Rules 3-10_3-16 Adopting Release.SupportingStatement.Final.11-22-2021

SUPPORTING STATEMENT FOR FINAL RULES
UNDER THE SECURITIES ACT OF 1933 AND
THE SECURITIES EXCHANGE ACT OF 1934
This submission, pursuant to the Paperwork Reduction Act of 1995, 44 U.S.C.
§3501, et seq., consists of this supporting statement and the following attachments:
A. Statutory Authority
B. Final Release
A.

JUSTIFICATION

1.

CIRCUMSTANCES MAKING THE COLLECTION OF INFORMATION
NECESSARY

On March 2, 2020, the Securities and Exchange Commission (the “Commission”)
adopted amendments to the financial disclosure requirements for guarantors and issuers
of guaranteed securities, and issuers’ affiliates whose securities collateralize the issuers’
securities, contained in Rules 3-10 and 3-16 of Regulation S-X under the Securities Act
of 1933 (the “Securities Act”) and the Securities Exchange Act of 1934 (the “Exchange
Act”). A copy of Commission Release No. 33-10762 (“Adopting Release”), which
contains the final amendments, is attached.
The following collections of information (“affected forms”) will be affected by
the final amendments:1







1

Form S-1 (OMB Control No.
3235-0065);
Form S-4 (OMB Control No.
3235-0324);
Form S-3 (OMB Control No.
3235-0073);
Form S-11 (OBM Control No.
3235-0067);
Form F-1 (OMB Control No.
3235-0258);
Form F-3 (OMB Control No.
3235-0256);







Form F-4 (OMB Control No.
3235-0325);
Form 20-F (OMB Control No.
3235-0288);
Form 10-K (OMB Control No.
3235-0063);
Form 10-Q (OMB Control No.
3235-0070);
Form 1-A (OMB Control No.
3235-0286);

The amendments to Form F-4 are not expected to affect the burdens associated with the form.

2.

PURPOSE OF THE INFORMATION COLLECTION

The purpose of the final amendments rules is to modernize and simplify Rules 310 and 3-16 of Regulation S-X to better align the requirements of these rules with the
needs of investors and reduce disclosure burdens on registrants. The final 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
compliance burdens to registrants. In addition, by reducing the costs and burdens of
compliance, issuers may be encouraged to offer guaranteed or collateralized securities on
a registered basis, thereby affording investors protection they may not be provided in
offerings conducted on an unregistered basis. The final amendments clarify, consolidate,
relocate and eliminate certain elements of these rules.
3.

CONSIDERATION GIVEN TO INFORMATION TECHNOLOGY

The collection of information requirements of the final rules are set forth in
amended rules and forms. All of the affected forms are filed electronically with the
Commission using the Commission’s Electronic Data Gathering, Analysis and Retrieval
(“EDGAR”) system.
4.

DUPLICATION OF INFORMATION
The final amendments do not duplicate, overlap, or conflict with other federal

rules.
5.

REDUCING THE BURDEN ON SMALL ENTITIES

The final amendments will affect issuers (including issuers that small entities),
and guarantors of guaranteed debt securities, issuers of debt securities collateralized by
securities of those issuers’ affiliates. The final amendments clarify, consolidate and
simplify compliance and reporting requirements for small entities and other registrants.
These effects will reduce compliance burdens for all registrants, including small entities.
Consequently, the Commission believes that the final amendments would not have a
significant impact on small businesses.
6.

CONSEQUENCES OF NOT CONDUCTING COLLECTION

The final amendments set forth financial reporting requirements for issuers and
guarantors of guaranteed securities, and issuers’ affiliates whose securities collateralize
the issuers’ securities. Less frequent collection would deprive investors of access to
material information that is important to their voting and investment decisions.
7.

SPECIAL CIRCUMSTANCE
There are no special circumstances in connection with these amendments.

2

8.

CONSULTATIONS WITH PERSONS OUTSIDE THE AGENCY

The Commission issued a proposing release soliciting comment on the new
“collection of information” requirements and the associated paperwork burdens.2
Comments on Commission releases are generally received from registrants, investors,
and other market participants. The Commission did not receive any comments that directly
addressed the Paperwork Reduction Act (“PRA”) analysis of the proposed amendments. In
addition, the Commission and staff participate in ongoing dialogue with representatives
of various market participants through public conferences, roundtables and meetings. All
comments received on the proposal are available at https://www.sec.gov/comments/s719-18/s71918.htm. The Commission considered all comments received prior to
publishing the final rules, as required by 5 CFR 1320.11(f).
9.

