Invested in a note that paid quarterly but interest was not paid out but put back into the investment. Issuer said no 1099 needed until payout. True?

In order fo the Issuer of the note to revise the 1099s, he wants to know the "statute" I am referring to requiring a revised 1099 for the years I did not receive a 1099. (If I am right, I need to amend returns to include the requested revised 1099s...What penalties am I going to face)?