On March 20, 2019, the Securities and Exchange Commission (“SEC”) adopted amendments to modernize and simplify certain disclosure requirements under Regulation S-K. Included in these amendments are new rules that allow registrants to file redacted material contracts and agreements under Items 601(b)(10) and 601(b)(2), respectively, without submitting a confidential treatment request, provided that the redacted information (i) is not material and (ii) would be competitively harmful if publicly disclosed. These rules became effective on April 2, 2019. The SEC issued guidance on the new rules on April 1, 2019 and again on April 16, 2019.

New Rules

If a registrant determines to redact information in an exhibit under the new framework, the registrant must:

  • mark the exhibit index to indicate that portions of the exhibit 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 (i) not material and (ii) would be competitively harmful if publicly disclosed; and

  • indicate with brackets where the information has been omitted from the filed version of the exhibit.

The SEC may review company filings for compliance with the new rules. If such a review is initiated, the SEC will send a letter requesting that the registrant provide a paper copy of the unredacted exhibit, marked to highlight the redacted information. The SEC may also request that the registrant provide its materiality and competitive harm analysis on a supplemental basis. It is therefore important that if a registrant determines to redact an exhibit it carefully considers this analysis and records such analysis at the time of the redactions so that it can be referred to in the event the SEC requests such materials. If upon review of such materials the SEC does not have any comments, the SEC will send a letter indicating that the compliance review is complete. If upon review of the unredacted exhibit the SEC has questions, it will provide the registrant with comments, and once any questions are resolved, the SEC will send the registrant a letter indicating that the compliance review is complete. Upon evaluation of the registrant’s supplemental materials, the SEC may require the registrant to amend its filing to include any previously redacted information that is not adequately supported by the registrant’s materiality and competitive harm analyses.

In order to preserve confidentiality, only the initial request for an unredacted exhibit and the closing review letter will be posted on EDGAR. In addition, if the review is initiated in connection with a regular filing review, the SEC will request that the registrant provide its responses separately from the regular filing review and comment process, and if the SEC provides any comments to the registrant, the SEC will provide such comments separate and apart from any comments on the associated filing. The SEC will also provide specific instructions for how the registrant should deliver any requested supplemental information. Finally, registrants are still permitted to request confidential treatment of materials that are in the SEC’s possession pursuant to Rule 83, such that upon completion of the review, the SEC will destroy all supplemental materials.

Consistent with current practice, the SEC will require a registrant, prior to submitting an acceleration request for a registration statement, to resolve any questions relating to the redaction of exhibits filed with such registration statement.

Transition Issues

A registrant that has pending confidential treatment requests at the time the new rules became effective may choose to either continue the confidential treatment request process under the old rules or withdraw its pending application and rely on the new rules. There are certain benefits to withdrawing a pending application. First, under the new rules, there is no cap on the amount of time that the redacted information will be considered confidential, which eliminates the need to submit an extension request. Second, under the new rules, unless requested by the SEC, confidential materials are not provided to the SEC and are therefore not subject to a Freedom of Information Act request. However, a registrant that elects to withdraw its confidential treatment request and rely on the new rules must amend its filings to conform to the exhibit notation requirements of the new rules.

The new rules have not impacted a registrant’s ability to request confidential treatment pursuant to Rule 406 or Rule 24b-2. The SEC will continue to process new applications for confidential treatment as well as pending applications that are not withdrawn.

Short-Form Process for Extensions of Existing Confidential Treatment Orders

A registrant that has previously obtained a confidential treatment order for a material contract under the old rules must continue to file extension applications under Rules 406 or 24b-2 to preserve the material contract’s confidential treatment; refiling the redacted exhibit in the manner specified by the new rules is not sufficient. However, the SEC has created a short form application that can be used in connection with such an extension request.

The short form application is a one-page document by which the registrant:

  • affirms that the most recently considered application continues to be true, complete and accurate with regard to the information for which the registrant continues to seek confidential treatment;

  • indicates its request to extend the order for an additional three, five, or 10 years; and

  • provides a brief explanation to support the request.

As long as the analysis remains the same as the analysis provided in the most recent confidential treatment request, the short form application is the only document that needs to be submitted to the SEC.

If a registrant wants to reduce the redactions, it may use the short form extension application, but must also publicly refile the revised redacted version of the contract when it submits the short form extension application. If a registrant wants to add new exhibits to the application or make additional redactions, it would not be able to use the short form extension application and would need to file a new confidential treatment application containing all of the information required by Rules 406 or 24b-2.

The short form application is not the only way to submit extension requests, it merely an alternative to the traditional method of requesting such extensions.