Topic No. 7: Confidential Treatment Applications Submitted Pursuant to Rules 406 and 24b-2
Date: December 19, 2019; Amended March 9,
2021
Summary: This guidance addresses how and
what to submit when filing an application objecting to public release of information
otherwise required to be filed under the Securities Act and the Securities Exchange
Act. This guidance replaces and supersedes the guidance provided in Staff Legal
Bulletins 1 and 1A.
Supplementary Information:
The statements in this CF Disclosure Guidance represent the views of the Division
of Corporation Finance. This guidance is not a rule, regulation or statement of
the Securities and Exchange Commission. Further, the Commission has neither
approved nor disapproved its content. This guidance, like all staff guidance,
has no legal force or effect: it does not alter or amend applicable law, and it
creates no new or additional obligations for any person.
Introduction
Securities Act Rule 406[1] and Exchange Act Rule 24b-2[2] provide the exclusive means for companies to object to the public release
of confidential information that is otherwise required to be filed. While the
rules refer to “documents” that contain confidential information, generally,
applications for confidential treatment pursuant to these rules relate to
material contracts required to be filed as exhibits to filings.[3] Prior to March 2019, confidential treatment applications under these rules
used to be the primary method for companies to protect confidential commercial
or financial information filed in materials contracts. In March 2019, the
Commission changed several of its exhibit filing requirements to allow companies
to omit immaterial, competitively harmful information without having to provide
the information to the Commission and request staff approval of the
omissions.[4] While most companies now rely on those provisions, the process described
in this guidance is still an available alternative to companies that wish to
protect confidential information using the traditional confidential treatment
application process. This guidance also applies to those filings, such as
Schedule 13D or filings whose exhibit requirements are set out in Item 1016 of
Regulation M-A, where confidential treatment applications are still the only
available method to protect private information in filed exhibits.
How to apply for confidential treatment
File the exhibit on EDGAR without the confidential information
To apply for confidential treatment under Rules 406 and 24b-2, an applicant
must file the required exhibit with the associated filing. The applicant
must omit all confidential information from that exhibit and must mark it to
indicate where it has omitted information. The filing must indicate, at the
appropriate places in the exhibit, that the confidential information has
been filed separately with the Commission.
Submit a written application
The applicant must send a paper application to the Office of the Secretary in
which it objects to public disclosure of the confidential information.[5] As required by Rules 406 and 24b-2, the applicant must:
- Provide one unredacted copy of the contract required to be filed with the Commission with the confidential portions of the document identified;
- Identify the Freedom of Information Act[6] exemption it is relying on to object to the public release of the
information and provide an analysis of how that exemption applies to the
omitted information. Often, this is the exemption provided by Section 552(b)(4)[7] of the FOIA, which protects “commercial or financial information obtained from a person and privileged or confidential.” If this is the case, the Supreme Court’s decision in Food Marketing Institute v. Argus Leader Media, 139 S.Ct. 2356 (2019) addresses the definition of confidential and may be helpful in providing this analysis;
- Justify the time period for which confidential treatment is sought;
- Explain, in detail, why, based on the applicant’s specific facts and circumstances, disclosure of the information is unnecessary for the protection of investors. This generally is encompassed in a materiality discussion, addressed below;
- Provide written consent to the furnishing of the confidential information to other government agencies, offices or bodies and to the Congress;
- Identify each exchange, if any, with which the material is filed (required in applications under Rule 24b-2 relating to Exchange Act filings only); and
- Provide the name, address and telephone number of the person with whom the Division should communicate and direct all issued notices and orders.
Additional considerations
Consistent with our investor protection mandate and the provisions of the FOIA,
we also consider additional information when assessing the potential impacts of
the proposed omissions of information from material contracts. These
considerations generally fall into two categories:
Materiality of the omitted information
We do not permit filers to omit material information from an exhibit, even if
it has been previously treated as confidential by the applicant.
While evaluating a confidential treatment application, we consider the
omitted provisions and information provided in the application and, if it is
clear from the text of the filed document and the associated application
that the redacted information is not material, we will not question the
applicant’s materiality representation. If it is not clear to us whether
some or all of the omitted information is not material, we will discuss our
concerns with the applicant. If we are unable to agree that some or all of
the omitted information is immaterial, we will request an amended
application and amendment to the filing.
Excessive omissions
If the applicant omits information beyond what it customarily and actually
treats as private or confidential, we will request an amendment with more
circumscribed omissions and an amended application.
Division review of applications for confidential treatment
The Division reviews all applications for confidential treatment to determine
whether the applicant has provided all information necessary to warrant the
issuance of an order granting the request for confidential treatment.
