The SEC is now publicly releasing via its EDGAR database staff comment letters and issuer response letters relating to Securities Act and Exchange Act filings subject to SEC review. While public access to this correspondence previously required a formal request under the Freedom of Information Act, it is now available to the general public free of charge through the SEC's website. This has made it increasingly important for issuers and their counsel to understand and properly utilize the confidential treatment request process to provide the SEC with necessary information while at the same time limiting disclosure of confidential information and materials.
The procedures for seeking confidential treatment of information contained in a document required to be filed under the Securities Act or Exchange Act, such as a material agreement or other exhibit, are set forth in Securities Act Rule 406 and Exchange Act Rule 24b-2. Applications for confidential treatment of information not required to be filed, such as information contained in responses to comment letters and supplemental materials such as marketing materials, internal financial projections, board books and minutes and the like that are requested by the SEC in connection with the SEC's review process, are governed by Rule 83 of the SEC's Rules of Practice. Issuers may also request the return of materials pursuant to Securities Act Rule 418(b) or Exchange Act Rule 12b-4.
If you are seeking to protect the confidentiality of supplemental materials, you need to make a confidential treatment request under Rule 83 with respect to those materials and simultaneously request that they be returned under Rule 418(b) or 12b-4. Rule 418(b) and 12b-4 requests may only be made with respect to materials that are not filed with the SEC via EDGAR.
If the SEC rejects your request for the return of the information, the information will not be automatically disclosed but will instead remain protected until a third party makes a formal request under FOIA. The SEC will then give you the opportunity to provide your reasons for seeking the request and will only disclose the information if it determines that the information does not warrant confidential treatment.
Rule 406 or 24b-2 Requests
Indicate Grounds for the FOIA Exemption. When you are making a confidential treatment request under Rule 406 or 24b-2, you must expressly refer to the specific exemption from disclosure under FOIA and give the grounds for seeking the exemption. The information covered by the request must be narrowly drawn to cover only information that is confidential under FOIA. There are nine exemptions available under FOIA, but issuers generally rely on the exemption for "trade secrets and commercial or financial information obtained from a person and privileged or confidential," under Section (b)(4) of FOIA, commonly referred to as the "(b)(4) exemption," when seeking confidential treatment in connection with the comment letter process.
You must indicate reasons for seeking confidential treatment and provide facts and sufficient legal analysis specific to the information subject to the request to support your view that disclosure would cause the issuer substantial commercial harm or would be otherwise injurious to the issuer. Where a request is made regarding different types of information, such as trade secrets and pricing information, you will need to specifically address each type of information separately and provide adequate information about the issuer's business to enable the SEC to evaluate the risks associated with disclosure of the information. Just because the information is subject to a confidentiality agreement does not alone sufficiently justify a grant of confidential treatment by the SEC. To avoid breaches, issuers should make certain to provide exclusions for disclosure to the SEC and the issuer's auditors and counsel under their confidentiality agreements.
Keep It Narrow. The SEC will deny as overly broad confidential treatment requests covering lengthy portions of agreements where you do not demonstrate that the omission is appropriate. Omissions will only be acceptable where you provide analysis explaining why the disclosure would be commercially harmful and why disclosure is not necessary for the protection of investors. The narrower you make your request, the more likely it will be accepted.
Specify Confidential Treatment Period. Indicate the period of time during which you are seeking confidentiality and provide justification for the period requested, explaining why the amount of time requested is appropriate in light of the issuer's business. The SEC has stated that confidential treatment beyond the minimum term of an agreement is generally inappropriate because the value of the information is typically associated with the term of the agreement, but extensions may be granted beyond the term with appropriate justification.
Avoid Public Disclosure of the Information. Because confidential treatment will only be given to information that is not publicly disclosed, issuers should take care to disclose the information only on a need-to-know basis to persons bound by a duty to keep it confidential. Even if disclosure is inadvertent, by the issuer or its agent, the SEC will not grant confidential treatment. Be careful to avoid these common mistakes, which can result in inadvertent disclosure:
Submitting to the SEC a redacted paper filing where a marker is used to delete portions of the document, but where the text is not completely blotted out, resulting in text that can be read through the markings. Consider submitting photocopies of the redacted documents rather than originals.
Submitting via EDGAR a filing where all of the confidential information is not removed from the electronic version of the document.
Submitting a redacted document that deletes the confidential information from one part of the document but fails to delete it from another part, a schedule, or another document or report in which the information appears.
