SUMMARY: This staff legal bulletin sets forth views of the
Division of Corporation Finance ("Division") regarding the
requirements a registrant must satisfy when requesting
confidential treatment of information that otherwise is required
to be disclosed in registration statements, periodic reports and
other documents filed with the Securities and Exchange Commission
("Commission"). The procedures are contained in Rule 406 under
the Securities Act of 1933 and Rule 24b-2 under the Securities
Exchange Act of 1934.
SUPPLEMENTARY INFORMATION: The statements in this legal bulletin
represent the views of the staff of the Division of Corporation
Finance. This bulletin is not a rule, regulation or statement of
the Securities and Exchange Commission. Further, the Commission
has neither approved nor disapproved its content.
CONTACT PERSON: For further information, please contact L. Jacob
Fien-Helfman, Special Counsel, or Marija Willen, Regulatory
Counsel, at (202) 942-2997; the Special Counsel of the office in
the Division to which the company is assigned; or, for small
business issuers, the Special Counsel in the Office of Small
In recent years, the number of confidential treatment
requests ("CTRs" or "applications") processed by the Division has
increased steadily from approximately 540 in fiscal year 1992 to
more than 1,000 in fiscal year 1996. Applications as initially
filed often lack the information and analysis necessary for the
staff to evaluate compliance with the requirements of the rules.
Consequently, the staff frequently issues deficiency letters
which require the applicant to amend its application. Often the
applicant also must amend the filing covered by the application.
This legal bulletin provides guidance on the substantive and
procedural requirements contained in Rule 4061 under the
Securities Act of 1933 ("Securities Act")2 and Rule 24b-23
under the Securities Exchange Act of 1934 ("Exchange Act").4
The bulletin also suggests procedures that, while not required,
would facilitate the staff's processing of CTRs. This guidance
should help issuers prepare complete confidential treatment
applications and thereby reduce the time and costs incurred by
issuers and the Division in processing confidential treatment
Failure to comply with either the substantive or procedural
aspects of the Commission's confidential treatment process may
result in a denial of an application. In this regard, the
Commission has delegated authority to the Division to grant and
deny requests for confidential treatment.5
II. SUBSTANTIVE AND PROCEDURAL REQUIREMENTS
>A. General Discussion
The federal securities laws generally require any company
that is publicly held or that is registering its securities for
public sale to disclose a broad range of financial and non-
financial information in registration statements, annual reports
and other filings made with the Commission. The disclosure
requirements for financial and non-financial information
primarily are found in Regulation S-K and, for small business
issuers, Regulation S-B.6 Regulation S-X sets forth the
financial statement disclosure requirements.7
Sometimes disclosure of information required by the
regulations can adversely affect a company's business and
financial condition because of the competitive harm that could
result from the disclosure. This issue frequently arises in
connection with the requirement that a registrant file publicly
all contracts material to its business other than those it enters
into in the ordinary course of business.8 Typical examples of
the information that raises this concern include pricing terms,
technical specifications and milestone payments. To address the
potential disclosure hardship, the Commission has a system
allowing companies to request confidential treatment of
information filed under the Securities Act and the Exchange Act.
Specifically, Rules 406 and 24b-2 set forth the exclusive
means for obtaining confidential treatment of information
contained in a document filed under the Securities Act and under
the Exchange Act, respectively,9 that would be exempt from
disclosure under the Freedom of Information Act ("FOIA").10
The rules incorporate the criteria for non-disclosure set
forth in FOIA and the Commission's FOIA rules.11 FOIA requires
all federal agencies to make specified information available to
the public, including the information required to be filed
publicly by Commission rules. FOIA contains, however, nine
specific exemptions.12 The rules require that CTRs contain an
analysis of the applicable FOIA exemption. Most applicants rely
on the exemption that covers "trade secrets and commercial or
financial information obtained from a person and privileged or
confidential" which is commonly referred to as "the (b)(4)
>B. Substantive Requirements: General
>>1. Confidential treatment cannot be granted
if the information is publicly disclosed.
