The SEC has adopted final rule amendments, in connection with the FAST Act, which have expanded the amount of information subject to the SEC’s XBRL-tagging requirement. The rule includes the tagging of all information on the cover page of Forms 8-K, 10-Q, 10-K, 20-F, and 40-F (annual reports) using Inline XBRL.
Compared to current tagging regulations, these new tagging requirements aren’t considered complex. However, the new rule shows the SEC’s commitment and preference for moving disclosures to structured data, specifically Inline XBRL. These actions provide insight that the SEC is finding value in certain aspects of XBRL tagging. The cover page tagging requirement is the most recent addition to what may constitute a growing amount of SEC computer-readable tagged data.
Benefits to Investors and the SEC
The SEC explained its rationale for adding the tagging requirement, and specified that not only do investors benefit from the tagged-data, but there are direct benefits internally for the SEC too.
The final rule stated that, “By increasing the capacity for automation of the data gathering process, we believe these amendments will further enhance investors’ use of interactive data to identify, count, sort, compare, and analyze registrants and their disclosures.”
And the rule continued with, “The new filing requirements will also be of benefit to the Commission, as the Commission and its staff will be able to more readily sort and analyze filings to, among other things, improve data and analysis for rulemaking initiatives.”
The value that comes from tagging of the cover pages clearly plays into a bigger value that the SEC is realizing from structured data. The rule explains specifically, “Investment analysis increasingly relies on quantitative statistical methods. Machine readable formats greatly facilitate quantitative analysis because they allow for the corresponding items to be imported directly into various platforms for data analysis. Thus, tagging all the data points on the cover pages of Form 10-K, Form 10-Q, Form 8-K, Form 20-F, and Form 40-F can decrease the costs to investors for implementing quantitative data analysis. In addition, relevant information will be available more quickly, at a more granular level, with greater accuracy, and with greater efficiency.”
SEC Commissioner Robert Jackson shares vision on structured data
In a speech in November 2018, SEC Commissioner Robert Jackson shared his vision on structured data. He clearly voiced his support for expanding the use of XBRL for SEC disclosures and the SEC’s structured data efforts.
In his speech, Jackson promoted the idea of expanding the XBRL requirements to corporate-governance disclosures, such as those in the proxy statement. When answering audience questions, Jackson suggested applying XBRL to other areas of the proxy where standard structure already exists. As an example, he said, “The proxy card itself lists the name, identity, age, and biography of [nominated] directors in fairly standardized terms – easily extractable and made XBRL-able. For those who are worried about things like board turnover, independence of directors, etc., that would be very valuable information.”
Elements of the SEC’s push to modernize all areas of financial disclosure are identified in Toppan Merrill’s recent article in Dimensions, “Where does XBRL go from here? SEC Commissioner Jackson shares his vision on structured data." The article brings to light the SEC’s ongoing movement to computer-readable structured data.
Business Development Companies and Registered Closed-End Funds
Separate from the rule amendments mentioned above, in March 2019 the SEC proposed another use of XBRL tagging for SEC disclosures. The SEC announced proposed reforms for Business Development Companies and Registered Closed-End Funds.
Under the proposal, affected funds would be required to use Inline XBRL to tag certain registration statement information, similar to the current tagging requirements for mutual funds and exchange-traded funds. Business Development Companies also would be required to submit financial statement information using Inline XBRL, as operating companies currently do.
The proposal again underlines the SEC’s strong support for Inline XBRL and modernizing business reporting.
SEC moves forward with structured data
Whether it’s the upcoming tagging requirement for cover pages, the mandated use of Inline XBRL for periodic reporting, or the Business Development Companies and Registered Closed-End Funds proposal, the SEC is finding areas in which XBRL creates value, and is applying XBRL requirements to them. The use of computer-readable tagged data for SEC disclosures continues to grow. These new rules indicate that investors and the SEC are realizing further benefits from structured data, and demonstrate that the SEC is committed to adding more structured data to its filing requirements.