Freedom of Information Act (FOIA)

The Freedom of Information Act (often called FOIA) is a landmark U.S. federal law that gives you, or any member of the public, the right to request records from any federal government agency. Think of it as a key that unlocks a vast library of government documents that aren't typically published online or in a company's glossy reports. For a value investing practitioner, this isn't just some dusty piece of legislation; it's a powerful tool for investigative research. While the U.S. FOIA is the most famous, similar transparency laws exist in many countries, including the UK's Freedom of Information Act 2000 and the European Union's regulations on public access to documents. These laws empower investors to go beyond standard financial statements and conduct true due diligence, seeking information that can provide a critical edge in understanding a company's real-world operations and risks.

The core of value investing is knowing more about a business than the market does. It’s about building a deep understanding of a company to determine its intrinsic worth, separate from its fluctuating stock price. FOIA is your secret weapon in creating this information asymmetry in your favor. Legendary investor Warren Buffett famously said, “Risk comes from not knowing what you're doing.” By using FOIA, you can significantly reduce your “not knowing” factor. You can use it to:

• Uncover hidden risks, like regulatory investigations or product safety concerns.
• Verify a company's claims, especially regarding government contracts.
• Gain a more nuanced understanding of an industry's relationship with its regulators.

This isn't about finding a single “gotcha” document (though that can happen!). It's about piecing together a mosaic of information to see a clearer, more honest picture of a potential investment than what you'll find in an annual report.

The potential trove is vast, but it helps to know what you're looking for. The trick is to think about which government agency interacts with the company you're researching.

This is where the real gold can be found. You can request communications between a company and its regulators.

• Example 1 (Finance): Are you looking at a financial company? You could file a FOIA request with the U.S. SEC (Securities and Exchange Commission) for correspondence related to an inquiry into the company's accounting methods.
• Example 2 (Healthcare): Researching a pharmaceutical giant? A request to the FDA (Food and Drug Administration) for inspection reports of its manufacturing facilities or data from clinical trials could reveal issues long before they hit the headlines.

Many companies rely on the government as a major customer. Public filings might tell you they have a big contract, but a FOIA request can reveal the juicy details. You can ask for the contract itself, modifications, performance reviews, and even information on competing bids. This helps you assess the true profitability and stability of that revenue stream. Is the company a low-cost, effective provider, or did it just barely win the bid and might struggle to turn a profit?

For industrial, energy, or manufacturing companies, environmental and safety compliance is a huge potential liability. You can request records from the EPA (Environmental Protection Agency) or the Occupational Safety and Health Administration (OSHA). Finding a pattern of violations, warnings, or fines could signal poor management and major future costs that haven't been factored into the stock price.

Using FOIA isn't as simple as a Google search, but it's more accessible than you might think. It requires patience and precision.

1. 1. Identify the Right Agency: Where does the information live? If it's a drug, think FDA. A defense company, think Department of Defense. A bank, think SEC or the Federal Reserve.
2. 2. Craft a Specific Request: This is the most critical step. A vague request like “Everything you have on Tesla” will be rejected. Be precise. A good request sounds like: “I request all warning letters issued by the National Highway Traffic Safety Administration (NHTSA) to Tesla, Inc. regarding its Autopilot system between January 1, 2022, and today's date.”
3. 3. Submit and Wait: Each agency has a FOIA portal on its website for online submissions. After you submit, the agency is legally required to respond, but backlogs mean you could be waiting weeks or even months. Patience is a key part of the process.

FOIA is a powerful tool, but it’s not a magic wand.

• Exemptions: Not everything is available. Information that is properly classified for national security, would violate personal privacy, or reveals confidential trade secrets is exempt from disclosure. You'll often receive documents with sections blacked out—this is called a redaction.
• Time and Effort: This is a strategy for the patient, long-term investor, not the day trading enthusiast. The research and waiting time are significant.
• Global Variations: If you're investing in European companies, you'll need to use the specific information access laws of that country or the EU. The principles are similar, but the procedures and what's available will differ.