The applicant must make every effort not to disclose any of
the confidential information. For example, the applicant should
safeguard carefully copies of agreements and restrict access to
only those who have a need to know the information or who are
under a duty to keep the information confidential. The
application must include an affirmative representation as to the
confidentiality of the information it covers.
Based on the staff's experience, there are a few common
mistakes that result in the inadvertent disclosure of the
information that is the subject of the application.14 The
following points illustrate typical mistakes.
For paper filings, the text can be read through
the marking used to delete the information.
For filings by the Commission's electronic filing
system, EDGAR,15 the applicant fails to remove all of
the confidential information from the electronic
version of the document.
The applicant omits the information, such as
pricing terms, from one part of the document, but not
from another part of that document or another document
or report. Applicants should be aware that information
may appear in more than one place in a document. For
example, a section heading may appear in the table of
contents of an agreement as well as in the agreement
itself. In addition, preparers of applications should
pay particular attention to the description of the
business of the company, the financial statement
footnotes and the Management's Discussion and Analysis
of Financial Condition and Results of Operations
section of disclosure documents.
Another party to the agreement has disclosed (or
intends to disclose) the information publicly.
The company has included the information in a
press release or news article or has provided the
information to one or more analysts.
The company has disclosed the information in
documents filed publicly with other regulators, such as
insurance, banking, utility or environmental
The staff understands, however, that an applicant may in a
general manner inform the market about, for example, a newly
negotiated contract. This may occur through various methods such
as the issuance of a press release. General disclosure about a
contract should not prevent an applicant from requesting
confidential treatment of selected terms of the contract that
>>2. Required and/or material information
must be disclosed, even if confidential.
In some instances the Commission's specific disclosure
requirements cover information that could be withheld under FOIA.
Except in unusual circumstances, disclosure required by
Regulation S-K or any other applicable disclosure requirement is
not an appropriate subject for confidential treatment, regardless
of the availability of an exemption under FOIA. This type of
information includes, for example,
the identity of a 10% customer;
the dollar amount of firm backlog orders;
* interest expense and other similar terms in a
material credit agreement;
"...the duration and effect of all patents,
trademarks, licenses, franchises and concessions held";16
required disclosure in the Management's Discussion
and Analysis of Financial Condition and Results of
Operations section17 relating for instance to loan
arrangements and installment payment obligations on
In addition, confidential treatment is generally not
appropriate for information that is material to investors.
Depending on the facts and circumstances, examples of material
information could include the name of a key supplier, material
contingency clauses, indemnification clauses, anti-assignability
clauses, take-or-pay clauses, and financial covenants in material
financing or credit agreements. Materiality must be analyzed in
the context of the issuer's business, financial condition and
financial results. Where there is any question about the
materiality of the information, the application must address the
issue and provide factual support for the issuer's belief that
the information is not material to investors.19
>C. Substantive Requirements: Specific
In addition to complying with the general substantive
requirements discussed above, an application for confidential
treatment must comply with several more specific substantive
requirements. In the staff's experience, however, applications
often do not.
>>1. The application should not be overly
Applicants should be selective when identifying the
information covered by their application. Frequently,
applications are overly broad and attempt to cover information
that is not confidential under FOIA and the Commission's
confidential treatment system. The information covered by an
application should include no more text than necessary to prevent
competitive harm to the issuer. A CTR should cover only those
words and phrases for which confidentiality is necessary and
supported by FOIA and applicable Commission rules.
The staff will comment on applications that cover lengthy
portions of agreements. Absent a satisfactory demonstration that
such extensive omissions are appropriate under the Commission's
confidential treatment rules, the CTR will be denied. For
example, the omission of an entire section is not appropriate
without an analysis that specifically addresses:
(i) why the disclosure of the existence of the section
would be commercially harmful; and
(ii) why its disclosure is not necessary for the
protection of investors.
>>2. Applicants must set forth their analysis
of the exemption.