PAYMENT OR GIFT TO RESPONDENTS
No payment or gift has been provided to any respondents.

10.

CONFIDENTIALITY
All documents submitted to the Commission are available to the public.

11.

SENSITIVE QUESTIONS

No information of a sensitive nature will be required under the affected forms.
These information collections collect basic Personally Identifiable Information (PII) that
may include a name and job title. However, the agency has determined that these
information collections do not constitute a system of record for purposes of the Privacy
Act. Information is not retrieved by a personal identifier. In accordance with Section 208
of the E-Government Act of 2002, the agency has conducted a Privacy Impact
Assessment (PIA) of the EDGAR system, in connection with this collection of
information. The EDGAR PIA, published on February 5, 2020, is provided as a
supplemental document and is also available at https://www.sec.gov/privacy.

2

See Financial Disclosures About Guarantors and Issuers of Guaranteed Securities and Affiliates
Whose Securities Collateralize a Registrant’s Securities, Release No. 33-10526 (July 24, 2018)
[83 FR 49630 (Oct. 2, 2018)] (“Proposing Release”).

3

12. and 13.

ESTIMATES OF HOUR AND COST BURDENS

The final amendments clarify, consolidate, relocate and eliminate certain elements
of existing Rules 3-10 and 3-16 of Regulation S-X. The Commission anticipates that the
final amendments will make these disclosures easier to understand, and reduce the
compliance burdens to issuers.
The tables below show the total annual compliance burden, in hours and in costs,
of the collection of information resulting from the final amendments.3 The burden
estimates were calculated by multiplying the estimated number of responses by the
estimated average amount of time it would take an issuer to prepare and review the
exhibit hyperlinks. The portion of the burden carried by outside professionals is reflected
as a cost, while the portion of the burden carried by the issuer internally is reflected in
hours.
For purposes of the PRA, the burden is allocated between internal burden hours
and outside professional costs. The table 1 below sets forth the percentage estimates the
Commission typically uses for the burden allocation for each affected form. We also
estimate that the average cost of retaining an outside professional is $400 per hour.4
Table 1: Standard Estimated Burden Allocation for Specified Forms and
Schedules.
Form / Schedule Type
Forms S-1, S-3, S-4, S-11,
F-1, F-3 and 20-F.

Internal
25%

Outside Professionals
75%

Forms 10-K, 10-Q, and 1-A

75%

25%

3

For convenience, the estimated hour and cost burdens in the table have been rounded to the nearest
whole number.

4

We recognize that the costs of retaining outside professionals may vary depending on the nature of
the professional services, but for purposes of this PRA analysis, we estimate that such costs would
be an average of $400 per hour. This estimate is based on consultations with several registrants,
law firms, and other entities that regularly assist registrants in preparing and filing documents with
the Commission.

4

Table 2 below illustrates the estimated net incremental change to the total annual
compliance burdens for the affected forms, in hours and in costs, as a result of the final
amendments.5
Table 2: Calculation of the Net Incremental Change in Burden Estimates of
Affected Responses Resulting from the Final Amendments

14.

Form

Estimated
Number of
Affected
Responses
(A)

Estimated
Change in
Burden
Hours/
Affected
Response
(B)

Estimated
Internal
Burden
Hours
(C)

Outside
Professional
Hours
(D)

Estimated Outside
Professional
Costs/Affected
Response
(E)

10-K
10-Q
S-1
20-F
S-4
S-11
F-1
1-A
Total

487
1,270
14
19
137
8
8
1

(14,610)
(36,300)
(20)
(170)
(410)
60
60
70

(10,958)
(27,225)
(5)
(42.5)
(102.5)
15
15
52.5
(38,250.5)

(3,652)
(9,075)
(15)
(127.5)
(307.5)
45
45
17.5

($1,460,800)
($3,630,000)
($6,000)
($51,000)
($123,000)
$18,000
$18,000
$7,000
($5,227,800)

COST TO FEDERAL GOVERNMENT

The annual cost of reviewing and processing disclosure documents, including
registration statements, post-effective amendments, proxy statements, annual report and
other filings of operating companies amounted to $103,479,690 in fiscal year 2019, based
on the Commission’s computation of the value of staff time devoted to this activity and
related overhead.
15.

