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Public Companies
July 19, 2004
 
In this Issue...
SEC Staff Comment Letters and Company Responses to Be Publicly Available
 
 July 19, 2004
 
Rodney H. Bell- Miami

The Securities and Exchange Commission (SEC) recently announced that it will publicly release disclosure filings that are reviewed by the Division of Corporation Finance and the Division of Investment Management through the Commission’s Public Dissemination Service and by using the Commission’s EDGAR database on the SEC Web site at www.sec.gov.

The SEC staff provides comments to public companies when the SEC staff believes filings may be improved as part of the review process conducted by the Division of Corporation Finance.  A filing review may result in several rounds of comment letters and a similar number of company responses.

Historically, comment letters and company responses were available to the public only in response to a Freedom Of Information Act (FOIA) request after a filing review was complete.  Recently, private businesses have been making FOIA requests for thousands of comment letters and company responses, and have been making this information publicly available for a usage fee.  In part due to the resulting selective availability of a large number of SEC comment letters, the SEC announced that it will eliminate the need to make a FOIA request in order to access comment letters and company responses.  According to the SEC, this will “expand the transparency of the comment process so that this information is available to a broader audience, free of charge.” 

Timing

The SEC will release comment letters and company responses relating to disclosure filings made after August 1, 2004, that are selected for review by the Division of Corporation Finance.  In applying the August 1, 2004 commencement date, the SEC will look to the filing that is the primary focus of the review.  For example, if the SEC selects for review a Form S-3 filed after August 1, 2004, and as a result of the review a Form 10-Q and a Form 8-K filed before August 1, 2004 are reviewed, the correspondence on all the filings will be made available.

The SEC has not yet announced how long it will take after filing with the SEC for comment letters and company responses to be made publicly available.  According to the SEC, correspondence will be released not less than 45 days after a filing review is completed.

Confidential Treatment

A company may seek confidential treatment under Rule 83, the SEC rule providing confidential treatment for portions of a response to a comment letter.  A company requesting confidential treatment must submit two separate documents in response to a comment letter – a response containing no confidential information and a response containing the confidential information, which should be marked confidential in accordance with Rule 83.  The SEC will publicly disclose only the non-confidential version of a response absent a subsequent FOIA request made to release the confidential portion of the response. 

The following are points to consider in making a confidential treatment request:

  • A company should avoid making overly broad requests for confidential treatment, as the narrower the request, the greater likelihood that a confidential treatment request may be granted.
     
  • In order to make a confidential treatment request, a company must have an appropriate basis, such as substantial harm to the company’s competitive position.
     
  • Rule 83 gives the SEC substantial flexibility in determining whether to grant a confidential treatment request.
     
  • SEC staff comment letters are not subject to confidential treatment.  Under Rule 83, only portions of a response to a comment letter may be granted confidential treatment.

Consequences of the Public Disclosure Policy

The SEC’s new public disclosure policy creates no significant changes in company liability or responsibility.  Comment letters and company responses have already been publicly available through a FOIA request. 

Comment letters and company responses will be easier to access using the SEC EDGAR system; however, the SEC has not indicated that the EDGAR system will have any increased searching features.  As a result, users of the EDGAR system will be limited to conducting company specific searches and will need to use the services of a private company for searches relating to specific topics or terms.

Companies should continue to carefully consider and, where appropriate, limit the disclosures contained in response letters.

For more information, e-mail Rodney H. Bell or Jim Lurie via email at rodney.bell@hklaw.com and james.lurie@hklaw.com, respectively, or call toll free, 1-888-688-8500.