The SEC recently published its draft strategic plan for 2018-2012 (read the PDF here). In the plan, the SEC reiterates its commitment to modernizing SEC filers’ financial data in ways that improve the ability of both Wall Street and Main Street investors to make informed investment decisions.
As investors increasingly make investments informed by extensive data analytics and executed through algorithms on electronic platforms, it’s imperative the SEC keep pace with the evolving capital markets.
Ramping Up Technology Use & Investment
In 2017, SEC Chairman Jay Clayton testified before the Senate Committee on Banking, Housing and Urban Affairs that the commission would seek budget increases for information technology in 2019, saying the budgeted $234 million for IT in fiscal 2018 was “quite modest” compared to billion-dollar budgets of Wall Street. The SEC draft strategic plan reinforces this commitment with the stated goal of keeping pace with developments in the capital markets and “adjust our efforts to ensure we are effectively allocating our resources.”
The strategic plan lists a few specific approaches for better leveraging technology:
- Broaden use of data analytics to set regulatory priorities and staff resources
- Invest in analytics of market and industry data to root out misconduct
- Encourage collaboration within and between SEC offices
XBRL Offers Great Potential for Efficiencies
In every instance, the standardization and use of structured data, such as from the use of XBRL taxonomies and the resulting tagged-data, would help to streamline and accelerate these efforts. XBRL US, which lobbies for the use of structured data in financial regulation, submitted a comment letter that spells out how structured data can help the SEC achieve its stated strategic goals.
In brief, XBRL US recommends that the SEC:
- Require all financial data be provided in computer-readable, standardized format
- Use consistent standards across the agency to lower costs and improve analysis
- Opt for only one financial data standard as the primary source for regulators and filers
- Increase use of structured, standardized data for analysis performed by the Commission
Currently, the SEC collects structured data in different formats, including XML. XBRL US argues that XBRL is more fit for financial disclosures and should be the sole format because it is “uniquely designed to capture the features of financial data such as time period, units, precision, and data type.”
Financial reporting continues to evolve. For more information about the modernization of technology for public disclosure, there’s an enlightening article in a recent issue of Dimensions titled, “Disclosure modernization marches on in the SEC's 2018-2022 strategic plan”.
By, Lou Rohman, Vice President, XBRL Services