On March 9, 2021, the Corporation Finance Division of the Securities and Exchange Commission (SEC) updated its guidance in Disclosure Topic No. 7 for preserving confidential treatment of exhibits redacted pursuant to an SEC confidential treatment order (CTO) that is about to expire.
CTOs are becoming more rare. Most companies obtain confidential treatment without a CTO by filing redacted copies of the exhibits in accordance with Regulation S-K Item 601(b)(10)(iv), which allows companies to redact immaterial, competitively harmful information without submitting an explanation in advance to the SEC staff (subject to legending and other requirements, as well as possible future SEC review). For exhibits not covered by Item 601(b) (such as Schedule 13D and Regulation M-A Item 1016 exhibits) filers must obtain a CTO from the SEC.
The prior revision to Disclosure Topic No. 7 (issued September 9, 2020) was significant in that, among other options for preserving confidential treatment, it announced that the staff would permit filers to transition certain CTOs to Item 601(b) treatment (if applicable), even before the CTO had expired. However, availability of certain options depended on whether the CTO had been issued more than three years before. See our prior blog post.
The revised Disclosure Topic No. 7 simplifies the prior guidance by using October 15, 2017 (rather than the three-year lookback) as a reference point in evaluating the three options for expiring CTOs:
(1) If the contract remains material and the information confidential, renew the CTO using a short form application (if the CTO was initially issued after October 15, 2017) or filing a new, complete application (if the CTO was initially issued on or before October 15, 2017).
(2) If the CTO was initially issued on or before October 15, 2017, and the contract continues to be material, transition to compliance with Item 601(b), if applicable.
(3) If the contract is material but no longer confidential, refile the exhibit without redactions.
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