You notice that you can't upload a password-protected file through the Confidential File Service plugin.
In such cases, the logs (sbs.log file) will include errors strings similar to service.ConfidentialFileService - Error occured during parsing the metadata for content.
In such cases, the page where the file has been uploaded would seem to be stuck with the following message,
This is the expected product behavior as the Confidential File Service plugin needs to read the file's metadata to prevent uploading the files marked as Confidential to Jive. Since the plugin can't read the file metadata, it doesn't allow the file to be uploaded.