Extension of Interactive Data Voluntary Reporting Program on the EDGAR System To Include Mutual Fund Risk/Return Summary Information, 6676-6687 [E7-2254]
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Federal Register / Vol. 72, No. 28 / Monday, February 12, 2007 / Proposed Rules
SECURITIES AND EXCHANGE
COMMISSION
17 CFR Parts 232, 239, 270 and 274
[Release Nos. 33–8781, IC–27697; File
Number S7–05–07]
RIN 3235–AJ59
Extension of Interactive Data Voluntary
Reporting Program on the EDGAR
System To Include Mutual Fund Risk/
Return Summary Information
Securities and Exchange
Commission.
ACTION: Proposed rule.
AGENCY:
SUMMARY: We are proposing rule
amendments to extend the current
interactive data voluntary reporting
program to enable mutual funds
voluntarily to submit supplemental
tagged information contained in the
risk/return summary section of their
prospectuses. A mutual fund choosing
to tag its risk/return summary
information also would continue to file
this information in HTML or ASCII
format, as currently required. This
extension of the voluntary program is
intended to help us evaluate the
usefulness to investors, third-party
analysts, registrants, the Commission,
and the marketplace of data tagging and,
in particular, of tagging mutual fund
information.
Comments should be submitted
on or before March 14, 2007.
ADDRESSES: Comments may be
submitted by any of the following
methods:
DATES:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/proposed.shtml);
• Send an e-mail to rulecomments@sec.gov. Please include File
Number S7–05–07 on the subject line;
or
• Use the Federal eRulemaking Portal
(https://www.regulations.gov). Follow the
instructions for submitting comments.
hsrobinson on PROD1PC76 with PROPOSALS2
Paper Comments
• Send paper comments in triplicate
to Nancy M. Morris, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
All submissions should refer to File
Number S7–05–07. This file number
should be included on the subject line
if e-mail is used. To help us process and
review your comments more efficiently,
please use only one method. The
Commission will post all comments on
the Commission’s Internet Web site
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(https://www.sec.gov/rules/
proposed.shtml). Comments are also
available for public inspection and
copying in the Commission’s Public
Reference Room, 100 F Street, NE.,
Washington, DC 20549. All comments
received will be posted without change;
we do not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly.
If
you have questions about the proposed
rules, please contact Alberto H. Zapata,
Senior Counsel, Christopher Kaiser,
Branch Chief, or Brent J. Fields,
Assistant Director, Office of Disclosure
Regulation, Division of Investment
Management, at (202) 551–6784,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–5720. If you have questions
about the EDGAR system, please contact
Richard Heroux, EDGAR Program
Manager, at (202) 551–8800, in the
Office of Information Technology.
FOR FURTHER INFORMATION CONTACT:
The
Securities and Exchange Commission
(‘‘Commission’’) is proposing for
comment amendments to rules 401 1
and 402 2 of Regulation S–T 3, rule 8b–
33 4 under the Investment Company Act
of 1940 (‘‘Investment Company Act’’),
and Form N–1A 5 under the Investment
Company Act and the Securities Act of
1933 (‘‘Securities Act’’).
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
A. Interactive Data and XBRL
B. The Voluntary Program
C. Tagging of Mutual Fund Information
II. Discussion
A. Expansion of Voluntary Program
Content
B. Required Disclosure
C. Liability Issues
D. The Risk/Return Summary Taxonomy
and Software Tools
E. Effective Date
III. General Request For Comments
IV. Paperwork Reduction Act
V. Cost/Benefit Analysis
VI. Promotion of Efficiency, Competition,
and Capital Formation
VII. Initial Regulatory Flexibility Analysis
VIII. Consideration of Impact on the
Economy
IX. Statutory Authority
Text of Proposed Rule and Form
Amendments
1 17
CFR 232.401.
CFR 232.402.
3 17 CFR 232.10 et seq.
