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210.12-01 Application of §§ 210.12-01 to 210.12-41.

210.12-02 Marketable securities; other security investments.

210.12-03 Amounts due from directors, officers, and principal holders of equity securities other than affiliates.

210.12-04 Investments in securities of affiliates.

210.12-05 Indebtedness of affiliates. 210.12-06 Property, plant, and equipment. 210.12-06a Unrecovered cost incurred in the promotional, exploratory, and development stage.

210.12-07 Reserves for depreciation, depletion, and amortization of property, plant, and equipment.

210.12-08 Intangible assets. 210.12-09 Reserves for depreciation and amortization of intangible assets.

210.12-10 Bonds, mortgages and similar debts.

210.12-11 Indebtedness

current.

to affiliates; not

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Sec.

210.12-27 Summary of investments in securities other than securities of affiliates.

210.12-28 210.12-29

Investments in stocks of affiliates. Premiums, losses, and underwriting expense.

210.12-30 Summary of realized gains or losses on sale or maturity of investments.

210.12-31 Policy reserves, benefits, and insurance in force.

FOR BANK HOLDING COMPANIES 210.12-32 Investments in securities of affiliates; banks.

FOR ALL UNIT INVESTMENT TRUSTS, AND FOR THOSE UNINCORPORATED MANAGEMENT INVESTMENT COMPANIES WHICH ARE ISSUERS OF PERIODIC PAYMENT PLAN CERTIFICATES 2

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210.12-40 210.12-41

Certificate reserves.

Qualified assets on deposit.

AUTHORITY: The provisions of this Part 210 issued under secs. 6, 7, 8, 10, 12, 13, 15, 19, 23, 48 Stat. 78, 79, as amended, 81, as amended, 85, as amended, 892, as amended, 894, 895, as amended, 901, as amended, secs. 5, 14, 20, 49 Stat. 812, 827, 833, secs. 8, 30, 31, 38, 54 Stat. 803, 836, 838, 841; 15 U.S.C. 771, 77g, 77h, 77j, 77s, 781, 78m, 780, 78w, 79e, 79n, 79t, 80a-8, 808-29, 80a-30, 80a-37, unless mediaries, controls, or is controlled by, otherwise noted.

APPLICATION OF THIS PART

§ 210.1-01 Application of Regulation S-X (17 CFR Part 210).

(a) This part (together with the Accounting Series Releases) (Part 211 of this chapter) states the requirements applicable to the form and content of all financial statements required to be filed as a part of—

(1) Registration statements under the Securities Act of 1933 (Part 239 of this chapter), except as otherwise specifically provided in the forms which are to be used for registration under this Act;

216 F.R. 2655, Mar. 24, 1951.

(2) Registration statements under section 12 (Subpart C of Part 249 of this chapter) and annual or other reports under sections 13 and 15(d) (Subparts D and E of Part 249 of this chapter) of the Securities Exchange Act of 1934, except as otherwise specifically provided in the forms which are to be used for registration and reporting under these sections of this Act;

(3) Registration statements and annual reports filed under the Public Utility Holding Company Act of 1935 (Part 259 of this chapter) by public utility holding companies registered under such Act; and

(4) Registration statements and annual reports under the Investment Company Act of 1940 (Part 274 of this chapter).

(b) The term "financial statements" as used in this part shall be deemed to include all supporting schedules. [33 F.R. 5036, Mar. 27, 1968]

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Unless the context otherwise requires, terms defined in the general rules and regulations or in the instructions to the applicable form, when used in this part, shall have the respective meanings given in such instructions or rules. In addition the following terms shall have the meanings indicated in this section unless the context otherwise requires:

(a) Affiliate. An "affiliate" of, or a person "affiliated" with, a specified person, is a person that directly, or indirectly through one or more interor is under common control with, the person specified.

(b) Bank holding company. The term "bank holding company" means a person which is engaged, either directly or indirectly, primarily in the business of owning securities of banks, for the purpose and with the effect of exercising control.