Submitting a redacted agreement that has been or is expected to be publicly disclosed in its entirety by another party to the agreement.
Including the information in a press release or news article.
Disclosing the information in documents filed publicly with other regulators, such as insurance, banking, utility or environmental regulators.
No Protection for Material Information. Confidential treatment will not be granted for information that the issuer is required to disclose under Regulation S-K or any other securities rule or regulation, or for information that is material to investors, such as names of key suppliers, material contingency clauses, financial covenants, credit agreements or other material clauses in important agreements or materials.
Procedure. Follow these steps to make a request under Rule 406 or 24b-2:
Send the application to the SEC in an envelope marked "confidential" that is separate from any envelope containing materials publicly filed or to be publicly filed by the issuer.
Send the application to the Office of the Secretary of the SEC and NOT to the SEC's filing desk.
File the application in paper form. If you mistakenly file electronically information intended to be covered by a confidential information request, the information can no longer be afforded confidential treatment.
File the application in paper form concurrently with your electronic filing of the publicly disclosed portions of the documents.
In the electronically filed document, indicate in the appropriate places that the confidential portion has been omitted pursuant to a request for confidential treatment and that the material has been filed separately.
The SEC recommends placing an asterisk or other mark where the information has been deleted and keying the mark to a legend that includes the required language on the page from which material is omitted and on the first page of the exhibit and marking the exhibit index to indicate that portions of the exhibit have been omitted pursuant to a request for confidential treatment.
Where the confidential information consists of multiple pages, the publicly filed document must indicate the number of pages omitted.
Include one complete copy of the documents clearly marked to show the portions covered by the request.
Include the name, address and telephone number of a contact person.
Rule 83 Requests
Like Rule 406 and 24b-2 requests, Rule 83 requests must be narrowly tailored to only cover those portions of a document that require confidential treatment. However, you are not required to explain your basis for requesting confidential treatment under Rule 83 until a request is made for disclosure of confidential information under FOIA, though the SEC may question a request for confidential treatment under Rule 83 that is on its face overly broad. Confidential treatment requests under Rule 83 will not be granted with respect to the text of the actual SEC comment, calculations of financial information that is already publicly disclosed or any other publicly available information. A confidential treatment request expires 10 years after the date it is received by the FOIA office unless the FOIA office receives a renewal request before expiration.
Procedure. Follow these steps to make a Rule 83 request:
1. Send a written request to the SEC examiner responsible for the filing along with the confidential material, in its entirety with no redactions, either by hand delivery or by facsimile and do not file it via EDGAR.
The request must contain a header on the first page which identifies the issuer, and must provide the name, telephone number and facsimile number of the issuer's contact person. The words "FOIA Confidential Treatment Request" must appear in the header on the first page of the request along with a notation that confidential treatment is being requested pursuant to 17 CFR 200.83.
Each page must be marked with "Confidential Treatment Requested by [name]" and an identifying number and code, such as a Bates-stamped number.
2. Send a copy of the request letter, but not the document containing confidential information that is subject to the request, by facsimile to the SEC's Freedom of Information and Privacy Act Operations Office at (703) 914-1149 or mail it to the FOIA Office, SEC Operations Center, 6432 General Green Way, Mail Stop 0-5, Alexandria VA 22312-2413. If a third party submits a FOIA request seeking disclosure of confidential information, the SEC will give the issuer 10 calendar days to provide justification for maintaining confidential treatment.
3. File a redacted version of the materials via EDGAR. The filing must indicate that confidential treatment was requested under Rule 83 for the redacted portions and that a clean, un-redacted version was submitted to the SEC's Division of Corporation Finance.
4. Request that supplemental materials be returned to the issuer. If the materials are returned, they will not be available to persons making a FOIA request. The SEC will return supplemental information if (i) the return of the information is requested at the time the information is furnished to the SEC, (ii) the return of the information is consistent with the protection of investors and the provisions of FOIA, and (iii) the information was not filed electronically.
If you are seeking confidential treatment when submitting materials to the SEC, you should determine an appropriate exemption under FOIA, provide a factual and legal analysis as to its applicability, keep your request narrow, and be sure to request the return of any supplemental materials that you furnish.
Scott Warren Goodman and Achilles B. Kintiroglou practice in the New Jersey office of Pitney Hardin LLP, where they are associates in the Corporate Group. This article represents only the authors' opinions and does not necessarily reflect the views of Pitney Hardin or any of its clients. Mr. Goodman and Mr. Kintiroglou may be reached at (973) 966-6300.