How does the Freedom of Information Act apply to investment firms?
What is the Freedom of Information Act?
Freedom of Information Act (FOIA) is a law established in 1967 which allows the public the right to request access to records from any federal agency and many government entities. The most common uses of this law revolve around requesting information of the FBI, NSA, etc to investigate their activities for any wrongdoing. The Freedom of Information Act has other implications that more directly affect investors because government entities sometimes manage money and make investments. That means these entities and their investments are subject to the disclosure requirements of the law.
Who is subject to FOIA?
Government related investment vehicles that invest funds are typically subject to FOIA. For example, entities like the CalPERS are pension funds invested on behalf of public sector employees and they are subject to disclosure upon request because they are a government entity. The most common examples are state university endowments and public sector pension funds. FOIA also applies to some funds of funds, because any fund that has Limited Partners that are 1) themselves a fund and 2) have a Limited Partner that is one of these government entities, are subject to additional disclosure requirements. This applies up and down an entire network of investment. (i.e. If any entity in the chain of investments is subject to FOIA, all entities in the chain are potentially subject to FOIA)
What does this mean for investors and fund managers?
If any underlying investment or investor is subject to FOIA, then that entity is likely also subject to the additional disclosure requirements found in FOIA. It is a useful to find out before investing or receiving capital whether or not anyone is subject to FOIA because it will require everyone involved to meet the standards of transparency set forth by FOIA.
It is worth noting that disclosure is only required when a request from the public has been made that requires information from a government entity. Only if that request applies to the entity that is part of your portfolio will you have the potential to be required to disclose information to the public. That means that disclosures won't likely be required regularly and they may never be required in the lifetime of a fund. But if an entity is subject to disclosure, a request can be made at any time, even after the dissolution of the fund or underlying assets that are subject to disclosure.