On January 6, the Division of Corporation Finance (the Division) of the Securities and Exchange Commission issued disclosure guidance, stating that it is "concerned about the risks to financial institutions that are SEC registrants from direct and indirect exposures" to European sovereign debt holdings. "To date we note that disclosures about the nature and extent of these exposures that registrants, including foreign private issuers, have provided in reports filed or furnished with the Commission have been inconsistent in both substance and presentation. We believe this inconsistency may lead to disclosures that lack transparency and comparability for investors."

The Division also stated, "Therefore, we determined that investors would benefit from our providing additional guidance to assist registrants in their assessment of what information about exposures to European countries they should consider disclosing and how they should disclose this information with the goal of greater clarity and comparability."

The Division called attention generally to MD&A requirements, and specifically to Industry Guide 3 (Guide 3), which provides staff guidance regarding disclosure for bank holding companies. Thus, registrants must disclose known trends or known demands, commitments, events, or uncertainties that will result or that are reasonably likely to result in a material increase or decrease in liquidity and to describe any known trends or uncertainties that have had, or that a registrant reasonably expects may have, a material favorable or unfavorable impact on income. Further, pursuant to Guide 3, registrants must identify cross-border outstandings to borrowers in each foreign country where the exposures exceed 1% of total assets, and disclose current conditions in a foreign country that give rise to liquidity problems which are expected to have a material impact on the timely repayment of principal or interest on the country’s private or public sector debt.

In determining which countries are covered by its guidance, the Division stated "[r]egistrants should focus on those experiencing significant economic, fiscal and/or political strains such that the likelihood of default would be higher than would be anticipated when such factors do not exist. We expect that the countries covered by this analysis would vary and thus the disclosures should be sufficiently flexible to capture those risks as they change over time. We encourage registrants to disclose the basis used for identifying the countries included in this disclosure. We believe that disclosures should be provided separately by country, segregated between sovereign and non-sovereign exposures, and by financial statement category, to arrive at gross funded exposure, as appropriate. Registrants should also consider separately providing disclosure of the gross unfunded commitments made. Lastly, we suggest that registrants provide information regarding hedges in order to present an amount of net funded exposure."

The Division also provided a list of factors for registrants to consider in crafting disclosure.

It has been reported that issuance of the guidance was precipitated by the recent failure of MF Global.

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