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7 January 2022 Issue Brief

SEC Regulation S-X

Regulation S-X is a U.S. Securities and Exchange Commission rule that covers annual reports and financial statements from companies. These annual reports, which are required to be filed by companies under the Securities Act of 1933 and the Securities Exchange Act of 1934, represent documents audited using GAAP principles required by the SEC and sent to a public company for mutual fund shareholders the end of each fiscal year; these reports explain the company’s financial results or the year, which include the balance sheet, income, cash flow statement, and description of company operations and commenting on the outlook for the company’s future.

Regulation S-X is seen less frequently but is equally valid for registration statements, annual reports and shareholder reports filed under the Public Utility Holding Company Act of 1935 and likewise for the Investment Company Act of 1940.

Regulation S-X extends the meaning of the term “financial statements” to include all notes to the statements and all related schedules. Regulation S-X is closely related to Regulation S-K, which lays out reporting requirements for various SEC filings and registrations used by public companies. Regulation S-X profoundly affects internal and external accounts and audit committees, and directors and officers and numerous officials, employees and contractors of publicly reporting companies, and because of the need for accurate reporting of monies and other data, any operation of a company may be affected to require ultimate compliance with Regulation S-X and the Sarbanes-Oxley Act. 

Regulation S-X History & Amendments

In October 13, 2016, the SEC issued a release adopting final rules to modernize and enhance the reporting and disclosure of information by registered investment companies. Though the final rules primarily address the reporting and disclosure obligations of registered investment companies, they also include amendments to Regulation S-X applicable to business development companies (BDCs). The compliance date for the amendments to Regulation S-X is August 1, 2017.

Regulation S-X currently does not require standardized information to be included in financial statements for most types of derivatives, including swaps, futures, and forwards. To address this, the final rules amend Regulation S-X to, among other things, standardize the reporting of certain derivative investments in a BDC’s financial statements. In addition, the final rules update the disclosures for other investments and investments in and advances to affiliates and amend the rules regarding the general form and content of a BDC’s financial statements.

The SEC’s amendments to Regulation S-X most significantly change the current reporting regime for BDCs by standardizing the reporting of certain derivative investments, but otherwise make only modest changes to the Regulation S-X rules applicable to BDCs. 

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