4 17 CFR 270.8b–33.
5 17 CFR 239.15A and 274.11A.
2 17
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I. Background
A. Interactive Data and XBRL
For the past several years, the
Commission has been evaluating the
expanded use of interactive data tagging
as a tool to improve the timeliness and
accessibility of the information
contained in filings with the
Commission under the federal securities
laws.6 Data tagging uses standard
definitions (or data tags) to translate
text-based information into data that is
interactive, that is, data that can be
retrieved, searched, and analyzed
through automated means.7
Interactive data has enormous
potential to enable investors and other
market participants to analyze and
compare data from different sources
more efficiently and effectively and to
exchange information across various
software platforms automatically.
Through interactive data, static textbased information can be transformed
into dynamic databases that can readily
be searched and analyzed, facilitating
the comparison of information across
companies, reporting periods, and
industries. Tagged information can help
investors, analysts, and other users to
mine the wealth of information
contained in detailed paper disclosure
documents, providing users with the
ability to access precisely the
6 See SEC to Rebuild Public Disclosure System to
Make It ’Interactive’, Securities and Exchange
Commission Press Release, Sept. 25, 2006, available
at: https://www.sec.gov/news/press/2006/2006–
158.htm (Commission awards contracts totaling $54
million to transform public company disclosure
system to create a dynamic real-time search tool
with interactive capabilities) (‘‘September 25 Press
Release’’); Commission Announces Interactive Data
Roundtable on New Software to Make Better
Information a Reality, Securities and Exchange
Commission Press Release, Sept. 25, 2006, available
at: https://www.sec.gov/news/press/2006/2006–
160.htm; Commission Announces Roundtable
Series Giving Investors and Analysts Better
Financial Data via Internet, Securities and
Exchange Commission Press Release, Mar. 9, 2006,
available at: https://www.sec.gov/news/press/2006–
34.htm; SEC Offers Incentives for Companies to File
Financial Reports with Interactive Data, Securities
and Exchange Commission Press Release, Jan. 11
2006, available at: https://www.sec.gov/news/press/
2006–7.htm; SEC Announces Initiative to Assess
Benefits of Tagged Data in Commission Filings,
Securities and Exchange Commission Press Release,
July 22, 2004, available at: https://www.sec.gov/
news/press/2004–97.htm.
7 The Commission’s Electronic Data Gathering,
Analysis, and Retrieval System (‘‘EDGAR’’) has
allowed certain tagged data since its inception, for
example, by using Standard Generalized Markup
Language and Extensible Markup Language
(‘‘XML’’) to tag form-specific information (such as
the form type, central index key, and file number)
that accompanies electronic documents submitted
on EDGAR. More recently, EDGAR has employed
HyperText Markup Language (‘‘HTML’’) to format
documents and made limited use of XML related to
financial and business information contained
within certain EDGAR submissions.
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information in which they are interested
and to analyze that data.
Interactive data also provides a
significant opportunity to automate
information processing throughout the
business and reporting cycle, with the
potential to increase accuracy and
reduce costs. By ensuring that
information is classified properly at
each step of the cycle, and minimizing
the need for human intervention and,
therefore, human error, interactive data
may improve the quality of information
at decreased cost. These benefits can
begin at the time of an initial transaction
and carry forward to the point of
disclosure in a Commission filing and,
ultimately, to the use of the disclosed
information by investors and other
market participants. At each step in the
process, interactive data offers the
potential to replace manual reentry of
information with automated processing
of previously tagged data.
