In December 2023, the SEC released its first update on the process for submitting Confidential Treatment Requests (CTRs) since December 2019. This update is significant as it impacts how public companies can redact sensitive information from material agreements in SEC filings. The revision builds upon earlier updates prompted by the Fixing America’s Surface Transportation Act ("FAST Act"), which streamlined the process for omitting confidential information from exhibits.

Background of the FAST Act and Initial Changes

The FAST Act allowed companies to omit sensitive information in material contracts if (i) the redacted information was not material, and (ii) its disclosure would likely cause competitive harm to the company. It further enabled companies to omit schedules and exhibits to these contracts, effectively reducing the need for separate CTR applications in many cases.

What’s New in the 2023 Guidance?

The updated guidance clarifies that although companies may continue to redact certain information using the FAST Act procedures, CTRs under Rules 406 of the Securities Act and Rule 24b-2 of the Exchange Act are still available for other types of confidential information. The SEC emphasizes that CTRs should be used in circumstances where streamlined procedures are not sufficient. Companies must submit their CTRs via the SEC's Office of the Secretary and ensure that all materials are properly labeled as “Confidential Treatment.” The update also outlines the specific criteria and steps that must be followed for such applications.

Submission Requirements for a CTR

The CTR submission must include:

1. Unredacted versions of the documents.
2. A cover letter outlining the specific information to be protected, including a time frame for the requested confidentiality.
3. A detailed explanation supporting why disclosure is not necessary for investor protection.
4. A signed consent for the SEC to share the confidential information with other government agencies.

The submission should also confirm that none of the redacted information has been previously disclosed to the public and explain how disclosure would cause substantial competitive harm.

FOIA Exemptions

A key element of the CTR process involves citing exemptions under the Freedom of Information Act (FOIA). The Supreme Court’s 2019 ruling in Food Marketing Institute v. Argus Leader Media simplified the ability for companies to seek CTRs by allowing confidential information to be withheld if it is "customarily kept private," even without proving competitive harm. This ruling continues to play a central role in justifying CTRs.

Application for Extensions of Confidential Treatment

The 2023 update also highlights the procedures for seeking extensions of previously granted CTRs. If a company’s confidential treatment order is expiring, the company can file a streamlined extension application. For CTRs granted less than three years ago, companies can use a simplified one-page application to affirm that the original basis for confidentiality remains valid. The SEC allows for extension requests of three, five, or ten years.

Conclusion

The SEC's updated CTR guidance provides clearer procedures while maintaining its commitment to investor protection. Companies should be meticulous in their submissions, ensuring that all confidential information is adequately protected while complying with SEC rules. As always, understanding and navigating the rules surrounding confidential treatment can be complex, and legal counsel should be consulted for specific applications.