United States

Amended rules simplify certain registered debt offering disclosures


The SEC recently released Release 33-10762, Financial Disclosures about Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralize a Registrant’s Securities. This final rule simplifies certain Regulation S-X financial disclosure requirements applicable to registered debt offerings in:

  • Rule 3-10, Financial statements of guarantors and issuers of guaranteed securities registered or being registered. The amendments to Rule 3-10:
    • Continue to permit the omission of separate financial statements of subsidiary issuers and guarantors when certain conditions are met, but replace the condition that a subsidiary issuer or guarantor be 100% owned by the parent company with a condition that it be consolidated in the parent company’s financial statements.
    • Replace currently required condensed consolidating financial information with certain proposed financial and non-financial disclosures. The financial disclosure requirements (a) consist of summarized financial information of the issuers and guarantors, which may be presented on a combined basis, and (b) reduce the number of periods presented. The non-financial disclosure requirements expand the qualitative disclosures about the guarantees, issuers, guarantors and other matters that are material to holders of the guaranteed security. 
    • Require the financial and non-financial disclosures for as long as an issuer or guarantor has an Exchange Act reporting obligation with respect to the guaranteed securities, rather than for as long as the guaranteed securities are outstanding.
  • Rule 3-16, Financial statements of affiliates whose securities collateralize an issue registered or being registered. The amendments to Rule 3-16:
    • Replace the existing requirement to provide separate financial statements for each affiliate whose securities are pledged as collateral with financial and non-financial disclosures about the affiliate(s) and the collateral arrangement as a supplement to the consolidated financial statements of the registrant that issues the collateralized security. 
    • Replace the requirement to provide disclosure only when the pledged securities meet or exceed a numerical threshold relative to the securities registered or being registered with a requirement to provide the amended financial and non-financial disclosures in all cases, unless they are immaterial.

The amended financial and non-financial disclosures in both Rules 3-10 and 3-16 are permitted to be provided outside the audited annual and unaudited interim consolidated financial statements in all filings. Such disclosure requirements will be relocated to new Article 13 in Regulation S-X. 

The amendments will be effective on January 4, 2021, but voluntary compliance is permitted in advance of the effective date.

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