Tags are standardized through the
development of taxonomies, which are
essentially data dictionaries that
describe individual items of information
and mathematical and definitional
relationships among the items. As
tagging has continued to gain
prominence in recent years, there has
been substantial progress in developing
data tagging taxonomies related to a
language for the electronic
communication of business and
financial data known as eXtensible
Business Reporting Language
(‘‘XBRL’’).8 XBRL was developed as an
open source specification that describes
a standard format for tagging financial
and other information to facilitate the
preparation, publication, and analysis of
that information by software
applications.9 XBRL was developed and
continues to be supported by XBRL
International, a collaborative
consortium of approximately 450
organizations representing many
perspectives in the financial reporting
community.10 Organizations in the
consortium include issuers, public
accounting firms, software companies,
filing agents, data aggregators, stock
exchanges, regulators, financial services
8 See Edward Hand, ‘‘XBRL: The Future of
Business Reporting,’’ NETWORK COMPUTING,
Aug. 31, 2006, available at: https://
www.networkcomputing.com/
showArticle.jhtml?articleID=192202551&pgno=1.
9 ‘‘Open Source’’ means that the software can be
used by anyone without charge and is being
developed in an open and collaborative setting. For
a more detailed discussion about XBRL, see ‘‘How
XBRL Works’’ on the XBRL International Web site
available at: https://www.xbrl.org/HowXBRLWorks/.
10 See ‘‘About the Organisation’’ page and
subpages on the XBRL International Web site,
available at: https://www.xbrl.org/
AboutTheOrganisation/.
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companies, and industry associations.11
XBRL International and its related
entities have been developing standard
taxonomies that are designed to classify
and define financial information in
accordance with U.S. Generally
Accepted Accounting Principles
(‘‘GAAP’’) and Commission regulations.
The Commission recently announced
that it is contracting with XBRL US,
Inc., the U.S. based arm of XBRL
International, to help complete the
writing of XBRL taxonomies that would
enable companies in all industries to
file financial reports with the
Commission using XBRL.12
B. The Voluntary Program
As part of our evaluation of the
potential of interactive data tagging
technology, the Commission adopted
rules in 2005 instituting a program that
permits filers, on a voluntary basis, to
submit specified, supplemental
disclosure tagged in XBRL format as an
exhibit to certain filings on the
Commission’s Electronic Data
Gathering, Analysis and Retrieval
System (‘‘EDGAR’’).13 The Commission
adopted the voluntary program to help
evaluate the usefulness of data tagging
and XBRL to registrants, investors, the
Commission, and the marketplace.14 In
2006, the Commission initiated an
interactive data test program, in which
companies, including investment
companies, voluntarily agree to furnish
financial data in XBRL format for at
least one year and provide feedback on
their experiences, including the costs
and benefits.15
11 See ‘‘Member Organisations’’ page and
subpages on the XBRL International Web site,
available at: https://xbrl.org/viewmembers.aspx.
12 September 25 Press Release, supra note 6.
13 Securities Act Release No. 8529 (Feb. 3, 2005)
[70 FR 6556 (Feb. 8, 2005)] (‘‘XBRL Adopting
Release’’). See also Securities Act Release No. 8496
(Sept. 27, 2004) [69 FR 59094 (Oct. 1, 2004)]
(‘‘XBRL Proposing Release’’); Securities Act Release
No. 8497 (Sept. 27, 2004) [69 FR 59111 (Oct. 1,
2004)] (concept release soliciting comment on data
tagging).
14 XBRL Adopting Release, supra note 13, 70 FR
at 6556.
15 More Companies Join SEC’s Program to Use
Interactive Data for Financial Statements,
Securities and Exchange Commission Press Release,
June 20, 2006, available at: https://www.sec.gov/
news/press/2006/2006-99.htm; 17 Companies Join
SEC Pilot Program to Use ‘‘Interactive Data’’ in
Financial Reports, Securities and Exchange
Commission Press Release, Mar. 29, 2006, available
at: https://www.sec.gov/news/press/2006-43.htm;
SEC Offers Incentives for Companies to File
Financial Reports with Interactive Data, Securities
and Exchange Commission Press Release, Jan. 11,
2006, available at: https://www.sec.gov/news/press/
2006-7.htm. For more information about the
Commission’s interactive data initiatives, see the
Commission Web page ‘‘Spotlight On: Interactive
Data and XBRL Initiatives’’ available at: https://
www.sec.gov/spotlight/xbrl.htm.
