Freedom of Information Act (FOIA)

The Freedom of Information Act (FOIA), often pronounced “foy-ah,” is a landmark U.S. federal law that gives you, or any member of the public, the right to request access to records from any federal agency. While it sounds like a tool for journalists and lawyers, it's a secret weapon for the diligent value investing practitioner. Think of it as a key that can unlock government file cabinets, revealing information that companies might prefer to keep out of their glossy annual reports. A savvy investor can use FOIA to obtain correspondence between a company and its regulators, inspection reports, consumer complaint data, or details about lucrative government contracts. This isn't about uncovering illegal activity; it's about gaining a deeper, more nuanced understanding of a business and its potential risks and opportunities, which is the very essence of building a durable information edge.

Publicly traded companies are masters of controlled communication. They spend millions on investor relations to present their operations in the best possible light. FOIA allows you to peek behind the curtain.

The market is flooded with the same information: earnings reports, press releases, and analyst ratings. True alpha often comes from finding what others have missed. A FOIA request can yield primary source documents that provide context far beyond a company’s polished narrative. For example, while a pharmaceutical company’s 10-K report might sound optimistic about a new drug, a FOIA request to the FDA (Food and Drug Administration) could reveal a trove of correspondence detailing regulators' serious concerns about its safety trials—a massive red flag that could save you from a catastrophic investment.

FOIA helps you “trust, but verify.”

• Product Safety: Worried about a company's flagship product? Request consumer complaint data from the Consumer Product Safety Commission.
• Environmental Risks: Does a manufacturing company have hidden environmental liabilities? A request to the EPA (Environmental Protection Agency) for inspection reports and notices of violation can be incredibly revealing.
• Healthcare Billing: Is a healthcare company overly reliant on a specific government reimbursement? Data from the CMS (Centers for Medicare & Medicaid Services) can quantify that risk.

Using FOIA is less intimidating than it sounds. It mainly requires curiosity and patience.

Start with a specific question you want to answer. A vague request like “Everything on XYZ Corp” will be rejected. A focused request is far more effective.

• Weak Request: “Send me documents about Globex Corporation.”
• Strong Request: “I request all Warning Letters issued by the FDA to the Globex Corporation's manufacturing facility in Springfield, Illinois, between January 1, 2022, and the present date.”

You have to send your request to the agency that holds the records. For investors, a few key agencies are treasure troves of information:

• SEC (Securities and Exchange Commission): The holy grail. You can request comment letters on company filings (which reveal what the SEC is scrutinizing) and records of investigations.
• FDA (Food and Drug Administration): Essential for biotech and pharma investors. Request clinical trial data, inspection reports, and adverse event reports.
• Department of Defense (DoD): For companies that are major government contractors, you can request details about contracts and performance reviews.
• EPA (Environmental Protection Agency): Crucial for industrial, chemical, and energy companies.

Most federal agencies now have online FOIA portals that make submission simple. In your request, you should:

1. Clearly state that you are making a request under the Freedom of Information Act.
2. Be as specific as possible about the records you want.
3. State your willingness to pay reasonable fees for processing, though many requests for personal or non-commercial use have their fees waived.

While powerful, FOIA is not a magic wand. Be prepared for the following:

• Patience is a Virtue: The process is not quick. It can take weeks, months, or even longer to get a response. Follow up politely but persistently.
• Redactions are Common: Agencies can withhold or “redact” information that falls under one of nine exemptions, such as protecting trade secrets or personal privacy. You might receive documents that look like a checkerboard of black ink.
• International Alternatives: The term FOIA is specific to the U.S., but don't despair, European investors! Most developed countries have their own “access to information” or “freedom of information” laws (e.g., the Freedom of Information Act 2000 in the UK). The principles are the same: use them to ask questions and get answers directly from the source.