The rules require that the application include a "statement
of the grounds of the objection referring to and analyzing the
applicable exemption(s) from disclosure under...the Commission's
rule adopted under [FOIA]."20 Applicants should note that an
agreement between the parties to keep information confidential
does not itself provide adequate justification for confidential
treatment. The Commission's confidential treatment system is
premised on the disclosure requirements of the federal securities
laws and FOIA, and does not contemplate non-disclosure based on a
private contractual provision between the parties.
The application should avoid conclusory statements and must
include a sufficient legal analysis, including case law
references. Two seminal cases covering the definition of
"confidential" information are National Parks and Conservation
Association v. Morton, 498 F.2d 765 (D.C. Cir. 1974) and National
Parks and Conservation Association v. Kleppe, 547 F.2d 673 (D.C.
The application also should include a factual analysis of
the basis for the exemption requested (for example, commercial
harm to the filing party) with respect to the specific
information that is the subject of the request. Where the
application relates to different types of information (for
example, trade secrets and financial provisions), the application
should address each type separately.
Finally, the application should describe anything about the
issuer's business or the specific contract that would help the
staff evaluate the sensitivity and importance of the information
to the issuer.
>>3. Applicants must specify a particular
The application must request a specific date (year, month
and day) for the termination of confidential treatment of the
subject information. Further, the application must include an
analysis that supports the period requested.21 This analysis
must be specific to the confidential information and to the
company and its business. The application should tie the term to
specific provisions of, anticipated performance under, or other
facts related to, the contract from which the confidential
information is omitted.
Confidential treatment beyond the minimum term of an
agreement usually is inappropriate, as the value of the
information typically is associated with the effective period of
an agreement. Where continued confidential treatment after the
term of the agreement is justified, the staff will consider
applications to extend the period. This bulletin addresses
applications for extension in Section III below ("Other
>>4. Applicants must identify clearly the
information that is the subject of the
Applicants must identify clearly the information that is the
subject of a request for confidential treatment. To make sure
there is a complete record as to which information has been
granted confidential treatment, the application should describe
each item or category of information omitted pursuant to the CTR.
The staff will question any inconsistencies between the material
identified in the application and the material deleted from the
>>5. Applicants must consent to the release
of the information for official purposes.
The application must include a written consent to the
furnishing of the confidential portion "to other government
agencies, offices or bodies and to the Congress."22 Conditions
to this consent — which have appeared most frequently when the
applicant demands notification if the Commission releases the
subject information to any of the institutions listed — are not
consistent with the requirement of the rules. Applicants should
recognize that in granting any order for confidential treatment
pursuant to delegated authority, the staff of the Commission is
not explicitly or implicitly agreeing to furnish notice other
than as required under the applicable rules and regulations.
>D. Procedural Requirements
>>1. Applicants must file the application
with the Office of the Secretary.
Applicants must send every application for confidential
treatment to the Office of the Secretary in an envelope marked
"confidential" which is separate from the envelope for any
materials which are to be or have been filed publicly.23
Applicants should send to the filing desk only documents that
they mean to have on public file.
>>2. Applicants, including EDGAR filers, must
file the application in paper form.
Both rules require, in introductory notes, that applicants
file CTRs in paper form, not by EDGAR, the electronic filing
system.24 This paper filing requirement applies regardless of
whether the applicant files other documents electronically. Once
an applicant files electronically by mistake information meant to
be covered by a CTR, such information is immediately available to
the public and is no longer confidential.25
>>3. Applicants should file the application
at the same time they file the material from which
they have omitted the confidential information.
The confidential treatment process contemplates that issuers
file CTRs at the same time that they file the publicly disclosed
portions.26 The staff will not process the application unless
and until the material from which information is omitted has been
filed publicly. There is only one exception to that general rule
with respect to domestic registrants. In the case of joint proxy
statements/prospectuses filed confidentially pursuant to Rule 14a-
6(e)(2) of Regulation 14A, the registrant customarily files the
wrap registration statement on Form S-4 only after the staff has
completed its review of the non-public proxy
statement/prospectus.27 The staff must review the CTR on a
preliminary basis at the same time it is reviewing the proxy
statement/prospectus to avoid delays in the acceleration of
effectiveness at the time the registrant files the Form S-4.