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Under the voluntary program, filers
may submit financial information using
XBRL as an exhibit to the filing to
which it relates, an amendment to such
filing, or, if the filer is eligible, to a filing
on Form 8–K 16 or Form 6–K.17 The
XBRL exhibits submitted in the
voluntary program are supplemental
submissions that do not replace the
required American Standard Code for
Information Interchange (‘‘ASCII’’) or
Hypertext Markup Language (‘‘HTML’’)
versions of the financial information
they contain.18 The data currently
permitted in XBRL exhibits is limited to
financial information.
The voluntary program permits any
registrant to participate merely by
submitting an XBRL exhibit in the
required manner. XBRL exhibits are
publicly available but are considered
furnished rather than filed.19 Although
XBRL exhibits are required to accurately
reflect the information that appears in
the corresponding part of the official
filing, the purpose of submitting XBRL
data is to test the related format and
technology and, as a result, investors
and others should continue to rely only
on the official version of a filing and not
on the XBRL exhibit in making
investment decisions. We have included
cautionary language to this effect on the
Commission Web site.20
C. Tagging of Mutual Fund Information
The current voluntary program
extends to investment companies,
including open-end management
investment companies (‘‘mutual
funds’’).21 Investment companies may
presently submit XBRL exhibits only to
Form N–CSR,22 the semi-annual filing to
submit certified shareholder reports, or
to Form N–Q,23 the quarterly report of
portfolio holdings.24
As part of our evaluation of data
tagging, the Commission held a
16 17
CFR 249.308.
CFR 249.306.
18 See EDGAR Filer Manual, Volume II, Section
5.1 (Version 3, Feb. 2006).
19 See infra note 57 and accompanying text.
20 See ‘‘XBRL Data Submitted in the XBRL
Voluntary Program on EDGAR’’ page on the
Commission Web site, available at: https://
www.sec.gov/Archives/edgar/xbrl.html.
21 See SEC XBRL Voluntary Program Extends to
Investment Companies, Securities and Exchange
Commission Press Release, Aug. 8, 2005, available
at: https://www.sec.gov/news/press/2005-112.htm.
22 17 CFR 249.331 and 274.128.
23 17 CFR 249.332 and 274.130.
24 Voluntary participants must use the standard
U.S. GAAP investment management taxonomy
(Version 2.1) approved by XBRL International. See
EDGAR Filer Manual, Volume II, Section 5.2.4.1
(Version 3, Feb. 2006); ‘‘Frequently Asked
Questions about the XBRL Voluntary Filing
Program’’ page on the Commission Web site,
available at: https://www.sec.gov/info/edgar/
xbrlfaq032105.htm.
17 17
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roundtable in June 2006 that focused, in
part, on the role of data tagging and
interactive data in improving the quality
of mutual fund disclosures.
Representatives from investor groups,
the mutual fund industry, analysts, and
others discussed how the Commission
could leverage the power of interactive
data and other technology to provide
mutual fund investors with better
information.25
Significant discussion at the June
roundtable concerned the importance of
providing mutual fund investors with
better, more user-friendly access to key
information, such as information about
investment objectives and strategies,
risks, and costs.26 This key information
is included in the mutual fund
prospectus,27 but it can be difficult for
investors to extract this key information
from lengthy prospectuses, which often
cover multiple funds and contain a
wealth of other information. Much of
this information is required to be
included in the risk/return summary
section of the prospectus,28 and tagging
this information could provide powerful
tools for investors.29
We believe that exploring the tagging
of the information in the risk/return
25 See Transcript of June 12 Interactive Data
Roundtable, June 12, 2006, available at: https://
www.sec.gov/spotlight/xbrl/
xbrlofficialtranscript0606.pdf (‘‘June 12 Roundtable
Transcript’’); Webcast Archive of June 12
Interactive Data Roundtable, June 12, 2006,
available at: https://www.connectlive.com/events/
secxbrl/. See also Agenda of October 3 Interactive
Roundtable, Oct. 3, 2006 available at: https://
www.sec.gov/spotlight/xbrl/xbrlroundagenda100306.htm; Webcast Archive of October 3
Interactive Data Roundtable, Oct. 3, 2006, available
at: https://www.connectlive.com/events/
secinteractivedata100306/ (‘‘October 3 Roundtable
Webcast’’) (second Commission interactive data
roundtable, focusing on new software using
interactive data to provide investor-friendly
research tools).
