delay between the time an issue arises and the time the Commission can deal with it has the practical effect of preventing the Commission from having any significant control over the matter. Fortunately, we believe there is a simple solution to this problem which is fully consistent with the spirit of the Act and which would aid us in carrying out our administrative duties. That solution would be to permit use of meeting announcements stating that a meeting will consider general administrative questions before the Commission. The announcement would be issued at least one week before the meeting and would name the specific administrative items that would definitely be on the agenda. However, it would also provide that other administrative issues that arose during the week might also be discussed. The open/closed status of the meeting would depend upon the specific items discussed, although normally such meetings would be open. As I said above, the Commission does not now hold the sort of general roundtable discussions about administrative matters that would be the subject of a general announcement. If the Sunshine Act permitted us to, I believe we would. That would assist us in carrying out our administrative and supervisory duties. Furthermore, by giving the public a window on an important aspect of the Commission's work which it does not now have, we would be furthering the principal purposes of the Act. One not unexpected aspect of Sunshine Act implementation is that we have found that, as we gain experience working under the literal requirements of the Act, we have become more comfortable in doing our work in the open. This in turn has led us increasingly to employ our discretion to open meetings that could have been closed. The statistics given above demonstrate the extent to which we have been doing this. Thank you for your time this morning. I would be glad to try to answer any questions you might have. [Subsequent to the hearing the following letter was received:] In testimony before the Subcommittee on Federal Spending Practices In order to correct my testimony, I hereby request that this letter be made a part of the record. I regret any misunderstanding this error may have caused. Sincerely, Hendrie Joseph M. Hendrie SEP 0 6 1978 SECURITIES AND EXCHANGE COMMISSION Senator CHILES. Our next witness is the Honorable Harold M. Williams, Chairman of the Securities and Exchange Commission. The SEC protects the interest of the public and investors against malpractices in the securities and financial market. Mr. Williams has been Chairman of the SEC since April of 1977. We are happy to have you with us today, Mr. Williams. We will have you share with us your views on sunshine, and your statement in full will be inserted in the record, and any summary remarks that you can make on that will be appreciated. TESTIMONY OF HAROLD M. WILLIAMS, CHAIRMAN, U.S. SECURITIES AND EXCHANGE COMMISSION, ACCOMPANIED BY HARVEY L. PITT, GENERAL COUNSEL Mr. WILLIAMS. Thank you very much, Mr. Chairman. I am pleased to have the opportunity to be here with you this morning and review certain aspects of the Commission's recent experiences under the Government in the Sunshine Act. I have with me Harvey L. Pitt, the Commission's General Counsel, who has been interested and involved in the Sunshine Act since it was under consideration in the Congress, and he has had a key role in assuring our compliance with the act. Congress intended the Sunshine Act to insure to the fullest practicable extent, public access to "information regarding the decisionmaking process of the Federal Government." Thus, the act provides as a general rule, that, "every portion of every meeting of an agency shall be open to public observation." As the Federal agency charged with responsibility for administering the laws designed by the Congress to provide full and fair disclosure to investors, the Securities and Exchange Commission is sensitive to the statutory objectives of the Sunshine Act and the importance of accurate public understanding of governmental processes and decisions. During the legislative process, we expressed our support for the act's objectives, but also our concern that certain of the burdens of compliance might outweigh the benefits to the public. We knew, and the Congress recognized, that most of our meetings could not be open to the public, in view of the Commission's broad-ranging law enforcement and quasi-judicial responsibilities and of the fact that even our consideration of rulemaking proposals must often include discussions of active enforcement cases. Nevertheless, our experience has been that the Commission has been able to consider a substantial number of its agenda items in meetings that are open to the public. Since the Commission, before the Sunshine Act, had conducted almost all of its meetings in private session, the act has truly worked significant changes in the manner in which the Commission conducts its business. As noted by Commissioner Evans during this subcommittee's earlier oversight hearings on the administration of the act, we have certain concerns about the operation of the Sunshine Act in practice. We are concerned that the ability of the Commission to perform its statutory mission should not be impeded for the sale of inflexible procedural requirements which, while theoretically designed to assure the public access to information about its Government, do not in fact perform this function. We are concerned that pressure is being applied to require the Commission to go far beyond the requirements of the act, and to expose the internal deliberative processes of the Commission to public view, something we feel would be very counterproductive. I feel that the Commission would be remiss if it did not report to you these concerns. As Commissioner Evans also pointed out in his testimony, many of the comments we have received about our public meetings indicate that observers are impressed by the depth of