Washington, D.C., Feb. 18, 2026 (GLOBE NEWSWIRE) -- The New Civil Liberties Alliance has filed an opening brief on appeal urging the U.S. Court of Appeals for the D.C. Circuit to require the Securities and Exchange Commission to comply with the Freedom of Information Act (FOIA). In 2022, SEC disclosed a scandalous “control deficiency” where SEC enforcement staff gained illicit access to and then downloaded confidential adjudicative documents in dozens of enforcement cases, sharing files of the very administrative law judges who were to decide those cases. NCLA promptly sought disclosure of those records. For over four years, the agency has stonewalled our request, refusing to produce any documents showing how this “control deficiency” occurred, who was responsible, who it affected, and what has been done about it.
Disappointingly, the U.S. District Court for the District of Columbia wrongly ruled below in NCLA v. SEC that SEC could keep the records hidden to avoid embarrassment, despite the agency’s failure to justify what it withheld or even to keep its story straight. NCLA asks the D.C. Circuit to reverse that flawed ruling and order the district court to require SEC to release the requested information on this scandal, paving the way for true accountability.
After SEC admitted the “control deficiency,” Congress summoned then-SEC Chair Gary Gensler to hearings in July 2022. He chose not to attend, instead sending his Enforcement Director, Gurbir Grewal, who testified about the control deficiency in an evasive manner that caused one congressman to admonish him for a pattern of “problematic” and non-responsive answers.
In June 2023, weeks after NCLA client Michelle Cochran won a unanimous Supreme Court ruling allowing SEC targets to vindicate their constitutional rights in federal court, the agency (1) revealed that such misconduct occurred in far more enforcement cases than first reported, (2) dismissing all 42 of its open enforcement cases. That mass dismissal not only denied respondents their day in a real court, but also conveniently prevented all targets of this misconduct from gaining judicial discovery about the extent of the breach. SEC has never disclosed whether the 42 dismissed cases were the only ones where the “control deficiency” occurred, but that is highly unlikely. The deficiency dated back to 2017 and was only acknowledged in 2022-23, meaning scores of closed or settled cases were likely affected by this pernicious filesharing over an estimated period of at least five years.
When agencies discover this kind of misconduct, they are obligated to report it to their taxpayer-supported Inspector General (IG) who must conduct an impartial, unbiased, and thorough investigation. SEC admits that it circumvented the IG process. Instead, it hired favored government vendors the Berkeley Research Group and General Dynamics to conduct an agency-orchestrated “internal review.”
SEC has illegally delayed proceedings, unlawfully withheld nearly all records and totally redacted the names and records of the people involved in the “control deficiency” by claiming FOIA exemptions to which it is not legally entitled. SEC’s paltry compliance was facially contradictory, unsupported by law, and a mockery of its duties under FOIA. The D.C. Circuit should correct the district court’s disregard of these glaring deficiencies.
NCLA released the following statements:
“The Wall Street Journal, which broke the story on this scandal, once asked, ‘What is Gary Gensler Hiding?’ At every turn, SEC has defied disclosure, preferring to abandon 42 enforcement actions, dissemble to Congress, sidestep its IG reporting obligations, and game FOIA through delay and non-compliance. The Circuit should call foul.”
— Peggy Little, Senior Litigation Counsel, NCLA
“SEC’s hypocritical double standard here is breathtaking. Imagine what SEC’s reaction would be to a company that had an internal control deficiency and then tried to whitewash its wrongdoing by hiring a favored vendor to help ‘investigate’ the problem but never disclose publicly what happened. Something is rotten, and the DC Circuit should let FOIA help NCLA get to the bottom of it.”
— Mark Chenoweth, President, NCLA
For more information visit the case page here.
ABOUT NCLA
NCLA is a nonpartisan, nonprofit civil rights group founded by prominent legal scholar Philip Hamburger to protect constitutional freedoms from violations by the Administrative State. NCLA’s public-interest litigation and other pro bono advocacy strive to tame the unlawful power of state and federal agencies and to foster a new civil liberties movement that will help restore Americans’ fundamental rights.
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Joe Martyak New Civil Liberties Alliance 703-403-1111 joe.martyak@ncla.legal