REASON FOR CHANGES IN BURDEN

Table 3 below illustrates the changes in cost and hour burdens from the burden
estimates currently approved by OMB. Columns (A) and (B) represent the current
burden estimates submitted to OMB.6 Columns (C) and (D) represent the new burden
estimates under the final rules. Columns (E) and (F) represent the program change,
which encompasses the change in the burden estimates attributable to the final rules.
5

The amendments to Forms S-3 and F-3 will not directly affect the burdens associated with these
forms, but will result in an increase in the annual number of responses. The change in the
collection burdens resulting from the increase in annual responses are reflected in table 3 below.

6

Figures in Columns A and B are the most recent information collection burdens and reflect any
adjustments to the information collections inventory for the affected forms made since the
publication of the Adopting Release.

5

In the Proposing Release, the Commission included PRA estimates for Schedules
14A and 14C, and Form 10. Commission staff modified the estimated number of filings
that would be affected by the final amendments and determined that the final
amendments would not impose an information collections burden on these forms.
Table 3:7

Current Burden

Program Change

Form

Current
Annual
Responses

Current
Burden
Hours
(A)

Current Cost
Burden
(B)

Number
of
Affected
Responses

S-1
S-3
S-4
S-11
F-1
F-3
10-K
10-Q
1-A

894
1,647
551
64
63
112
8,286
22,907
204

146,067
192,460
562,465
12,214
26,692
4,441
14,198,998
3,209,558
111,832

$178,922,043
$234,775,580
$677,378,579
$14,925,768
$32,275,375
$5,703,600
$1,895,253,919
$425,120,754
$15,003,502

20-F

725

479,304

$576,875,025

16.

Requested Change in Burden

Increase or
Reduction in
Professional
Costs
(D)

Annual
Responses

Burden
Hours
(E)

Cost Burden
(F)

14
4
137
8
8
1
487
1,270
1

Increase
or
Reduction
in
Company
Hours
(C)
(5)
70
(103)
15
15
18
(10,958)
(27,225)
53

($6,000)
$84,000
($123,000)
$18,000
$18,000
$21,000
($1,460,800)
($3,630,000)
$7,000

898
1,651
588
67
66
113
8,292
22,925
205

146,062
192,530
562,362
12,229
26,707
4,459
14,188,040
3,182,333
111,885

$178,916,043
$234,859,580
$677,255,579
$14,943,768
$32,293,375
$5,724,600
$1,893,793,119
$421,490,754
$15,010,502

19

(43)

($51,000)

729

479,261

$576,824,025

INFORMATION COLLECTION PLANNED FOR STATISTICAL
PURPOSES
The information collections do not employ statistical methods.

17.

APPROVAL TO OMIT OMB EXPIRATION DATE

We request authorization to omit the expiration date on the electronic version of
the form. Including the expiration date on the electronic version of the form will result in
increased costs, because the need to make changes to the form may not follow the
application’s scheduled version release dates. The OMB control number will be
displayed.
18.

EXCEPTIONS TO CERTIFICATION FOR PAPERWORK REDUCTION
ACT SUBMISSIONS

7

Figures in Table 3 have been rounded to the nearest whole number.

6

There are no exceptions to certification for Paperwork Reduction Act
submissions.
B.

STATISTICAL METHODS
The information collections do not employ statistical methods.

7

Short Statements Rel. No. 33-10762
Form S-1
The amendments to the Regulation S-X financial disclosure requirements are
applicable to registered debt offerings that include credit enhancements, such as
subsidiary guarantees. The amendments are intended to both improve the quality of
disclosure and increase the likelihood that issuers will conduct credit enhanced debt
offerings on a registered basis. The amendments clarify, consolidate, relocate and
eliminate some disclosures of the credit enhancement requirements. The amendments
focus on material information regarding guarantees and other credit enhancements, and
eliminate prescriptive requirements that have imposed unnecessary burdens and
incentivized issuers of securities with guarantees and other credit enhancements to offer
and sell those securities in unregistered offerings. All together, the Commission believes
these effects will facilitate more registered offerings of guaranteed and collateralized debt
securities, thereby affording investors protection they may not otherwise have had in debt
offerings conducted in the private markets. For purposes of the Paperwork Reduction
Act, the Commission estimates that the final amendments will result in four additional
filings of Form S-1, as well as a net decrease of five burden hours and a net decrease of
$6,000 in the cost burden of the form.