26 See Barbara Roper, Director of Investor
Protection, Consumer Federation of America, June
12 Roundtable Transcript, supra note 25, at 20 &
22. See also Paul G. Haaga, Jr., Executive Vice
President, Capital Research and Management
Company, id. at 90; William D. Lutz, Ph.D.,
Professor of English, Rutgers University, id. at 88;
Elisse B. Walter, Senior Executive Vice President,
NASD, id. at 40–41.
27 Items 2 and 3 of Form N–1A [17 CFR 239.15A
and 274.11A] (risk/return summary section of the
prospectus).
28 Id.
29 See Chairman Christopher Cox, June 12
Roundtable Transcript, supra note 25, at 8
(‘‘Interactive data, the tagging of these key facts [in
the prospectus] so that they can easily be identified
and extracted[,] offers the possibility of dramatic
improvement over traditional disclosure delivery
for mutual fund investors.’’); Paul Schott Stevens,
President and Chief Executive Officer, Investment
Company Institute, id. at 72 (‘‘XBRL tagging can
help turn the Risk/Return Summary into an even
more powerful tool than the Commission
envisioned when it first adopted it in 1998 as a way
to help investors compare one fund with another
through the standardization of the information and
the format in which it’s presented.’’).
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summary section is an important step in
our interactive data program. With
almost half of all U.S. households
owning mutual funds,30 typically to
fund their education, retirement, and
other basic needs, improving the quality
of mutual fund disclosure is important
to millions of Americans. Tagging of key
mutual fund information could help to
streamline the delivery of mutual fund
information and provide investors,
analysts, and others with improved
tools to compare funds based upon,
among other things, costs, investment
objectives, strategies, and risks. In
addition, the risk/return summary
information is largely narrative in
format, and exploring the viability of
tagging this information will provide us
with valuable insights as we assess the
potential for tagging other primarily
narrative information.
As noted above, XBRL International
has approved an investment
management XBRL U.S. GAAP financial
reporting taxonomy.31 That taxonomy
generally does not extend to the
information in the risk/return summary
section. In March 2006, the Investment
Company Institute (the ‘‘ICI’’) 32
announced an initiative to create a
taxonomy to cover the risk/return
summary information in the
prospectus.33 The ICI recently released
its draft risk/return summary taxonomy
and announced that it would provide a
45-day period for public review and
comment.34 We are proposing
30 2006 Investment Company Fact Book, at 47,
Investment Company Institute (2006), available at:
https://www.icifactbook.org/pdf/2006_factbook.pdf.
31 Supra note 24.
32 The ICI is a national association of the
American investment company industry.
33 Stevens Calls for Greater Use of Internet;
Announces Initiative to Develop XBRL Data Tagging
Technology, ICI Press Release, Mar. 20, 2006,
available at: https://ici.org/statements/nr/
06_news_mfimc.html#TopOfPage; Remarks of Paul
Schott Stevens, President and Chief Executive
Officer, Investment Company Institute, at the
Mutual Funds and Investment Management
Conference, Mar. 20, 2006, available at: https://
ici.org/statements/remarks/
06_mfimc_stevens_spch.html#TopOfPage;
Statement of the Investment Company Institute at
the June 12, 2006 Interactive Data Roundtable,
available at: https://www.sec.gov/news/press/4-515/
ici050906.pdf.
