2610.1 Background – Securities that are registered or being registered may be collateralized by the securities of one or more of the registrant’s affiliate(s). In general, such affiliates are consolidated subsidiaries of the registrant, and the pledge of collateral is a residual equity interest that could potentially be foreclosed upon in the event of default. If securities registered or being registered include a pledge of affiliate securities as collateral, S-X 13-02 requires a registrant to provide supplemental financial and non-financial disclosures about the affiliate and collateral arrangement. The requirements of S-X 13-02, 3-10 and 3-16 were amended on March 2, 2020 in SEC Release No. 33-10762 (the “March 2020 Amendments”). This release includes an appendix that summarizes the main features of these rules, including the required disclosures. As a result of these amendments, separate financial statements of such affiliates usually are not required (see Section 2620.3 - Unconsolidated Pledged Affiliates).
While a given security may have guarantees as well as pledges of collateral, the requirements of S-X 13-02 are separate from financial statement and disclosure requirements related to guarantees. S-X 3-10 and S-X 13-01 apply to guaranteed securities (see Section 2500) and do not apply to pledges of affiliate securities as collateral - the concepts of full, unconditional, and joint and several obligation do not apply to collateralizations.
NOTE to SECTION 2610.1
The requirements of S-X 13-02 also apply to entities that qualify as smaller reporting companies under S-X 8-01(d) and S-X 8-03(b)(7), and to entities offering or that have offered collateralized securities pursuant to Regulation A through the requirements of Forms 1-A, 1-K, and 1-SA.
2610.2 Summarized Disclosure Requirements - Set forth below are tables summarizing the non-financial and financial disclosures specified in S-X 13-02 that must be provided, to the extent material. These tables are only a summary of certain requirements contained in the rules and regulations; they are not a substitute for the rules and regulations. Refer to the rules for the full requirements and to the description of those requirements the March 2020 Amendments. Section 2620 includes additional information on the application of these requirements.
The registrant may provide the disclosures in its consolidated financial statements and related footnotes or, alternatively, in MD&A. If a registrant elects to provide the disclosures in its audited financial statements, the disclosures must be audited. If not otherwise included in the consolidated financial statements or in MD&A, the registrant must include the disclosures in its prospectus immediately following “Risk Factors,” if any, or otherwise, immediately following pricing information described in Item 105 of Regulation S-K [S-X 13-02(b)].
Non-Financial Disclosure Requirement
Rule Reference
Non-Financial Disclosures
Disclosures about the following:
  • The securities pledged as collateral;
  • the affiliates whose securities are pledged;
  • the terms and conditions of the collateral arrangement; and
  • whether a trading market exists for the pledged securities.
Disclosure of facts and circumstances specific to particular affiliates or the collateral arrangement that are beyond what is specifically required in S-X 13-02(a)(1) through (3) may be necessary (see “Additional Information Required to be Disclosed” section below).
Exhibit Listing Each Affiliate Whose Securities Are Pledged & the Securities Pledged as Collateral
List of each of the registrant’s affiliates whose securities are pledged as collateral for securities registered or being registered that also identifies the securities pledged as collateral.
Exhibit 22 (Item 601(b)(22) of Regulation S-K)
Financial Disclosure Requirement
Rule Reference
Summarized Financial Information
Summarized financial information, as specified in S-X 1-02(bb)(1), which includes select balance sheet and income statement line items, for each affiliate whose securities are pledged as collateral.
Disclosure of additional line items of summarized financial information beyond what is specified in S-X 13-02(a)(4) may be necessary (see “Additional Information Required to be Disclosed” section below).
Basis of Presentation Note
An accompanying note that briefly describes the basis of presentation.
Transactions with and Balances Due To / From the Registrant, Certain Subsidiaries, and Related Parties
An affiliate’s amounts due from, amounts due to, and transactions with the registrant, any of the registrant’s subsidiaries not included in the Summarized Financial Information of the affiliate(s), and related parties must be presented in separate line items.
Combined Basis Presentation
The summarized financial information of each affiliate consolidated in the registrant’s financial statements is permitted to be presented on a combined basis.
However, if information provided in response to disclosures specified in S-X 13-02 (e.g., one of the non-financial disclosures) is applicable to one or more, but not all, affiliates, separate disclosure of summarized financial information for the affiliates to which the information applies is required. In limited circumstances (i.e., where the separate financial information applicable to those affiliates can be easily understood), narrative disclosure may be provided in lieu of such separate summarized financial information.
Elimination of Certain Intercompany Balances and Transactions
Intercompany balances and transactions between affiliates whose information is presented on a combined basis must be eliminated in the financial disclosures.
Periods to Present
The summarized financial information must be provided as of and for the most recently ended fiscal year and year-to-date interim period, if applicable, included in the registrant’s consolidated financial statements.
Non-Exclusive Scenarios Permitting Omission of Summarized Financial Information
The summarized financial information may be omitted on the basis that it is not material if one of the two non-exclusive scenarios in S-X 13-02(a)(4)(vi) is applicable and the related scenario is disclosed.
Additional Information Required to be Disclosed
Disclose any financial and narrative information about each affiliate if the information would be material for investors to evaluate the pledge of the affiliate’s securities as collateral, and disclose sufficient information so as to make the financial and nonfinancial information presented not misleading.
Recently-Acquired Affiliates Whose Securities are Pledged as Collateral
Disclose pre-acquisition summarized financial information specified in S-X 13-02(a)(4) for recently-acquired affiliates whose securities are pledged as collateral in a Securities Act registration statement filed in connection with the offer and sale of the collateralized security if the registrant has acquired a significant “business” after the date of its most recent balance sheet included in its consolidated financial statements and that acquired business and/or one or more of its subsidiaries are affiliates whose securities are pledged as collateral. See Section 2630 below for additional information.
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