(Adds detail in 5th paragraph on judge's concurring opinion; comment from PIABA's lawyer in 7th paragraph)

Reuters (November 14, 2014 11:50 am) -- The U.S. Securities and Exchange Commission does not have to release records about its supervision of Wall Street's arbitration process to a group of investors' lawyers, a federal appeals court ruled on Friday.

The decision by the U.S. Court of Appeals for the District of Columbia Circuit is likely to end a long battle about public access to documents related to SEC oversight of the Financial Industry Regulatory Authority's arbitration system.

FINRA, Wall Street's private watchdog, runs the arbitration forum where investors and brokerages must resolve legal disputes. The SEC oversees and examines FINRA.

At issue was whether an exemption to the Freedom of Information Act should allow the SEC to keep certain records about arbitration sealed. The court agreed that the SEC had properly invoked the exemption, which protects information contained in "examination reports" that federal agencies use to regulate financial institutions, according to the decision.

Nonetheless, that exemption may be too broad for the U.S. financial system and its regulators, which "frequently operate under a haze of public distrust," wrote Judge Janice Brown, one of three judges who heard the case, in a separate concurring opinion.

The FOIA gives the public access to federal agency records, but carves out exemptions. In 2010, the SEC claimed such an exemption in turning down a request by the Public Investors Arbitration Bar Association a group of lawyers whose members represent investors in FINRA's arbitration system. PIABA lost again after a second SEC review and sued the agency.

"We are disappointed in the result," said Jehan Patterson, a lawyer for the litigation arm of Public Citizen, a consumer rights group in Washington that represented PIABA. The group agrees with Judge Brown's view on the exemption, Patterson said.

PIABA's president could not be reached for comment. A spokeswoman for FINRA, which was not a party, declined to comment.

PIABA wanted the documents, about FINRA's process for picking arbitrators, as a matter of transparency, it has said. Consumers are "forced" into arbitration when signing agreements to open accounts and should know how FINRA determines who hears cases, PIABA has said.

PIABA argued, among other things, that the FOIA exemption the SEC invoked should protect information related to actual financial examinations and not "administrative activities" such as overseeing FINRA's arbitration process. The court held that the exemption applies to documents the SEC collects while "examining any organization the agency regulates." (Reporting by Suzanne Barlyn; Editing by Dan Grebler)