Form S-3
The amendments to the Regulation S-X financial disclosure requirements are
applicable to registered debt offerings that include credit enhancements, such as
subsidiary guarantees. The amendments are intended to both improve the quality of
disclosure and increase the likelihood that issuers will conduct credit enhanced debt
offerings on a registered basis. The amendments clarify, consolidate, relocate and
eliminate some disclosures of the credit enhancement requirements. The amendments
focus on material information regarding guarantees and other credit enhancements, and
eliminate prescriptive requirements that have imposed unnecessary burdens and
incentivized issuers of securities with guarantees and other credit enhancements to offer
and sell those securities in unregistered offerings. All together, the Commission believes
these effects will facilitate more registered offerings of guaranteed and collateralized debt
securities, thereby affording investors protection they may not otherwise have had in debt
offerings conducted in the private markets. For purposes of the Paperwork Reduction
Act, the Commission estimates that the final amendments will result in four additional
filings of Form S-3, as well as a net increase of 70 burden hours and a net increase of
$84,000 in the cost burden of the form.

8

Form S-4
The amendments to the Regulation S-X financial disclosure requirements are
applicable to registered debt offerings that include credit enhancements, such as
subsidiary guarantees. The amendments are intended to both improve the quality of
disclosure and increase the likelihood that issuers will conduct credit enhanced debt
offerings on a registered basis. The amendments clarify, consolidate, relocate and
eliminate some disclosures of the credit enhancement requirements. The amendments
focus on material information regarding guarantees and other credit enhancements, and
eliminate prescriptive requirements that have imposed unnecessary burdens and
incentivized issuers of securities with guarantees and other credit enhancements to offer
and sell those securities in unregistered offerings. All together, the Commission believes
these effects will facilitate more registered offerings of guaranteed and collateralized debt
securities, thereby affording investors protection they may not otherwise have had in debt
offerings conducted in the private markets. For purposes of the Paperwork Reduction
Act, the Commission estimates that the final amendments will result in 37 additional
filings of Form S-4, as well as a net decrease of 103 burden hours and a net decrease of
$123,000 in the cost burden of the form.

Form S-11
The amendments to the Regulation S-X financial disclosure requirements are
applicable to registered debt offerings that include credit enhancements, such as
subsidiary guarantees. The amendments are intended to both improve the quality of
disclosure and increase the likelihood that issuers will conduct credit enhanced debt
offerings on a registered basis. The amendments clarify, consolidate, relocate and
eliminate some disclosures of the credit enhancement requirements. The amendments
focus on material information regarding guarantees and other credit enhancements, and
eliminate prescriptive requirements that have imposed unnecessary burdens and
incentivized issuers of securities with guarantees and other credit enhancements to offer
and sell those securities in unregistered offerings. All together, the Commission believes
these effects will facilitate more registered offerings of guaranteed and collateralized debt
securities, thereby affording investors protection they may not otherwise have had in debt
offerings conducted in the private markets. For purposes of the Paperwork Reduction
Act, the Commission estimates that the final amendments will result in three additional
filings of Form S-11, as well as a net increase of 15 burden hours and a net increase of
$18,000 in the cost burden of the form.

9

Form F-1
The amendments to the Regulation S-X financial disclosure requirements are
applicable to registered debt offerings that include credit enhancements, such as
subsidiary guarantees. The amendments are intended to both improve the quality of
disclosure and increase the likelihood that issuers will conduct credit enhanced debt
offerings on a registered basis. The amendments clarify, consolidate, relocate and
eliminate some disclosures of the credit enhancement requirements. The amendments
focus on material information regarding guarantees and other credit enhancements, and
eliminate prescriptive requirements that have imposed unnecessary burdens and
incentivized issuers of securities with guarantees and other credit enhancements to offer
and sell those securities in unregistered offerings. All together, the Commission believes
these effects will facilitate more registered offerings of guaranteed and collateralized debt
securities, thereby affording investors protection they may not otherwise have had in debt
offerings conducted in the private markets. For purposes of the Paperwork Reduction
Act, the Commission estimates that the final amendments will result in three additional
filings of Form F-1, as well as a net increase of 15 burden hours and a net increase of
$18,000 in the cost burden of the form.

Form F-3
The amendments to the Regulation S-X financial disclosure requirements are
applicable to registered debt offerings that include credit enhancements, such as
subsidiary guarantees. The amendments are intended to both improve the quality of
disclosure and increase the likelihood that issuers will conduct credit enhanced debt
offerings on a registered basis. The amendments clarify, consolidate, relocate and
eliminate some disclosures of the credit enhancement requirements. The amendments
focus on material information regarding guarantees and other credit enhancements, and
eliminate prescriptive requirements that have imposed unnecessary burdens and
incentivized issuers of securities with guarantees and other credit enhancements to offer
and sell those securities in unregistered offerings. All together, the Commission believes
these effects will facilitate more registered offerings of guaranteed and collateralized debt
securities, thereby affording investors protection they may not otherwise have had in debt
offerings conducted in the private markets. For purposes of the Paperwork Reduction
Act, the Commission estimates that the final amendments will result in one additional
filing of Form F-3, as well as a net increase of 18 burden hours and a net increase of
$21,000 in the cost burden of the form.

