Corp Fin has once again amended Disclosure Guidance Topic No. 7, Confidential Treatment Applications Submitted Pursuant to Rules 406 and 24b-2, to modify—slightly—the alternatives available for companies with confidential treatment orders that are about to expire. The guidance was last amended in September 2020 (see this PubCo post), but apparently needed another revamp. The guidance addresses procedures for CTRs that were submitted, not under the new streamlined approach adopted in 2019 (see this PubCo post), but rather under the old traditional process that continues in use to a limited extent.
Under the prior guidance, when a CT order obtained under the traditional process was about to expire, Corp Fin offered some alternatives approaches for extending the confidential period, with availability of alternatives based on whether the order was initially issued “less than three years ago” or “more than three years ago.” Perhaps there was some confusion about what exactly that language meant? In any event, under the new guidance, Corp Fin has instead pegged the date at October 15, 2017, that is, whether the order was initially issued after October 15, 2017 or on or before October 15, 2017.
The amended guidance provides three alternative approaches to obtaining an extension (or not) when a CT order is about to expire:
- First, if the exhibit is still material but none of the information in the exhibit is still confidential, the company can simply refile an unredacted copy of the exhibit.
- Second, to extend the confidential period, companies can file an application under Rule 406 or Rule 24b-2 to continue to protect the confidential information from public release.
- If the order was initially issued after October 15, 2017, companies may submit (to CTExtensions@sec.gov) a short form application, which provides a more efficient process to file an application to extend the duration of confidentiality. The short form requires the company to affirm that the most recent application continues to be “true, complete and accurate,” indicate the desired duration of the extension and provide a brief explanation to support the request. Under the short form, the company is not required to resubmit the exhibit or the supporting analysis unless there is a change in the analysis. If the company reduces the amount of omitted information, a revised redacted exhibit must be filed. (See this PubCo post.)
- If the order was initially issued on or before October 15, 2017, the short-form application is not available; the company would be required, unless the third alternative below is elected, to go through the CTR process again, filing a new, complete application under Rule 406 or Rule 24b-2.
- Third, if the order was initially issued on or before October 15, 2017, companies may elect—and most companies will likely elect—to transition to the streamlined new approach, described below, that is set forth in Reg S-K Item 601(b)(10). To accomplish the transition, the company would be required to refile the material contract in redacted form and comply with the legend and other requirements of the streamlined approach. The SEC expects most companies to transition to the streamlined process. With regard to timing, the staff will not recommend enforcement action if a company refiles a redacted exhibit under this streamlined approach in the company’s first Exchange Act report following the expiration of the CT order. However, if the order was initially granted on or before October 15, 2017, a company may elect to transition earlier by complying with the rules for the streamlined process in a new filing or by amending a previously filed document to refile a redacted exhibit, either before or after expiration of the CT order.
The SEC’s streamlined approach to confidential treatment adopted in FAST Act Modernization and Simplification of Regulation S-K allowed companies to redact information from material contracts without the need to submit in advance formal confidential treatment requests, so long as the redacted information is not material and would be competitively harmful if publicly disclosed. Effective March 15, however, amendments to Reg S-K Item 601 adjust the exhibit filing requirements related to confidential treatment “by removing the competitive harm requirement and replacing it with a standard that permits information to be redacted from material contracts if it is the type of information that the issuer both customarily and actually treats as private and confidential, and which is also not material.” The amendments also modify the prominent statement required on the first page of the redacted exhibit to now provide that “certain identified information has been excluded from the exhibit because it is both not material and is the type that the registrant treats as private or confidential.” (See this PubCo post.) Under the streamlined approach, upon request by the staff, companies are required to submit, on a supplemental basis, an unredacted paper copy and analyses supporting confidential treatment. Because it is streamlined and much more convenient, this process is preferred by most companies. (See this PubCo post.)