Memo #
20954

ICI Comments on SEC Proposal to Extend Interactive Data Voluntary Reporting Program to Include Mutual Fund Risk/Return Summary Information
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[20954]

 

March 15, 2007

TO: ACCOUNTING/TREASURERS MEMBERS No. 7-07
SEC RULES MEMBERS No. 34-07
SMALL FUNDS MEMBERS No. 24-07
TECHNOLOGY ADVISORY COMMITTEE No. 9-07
XBRL WORKING GROUP     RE: ICI COMMENTS ON SEC PROPOSAL TO EXTEND INTERACTIVE DATA VOLUNTARY REPORTING PROGRAM TO INCLUDE MUTUAL FUND RISK/RETURN SUMMARY INFORMATION

 

The Securities and Exchange Commission recently proposed rule amendments that would enable investment company registrants to voluntarily submit supplemental tagged information contained in the risk/return summary section of their prospectuses using eXtensible Business Reporting Language (“XBRL”). [1]  The Institute has filed a comment letter on the proposal with the SEC.  The letter is attached and summarized below.

 

The letter expresses strong support for the proposal, calling it an important step in the SEC’s continuing efforts to promote greater use of technology to better inform investors.  It also strongly urges the SEC to pursue additional disclosure reforms that will further enable funds to better serve investors’ information needs and preferences.  In this regard, the letter recommends that the SEC propose as soon as possible rule changes to allow mutual funds to provide investors with a concise disclosure document, similar to a fund profile, in paper, with additional information available on the Internet (or in paper, upon request).  The letter states that this approach, along with the SEC’s interactive data initiative, will benefit investors, their financial advisers, and other market participants, and will bring the mutual fund disclosure system into the 21st century.

 

The letter then makes the following specific comments on the SEC’s proposal.

  • Expanding the voluntary interactive data program to permit funds to file tagged risk/return summaries is an ideal way to test the use of XBRL in the mutual fund context. The risk/return summary contains key fund information that lends itself well to analyses and comparisons. 
  • The SEC should permit participants in the voluntary program to file risk/return summary exhibits that cover one or more, but fewer than all, funds, series or share classes included in the corresponding official filing. 
  • For any fund, series or share class that a volunteer chooses to include in an exhibit filed under the voluntary program, the Institute supports requiring tagging of all of the risk/return summary information relating to that fund, series or class. 
  • The SEC need not and should not require funds to submit separate tagged risk/return summary exhibits for each series or class because the design of the ICI taxonomy makes this unnecessary. 
  • The Institute agrees that participation in the voluntary program should not create a continuing obligation for a volunteer to submit tagged risk/return summary information. 
  • As an incentive to encourage participation in the voluntary program, the SEC should offer expedited review of exemptive applications.  In addition, as an alternative, the SEC should offer expedited review of an initial registration statement on Form N-1A or an amendment to a registration statement to add a new fund or series. 
  • The Institute supports the proposed requirements concerning cautionary disclosures. 
  • The Institute supports the proposal to extend the liability protection under the voluntary program to include protection from liability under Section 11 of the Securities Act of 1933. 
  • Technically and practically, the ICI taxonomy can be considered valid XBRL.  The Institute intends to seek additional levels of recognition by the XBRL International consortium responsible for the XBRL standards (“acknowledgement” and “approval”).  There may be obstacles to obtaining approval on a predictable schedule, but we do not believe that approval is necessary before allowing filers to use the taxonomy in the voluntary program. 
  • The Institute recommends giving filers adequate flexibility to extend the ICI taxonomy in the voluntary program. 
  • The Institute is in favor of the SEC offering a rendering tool on its website, and recommends that any such tool include appropriate cautionary language, as well as a cross-reference to the EDGAR database for investors who seek information for investment purposes. 
  • The Institute supports the expeditious implementation of the proposal and recommends that, if possible, the amendments become effective the later of:  (1) 30 days after publication of the adopting release in the Federal Register or (2) when the ICI taxonomy is made available to filers on the SEC’s website. 
  • It is difficult to estimate the likely cost of participation in the voluntary program at this time, but the Institute hopes to learn more about the costs of participation from its members as they begin to prepare XBRL submissions and may wish to offer cost data to the SEC in the future.

 

Frances M. Stadler
Deputy Senior Counsel

Attachment

endnotes

 [1] See Extension of Interactive Data Voluntary Reporting Program on the EDGAR System to Include Mutual Fund Risk/Return Summary Information, SEC Release Nos. 33-8781 and IC-27697 (Feb. 6, 2007), 72 Fed. Reg. 6676 (Feb. 12, 2007).