>>4. Applicants must omit from the public
filings all of the information that is the subject
of the application.
As discussed above, the grant of confidential treatment is
premised on the subject information being non-public. See
Section II.B.1 of this bulletin. The release of the information
by the issuer, even if inadvertent, precludes the grant of
>>5. Applicants must adequately mark the
confidential portions of publicly filed documents.
The applicant must "indicate at the appropriate place in the
material filed that the confidential portion has been so omitted
and filed separately with the Commission."28 An application
will be considered incomplete unless the publicly-filed document
has been marked to indicate both that the material has been
omitted pursuant to a request for confidential treatment and that
the material has been filed separately.
A recommended method of marking is to place an asterisk or
other mark in the precise places in the document where the
applicant deletes information. If the registrant uses this
method of marking, it should key the mark to a legend which
includes the required language on the page from which material is
omitted and/or on the first page of the exhibit. In the unusual
case where the confidential information consists of multiple
pages, the publicly-filed document also must include an
indication of the number of pages omitted pursuant to the CTR.
Finally, the applicant should mark the exhibit index to
indicate that portions of the exhibit or exhibits have been
omitted pursuant to a request for confidential treatment.
>>6. Applicants should show clearly which
portions of the complete documents filed with the
application are the subject of the CTR.
The application must include one complete copy of the
document clearly marked to show those portions of the document
covered by the CTR. The applicant must submit the complete
marked copy "in the same form as the remainder of the material
filed."29 The confidential segments should be underlined,
highlighted, circled or otherwise clearly marked in that copy.
>>7. Applicants should indicate to whom
correspondence, orders and notices should be sent.
Rule 406(b)(2)(v) requires the application to include "the
name, address and telephone number of the person to whom all
notices and orders issued under [the] rule should be directed."30 If an application filed pursuant to Rule 24b-2 does not
specifically include this information, the service list for the
order will include the person who prepared the application.
III. OTHER MATTERS
>A. Requests for extension of previously granted
orders for confidential treatment
An applicant requesting the extension of a previously
granted order for confidential treatment should submit the
application before the expiration date of the earlier order.
After the expiration date of an order, the subject information is
publicly available upon request under FOIA.
The request for extension (including the substantive
supporting argument) must comply with the disclosure and
confidential treatment rules at the time the applicant submits
the extension request. The application should include a complete
copy of the agreement or agreements, a copy of the original
order, and copies of the original application and correspondence
with the Commission, if available.
The substantive and procedural requirements discussed in
this bulletin are equally applicable to any extension request.
Therefore, the applicant should represent that (a) none of the
confidential information has been disclosed, (b) disclosure of
the information will cause substantial competitive harm to the
issuer, and (c) disclosure of the confidential information is not
necessary for protection of investors.
To the extent that the applicant cannot make these
representations, the applicant should refile the agreement to
disclose the information that no longer satisfies the
requirements. The applicant should refile the agreement with the
first filing it makes after the order expires. The extension
application should include a request for confidential treatment
of the information in the newly filed document as well as
continuing confidential treatment for the document that the
issuer filed earlier. The applicant should take care to cite the
appropriate rule for each part of the application.
>B. Timing of CTR Submission
>>1. Initial public offerings
The staff processes confidential treatment requests filed
with initial public offerings pursuant to Rule 406 concurrently
with the review of the registration statement. All issues must
be resolved, and the CTR must be complete, before the
acceleration of effectiveness of the registration statement.
Issuers are advised to file the CTR at the time they initially
file the registration statement, rather than waiting to file the
agreements and the CTR with later amendments to the registration
statement. See Section II.D.3. of this bulletin regarding the
need to file the application and the agreements at the same time.
