On May 12, 2005, the SEC began releasing comment letters of the staff relating to filings reviewed by the Division of Corporation Finance and the Division of Investment Management, as well as the responses of the filers. The process commenced with filings made after August 1, 2004. Comment letters and responses will be released through the EDGAR system no earlier than 45 days after the review of the filing is complete. These documents are a valuable resource both for determining the comments likely to be raised in the staff’s future reviews and for providing potential responses. A filer may request confidential treatment for portions of its written response. Confidentiality may also be maintained by submitting the confidential information in paper form as supplemental material and, thereafter, requesting the return of that material or by discussing the information verbally with the staff rather than submitting it in writing. The SEC will require all filers being reviewed to represent in writing that they will not use the SEC’s comment process as a defense in any securities related litigation.
The SEC reviews selected filings made under the Securities Act of 1933, the Securities Exchange Act of 1934, the Trust Indenture Act of 1939 and the Investment Company Act of 1940. The staff provides filers with comments on filings selected for review, and the filers then respond to the staff’s comments. This process may involve several rounds of comments from the staff and responses by the filer. Upon resolution of all issues raised in its review, the staff advises the filer that the review is complete.
Historically, the SEC has released staff comment letters and filer responses only in response to a request under the Freedom of Information Act (the “FOIA”). Recently, however, information service providers have obtained hundreds of comment letters and related responses through FOIA requests and made them available to their subscribers.
In June 2004, the SEC announced that it intended to publicly release through the EDGAR system all comment letters and responses relating to filings made after August 1, 2004 which are reviewed by the SEC’s Division of Corporation Finance or the Division of Investment Management. The purpose of this policy is “to expand the transparency of the comment process so that this information is available to a broader audience, free of charge.” www.sec.gov/news/press/2004-89.htm
Release of Comments and Responses
On May 12, 2005, the staff began the process of releasing staff comment letters and filer responses. www.sec.gov/news/press/2005-72.htm The process began with the oldest eligible filings. As the process continues, comment letters and responses will be released no earlier than 45 days after the review of the filing is complete.
In applying the August 1, 2004 commencement date, the staff will look to the filing that is the primary focus of the review. For example, if the staff reviews a Form 10-K filed before August 1, 2004, and in connection with that inquiry also reviews a Form 10-Q or Form 8-K filed after August 1, the determination will be based on the filing date of the Form 10-K. Similarly, if a registration statement is filed before August 1, 2004, but an amendment is filed after that date, the determination will be made on the basis of the earlier filing.
Comment letters set forth the staff’s positions on a particular filing only and do not constitute an official expression of the Commission’s views. Further, comment letters are limited to the specific facts of the filing to which they apply, and do not apply to other filings. However, these documents are a valuable resource for filers both for determining the comments likely to be raised in the staff’s future reviews and for providing potential responses to such comments.
Filers must consider whether to request confidential treatment of information whose release could be a competitive disadvantage or affect the market price of the filer’s stock. In addition, filers must now consider whether the inclusion of any information in a response or in supplemental information could violate a confidentiality agreement with a third party.
A filer may not request confidential treatment of the staff’s comment letters. Rule 83 adopted under the FOIA, however, allows a filer to request confidential treatment for some portions of a written response, including supplemental information filed by EDGAR. This rule requires the filer to submit its response letter as two separate documents – a response to the comment letter filed by EDGAR (as SEC correspondence) without the confidential information and a separate paper copy of the response delivered to the staff examiner and containing the confidential information. In a separate letter, the filer must clearly indicate that confidential treatment is being requested under Rule 83 and specify those portions for which confidential treatment is requested. The request for confidential treatment must be made at the time the response is filed with the SEC. A request for confidential treatment will not itself be publicly released and expires in ten years unless it is renewed for an additional ten year term by the filer before it expires.
Although the SEC will now release comment and response letters as a matter of course, they will release only the redacted version of a response letter if a request for confidential treatment has been filed. Anyone wishing to obtain the portions of a response letter that are the subject of a confidential treatment request must submit a FOIA request for the information.
The filer is not required to justify its request for confidential treatment at the time it is made, but only if a third party later requests the information under the FOIA. The staff will notify the filer of a FOIA request, and the filer has ten calendar days to justify its request for confidential treatment. However, consistent with current practice, the staff will question a request for confidential treatment that is on its face overly broad. There also must be an appropriate basis for a request for confidential treatment. In general, a narrow request, limited to only confidential business information, such as pricing strategy, royalty rates or trade secrets, is more likely to be successful than an overly broad request.
Supplemental material provided in paper form to the staff also may be kept confidential by requesting that such material be returned under Rule 418(b) adopted under the Securities Act of 1933 or Rule 12b-4 adopted under the Securities Exchange Act of 1934. In addition, a filer can maintain the confidentiality of information by discussing it verbally with the staff, rather than providing it in writing. However, the staff may require that information provided in paper form or verbally be filed by EDGAR.
Historically, in connection with an SEC inquiry or investigation, the staff has asked the filer to represent in writing that it would not use the SEC’s comment process as a defense in any securities related litigation. Since all comments and responses will now be made public, the staff will require all filers being reviewed to make this representation. However, the staff has stated that the request and representation “should not be construed as confirming that there is or is not, in fact, an inquiry or investigation or other matter involving the filer.”
For further information on maintaining the confidentiality of responses or supplemental information, please contact Peter M. Menard (213) 617-5483.
- Each page of the redacted version should bear the legend “Confidential Treatment Requested by [name of filer],” and each portion for which confidential treatment is requested should be given an identifying number.
- A copy of the request letter must be sent to the SEC’s Office of Freedom of Information and Privacy Act Operations and must bear the legend “FOIA Confidential Treatment Request” on the top of the first page, together with the name, address and telephone number of the person to be contacted if a FOIA request is made to disclose any information covered by the letter. The contact information must be updated in the event of any change. If the request letter refers to any portion of the response for which confidential treatment has been requested, the reference should be to the identifying number of that portion of the response.