34 ICI Unveils Draft XBRL Taxonomy For Public
Review, Investment Company Institute Press
Release, Jan. 4, 2007, available at: https://
www.ici.org/home/
07_news_xbrl_txnmy.html#TopOfPage. The
taxonomy, as well as instructions for commenting
on the taxonomy, are available at https://
members.ici.org/xbrl. See also Statements of SEC
Chairman Christopher Cox and Division of
Investment Management Director Andrew Donohue
Regarding the Investment Company Institute’s
Mutual Fund Interactive Data Taxonomy, Securities
and Exchange Commission Press Release, Jan. 4,
2007, available at: https://www.sec.gov/news/press/
2007/2007-2.htm.
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amendments to the voluntary program
that would, if adopted, permit mutual
funds to tag the information in the risk/
return summary section of their
prospectuses using the taxonomy
developed by the ICI.
II. Discussion
As part of our ongoing effort to
evaluate the usefulness of data tagging,
we are proposing amendments to extend
the voluntary program to enable mutual
funds to submit exhibits containing
tagged risk/return summary information
attached to EDGAR filings.35 We expect
to permit any mutual fund to
participate, without pre-approval,
merely by submitting the risk/return
summary information in the required
manner. As we continue to gain
experience with interactive data, we
will evaluate the benefits of data tagging
to investors, analysts, and others. If, in
the future, we consider requiring filers
to tag the risk/return summary
information, that would be the subject
of a separate rulemaking proposal.
A. Expansion of Voluntary Program
Content
Currently, the XBRL data furnished
under the voluntary program must
consist of at least one item from a list
of enumerated mandatory content
(‘‘Mandatory Content’’), including
financial statements, earnings
information, and, for registered
management investment companies,
financial highlights or condensed
financial information.36 This may be
accompanied by one or more related
items from a list of optional content,
including (1) audit opinions; (2) interim
review reports; (3) reports of
management on the financial
statements; (4) certifications; (5)
management’s discussion and analysis
of financial condition and results of
operations; (6) management’s discussion
and analysis or plan of operation; (7)
operating and financial review and
prospects; and (8) management’s
discussion of fund performance.37
We propose to add the risk/return
summary information set forth in Items
2 and 3 of Form N–1A as a new item
of Mandatory Content.38 As with all
tagged exhibits under the voluntary
program, submissions of tagged exhibits
containing risk/return summary
35 The proposed amendments, if adopted, would
not alter the voluntary program as it applies to the
furnishing of XBRL information by non-investment
companies.
36 Rule 401(b)(1) of Regulation S–T [17 CFR
232.401(b)(1)].
37 Rule 401(b)(2) of Regulation S–T [17 CFR
232.401(b)(2)].
38 Proposed rule 401(b)(1)(iv).
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information would be supplemental and
would not replace the required HTML
or ASCII version of the information
called for in Form N–1A. Volunteers
would be required to file their complete
official registration statements to ensure
that all investors have access to
information upon which to base their
investment decisions.39 While tagged
exhibits would be required to reflect the
same information contained in the risk/
return summary section of the related
official Form N–1A filing, we emphasize
that investors and others should
continue to rely on the official filing
rather than the tagged exhibit.
