The Securities and Exchange Commission recently adopted new rules that permit registrants to file redacted material contracts without applying for confidential treatment of the redacted information, provided the redacted information is not material and would be competitively harmful if publicly disclosed.
The rules in question were part of what the Commission described as “FAST Act modernization and simplification of Regulation S-K.” The final rule adopted amendments to “modernize and simplify certain disclosure requirements in Regulation S-K, and related rules and forms, in a manner that reduces the costs and burdens on registrants while continuing to provide all material information to investors.”
The amendments are also intended to improve the readability and navigability of disclosure documents and “discourage repetition and disclosure of immaterial information,” the SEC wrote.
CorpFin, in its release, explained that the new rules, primarily located in Regulation S-K Item 601(b), require registrants to identify where information has been omitted from a filed exhibit. Specifically, registrants must:
- mark the exhibit index to indicate that portions of the exhibit or exhibits have been omitted;
- include a prominent statement on the first page of the redacted exhibit that certain identified information has been excluded from the exhibit because it is both not material and would be competitively harmful if publicly disclosed; and
- indicate with brackets where the information has been omitted from the filed version of the exhibit.
“We intend to review registrant filings for compliance with the new rules,” the Division wrote. “When we do this in connection with a regular filing review, we will separate our requests for supplemental information, and will request that registrants provide their responses to those requests separately from the regular filing review comment and response process to minimize the risk of inadvertent public disclosure of competitive information.”
To initiate a redacted exhibit review, the Division will send a letter with a request that the registrant provide a paper copy of the unredacted exhibit marked to highlight the redacted information. “Once we review the unredacted materials, we may or may not ask for further substantiation of the registrant’s redaction decisions,” it said.
If the Division’s review of the unredacted exhibit does not lead to comments, it will send a letter indicating that its compliance review is complete. If the review of the unredacted exhibit leads to questions about immateriality or claims of competitive harm, it will provide the registrant with comments, separate and apart from any comments on the associated filing, the Division wrote. When those questions are resolved, the registrant will receive a letter indicating the compliance review is complete.
Consistent with historical practice, the Division will ask registrants to resolve any questions relating to redacted exhibits in registration statements before submitting a request for acceleration of the effective date. It will release the initial request for an unredacted exhibit and the closing of review letter publicly on the EDGAR system, along with posting the other correspondence related to the filing review.
“In order to avoid public disclosure of competitively harmful information, we will not make public our comments regarding redacted exhibits, nor registrant responses to staff requests or comments related to that topic,” the Division wrote.
Exchange Act filings
The Division says it will make its initial request for an unredacted exhibit and the closing of review letter for that exhibit publicly available on EDGAR following the closing of that review. If that review was done in conjunction with a regular filing review, it will post the initial request and closing of review letter at the time it posts the other correspondence related to the filing review.
“These letters will only note the existence of an opened and a closed redacted exhibit compliance review. In order to avoid public disclosure of competitively harmful information, we will not make public our comments regarding redacted exhibits, nor registrant responses to staff requests or comments related to that topic,” CorpFin added.
Procedures to preserve confidentiality of supplemental materials
Registrants may request confidential treatment of supplemental materials while they are in the Division’s possession, pursuant to Rule 83.
“Upon completion of a compliance review, we will destroy all supplemental materials so long as the registrant has complied with the procedures outlined in Rules 418 or 12b-4,” it wrote. “To minimize the risk of inadvertent disclosure of the information, we will provide specific supplemental material delivery instructions in our request for unredacted exhibits. We encourage registrants to follow those instructions and not send supplemental responses to requests for unredacted exhibits or other supplemental information relating to those exhibits to individual staff members or the staff member that made the request.”
The new rules have not changed a registrant’s ability to request confidential treatment pursuant to Rule 406 or Rule 24b-2, and the Division and its staff will continue to process new applications as well as pending applications that are not withdrawn following established procedures, it wrote.
If a registrant has a confidential treatment request pursuant to Rule 406 or Rule 24b-2 pending at the time the new rules became effective, the registrant may, but is not required to, withdraw its pending application. Those who do so and rely on the new rules must amend their filing to conform to the new rule requirements.
The Division says registrants should contact the office responsible for reviewing their filings to coordinate the withdrawal of a confidential treatment application. When that office processes the withdrawal of the confidential treatment request, the application and related materials will be destroyed unless the registrant requests their return.
If the registrant has received an order granting confidential treatment and the order is still in effect, the grant of confidential treatment will continue until the date stated on the order, according to CorpFin.
A special e-mail address has been created to address questions related to the process: RedactedExhibits@sec.gov.