If we require additional information to assess the application, we will convey
any comments to the applicant by telephone and request a written response. Upon
resolution of any comments, we will grant the application or allow the applicant
to withdraw it, as appropriate. If we determine to grant an application, we will
issue an order and post it with the company’s filing history on sec.gov. We will
notify the applicant by phone that we have posted the order.
If the applicant does not respond to our comments or our comments are not
resolved, we may take action to deny the application. We will notify the
applicant or the agent for service by registered or certified mail and advise it
that it may petition the Commission for review of a determination by the
Division disallowing the objections.[8] If as a result of this process we ultimately issue an order denying the
application, we will post the denial order with the company’s filing history on
sec.gov.
Options for when a confidential treatment order is about to expire [as amended March 9, 2021]
Companies that previously have obtained a confidential treatment order have three
choices of what to do when the order is about to expire:
Refile the unredacted exhibit
If the contract is still material, refile it in complete, unredacted form if
none of the information needs to be protected from public disclosure.
Extend the confidential period pursuant to Rules 406 or 24b-2
If the contract continues to be material, and the previously redacted
information continues to be confidential, companies may request to extend
the period of confidential treatment by filing an application under Rule 406
or Rule 24b-2 to continue to protect the confidential information from
public release.
If the order is about to expire and initially was issued after October
15, 2017
If the order is about to expire and was initially issued after October 15,
2017, companies may use the short form application, which provides a streamlined
process to file an application to extend the time for which confidential
treatment has been granted.[9]
Submit short form applications to CTExtensions@sec.gov.
Do not use this email address for any other type of confidential treatment
application.
If the order is about to expire and initially was issued on or before
October 15, 2017
If the order is about to expire and initially was issued on or before October
15, 2017, companies may file new, complete applications for confidential
treatment under Rule 406 or Rule 24b-2. The short form application is not
available in these cases.
Submit new applications to the Office of the Secretary before an order will
expire and provide sufficient time for staff review and processing.
Transition to the rules governing the filing of redacted exhibits under Regulation S-K Item 601(b)(10)(iv)[10] and parallel rules
If the initial confidential treatment order was issued on or before October
15, 2017, and if the contract continues to be material, companies have the
option to transition to compliance with the requirements set out in
Regulation S-K Item 601(b)(10) and other parallel rules, referred to here as
the redacted exhibit rules. The redacted exhibit rules allow for the filing
of redacted exhibits without submitting an explanation or substantiation to
the SEC, or providing an unredacted copy of the exhibit, except upon request
of the staff. In order to transition to the redacted exhibits rules in these
situations, a company would only be required to refile the material contract
in redacted form and comply with the legend and other requirements of the
applicable redacted exhibit rule, most commonly Item 601(b)(10)(iv) of
Regulation S-K. We anticipate that many if not most companies will chose to
transition to this process since substantiation of compliance and submission
of unredacted materials to the staff is only required upon staff
request.
With regard to the timing of the transition, the staff will not recommend
enforcement action to the Commission if a company refiles a redacted exhibit
in compliance with the redacted exhibit rules in the company’s first
Exchange Act report following the expiration of the confidential treatment
order.[11]
If you have questions relating to the filing and processing of extension
requests, or transitioning to compliance with the redacted exhibit rules,
email us at CTExtensions@sec.gov and ask us to call you at the
phone number of your choice to discuss your questions. Do not include any
confidential information in your emails.
Footnotes
[1]
17 CFR 230.406.
[2]
17 CFR 240.24b-2.
[3]
We will refer to documents that are the subject of a confidential
treatment request under Rules 406 and 24b-2 as “documents,” “material
contracts” or “exhibits.”
[4]
See Release No. 33-10618 (March 20, 2019)[84 FR 12674].
[5]
Rules 406 and 24b-2 provide that the confidential information will not be
made publicly available at least as long as the final disposition of the
application is pending.
[6]
5 USC 552.
[7]
5 USC 552(b)(4).
[8]
See 17 CFR 201.431.
[9]
Pursuant to this application, the applicant can affirm that the most
recently considered application continues to be true, complete and
accurate regarding the information for which the applicant continues
to seek confidential treatment and indicate the desired time period
of the extension. The applicant must provide a brief explanation to
support the request. The applicant is not required to refile the
unredacted documents or provide the supporting analysis presented in
the previous application for that document(s) if the analysis
remains the same. If the applicant reduces the extent of omitted
information, it must file the revised redacted version of the
exhibit on EDGAR when it submits the short form extension
application.
[10]
17 CFR 229.601(b)(10)(iv).
[11]
If a company’s confidential treatment order was granted on or before
October 15, 2017, it does not have to wait for the order to expire
to transition to compliance with the redacted exhibit rules. It can
transition by complying with those rules in a new filing or by
amending a previously filed document to refile a redacted
exhibit.