Monday 5 March 2018

SEC Proposed Inline XBRL Filing

As a lawyer in Utah, we regularly go over new developments in the law. The Securities and Exchange Commission recently voted to propose amendments intended to improve the quality and accessibility of data submitted by public companies and mutual funds using eXtensible Business Reporting Language (XBRL).

SEC PROPOSES INLINE XBRL FILING OF TAGGED DATA

The proposals would require the use of Inline XBRL, which has the potential to benefit investors and other market participants while decreasing, over time, the cost of preparing information for submission to the SEC.  The recommendations are part of the SEC’s disclosure modernization initiative.

SEC Proposed Inline XBRL Filing

“While XBRL technology has made disclosures easier to access for investors, there are legitimate concerns about the burdens smaller companies face when preparing their filings,” said SEC Acting Chairman Michael Piwowar. “Today, the SEC is asking comment on a way to streamline this process to ensure usability for the public while keeping compliance costs down.”

The SEC will seek public comment on the proposed rules for 60 days.

FACT SHEET (SEC Open Meeting)

Highlights

The proposed amendments would require the use of Inline XBRL format for the submission of operating company financial statement information and mutual fund risk/return summaries.  The proposal would also eliminate the requirement for filers to post XBRL data on their websites.

Among additional potential benefits:

  • Inline XBRL allows filers to embed XBRL data directly into their filings instead of as attachments, reducing the likelihood of inconsistencies.
  • Inline XBRL would give the preparer full control over the presentation of XBRL disclosures within the HTML filing.  In addition, tools like the open source Inline XBRL Viewer on SEC.gov can be used to review the XBRL data more efficiently.
  • For mutual funds, the proposed amendments would facilitate efficiencies in the filing process by permitting the concurrent submission of XBRL data files with certain post-effective amendment filings.  The proposed amendments also would improve the timeliness of the availability of risk/return summaries in XBRL by eliminating the current 15 business day filing period accorded to all filings containing risk/return summaries.
  • Under the proposals, requirements for operating company financial statements would be phased in over a three-year period.  Requirements for mutual funds risk/return summaries would be phased in over a two-year period.

Background

In 2009, the Commission adopted rules requiring operating companies to provide financial statement information in registration statements and periodic and current reports in XBRL by submitting it to the Commission in an Interactive Data File as an exhibit to these filings and posting it on their corporate websites, if any.

In 2009, the Commission also adopted rules requiring mutual funds to provide risk/return summaries in XBRL by submitting them to the Commission in Interactive Data Files as exhibits and posting them on their websites, if any.

There is a wide range of users of XBRL data, including investors, financial analysts, economic research firms, data aggregators, academic researchers, filers, and Commission staff.  Machine-readable financial market data, including XBRL-formatted data, enhances the Commission’s rulemaking and market monitoring activities by allowing staff to efficiently analyze large quantities of information.

SEC’S OFFICE OF THE INVESTOR ADVOCATE TO HOLD EVIDENCE SUMMIT, LAUNCH INVESTOR RESEARCH INITIATIVE

The Securities and Exchange Commission’s Office of the Investor Advocate today announced it will host an Evidence Summit to discuss strategies for raising retail investors’ understanding of key investment characteristics such as fees, risks, returns, and conflicts of interest.

The March 10 Evidence Summit will mark the official launch of the SEC’s new investor research initiative led by the SEC’s Office of the Investor Advocate, dubbed ‘POSITIER’, also known as Policy Oriented Stakeholder and Investor Testing for Innovative and Effective Regulation.

POSITIER seeks to inform the rulemaking process with evidence obtained from surveys and specific testing projects. Under this initiative, the SEC’s Office of the Investor Advocate has launched a specific study program to examine the topic of Retail Disclosure Effectiveness. This study program seeks to identify and test interventions that increase investor awareness of key investment features and, in turn, improve investment outcomes.

“I am excited about the launch of POSITIER,” said Investor Advocate Rick Fleming, “because it has the potential to make a significant contribution to evidence-based policymaking at the Commission. With this new tool, we can gain better insights into the potential benefits to investors from proposed rule changes, and we will be able to help identify the best options amongst competing policy choices.”

Acting Chairman Michael Piwowar and Commissioner Kara Stein will speak at the event, as well as an interdisciplinary group of leading scholars in household and behavioral finance, psychology, marketing, and law. Although the focus will be on disclosure in the context of investment funds, the insights on improving the cognitive salience of information will be relevant to other financial disclosure contexts.

MORGAN STANLEY SETTLES CHARGES RELATED TO ETF INVESTMENTS

The Securities and Exchange Commission announced that Morgan Stanley Smith Barney has agreed to pay an $8 million penalty and admit wrongdoing to settle charges related to single inverse ETF investments it recommended to advisory clients.

The SEC’s order finds that Morgan Stanley did not adequately implement its policies and procedures to ensure that clients understood the risks involved with purchasing inverse ETFs.  Among the order’s findings, Morgan Stanley failed to obtain from several hundred clients a signed client disclosure notice, which stated that single inverse ETFs were typically unsuitable for investors planning to hold them longer than one trading session unless used as part of a trading or hedging strategy.  Morgan Stanley solicited clients to purchase single inverse ETFs in retirement and other accounts, the securities were held long-term, and many of the clients experienced losses.

The SEC’s order further finds that Morgan Stanley failed to follow through on another key policy and procedure requiring a supervisor to conduct risk reviews to evaluate the suitability of inverse ETFs for each advisory client.  Among other compliance failures, Morgan Stanley did not monitor the single-inverse ETF positions on an ongoing basis and did not ensure that certain financial advisers completed single inverse ETF training.

“Morgan Stanley recommended securities with unique risks and failed to follow its policies and procedures to ensure they were suitable for all clients,” said Antonia Chion, Associate Director of the SEC Enforcement Division.

Free Initial Consultation with an SEC Lawyer

When you need help from an SEC Lawyer, call Ascent Law for your free consultation (801) 676-5506. We want to help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

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