(c) Control. The term "control" (including the terms "controlling", "controlled by" and "under common control with") means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise.

(d) Equity security. The term "equity security" means any stock or similar security; or any security convertible, with or without consideration, into such

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a security, or carrying any warrant or right to subscribe to or purchase such a security; or any such warrant or right.

(e) Fifty-percent owned person. The term "fifty-percent owned person" means a person in respect of which the registrant owns directly or indirectly approximately 50 percent of the voting securities and approximately 50 percent of the voting securities of such person is owned directly or indirectly by another single interest.

(f) Majority-owned subsidiary. The term "majority-owned subsidiary" means a subsidiary more than 50 percent of whose outstanding securities representing the right, other than as affected by events of default, to vote for the election of directors, is owned by the subsidiary's parent and/or one or more of the parent's other majority-owned subsidiaries.

(g) Material. The term "material", when used to qualify a requirement for the furnishing of information as to any subject, limits the information required to those matters as to which an average prudent investor ought reasonably to be informed before purchasing the security registered.

(h) Parent. A "parent" of a specified person is an affiliate controlling such person directly, or indirectly through one or more intermediaries.

(i) Principal holders of equity securities. The term "principal holders of equity securities", used in respect of a particular registration statement or report, means the persons named in the item of such statement or report calling for holders of record or beneficial owners of more than 10 percent of any class of equity securities. If the particular statement or report contains no such item, the term means the persons named in the most recent related registration statement, application or report of the registrant which contains such an item.

(j) Registrant. The term "registrant" means the issuer of the securities for which an application, a registration statement, or a report is filed.

(k) Significant subsidiary. The term "significant subsidiary" means a subsidiary meeting any one of the following conditions:

(1) The assets of the subsidiary, or the investments in and advances to the subsidiary by its parent and the parent's other subsidiaries, if any, exceed 15 perIcent of the assets of the parent and its subsidiaries on a consolidated basis.

(2) The sales and operating revenues of the subsidiary exceed 15 percent of the sales and operating revenues of its parent and the parent's subsidiaries on a consolidated basis.

(3) The subsidiary is the parent of one or more subsidiaries and together with such subsidiaries would, if considered in the aggregate, constitute a significant subsidiary.

(1) Subsidiary. A "subsidiary" of a specified person is an affiliate controlled by such person directly, or indirectly through one or more intermediaries.

(m) Totally-held subsidiary. The term "totally-held subsidiary" means a subsidiary (1) substantially all of whose outstanding securities are owned by its parent and/or the parent's other totallyheld subsidiaries, and (2) which is not indebted to any person other than its parent and/or the parent's other totallyheld subsidiaries in an amount which is material in relation to the particular subsidiary, excepting indebtedness incurred in the ordinary course of business which is not overdue and which matures within one year from the date of its creation, whether evidenced by securities or not.

[15 F.R. 9383, Dec. 29, 1950, as amended at 16 F.R. 2655, Mar. 24, 1951]

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(a) The Commission will not recògnize any person as a certified public accountant who is not duly registered and in good standing as such under the laws of the place of his residence or principal office. The Commission will not recognize any person as a public accountant who is not in good standing and entitled to practice as such under the laws of the place of his residence or principal office.

(b) The Commission will not recognize any certified public accountant or public accountant as independent who is not in fact independent. For example, an accountant will be considered not independent with respect to any person or any of its parents or subsidiaries in whom he has, or had during the period of report, any direct financial interest or any material indirect financial interest; or with whom he is, or was during such period, connected as a promoter, under

writer, voting trustee, director, officer, or employee.

(c) In determining whether an accountant may in fact be not independent with respect to a particular person, the Commission will give appropriate consideration to all relevant circumstances, including evidence bearing on all relationships between the accountant and that person or any affiliate thereof, and will not confine itself to the relationships existing in connection with the filing of reports with the Commission.

[15 F.R. 9384, Dec. 29, 1950, as amended at 23 F.R. 2454, Apr. 16, 1958]

§ 210.2-02 Accountants' certificates.