10

Form 10-K
The amendments to the Regulation S-X financial disclosure requirements are
applicable to registered debt offerings that include credit enhancements, such as
subsidiary guarantees. The amendments are intended to both improve the quality of
disclosure and increase the likelihood that issuers will conduct credit enhanced debt
offerings on a registered basis. The amendments clarify, consolidate, relocate and
eliminate some disclosures of the credit enhancement requirements. The amendments
focus on material information regarding guarantees and other credit enhancements, and
eliminate prescriptive requirements that have imposed unnecessary burdens and
incentivized issuers of securities with guarantees and other credit enhancements to offer
and sell those securities in unregistered offerings. All together, the Commission believes
these effects will facilitate more registered offerings of guaranteed and collateralized debt
securities, thereby affording investors protection they may not otherwise have had in debt
offerings conducted in the private markets. For purposes of the Paperwork Reduction
Act, the Commission estimates that the final amendments will result in six additional
filings of Form 10-K, as well as a net decrease of 10,958 burden hours and a net decrease
of $1,460,800 in the cost burden of the form.

Form 10-Q
The amendments to the Regulation S-X financial disclosure requirements are
applicable to registered debt offerings that include credit enhancements, such as
subsidiary guarantees. The amendments are intended to both improve the quality of
disclosure and increase the likelihood that issuers will conduct credit enhanced debt
offerings on a registered basis. The amendments clarify, consolidate, relocate and
eliminate some disclosures of the credit enhancement requirements. The amendments
focus on material information regarding guarantees and other credit enhancements, and
eliminate prescriptive requirements that have imposed unnecessary burdens and
incentivized issuers of securities with guarantees and other credit enhancements to offer
and sell those securities in unregistered offerings. All together, the Commission believes
these effects will facilitate more registered offerings of guaranteed and collateralized debt
securities, thereby affording investors protection they may not otherwise have had in debt
offerings conducted in the private markets. For purposes of the Paperwork Reduction
Act, the Commission estimates that the final amendments will result in 18 additional
filings of Form 10-Q, as well as a net decrease of 27,225 burden hours and a net decrease
of $3,630,000 in the cost burden of the form.

11

Form 1-A
The amendments to the Regulation S-X financial disclosure requirements are
applicable to registered debt offerings that include credit enhancements, such as
subsidiary guarantees. The amendments are intended to both improve the quality of
disclosure and increase the likelihood that issuers will conduct credit enhanced debt
offerings on a registered basis. The amendments clarify, consolidate, relocate and
eliminate some disclosures of the credit enhancement requirements. The amendments
focus on material information regarding guarantees and other credit enhancements, and
eliminate prescriptive requirements that have imposed unnecessary burdens and
incentivized issuers of securities with guarantees and other credit enhancements to offer
and sell those securities in unregistered offerings. All together, the Commission believes
these effects will facilitate more registered offerings of guaranteed and collateralized debt
securities, thereby affording investors protection they may not otherwise have had in debt
offerings conducted in the private markets. For purposes of the Paperwork Reduction
Act, the Commission estimates that the final amendments will result in one additional
filing of Form 1-A, as well as a net increase of 53 burden hours and a net increase of
$7,000 in the cost burden of the form.

Form 20-F
The amendments to the Regulation S-X financial disclosure requirements are
applicable to registered debt offerings that include credit enhancements, such as
subsidiary guarantees. The amendments are intended to both improve the quality of
disclosure and increase the likelihood that issuers will conduct credit enhanced debt
offerings on a registered basis. The amendments clarify, consolidate, relocate and
eliminate some disclosures of the credit enhancement requirements. The amendments
focus on material information regarding guarantees and other credit enhancements, and
eliminate prescriptive requirements that have imposed unnecessary burdens and
incentivized issuers of securities with guarantees and other credit enhancements to offer
and sell those securities in unregistered offerings. All together, the Commission believes
these effects will facilitate more registered offerings of guaranteed and collateralized debt
securities, thereby affording investors protection they may not otherwise have had in debt
offerings conducted in the private markets. For purposes of the Paperwork Reduction
Act, the Commission estimates that the final amendments will result in four additional
filings of Form 20-F, as well as a net decrease of 43 burden hours and a net decrease of
$51,000 in the cost burden of the form.

12