On July 24, 2018, the US Securities and Exchange Commission (SEC) proposed amendments to the financial disclosure requirements in Rules 3-10 and 3-16 of Regulation S-X, in an effort to simplify and streamline disclosures by registrants in registered debt offerings with respect to guaranteed or collateralized debt securities. Rule 3-10 addresses the financial disclosure requirements for guarantors and issuers of guaranteed securities, while Rule 3-16 focuses on financial disclosure requirements for affiliates whose securities constitute a substantial portion of the collateral for securities offered. Both sets of disclosure requirements affect not only the issuer’s offering documents, but also its periodic filings. The SEC stated that the proposed amendments are “intended to provide investors with material information given the specific facts and circumstances, make the disclosures easier to understand, and reduce the costs and burdens to registrants.” The review of the requirements and proposed amendments to Rule 3-10 and 3-16 stem from the SEC’s Disclosure Effectiveness Initiative. The proposed rules follow the SEC’s 2015 request for comments on these requirements. This Legal Update summarizes the SEC’s proposed amendments.
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