April 17, 2019

CTRs: Corp Fin Streamlines Extension Procedure

Yesterday, Corp Fin announced a streamlined procedure for extending previously granted confidential treatment orders covering information in material contracts. The announcement notes that, when it comes to extensions, simply filing the redacted exhibit as contemplated by the new Fast Act rules will not provide confidential treatment for information in the previously filed CTR.  This excerpt from the announcement summarizes the new procedure:

We have developed a short form application to facilitate and streamline the process of filing an application to extend the time for which confidential treatment has been granted. It is a one-page document by which the applicant can affirm that the most recently considered application continues to be true, complete and accurate regarding the information for which the applicant continues to seek confidential treatment. With that affirmation, the applicant indicates its request that the Division extend the time period for confidential treatment for an additional three, five or 10 years and provides a brief explanation to support the request.

Companies don’t have to refile the unredacted contract with the extension request, and if the supporting analysis remains the same as presented in the most recent CTR, they won’t have to refile that either. If the applicant reduces the redactions, the revised redacted version of the contract must be filed with the short form extension application.

The short form application may only be used if the contract has already been the subject of an order granting a CTR, and it can’t be used to add new exhibits to the application or make additional redactions. For a deeper dive into the new process, check out this Cydney Posner blog. We’ve also updated our “Checklist on Confidential Treatment Requests” to reflect this new procedure.

Cybersecurity:  Beware Cyberinsurance’s War Exclusion

This recent NYT article says that the cyberinsurance policy you pay big bucks for may have a big hole in it – thanks to the standard “war exclusion” contained in most policies. Here’s an excerpt:

Mondelez, owner of dozens of well-known food brands like Cadbury chocolate and Philadelphia cream cheese, was one of the hundreds of companies struck by the so-called NotPetya cyberstrike in 2017. Laptops froze suddenly as Mondelez employees worked at their desks. Email was unavailable, as was access to files on the corporate network. Logistics software that orchestrates deliveries and tracks invoices crashed.

Even with teams working around the clock, it was weeks before Mondelez recovered. Once the lost orders were tallied and the computer equipment was replaced, its financial hit was more than $100 million, according to court documents. After the ordeal, executives at the company took some solace in knowing that insurance would he lp cover the costs. Or so they thought.

Mondelez’s insurer, Zurich Insurance, said it would not be sending a reimbursement check. It cited a common, but rarely used, clause in insurance contracts: the “war exclusion,” which protects insurers from being saddled with costs related to damage from war.

The U.S. government said that Russia was responsible for the cyberattack, which made Mondelez & other companies “collateral damage in a cyberwar” & gave insurers an opening to deny coverage under the war exclusion. Mondelez & Merck, which was also denied coverage, sued their insurers & the issue is working its way through the courts. The stakes are high – given the prevalence of state-sponsorship when it comes to big cyberattacks, the article suggests that the outcome could go a long way to determining whether cyberinsurance is worthless.

ICOs: Reg D Remains the Preferred Route

I blogged last year about a MarketWatch article highlighting coin offerings’ increased reliance on Regulation D following the Staff’s 2017 guidance on coin offerings. This recent MarketWatch article says that while the volume of coin offerings is down, Reg D still seems to be the preferred route. Here’s an excerpt addressing the number of Form D filings for token deals:

MarketWatch counted 33 ICO-related fundraisings accepted by the SEC in the first quarter of 2019, with a total stated value of $1.9 billion. That is down from a peak of 99 in the second quarter of 2018. MarketWatch estimated there were 287 ICO-related fundraisings accepted by the SEC with a total stated value of $8.7 billion in 2018. That was a significant increase from 44 fundraisings filed with a total stated value of $2.1 billion in 2017.

John Jenkins