Update: H.R. 37, the “Promoting Job Creation and Reducing Small Business Burdens Act”, which includes Rep. Robert Hurt‘s Small Company Disclosure Simplification Act passed the House of Representatives on January 14, 2015. Read the Coalition’s press release on the setback and the path forward.
Less than one week after an unexpected, but temporary procedural defeat, H.R. 37 will be back on the floor of the U.S. House of Representatives this afternoon. As House leaders moved to bring the multi-part financial services legislation to consideration, data transparency supporters offered an amendment to remove the crucial anti-XBRL provision from the package. Meanwhile, the White House signaled President Obama will veto the entire bill if it reaches his desk.
H.R. 37 is a package bill bringing together many different, and mostly incremental, changes to U.S. securities laws. Included as Title VII is Rep. Robert Hurt’s proposal to require the Securities and Exchange Commission to stop collecting searchable financial data from most companies, and gather that information only in non-searchable documents. This isn’t H.R. 37’s first rodeo. The House passed it once before, last September, when it was known by its previous number, H.R. 5405. Last week, House leaders sought to bring the bill to quick passage using the fast-track suspension procedure, which requires a two-thirds majority. Democrats unexpectedly united against the bill, causing it to fall a few votes short of two-thirds.
Today’s vote will not require two-thirds – only a simple majority.
Late yesterday afternoon, a bipartisan group of Members of Congress who support data transparency – Reps. Darrell Issa (R-CA), Keith Ellison (D-MN), and Jared Polis (D-CO) – submitted an amendment to the House Rules Committee that would strike Title VII and remove it from the bill. Issa championed last year’s DATA Act, Ellison has questioned the SEC on its data practices, and Polis is also a longtime supporter of data transparency and the Data Transparency Coalition.
However, since the Rules Committee later decided that no amendments to H.R. 37 would be considered, the House will not get a chance to vote on the pro-data transparency amendment. The only substantive vote will be on the entire package, which includes many popular and bipartisan provisions.
The SEC began requiring public companies to file financial statements in the eXtensible Business Reporting Language (XBRL), an open data format, in 2009. But the agency didn’t stop collecting the old-fashioned document versions, and has not fully enforced the quality of the XBRL submissions. As a result, investors still distrust the XBRL data – which means companies aren’t enjoying the reduced capital costs and greater market visibility that freely-available open data should generate.
Rep. Hurt and other proponents of getting rid of XBRL are acting on justified frustration. But the right response would be to direct the agency to fix this data – not eliminate most of it.
The larger package bill, H.R. 37, will likely not become law. The White House issued a statement yesterday suggesting President Obama will veto the bill if it is passed by both the House and the Senate. However, data transparency supporters should be concerned if the House votes today in favor of regressing from standardized, open data to non-searchable documents.
On the House floor last week, Rep. Hurt argued that small public companies shouldn’t have to spend “tens of thousands” of dollars to create XBRL filings when they are already submitting the same information as documents. According to the American Institute of CPAs, the true average cost to small companies is just over $10,000, with a median of $8,000 – a very small amount compared to the investment required to maintain a listing on a public securities exchange.
As SEC chair Mary Jo White told the Financial Services Committee last year, Rep. Hurt’s proposed exemption would harm investors’ interests because it would restrict investors’ and the SEC’s ability to “search and analyze the financial information dynamically and … [compare] financial and business performance across companies, reporting periods, and agencies.”
Consideration of H.R. 37 is scheduled for 1:15 pm, Eastern time, this afternoon. Even though the Rules Committee rejected their amendment, Issa, Polis, and Ellison are expected to deliver remarks on the House floor supporting data transparency at the SEC.