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Wednesday, April 15, 2009

Fairly "radical" initiatives regarding private sector disclosure.

"Radical transparency" according to an entry on Wikipedia is "a management approach in which (ideally) all decision making is carried out publicly." You can see why the "radical" tag fits. Last month Daniel Roth in Wired ran it up as part of the solution to the current crisis in financial regulation around the world (and in other sectors as well), a theme picked up on Sunday in ABC Radio National's Background Briefing on Zombie banks. One of the speakers said we need to seriously question bank claims to confidentiality for information that goes to the management of risk, our money, and potentially involving high cost to the taxpayer in the form of government support.

The Leaders Statement in London following the G20 and the accompanying Declaration on Strengthening the Financial System steered clear of the word "radical" but had plenty to say about the need for greater transparency in the operations and regulation of financial institutions.

Could all this have any connection with two aspects of Minister Faulkner's Federal Freedom of Information reform package, neither of which have had much in the way of public explanation from the Government to date, that indicate more than a passing interest in a couple of big changes with implications for the private sector ?

One, the announcement that "the Government will (later this year) provide the Australian Law Reform Commission with a reference to consider whether FOI should be extended to, or another disclosure regime provided for the private sector." While this proposal had been considered but not recommended in the Commission's 1995 Open Government Report, Senator Faulkner said "the Government considers it timely to re-examine this issue in the context of the general reforms to freedom of information and developments on disclosure regimes in both public and private sectors." By the by, this has emerged as an issue in several countries including Ireland where the finance regulator is not subject to the FOI Act, with a call also for "banks that have been nationalised or guaranteed by the government (to) come under Freedom of Information legislation." In the US , not only are the banks not covered, but it has emerged that large parts of the Federal Reserve system that has lent trillions to banks is not subject to the FOI Act either.

Two, the proposed changes to the business affairs exemption in the Freedom of Information Act.The current exemption ( Section 43) which has worked effectively to deny access to important information in government hands about private sector entities regardless of any community interest or impact, and with which the business community grudgingly accepted way back in 1982, is to be amended. For the first time, two categories of information-the disclosure of trade secrets, and disclosure of information that has a commercial value that could be destroyed or diminished by disclosure- will only be exempt where in addition, release on balance is contrary to the public interest. In addition an " on balance contrary to the public interest " test is to be ( somewhat clumsily) grafted onto that part of the exemption that protects information concerning business, commercial or financial affairs information where disclosure would have an unreasonable adverse effect.

Radical transparency, as defined, maybe not. But a potential shake-up to some cozy notions concerning the need for secrecy and confidentiality about information that goes to public well-being held by government about private sector bodies. And a serious look later in the year at whether the private sector should have a more onerous obligation regarding direct disclosure of information as well.Interesting times.

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