(a) Technical requirements. The accountant's certificate shall be dated, shall be signed manually, and shall identify without detailed enumeration the financial statements covered by the certificate.

(b) Representations as to the audit. (1) The accountant's certificate (1) shall state whether the audit was made in accordance with generally accepted auditing standards; and (ii) shall designate any auditing procedures generally recognized as normal, or deemed necessary by the accountant under the circumstances of the particular case, which have been omitted, and the reasons for their omission.

(2) Nothing in this section shall be construed to imply authority for the omission of any procedure which independent accountants would ordinarily employ in the course of an audit made for the purpose of expressing the opinions required by paragraph (c) of this section.

(c) Opinions to be expressed. The accountant's certificate shall state clearly: (1) The opinion of the accountant in respect of the financial statements covered by the certificate and the accounting principles and practices reflected therein; (2) the opinion of the accountant as to any material changes in accounting principles or practices or method of applying the accounting principles or practices, or adjustments of the accounts, required to be set forth by § 210.3-07; and (3) the nature of, and the opinion of the accountant as to, any material differences between the accounting principles and practices reflected in the financial statements and those reflected in the accounts after the entry of adjustments for the period under review.

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Notwithstanding any requirements as to certification by independent accountants, the financial statements of any foreign governmental agency may certified by the regular and customary auditing staff of the respective government, if public financial statements of such governmental agency are customarily certified by such auditing staff. § 210.2-04 Certification of financial statements of persons other than the registrant.

If a registrant is required to file financial statements of any other person, such statements need not be certified if certification of such statements would not be required if such person were itself a registrant.

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If, with respect to the certification of the financial statements of any person, the principal accountant relies on an examination made by another independent public accountant of certain of the accounts of such person or its subsidiaries, the certificate of such other accountant shall be filed (and the provisions of §§ 210.2-01 and 210.2-02 shall be applicable thereto); however, the certificate of such other accountant need not be filed (a) if no reference is made directly or indirectly to such other accountant's examination in the principal accountant's certificate, or (b) if, having referred to such other accountant's examination, the principal accountant states in his certificate that he assumes responsibility for such other accountant's examination in the same manner as if it had been made by him.

RULES OF GENERAL APPLICATION SOURCE: $ 210.3-01 to 210.3-20 appear at 15 F.R. 9385, Dec. 29, 1950, unless otherwise noted.

§ 210.3-01 Form, order, and terminol

ogy.

(a) Financial statements may be filed in such form and order, and may use such generally accepted terminology, as will best indicate their significance and character in the light of the provisions applicable thereto.

(b) All money amounts required to be shown in financial statements may be expressed in even dollars or thousands of dollars: Provided, That, in the latter case, an indication to that effect is inserted immediately beneath the caption of the statement or schedule, or at the top of each money column. The individual amounts shown need not be adjusted to the nearest dollar or thousand if in a note it is stated that the failure of the items to add to the totals shown is due to the dropping of amounts less than $1.00 or $1,000, as appropriate. § 210.3-02 Items not material.

If the amount which would otherwise be required to be shown with respect to any item is not material, it need not be separately set forth in the manner prescribed.

§ 210.3-03 Inapplicable captions and omission of unrequired or inapplicable financial statements.

(a) No caption need be shown in any financial statement as to which the items and conditions are not present.

(b) Financial statements not required or inapplicable because the required matter is not present need not be filed.

(c) Financial statements omitted and the reasons for their omission shall be indicated in the list of financial statements required by the applicable form. § 210.3-04 Omission of substantially identical notes.

If a note covering substantially the same subject matter is required with respect to two or more financial statements, the required information may be shown in a note to only one of such statements: Provided, That a clear and specific reference thereto is made in each of the other statements with respect to which the note is required. § 210.3-05 Omission of names of certain subsidiaries.

Notwithstanding the requirements as to particular statements, subsidiaries, the names of which are permitted to be omitted from the list of affiliates re

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