The Securities and Exchange Commission constantly promotes transparency, but one critic says the regulator has failed to practice what it preaches.

To be sure, that critic — John Gavin, president of research firm SEC Insight — has an axe to grind. Gavin earns a living by mining SEC correspondence. His firm uses Freedom of Information Act (FOIA) requests as an investigative tool to pry company information from the SEC, and sells analysis based on its findings to institutional investors. His firm files upward of 1,500 FOIA requests each year. This week the SEC avoided sanctions by a federal judge in a lawsuit brought by Gavin after the agency refused to respond to his requests.

“We are gratified by the decision,” SEC spokesman John Nester said, though he declined to discuss the case further.

“This agency should hang its head in shame,” Gavin told CFO.com. “They misbehaved when they started fabricating reasons to block our access to records.”

Although U.S. District Judge Paul Magnuson expressed “great frustration” with the SEC’s tactics to delay responses to FOIA requests, the court did not find its actions worthy of legal sanctions. The case began three years ago when SEC Insight formally asked the commission to release information on orders of investigation, Wells notices, and subpoenas at several companies. When those requests were denied, Gavin concluded that the SEC was behaving inconsistently when it came to deciding which information it would release.

The SEC’s victory in the case was a mixed one — much of the information that the Minnesota-based SEC Insight sought was unveiled during the litigation. While the commission’s behavior was not sufficiently “outrageous” to warrant sanction, and Gavin’s legal fees of more than $100,000 will not be reimbursed, the court said SEC Insight “substantially prevailed” because its “vigorous prosecution” compelled the agency to release many documents and apply proper FOIA exemptions.

The commission often blames delayed responses to FOIA demands on a severe backlog of such requests. In an article published by the American Bar Association, attorneys Michael Rivera and Kimberly Cain wrote: “FOIA requests have become a cottage industry” because of research firms “bombarding” the SEC. Nester told CFO.com that approximately 92.25 percent of the FOIA requests the SEC receives come from commercial users such as SEC Insight.

A recent report by the Coalition of Journalists for Open Government shows that the SEC is among the slowest of all government agencies at handling FOIA requests. In 2006 the median response time for a “complex” request was 706 days, while the Department of Justice took 510 days and the Department of Energy took 431 days. The SEC’s backlog was the worst among government agencies.

CFO.com filed a FOIA request with the SEC on April 12, 2007, for an unrelated story, and has yet to receive a response.

In 2006 the SEC implemented a FOIA “action plan” to reduce its backlog. Between 2000 and 2006, the SEC received 42,000 FOIA requests, and currently has a backlog of 4,106 requests pending from 2005 and 2006, according to Nester. That backlog has been reduced by 60.5 percent since October 1, 2006, and is expected to be reduced by another 25 percent in 2007, he said.

Gavin remains skeptical because of his experience with the SEC, which he perceives as “probusiness.” “It opens the question of whether this is an agency that is genuinely overwhelmed or an agency that doesn’t want to comply,” he says.

Of course, a more-compliant SEC would be good for Gavin’s business. Although he says he has faced criticism from those who say he is misusing FOIA, he argues that he is merely seeking access to public information that might interest investors, not trying to garner trade secrets.

Rivera and Cain warn that companies should request “confidential treatment” for records submitted to the SEC to avoid unwanted information from becoming public. “Failing to do so leaves vulnerable documents that might otherwise qualify for protection under FOIA,” they write.

Of course, a valid subpoena could potentially force the release of such documents, and Gavin has already proved that he is not afraid to take the SEC to court. And, he says, he will most definitely continue to paper the agency with FOIA requests.