Keeping it Off the Record: An Overview of Confidential Treatment Requests

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An Overview of the Comment and Review Process

The Securities and Exchange Commission’s (the "Commission's") Division of Corporation Finance reviews filings made under the Securities Act of 1933, as amended (the "Securities Act"), and the Securities Exchange Act of 1934, as amended (the "Exchange Act"), to monitor and address issuer compliance with applicable disclosure requirements and accounting standards.

These reviews fall into two categories: required reviews and selective reviews. In accordance with the provisions of the Sarbanes-Oxley Act of 2002, the Commission is required to review an issuer's Exchange Act filings, including its financial statements, at least once every three years. Additionally, the Commission may elect to selectively review transactional filings such as proxy materials and registration statements.

Once an issuer's filings have been selected for review, the Commission will first conduct a non-public preliminary review and, on the basis of its findings, determine whether to undertake a further review. There are three levels of further review that the Commission can elect:

  • a full review, in which the entire filing is examined;

  • a financial statement review, in which the financial statements and related disclosures, such as Management’s Discussion and Analysis of Financial Condition and Results of Operations are examined; and

  • a targeted issue review, in which one or more specific items are examined.

It is at this point in the review process the Commission will generally prepare and issue a comment letter, although it is entirely possible that a review may be completed without comments being issued at all.

Public Availability of Comment and Response Letters

Beginning with filings made after August 1, 2004, the Commission has made its comment letters and issuers' response letters available publicly through its Electronic Data Gathering, Analysis, and Retrieval system, EDGAR, though not for at least 45 days until after a review has been completed. Comment and response letters and other supplemental information filed electronically with the Commission prior to August 1, 2004 may be obtained pursuant to a Freedom of Information Act ("FOIA") request.

An Overview of Confidential Treatment Requests

An issuer that desires to keep confidential certain information that may otherwise end up in the public arena as a result of the Commission's comment and review process can sometimes do so by filing a request for confidential treatment. There are two types of confidential treatment requests available, those made pursuant to:

  • Rule 406 of the Securities Act or Rule 24b-2 of the Exchange Act, with respect to information required to be filed with the Commission, such as a material agreement filed as an exhibit to a registration statement or periodic report; or

  • Rule 83 of the Commission's Rules of Practice, with respect to information not required to be filed with the Commission, such as supplemental information provided in the context of the comment and review process.

Requests Made Pursuant to Securities Act Rule 406 or Exchange Act Rule 24b-2

A request for confidential treatment made pursuant to Rule 406 of the Securities Act or Rule 24b-2 of the Exchange Act must:

  • be sufficiently narrow, so as to only include information eligible for exemption under the FOIA;

  • specify the basis for the exemption (there are nine FOIA exemptions available, with "trade secrets and commercial or financial information obtained from a person and privileged or confidential" being the most invoked);

  • contain legal and factual analyses substantiating the exemption;

  • contain an affirmative representation as to the confidentiality of the information; and

  • indicate the duration for which the exemption is being sought.

The Commission will not generally grant a request for confidential treatment with respect to information that is specifically required to be disclosed under applicable securities laws or information that is otherwise material to investors.

Requests Made Pursuant to Rule 83 of the Commission's Rules of Practice

As with a request for confidential treatment made pursuant to Rule 406 of the Securities Act or Rule 24b-2 of the Exchange Act, a request made pursuant to Rule 83 of the Commission's Rules of Practice must be sufficiently narrow so as to only include information eligible for exemption under the FOIA. However, it is not necessary to substantiate a Rule 83 request for confidential treatment until such time as a disclosure request is made under the FOIA. Any request for confidential treatment that is granted under Rule 83 will expire after 10 years unless renewed prior to its expiration.

Requests for Supplemental Information to be Returned

It is possible to request that the Commission return any supplemental materials that are furnished during the comment and review processes, thus rendering them unavailable for production in a FOIA request. The request should be made pursuant to Rule 418(b) of the Securities Act or 12b-4 of the Exchange Act, as applicable. The Commission will generally honor the request if:

  • the request is made at the time the supplemental material is furnished to the Commission; return of the supplemental material is consistent with the protection of investors and provisions of the FOIA; and

  • the supplemental material was submitted to the Commission in paper form.

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If you have any questions or would like additional information regarding this update, please contact your representative at Qashu & Schoenthaler LLP or contact:

Vanessa J. Schoenthaler
(646) 274-1450