discussion and the consideration afforded to opposing viewpoints of major issues, as well as by the overall competence and fairness of the Commission's deliberations. Our experience since Commissioner Evans' remarks has generally been consistent with his report. But, as the public's experience with our meetings broadens, an increased demand is evolving, particularly on the part of the press, for supplementary measures, beyond those required by the act itself, in order to make our meetings more informative and understandable. I think this can be healthy process, and we are always ready to consider suggestions for improving our procedures. We have been making some changes in the way we conduct our meetings and, in general, improving the level of understanding the Commission's meetings. As you are aware, the Congress intended that the public's access to the decisionmaking processes of the Federal Government, as implemented by the Sunshine Act, be balanced against the need to protect the ability of Government to carry out its responsibilities. In the case of the Commission, of course, our principal responsibility is to administer and enforce the Federal securities laws. I think this can be & healthy process. Senator CHILES. Not to interrupt you very much, but let me just say I think it is very healthy, too, if the press is showing some appreciation for the fact that open meetings are taking place and that they want to find some information. The greatest problem that I have noted in trying to do something about sunshine is in the lack of interest on the part of the press. Both lack of support where we were trying to get the act passed, and lack of interest, really, in trying to see that the agencies are going along and enforcing the act or opening under the act the way they should. To me, coming from Florida where we are sort of the Sunshine State, the press took the leadership and carefully followed the implementation. In first passing the act, every time as a member of the State legislature I went into a closed meeting they would take my picture or they would note my name. Every time the legislature had a closed meeting the response of the press was "they would be hauled bodily out of that meeting." Through that constant sort of operation they made me a convert. I guess they made a lot of other people converts of Sunshine and ultimately opened up the process. Up here I will have to say on a national press level there has been almost a complete absence and lack of interest. I think they are too used to dealing with their sources or operating the way it has in the past. So, I am very heartened by your saying that you are finding the press is wanting more information, and wanting further openness. I think that's very helpful. Mr. WILLIAMS. By and large we react the same way to it, and we are and have been, in part, using the response of the people who observe our sessions, and the kinds of questions raised by the public as a result of our meetings as a kind of barometer of whether our meetings are understandable. We then try other ways of increasing, at a reasonable cost and effort to the Commission, public understanding of our open meetings. For the past 16 months, as we have worked with the Sunshine Act, which, incidentally, is about the same period of time as I have been Chairman and during which I have also been involved in learning how to be Chairman, we have become increasingly aware of the difficulties involved in following the discussions at our meetings. For example, as you might expect, the more complex the matter under discussion, the more detailed the Commission discussion of that matter becomes. It is in these situations that we recognized, even before certain recent criticism of our open meeting procedures, a need for improvements in our procedures. In his testimony before you last November, Commissioner Evans informed you that, in order to facilitate a better understanding of the discussions at our open meetings, the Commission had begun to distribute to attendees at these meetings summaries of relevant background information pertaining to agenda items. Nevertheless, the Commission has recently received some responsible criticism with regard to the conduct of its open meetings and, in your letter dated June 10, 1978, you requested our views "in light of recent complaints about the cryptic nature of some of your open meetings." These complaints, which originated with some members of the press who regularly cover the Commission's meetings, indicated to us that the discussions between the Commission and staff that occur during our open meetings are not always fully understood by those who attend our open meetings. In my prepared testimony, I set forth in some detail relevant information concerning the two particular meetings in which this type of problem arose in order to preserve time, I will not now detail that for you, Mr. Chairman, but I do want to point out that these were both very difficult meetings for the Commission as well as the public, and involved very complex issues which did not lend themselves readily to simplification. In essence, what I am saying is that we did make a sincere and honest effort to aid those who wanted to understand what was going on, and I would say, judging from the fullness and accuracy of the published reports of those meetings, that I think we were rather successful. Complaints about open meetings are serious to us, not only because these complaints indicate that the benefits of the Sunshine Act are not being fully realized, but beyond that, because they imply that the quality of public understanding of what the Commission is doing and the press attendant coverage is less than it could be. On the other hand, there is a limit to the amount of educating we can do. The Commission's meetings are primarily business meetings. not classrooms, and, as Commissioner Karmel pointed out recently. "The public has a right to know what we are doing, but also has a right |