Congressional Subcommittee Debates Open Data at SEC
Washington, D.C. — A Congressional panel yesterday considered a proposal that would require the U.S. Securities and Exchange Commission to stop collecting searchable data from most public companies. Rep. Robert Hurt’s Small Company Disclosure Simplification Act, recently reintroduced for the new 114th Congress as H.R. 1965, would exempt companies under $250 million in annual revenue — some 60% of all U.S. public companies — from the SEC’s existing requirement to file financial statements in the eXtensible Business Reporting Language (XBRL).
Yesterday’s hearing of the House Financial Services Committee’s subcommittee on capital markets featured sharp disagreements over whether the SEC should continue using searchable data to collect corporate financial information. The full Financial Services Committee is expected to vote on H.R. 1965 during its next business meeting, which could take place as early as mid-May.
The Data Transparency Coalition, representing the technology industry, called on members of the Financial Services Committee to oppose H.R. 1965. “The Small Company Disclosure Simplification Act is based on justified frustration with the SEC’s very real failure to make its existing data reporting requirement work properly for investors, companies, and internal use,” said Coalition Executive Director Hudson Hollister. “But the proper response should be for Congress to direct the agency to improve the quality of the data, stop collecting a duplicative document version of each financial statement alongside the searchable data version, and make a plan to modernize its whole corporate disclosure system. Unfortunately, H.R. 1965 would make modernization harder by directing the agency to simply stop using data altogether for most companies.”
The bill stirred spirited debate at today’s hearing. Shane Kovacs, Executive Vice President and CFO of PTC Therapeutics, Inc., testified his company spends $50,000 each year to translate its document-based financial statements into XBRL data to be filed with the SEC. Supporters of data reporting, including Reps. Carolyn Maloney and Keith Ellison, responded by citing a study by the American Institute of CPAs finding that the median cost for smaller reporting companies like PTC Therapeutics is only $8,000 annually.
Rep. Hurt, who introduced H.R. 1965, told the panel that the SEC’s data reporting was well intended but “the costs outweigh the benefits.” Thomas Quaadman, Vice President of the Center for Capital Markets Competitiveness of the U.S. Chamber of Commerce, testified in support of Rep. Hurt’s bill while calling for a “better delivery system” for corporate financial information. Reps. Maloney and Ellison disagreed, with Maloney opining that “the more information is easily available,” the more investors will find opportunities to invest in public companies. Prof. Theresa Gabaldon of The George Washington University testified that the benefits of searchable data — including the SEC’s ability to spot suspicious patterns — are “well worth the steadily declining costs.”
Ellison, who voted for the bill when it was considered by the Financial Services Committee in March 2014, said he had changed his mind. “You don’t hear Members of Congress say that often, but the reason is I’ve done some research and found the [cost of XBRL filings] are lower than expected. I think that it’s a good idea to move toward a 21st-century searchable electronic database,” said Ellison.