SEC Proposes Requiring Use of Inline XBRL for Mutual Fund Risk/Return Summaries
[30654]
March 29, 2017 TO: SEC Rules CommitteeSmall Funds Committee RE: SEC Proposes Requiring Use of Inline XBRL for Mutual Fund Risk/Return Summaries
The SEC recently proposed requiring mutual funds to use the Inline XBRL format to tag risk/return summary information within a filing, instead of filing a separate XBRL exhibit with this information.[1] Currently, mutual funds must provide prospectus risk/return summary information in XBRL format by submitting it to the Commission in exhibits and posting it on their websites. The SEC believes that the use of Inline XBRL may reduce the time and effort associated with preparing XBRL filings, simplify the review process for filers, and improve the quality of structured data. The SEC expects improved data quality to increase the use of XBRL data by investors, other market participants, and other data users.
The proposed amendments also would eliminate the requirement for funds to post Interactive Data Files on their websites and would terminate the Commission’s voluntary program for the submission of investment company financial statement information interactive data.
The proposal includes a phase-in schedule, based on net asset size, for the mandatory use of Inline XBRL for risk/return summary information.
Comments on the proposal are due on May 16, 2017. We will hold a conference call on Tuesday, April 11 from 3:00-4:00 p.m. ET, to discuss the proposal and potential comments. Among other matters, we would like to discuss the extent to which investors and third-party information providers actually use funds’ current XBRL filings as the source for fund performance, cost, and other information. If you plan to participate in the call, please RSVP to Jennifer Odom (jodom@ici.org) to ensure that we have sufficient telephone lines available. The dial-in number for the call is (888) 282-0429 and the passcode is 63362.
Provided below is a more detailed summary of the proposal as it relates to mutual funds.[2]
I. Current XBRL Filing Requirements
Under the current rules, mutual funds must file the risk/return summary section of their prospectuses with the Commission and post it on their websites in interactive data format using XBRL.[3] The XBRL filing consists of an Interactive Data File, including information tagged in XBRL. The related original filing, however, is filed in HyperText Markup Language (HTML) or, less commonly, American Standard Code for Information Interchange (ASCII) format. Mutual funds are required to submit the Interactive Data File within 15 business days after (1) the effective date of the registration statement or post-effective amendment that contains the related information, or (2) the filing of a form of prospectus made pursuant to paragraph (c) or (e) of Rule 497.
The Interactive Data File submitted to the Commission also must be posted on the fund’s website, if any, on the earlier of the calendar day that the fund submitted or was required to submit it. SEC rules require the fund to post the Interactive Data File on the fund’s website for as long as the registration statement or post-effective amendment to which the Interactive Data File relates remains current.
II. Proposed Inline XBRL Filing Requirements
Inline XBRL Filings. The SEC’s proposal to require the use of Inline XBRL would result in a single document that is both human-readable and enables the automated extraction and analysis of embedded XBRL data. The SEC notes that requiring mutual funds to file their risk/return summary information using the interactive data format enables investors, third-party information providers, and the Commission staff to capture and analyze that information more quickly and at a lower cost than is possible using the same information provided in a static format. According to the SEC’s release, it also facilitates comparisons of mutual fund costs, performance and other information across classes of securities and across funds and helps investors make more well-informed investment decisions.
Change in Filing Timeframe. The SEC also is proposing to shorten the timeframe for the submission of the Interactive Data File. The proposal would eliminate the current 15 business day filing period during which mutual funds must submit Interactive Data Files for all filings containing risk/return summaries (i.e., initial registration statements, post-effective amendments, and forms of prospectuses pursuant to Rule 497).
Rather, the proposal would require submission of Interactive Data Files as follows:
- For post-effective amendments filed pursuant to paragraphs (b)(1)(i), (ii), (v), or (vii) of Rule 485, Interactive Data Files must be filed either concurrently with the filing or in a subsequent amendment that is filed on or before the date that the post-effective amendment that contains the related information becomes effective;
- For initial registration statements and post-effective amendments filed other than pursuant to paragraphs (b)(1)(i), (ii), (v), or (vii) of Rule 485, Interactive Data Files must be filed in a subsequent amendment filed on or before the date the registration statement or post-effective amendment that contains the related information becomes effective; and
- For any form of prospectus filed pursuant to Rule 497(c) or (e), mutual funds would be required to submit the Interactive Data File concurrently with the filing.
The SEC notes that it expects that immediate availability of risk/return summary information in Inline XBRL filings will benefit investors, other market participants, and other data users by reducing the time required to obtain risk/return summary information in a structured format that can facilitate analysis and comparisons across funds.
Removal of Website Posting Requirement. The proposal also would eliminate the existing requirement to post the Interactive Data File on the fund’s website.
Termination of 2005 Voluntary Program. Lastly, the proposal would terminate the Commission’s 2005 XBRL Voluntary Program for the submission of investment company financial statement information interactive data. The SEC notes that it has not received any submissions through this program in the past several years.
III. Compliance Dates
The SEC proposes a phase-in schedule for mutual funds based on net asset size. Specifically, for larger entities (i.e., mutual funds that together with other investment companies in the same “group of related investment companies” have net assets of $1 billion or more as of the end of the most recent fiscal year), the SEC proposes a compliance date of one year after the effective date to comply with the new reporting requirements. For smaller entities (i.e., mutual funds that together with other investment companies in the same “group of related investment companies” have net assets of less than $1 billion as of the end of the most recent fiscal year), the SEC would provide an additional year to comply with the new reporting requirements.
Linda French
Counsel
endnotes
[1] Proposed Rule: Inline XBRL Filing of Tagged Data, SEC Rel. Nos. 33-10323, 34-80133, IC-32518 (March 1, 2017), available at https://www.sec.gov/rules/proposed/2017/33-10323.pdf.
[2] The SEC’s proposal also would require the use of Inline XBRL format for the submission of operating company financial statement information.
[3] Final Rule: Interactive Data for Mutual Fund Risk/Return Summary, SEC Rel. Nos. 33-9006, 34-59391, 39-2462, IC-28617 (Feb. 11, 2009), available at https://www.sec.gov/rules/final/2009/33-9006.pdf.