October 29, 2008
Authored by: Bryan Cave
What Should be Confidential?
Although the TARP Capital application form itself is simple and does not generally request information that is not otherwise publicly available or that is sensitive in nature, there are some aspects that you should consider for confidential treatment. A few examples are listed below. The first item listed (M&A and capital plan) is requested in the application, and the regulators may request the others supplementally.
- Description of anticipated mergers, acquisitions or other capital plans
- Projections, if requested by the regulators
- Contemplated use of proceeds
- Discussions of CAMELS ratings or other exam-related information
- Data that raises customer privacy concerns
How Do I Keep Information Confidential?
The TARP Capital program application form contains the following instructions:
Any applicant desiring confidential treatment of specific portions of the application must submit a request in writing with the application. The request must discuss the justification for the requested treatment. The applicant’s reasons for requesting confidentiality should specifically demonstrate the harm (for example, loss of competitive position, invasion of privacy) that would result from public release of information (5 U.S.C. 552). Information for which confidential treatment is requested should be: (1) specifically identified in the public portion of the application (by reference to the confidential section); (2) separately bound; and (3) labeled “Confidential.” The applicant should follow the same procedure when requesting confidential treatment for the subsequent filing of supplemental information to the application.
The applicant should contact the appropriate regulatory agency for specific instructions regarding requests for confidential treatment. The appropriate regulatory agency will determine whether the information will be treated as confidential and will advise the applicant of any decision to make available to the public information labeled as ‘Confidential.’
What Should My Request Include?
When requesting confidential treatment, a separate letter dealing with that issue specifically should be attached to the application. The letter should:
- reference your bank and its application;
- state that you are requesting confidential treatment of the information identified in the request under the Freedom of Information Act (5 U.S.C. 552);
- identify the nature (but not specific content) of the information for which confidential treatment is requested;
- state why confidential treatment of the identified information is necessary (see below for typical grounds); and
- repeat the identification and explanation for other categories of confidential information covered in the request.
How Do I Support My Request?
While the specific issues will vary depending on each bank’s situation, the typical grounds for confidential treatment involve competitive harm, adverse legal or regulatory consequences, or violations of privacy that could be suffered if the information were disclosed. Examples include:
Acquisition discussions: Disclosure would result in competitive harm because a fundamental competitive aspect of the bank’s strategic plan would be made public. Third parties could interfere in the negotiations, and premature disclosure could adversely affect both parties’ ability to consummate the transaction and/or the market for their stock. Disclosure will in any event likely be prohibited under a confidentiality agreement or terms of a letter of intent or definitive agreement.
Capital transactions: Disclosure would result in competitive harm because competitors would be in a position to evaluate the bank’s current and prospective capital position and future performance prospects. Competitive harm could also result from public disclosure of privately negotiated transaction terms with identified investors. Additionally, a prior public announcement of a private placement could trigger “general solicitation” concerns under federal securities laws.
Projections: Disclosure would result in competitive harm because this information reflects the bank’s own internal evaluation of its resources, future prospects and operating and growth strategies.
Use of Proceeds: Disclosure would result in competitive harm because the bank’s intended use of capital provides valuable insight into its future plans regarding acquisitions, branching, product and service expansion, and other elements of its strategic plan.
CAMELS and Exam Information: This information is required to be kept confidential under banking regulations.
Customer or Account Data: Disclosure would violate existing statutory and regulatory privacy protections and would also damage the bank’s existing and potential customer relationships.
These are just general illustrations—the key is to think about the harm that disclosure could do and describe it briefly.
Is this Really Necessary?
Applications submitted in draft form are not available publicly, so the confidential treatment request is not as critical at that stage. For final applications, it’s possible that all information will be treated as confidential under the regulators’ supervisory powers (as opposed to the applications process), but until this is confirmed, it would be prudent to request confidential treatment.