In addition, because the issuer files the CTR and the
registration statement separately, the staff may not be aware
that a CTR has been filed at the time of the filing of the
registration statement. The applicant should include a reference
to the related application for confidential treatment in its
cover letter to the registration statement.
>>2. Registered offerings by reporting
Regardless of whether the staff selects a registration
statement for review, the staff must act on a confidential
treatment request filed in connection with a registration
statement pursuant to Rule 406 before the acceleration of
effectiveness of a pending registration statement.
Please note that the same restriction applies to
registration statements that incorporate by reference periodic
reports. All CTRs filed pursuant to Rule 24b-2 must be completed
before the effectiveness of the registration statement can be
accelerated. The applicant should include in its cover letter to
the registration statement a reference to the pending CTR, and
issuers should allow enough time in their offering schedules for
processing of the CTR by the staff.
>>3. Applications pursuant to Rule 24b-2 when
no registration statement is pending
The goal of the Division is to complete the initial review
of confidential treatment requests filed pursuant to Rule 24b-2
within 28 days from the filing date. Comments will usually be
issued within this period. If the staff has no comments, an
order will be issued granting the CTR. If the staff issues
comments, applicants must respond to those comments within 21
days of the date of the comment letter. If the applicant does
not respond within this period, the staff will consider, pursuant
to its delegated authority from the Commission, what action is
warranted, including whether to grant, deny, or grant and deny in
part confidential treatment applications based on the record
before it. The staff will base its action on the initial
application and all amendments and supplemental information
See Item 601(b)(10) of Regulation S-K [17 CFR
229.601(b)(10)]. Item 601(b)(10) requires that:
Every contract not made in the ordinary course of
business which is material to the registrant and is to
be performed in whole or in part at or after the filing
of the registration statement or report or was entered
into not more than two years before such filing.
While Rule 406 under the Securities Act of 1933, in
particular, appears to contemplate confidential treatment
for portions of filed documents, this Bulletin will address
requests made with respect to exhibits to filings only.
Issuers requesting confidential treatment with respect to
other portions of filings should bring such requests to the
attention of the staff before public filing.
This staff legal bulletin is not intended to include an
exhaustive discussion of all Commission rules relating to
confidential treatment of information submitted to the
Commission. For example, Rule 418 of Regulation C under the
Securities Act of 1933 [17 CFR 230.418] and Rule 12b-4 under
the Securities Exchange Act of 1934 [17 CFR 240.12b-4] cover
specific types of supplemental information requested by the
staff in processing registrant filings with the Commission.
Rule 171 under the Securities Act [17 CFR 230.171] and
Rule 0-6 under the Exchange Act [17 CFR 240.0-6] cover the
disclosure of information detrimental to the national
security of the United States. Public availability of no-
action and interpretive letters is governed by Rule 81 under
the Rules of Practice [17 CFR 200.81]. Confidential
treatment of other information not required to be filed
under either Act is covered by Rule 83 under the Rules of
Practice [17 CFR 200.83]. Confidential treatment of the CTR
and supplemental information provided to the staff in
connection with the processing of the CTR should be
requested pursuant to Rule 83.
Even if the disclosure is made in error, whether by the
issuer or its agent, the staff will not attempt to edit a
filed document and will not grant confidential treatment for
any of the disclosed information. See Release No. 33-6977
(February 23, 1993) [58 FR 14628].
In a release issued on December 6, 1996 (Release No.
33-7369) [61 FR 65440], the Commission solicited comment as
to whether the EDGAR system should be enhanced to allow
confidential treatment requests to be filed electronically.
See Rule 406(b) [17 CFR 230.406(b)] and Rule 24b-2(b) [17
CFR 240.24b-2(b)]. As an accommodation to foreign private
issuers, the Division developed an informal procedure
whereby the staff will review and comment on draft
registration statements. Typically, a foreign private
issuer will formally file a CTR concurrently with its
submission of its draft registration statement. This
bulletin does not change the procedures applicable to
foreign private issuers.