SEC Division of Corporate Finance Issues Guidance Regarding Expiring Confidential Treatment Orders

Kramer Levin Naftalis & Frankel LLP

On Sept. 9, the SEC’s Division of Corporate Finance (the Division) amended CF Disclosure Guidance: Topic No. 7 (Topic No. 7) and issued guidance regarding the options available to companies when a previously obtained confidential treatment order is about to expire.


Companies seeking to object to the public release of information that would otherwise have to be filed pursuant to the SEC’s disclosure requirements can file what is known as a “confidential treatment request” pursuant to Rule 406 of the Securities Act of 1933 (Rule 406) and Rule 24b-2 of the Securities Exchange Act of 1934 (Rule 24b-2). Confidential treatment requests generally pertain to information contained in material contracts being filed as exhibits to public filings. Historically, in order to make a confidential treatment request, companies were required to submit a detailed application to the SEC that identifies the particular text for which confidential treatment is sought, a statement of the legal grounds for the exemption and an explanation of why disclosure of the information is unnecessary for the protection of investors. If the application is approved, a confidential treatment order is granted and the applicant is permitted to redact the information in question.

Prior to March 2019, submitting a formal confidential treatment request was the primary method for companies to protect sensitive commercial or financial information in their material contracts. However, in March 2019, the SEC changed several of its exhibit filing requirements to allow companies to omit information if the company determines that the information in question is immaterial and would likely cause it competitive harm if publicly disclosed, without having to go through the formal application process described above. While most companies now rely on these provisions to protect sensitive information, the formal application process for submitting a confidential treatment request is still available to companies that wish to use it and for certain filings — such as Schedule 13D filings or those whose exhibit requirements are set out in Item 1016 of Regulation M-A — that are not covered by the new exhibit filing rules. Accordingly, the Division’s amendments to Topic No. 7 explain the options available to companies that previously used or continue to use the formal confidential treatment request process and whose confidential treatment order is about to expire.

Options for When a Confidential Treatment Order Is About to Expire

The Division stated that companies that have obtained a confidential treatment order have the following three options for what to do when the order is about to expire:

1. Refile the unredacted exhibit

If the contract is still material, refile it in its complete, unredacted form if none of the information (including the information previously deemed confidential) needs to be protected from public disclosure.

2. Extend the confidential period pursuant to Rule 406 or Rule 24b-2

If the contract is still material and the previously redacted information continues to be confidential, request to extend the period of confidential treatment by filing a new confidential treatment request under Rule 406 or Rule 24b-2.

If the confidential treatment order was initially issued less than three years ago, companies may use the short form application, which provides a streamlined process for filing an application to extend the time for which confidential treatment has been granted. Using 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. Furthermore, the applicant is not required to resubmit the unredacted documents or provide the supporting analysis presented in the previous application if the analysis remains the same.

If the confidential treatment order was initially issued more than three years ago, the short form application is not available, and companies may file new, complete applications for confidential treatment under Rule 406 or Rule 24b-2.

3. Transition to the new rules governing the filing of redacted exhibits under Regulation S-K Item 601(b)(10)(iv) and parallel rules

If it has been more than three years since the initial confidential treatment order was issued, and if the contract continues to be material, companies may transition to the new exhibit filing requirements set out in Regulation S-K Item 601(b)(10) and other parallel rules. In order to do so, 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 exhibit filing rule, most commonly Item 601(b)(10)(iv) of Regulation S-K. The Division stated that it expects many if not most companies to choose this process. With regard to the timing of the transition, the Division stated that it will not recommend enforcement action to the SEC if a company refiles a redacted exhibit in compliance with the new exhibit filing rules in the company’s first Exchange Act report following the expiration of the confidential treatment order. Companies may also choose to transition earlier, any time after three years following the issuance of the confidential treatment order, by complying with the new exhibit filing rules in a new filing or by amending a previously filed document to refile a redacted exhibit, either before or after expiration of the confidential treatment order.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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