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Yesterday, Corp Fin added to its “CF Disclosure Guidance Topic” series with two new topics. “Topic No. 8: Intellectual Property & Technology Risks Associated with International Business Operations” explains the Staff’s views on what companies should consider disclosing about their reliance on technology & intangible assets if they conduct business in places that don’t have robust IP laws – and where that disclosure would appear. Here’s an excerpt:

Although there is no specific line-item requirement under the federal securities laws to disclose information related to the compromise (or potential compromise) of technology, data or intellectual property, the Commission has made clear that its disclosure requirements apply to a broad range of evolving business risks in the absence of specific requirements. In addition, a number of existing rules or regulations could require disclosure regarding the actual theft or compromise of technology, data or intellectual property if it pertains to assets or intangibles that are material to a company’s business prospects. For example, disclosure may be necessary in management’s discussion and analysis, the business section, legal proceedings, disclosure controls and procedures, and/or financial statements.

The guidance includes examples of risks that might arise from business relationships – e.g. idiosyncratic license terms that favor the other party or compromise the company’s control over proprietary info, regulatory requirements that require companies to store data locally or use local services or technology. It also includes a laundry list of questions companies should ask themselves to assess risks. We’ll be posting memos in our “Cybersecurity” Practice Area.

Corp Fin’s New “Disclosure Guidance”: Confidential Treatment Requests

RIP, Staff Legal Bulletins No. 1 and 1A. Yesterday’s new “CF Disclosure Guidance Topic No. 7: Confidential Treatment Applications Under Rules 406 & 24b-2” supersedes that guidance. It addresses how and what to provide when submitting a “traditional” confidential treatment request – i.e. outside of the accommodations from earlier this year that now allow companies to simply redact immaterial confidential information from exhibits. The new disclosure guidance also applies to filings where traditional CTRs remain the only available method to protect private information – e.g. Schedule 13D or exhibits required by Item 1016 of Reg M-A.

After filing the exhibit on Edgar with redactions that show where confidential info is omitted, here’s what companies now need to do for written applications (we’ll be posting memos in our “Confidential Treatment Requests” Practice Area):

1. Provide one unredacted copy of the contract required to be filed with the Commission with the confidential portions of the document identified;

2. Identify the Freedom of Information Act[6] exemption it is relying on to object to the public release of the information and provide an analysis of how that exemption applies to the omitted information. Often, this is the exemption provided by Section 552(b)(4)[7] of the FOIA, which protects “commercial or financial information obtained from a person and privileged or confidential.” If this is the case, the Supreme Court’s decision in Food Marketing Institute v. Argus Leader Media, 139 S.Ct. 2356 (2019) addresses the definition of confidential and may be helpful in providing this analysis;

3. Justify the time period for which confidential treatment is sought;

4. Explain, in detail, why, based on the applicant’s specific facts and circumstances, disclosure of the information is unnecessary for the protection of investors. This generally is encompassed in a materiality discussion, addressed below;

5. Provide written consent to the furnishing of the confidential information to other government agencies, offices or bodies and to the Congress;

6. Identify each exchange, if any, with which the material is filed (required in applications under Rule 24b-2 relating to Exchange Act filings only); and

7. Provide the name, address and telephone number of the person with whom the Division should communicate and direct all issued notices and orders.

What’s the Deal with “CF Disclosure Guidance”?

A while back, Corp Fin was on a roll with this format for guidance – issuing six topics from 2011 to 2013 (here’s Broc’s blog from when this format first debuted). But yesterday’s new topics were the first in over six years.

They’ve always included a “Supplementary Information” disclaimer at the beginning to emphasize that the guidance isn’t a rule and hasn’t been approved by the Commission. Of course, lately there’s been even more back & forth about the role of “guidance” versus rules – and as Broc blogged last month, a recent executive order severely restricted most federal agencies’ ability to practice “regulation by guidance.” So to be extra clear that these publications aren’t rules, the disclaimer for yesterday’s two topics includes this new sentence:

This guidance, like all staff guidance, has no legal force or effect: it does not alter or amend applicable law, and it creates no new or additional obligations for any person.

SEC & Edgar Closed Tuesday & Wednesday

This executive order announces that all federal agencies – including the SEC – will be closed on Tuesday for Christmas Eve (Christmas Day was already designated as a Federal Holiday, so the SEC is closed that day too). The SEC announced that this means Edgar will be closed too – so you’ve got until December 26th to make filings that would be due on Tuesday or Wednesday.

This blog from Alan Dye points out that it isn’t clear whether the 24th is still counted as a “business day” for purposes of calculating filing deadlines that fall later in the week. Based on last year’s precedent, it wouldn’t be considered a “business day” for purposes of calculating filing deadlines – and Alan was told in a phone call with the Staff that they’d take the same position this year.

– Lynn Jokela