SEC Extends Interactive Data Voluntary Reporting Program on the EDGAR System to Include Mutual Fund Risk/Return Summary Information
[21363]
July 16, 2007
TO: SEC RULES MEMBERS No. 83-07ACCOUNTING/TREASURERS MEMBERS No. 22-07
TECHNOLOGY ADVISORY COMMITTEE No. 21-07
SMALL FUNDS MEMBERS No. 55-07
XBRL WORKING GROUP RE: SEC EXTENDS INTERACTIVE DATA VOLUNTARY REPORTING PROGRAM ON THE EDGAR SYSTEM TO INCLUDE MUTUAL FUND RISK/RETURN SUMMARY INFORMATION
The Securities and Exchange Commission has adopted rule amendments that 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] Registrants electing to participate in the voluntary program should continue to file their financial information in HTML or ASCII format. The extension of the voluntary program is intended to enable the SEC to evaluate the usefulness to investors, third party analysts, registrants, the Commission, and the marketplace of tagging mutual fund information.
Background
XBRL is an international Internet-based language designed specifically for business information. XBRL provides machine-readable tags corresponding to business information concepts and data included in internal company reports and external reports distributed to stakeholders (e.g., revenue, earnings-per-share, portfolio turnover, investment performance, business and organizational description, income tax disclosures, etc.). Individual industries must reach consensus on tag sets that identify industry-specific concepts. Once agreed upon, tag definitions are made available to all market participants free of charge and without license fees.
In February 2005, the SEC instituted a voluntary XBRL filing program allowing registrants, including mutual funds, to file tagged financial information as an exhibit to certain filings made on the EDGAR system. [2] Unlike with operating companies, however, mutual fund financial statements do not provide the information that investors most commonly rely upon in making investment decisions. To better serve mutual fund investors, the Institute developed an XBRL taxonomy covering the information in the risk/return summary required at the beginning of every fund prospectus. In June 2007, the taxonomy was recognized by the XBRL International Standards board as an acknowledged taxonomy. [3]
Amendments to the Voluntary Filing Program
The SEC has now adopted amendments to its voluntary XBRL filing program to permit investment company registrants to include tagged risk/return summary information as supplemental exhibits to amendments of Form N-1A filings, using the ICI’s taxonomy. The final amendments reflect most of the Institute’s comments on the proposal. [4]
Mechanics of the Program
Effective August 20, 2007, an investment company registrant may file XBRL-tagged risk/return information as an exhibit to an amendment of a previous filing on Form N-1A. The tagged exhibits may be submitted only after the effective date of the filings to which they relate. They may be submitted under Rule 485(b) of the Securities Act, and need to contain only the new exhibit, a facing page, a signature page, a cover letter explaining the nature of the filing, and a revised exhibit index.
In the case of a Form N-1A filing that includes more than one series, a participant in the voluntary program may submit a complete set of risk/return summary information for any one or more series. For each series that is submitted, the participant must tag all of the information for that series, including information for each class of the series. [5] The amendments also permit mutual funds to submit tagged financial highlights or condensed financial information as an exhibit to a post-effective amendment filed on Form N-1A. [6]
Tagged exhibits must reflect the same information contained in the risk/return summary section of the related Form N-1A filing. [7] Any filing with which tagged exhibits are submitted must state that the purpose of submitting the tagged exhibits is to test the related format and technology, and therefore that investors should not rely on the exhibits in making investment decisions. This disclosure must also appear within a tagged exhibit.
Participants are free to submit tagged risk/return summary information regularly or from time to time, and may stop and start as they choose. Participation in the program will not create a continuing obligation for a volunteer filer. A volunteer filer is, however, required to amend any tagged risk/return summary exhibits that do not comply with the content and format requirements of the rule, e.g., because they do not reflect the same information as the corresponding official filing.
Liability Issues
The existing voluntary filing program contains certain safeguards from liability, so as not to unnecessarily deter filers from participating in the program. These safeguards will also apply to participants who furnish risk/return summary information in XBRL-tagged exhibits. Under the program, these exhibits:
- are not deemed “filed” for purposes of the Securities Exchange Act or Section 34(b) of the Investment Company Act;
- are therefore not incorporated by reference into registration statements or prospectuses; and
- are not otherwise subject to liability under these sections.
The program also provides more general relief from liability under the securities laws for information in a tagged exhibit that complies with the content and format requirements of the voluntary program to the extent that the information in the corresponding portion of the official EDGAR filing was not materially false or misleading. All other liability and antifraud provisions of the securities laws still apply.
Because Form N-1A is a registration form under both the Securities Act and the Investment Company Act, creating the potential for registration statement liability under the Securities Act, the amendments extend the liability protection to include Section 11 of the Securities Act. The rule explicitly states that tagged exhibits are not part of any registration statement to which they relate. The SEC will also caution users on its website that tagged documents should not be relied upon for making investment decisions.
If you have any questions about the risk/return summary taxonomy or the voluntary filing program, please contact Don Boteler (202/326-5845), Lee Butler (202/326-5931) or me (202/326-5923).
Mara Shreck
Assistant Counsel
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. 33-8823 and IC-27884 (July 11, 2007) (“Adopting Release”), available at http://www.sec.gov/rules/final/2007/33-8823.pdf.
[2] See Institute Memorandum to Accounting/Treasurers Members No. 3-05, Closed-End Investment Company Members No. 20-05, SEC Rules Members No. 23-05 [18515], dated February 8, 2005. See also XBRL Voluntary Financial Reporting Program on the EDGAR System, SEC Release Nos. 33-8529, 34-51129, IC-26747 (Feb. 3, 2005), available at http://www.sec.gov/rules/final/33-8529.htm.
[3] See http://www.xbrl.org/Taxonomy/ici/ici-rr-summarydocument-20070516-acknowledged.htm. The taxonomy was released in draft form on January 4, 2007, and underwent a 45-day public comment period prior to being submitted for acknowledgment. For a discussion of the comments received, see Letter from Donald J. Boteler, Vice President – Operations, Investment Company Institute, to Andrew J. Donohue, Director, Division of Investment Management, U.S. Securities and Exchange Commission, dated May 18, 2007, available at http://www.sec.gov/comments/s7-05-07/s70507-21.pdf.
[4] See Letter from Donald J. Boteler, Vice President – Operations and Elizabeth R. Krentzman, General Counsel, Investment Company Institute, to Nancy Morris, Secretary, U.S. Securities and Exchange Commission, dated March 14, 2007, available at http://www.sec.gov/comments/s7-05-07/s70507-6.pdf; 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), available at http://www.sec.gov/rules/proposed/2007/33-8781.pdf.
[5] The Adopting Release clarifies that only class-specific information, such as expenses and performance, must be separately identified. Information that is not class-specific, such as investment objectives, need not be separately identified by class.
[6] Previously, the voluntary filing program permitted mutual funds to submit such information only as an exhibit to Form N-CSR.
[7] Participants are permitted to use extensions to the risk/return summary taxonomy to further refine the tags.