For years following the Securities and Exchange Commission’s (SEC) 2009 adoption of the eXtensible Business Reporting Language (XBRL) open data format for corporate financial statements, the agency remained mum about its intentions for the rest of corporate disclosure. The SEC still collects most regulatory information as documents, not as data. Investors, companies, and markets do not know whether the agency intends to transform its whole disclosure system into open data.
In an apparent response to the Coalition’s advocacy for data standards and data publication, the SEC is now embracing the need for transformation.
In February the SEC released its Draft Strategic Plan for fiscal years 2014 to 2018. The draft laid out the agency’s mission, planned initiatives, and performance goals. It outlined a framework of strategic objectives for the five-year period.
Our Coalition criticized the draft plan for not fully embracing the transformation from documents into open data. In March the Coalition submitted a formal comment to the SEC, detailing the crucial role data standards and data publication must play in order for the agency to modernize its disclosure system and realize the overarching goals set forth in the draft strategic plan.
The SEC responded to the Coalition’s recommendations.
In mid-September the agency quietly released the final version of its plan for 2014 to 2018. The February draft only mentioned the need for data transformation in passing—as part of Strategic Objective 4.2. The final version published endorses data transformation throughout.
The very first element of the SEC’s final plan, Strategic Objective 1.1, illustrates this change. The final plan commits the SEC major efforts in data standardization and publication—and illustrates the impact of the Coalition’s advocacy.
|Draft||Final (changes highlighted)|
|STRATEGIC OBJECTIVE 1.1 Improve the quality and usefulness of disclosure: The SEC will continue to evaluate and, where necessary, amend its requirements to improve the quality and usefulness of registrants’ disclosures to investors. Areas of focus will include disclosure about registrants’ financial condition, operations, risk management and executive compensation decisions and practices.||STRATEGIC OBJECTIVE 1.1 Improve the quality and usefulness of disclosure: The SEC will continue to evaluate and, where necessary, amend its requirements to improve the quality and usefulness of registrants’ disclosures to investors, including continuing to modernize the collection and dissemination of timely, machine-readable, structured data to investors when appropriate. Areas of focus will include disclosure about registrants’ financial condition, operations, risk management and executive compensation decisions and practices. Additionally, the SEC will continue to pursue data standards and methods that permit investors to more efficiently search for information within forms as well as aggregate and compare financial data across filers.|
Other notable commitments come in objectives 3.1 and 4.2.
In Strategic Objective 3.1 the agency makes a pledge for XBRL improvements. “Design and implement enhancements to EDGAR and SEC.gov to facilitate investor and market participant access to and utilization of disclosure documents and other information: The SEC will continue to modernize its IT systems and the dissemination and rendering of electronic disclosure documents to improve investor access to relevant information and the ease of interacting with the SEC. The SEC is working on enhancements to data standards and XBRL filing requirements that improve the quality of structured data and reduce burdens on filers.”
And in Strategic Objective 4.2: “Make disclosure information more useful for analysis: Disclosure documents are submitted to the Commission electronically and, as appropriate, disseminated electronically to the investing public. This initiative will review the current disclosure systems and processes and identify ways to optimize the use of technology to improve the way disclosure documents are constructed and submitted with more emphasis on data collection. A new filing system that is optimized for data retrieval and analysis will provide features that help users create filings that are appropriate to their purpose and that allow computers to extract data from the filings for automated analysis. The system will be more flexible, so that, as new disclosure documents are defined, they can be implemented much more quickly, with all of the features of a modern, web-based filing system. Eventually, new filings structured for automated data retrieval and analysis will replace all filings submitted through the EDGAR system.”
The Coalition is encouraged by the SEC’s recent pivot towards an open data transformation.
The agency’s willingness to incorporate our suggestions throughout its strategic plan is the latest in a string of good news. In July, the SEC took its first steps toward XBRL quality enforcement. This fall, its brand-new chief economist, Mark Flannery announced at our policy conference that the agency is poised to stop collecting separate document-based and data-based versions of company financial statements and collect a single version that is both human-readable and machine-readable.
We hope that this progress and leadership will continue at the SEC—and we will continue to urge Congress not to cut it off through short-sighted legislation.