SEC and FDA Sign Memorandum of Understanding Formalizing Cross-Agency Information Sharing

On Aug. 31, the SEC and the FDA executed an MOU establishing a framework governing the exchange of non-public information between the two agencies. The MOU reflects increased and formalized interagency cooperation between the FDA and SEC, with broad implications for FDA-regulated industries and their corresponding disclosure practices, enforcement risk, and regulatory compliance. For both FDA-regulated companies and counsel, the MOU emphasizes the importance of consistency of communications across various regulatory touchpoints and an increased appreciation of cross-agency enforcement risk.

FDA Memorandum of Understanding: Key Terms and Effective Date

The MOU became effective on Aug. 31 and lasts for a three-year period.

In announcing the MOU, SEC Chairman Paul S. Atkins remarked that “FDA-related disclosure by public companies have a significant impact on our markets,” and highlighted the FDA’s role as “a valuable partner in [the SEC’s] efforts to administer and enforce applicable disclosure requirements under the federal securities laws.” Acting FDA Commissioner Kyle Diamantas similarly stated in a statement that the FDA “is proud to partner with the SEC to enhance transparency across the life sciences sector.”

SEC and FDA Information Sharing: Prior Agency Collaboration

Although the MOU is the latest development in cross-agency information sharing between the agencies, collaboration between the SEC and FDA is not without precedent. For example, in February 2004, the SEC and FDA announced an initiative through which the agencies would establish procedures for FDA personnel to refer potentially false or misleading statements made by FDA-regulated companies to the SEC. In announcing this initiative, the SEC highlighted that the collaboration was “enhancing” prior cooperative efforts between the agencies, including “continued sharing of non-public information by the FDA with the SEC, consistent with FDA’s current practices.”

The MOU should therefore be seen as expanding and formalizing prior interagency collaboration, replacing the earlier informal cooperation with a binding agreement that establishes formal mechanisms to facilitate cross-agency information sharing.

How the SEC and FDA Will Share Non-Public Information

Per the MOU, the agencies intend to share non-public information regarding “FDA-regulated products and activities,” and individuals and entities who manufacture, distribute, and sell such products, with each other where practicable. To that end, the MOU provides that each agency will establish mechanisms for receiving requests for information from the other agency and for disclosing non-public information.

Points of Contact for Information Requests

The SEC and FDA will each designate at least one point of contact to facilitate requests and notify the other agency of their point of contact. The SEC will select one point of contact from both the Division of Enforcement and the Division of Corporation Finance. Likewise, the FDA will select at least one POC from the Office of Chief Counsel.

Confidentiality and Regulatory Framework

Most importantly, the MOU establishes a parallel information-sharing framework, governed by existing federal regulations. FDA disclosures to the SEC are governed by 21 C.F.R. § 20.85, which generally allows the FDA to share otherwise non-public records with the SEC, subject to specific statutory exceptions for trade secrets and confidential commercial information. (21 C.F.R. § 20.85 (citing 21 U.S.C. §§ 331(j), 360j(c), 360ll(d), 360nn(e), and 387f(c)). SEC disclosures to the FDA are governed by 17 C.F.R. § 240.24c-1, which permits the SEC to share non-public information with the FDA upon a showing of need and providing confidentiality assurances.

Although the MOU provides a general framework for mutual information sharing between the two agencies, the agreement’s primary focus appears to be targeted toward disclosures from the FDA to the SEC, and more generally, increasing scrutiny of disclosures and statements from FDA-regulated companies to the public. The MOU specifically identifies situations where entities engaged in FDA-regulated activity “may have disseminated false or misleading statements to the investing community such as representations about the status of FDA review, product approvals, clinical trial results, or other matters within the FDA’s regulatory authority that could affect investors’ decisions.”

Protections for SEC-FDA Information Sharing

Under the MOU, access to shared non-public information is generally restricted to authorized FDA and SEC officials, employees, and contractors who need access to such information as part of their official duties. The MOU also outlines comprehensive protocols for the agencies’ response to compulsory process, including FOIA requests, subpoenas, discovery requests, and congressional inquiries. Consistent with the MOU’s apparent focus on FDA-to-SEC disclosures, the MOU provides that the SEC will not disclose non-public information shared by the FDA pursuant to the MOU, without the FDA’s written permission.

The MOU’s confidentiality provisions have significant implications for defense counsel. First, the MOU’s prohibition on the SEC’s disclosure of non-public information provided by the FDA without written permission may restrict the SEC’s ability to share the same information with other enforcement agencies or in parallel proceedings. Second, the MOU’s detailed protocols — which mandate that the receiving agency notify the providing agency and cooperate to preserve confidentiality — may create additional procedural requirements that defense counsel can leverage in discovery, for example, when seeking to challenge the scope of document production during an enforcement action or related litigation.

Key Compliance Implications for FDA-Regulated Companies

The MOU is another example of increased cooperation between the FDA and SEC with respect to identifying and investigating securities law violations by companies operating in FDA-regulated industries. Under the MOU, the SEC now has a formal mechanism to obtain non-public information from the FDA, and consequently, more resources to scrutinize the accuracy of a company’s statements against the FDA’s internal records, including inspection reports, warning letter responses, clinical trial data, and pre-approval communications.

FDA-regulated companies should therefore assume that disclosures to the FDA and other documented agency interactions may be shared with the SEC; likewise, statements in SEC filings or enforcement proceedings regarding FDA matters may similarly be shared with the FDA. Companies and counsel will need to be vigilant in ensuring compliance with applicable laws and regulations governing public disclosures, consistency in statements made to the SEC, FDA, and the investing public, and reviewing and updating applicable controls and protocols as necessary. Securities and FDA regulatory counsel should consider establishing formal lines of communication and joint review protocols to ensure that statements made by companies are accurate and consistent.

FDA-regulated companies should also be prepared for the possibility that interactions with the FDA may trigger a parallel SEC inquiry (or vice versa). And litigants in SEC or FDA enforcement proceedings should treat the MOU as creating an identifiable category of shared agency records to seek in discovery. Although the MOU generally prohibits the SEC from sharing non-public information outside the agency without written permission from the FDA, litigants should consider pursuing communications between the SEC and FDA, requests for non-public information made under the MOU, and cross-agency referrals in discovery. Such documents may bear on the scope and direction of any cross-agency investigation, the identities of critical witnesses and documents, and any bias or unreasonable or arbitrary focus of the investigations.