Any mutual fund submitting tagged
risk/return summary information would
be required to include this information
as an exhibit to an amendment to a
previous filing on Form N–1A.40 Form
N–1A filings, which contain mutual
fund registration statements (or
amendments thereto), differ from the
other filings used in the voluntary
program in that they are often subject to
revision prior to effectiveness. For this
reason, the proposed rules would not
permit the submission of a tagged
exhibit that is related to a registration
statement or an amendment that is not
yet effective. More specifically, the
proposed rules would provide that a
tagged exhibit to a Form N–1A filing,
whether the filing is an initial
registration statement or an amendment
thereto, could be submitted only as an
amendment to the filing to which the
tagged exhibit relates and only after the
effective date of such filing.41 An
exhibit containing tagged risk/return
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39 Consistent
with the current voluntary program,
once received by the Commission, the official filing
and the tagged risk/return summary information
submitted as exhibits to the official filing would
undergo technical validations. The official filing
would continue to follow the normal process for
receipt and acceptance. That is, it would be
suspended if it fails its validation criteria. If the
official filing meets its validation criteria, but any
tagged risk/return summary document submitted as
an exhibit to the official filing fails its own
validation criteria, all tagged documents would be
removed and the official filing would be accepted
and disseminated without the tagged documents.
The volunteer would be notified of the submission
problem with the tagged documents. If the official
filing failed to meet the required receipt and
acceptance process and was suspended for any
reason, any tagged risk/return summary information
submitted with the official filing would also be
suspended.
40 See proposed rule 401(a) of Regulation S–T;
proposed rule 8b–33. A mutual fund submitting
tagged risk/return summary information as an
exhibit to Form N–1A would be required to name
each document ‘‘EX–100’’ as specified in the
EDGAR Filer Manual. Proposed rule 8b–33. We also
propose a technical amendment to General
Instruction B.4.(b) of Form N–1A to add rule 8b–
33 to the list of general provisions that apply to the
filing of registration statements on Form N–1A.
41 Proposed rule 401(a); see also proposed rule
8b–33.
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summary information could be
submitted under rule 485(b) of the
Securities Act, which provides for
immediate effectiveness of amendments
filed to make non-material changes and
for certain other purposes, and would
only need to contain the new exhibit, a
facing page, a signature page, a cover
letter explaining the nature of the filing,
and a revised exhibit index. Filers
submitting tagged risk/return summary
information should not include the ICI
taxonomy in their submissions as this
taxonomy will be stored as a part of the
EDGAR system.
Similar to the current voluntary
program, volunteers would be free to
submit tagged risk/return summary
information regularly or from time to
time, and volunteers could stop and
start as they choose. Participating in the
voluntary program would not create a
continuing obligation for a volunteer to
submit tagged risk/return summary
information as an exhibit to a
subsequent post-effective amendment. A
volunteer would, however, be required
to amend any tagged risk/return
summary exhibits that do not comply
with the content and format
requirements of rule 401, e.g., because
they do not reflect the same information
as the corresponding official filing.42
We also propose amendments that
will require investment companies to
tag information in a manner that will
permit the information for each class 43
to be separately identified.44 Currently,
rule 8b–33 under the Investment
Company Act requires that investment
companies participating in the
voluntary program submit tagged
documents in a manner that will permit
the information for each series of an
investment company registrant 45 and
each contract of an insurance company
separate account 46 to be separately
identified.47 We propose to amend this
rule to require that investment
42 XBRL Adopting Release, supra note 13, 70 FR
at 6559 n. 48. See rule 401(c)(1) (requires tagged
exhibits to reflect the same information as
corresponding official filing).
43 A mutual fund may issue more than one class
of shares that represent interests in the same
portfolio of securities with each class, among other
things, having a different arrangement for
shareholder services or the distribution of
securities, or both. Rule 18f–3 under the Investment
Company Act [17 CFR 270.18f–3].
44 Proposed rule 8b–33.
45 A mutual fund may issue multiple ‘‘series’’ of
shares, each of which is preferred over all other
series in respect of assets specifically allocated to
that series. Rule 18f–2 under the Investment
Company Act [17 CFR 270.18f–2]. Each series is, in
effect, a separate investment portfolio.
46 Variable annuity contracts and variable life
insurance contracts are issued through insurance
company separate accounts.
47 Rule 8b–33 under the Investment Company Act
[17 CFR 270.8b–33].
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companies submit tagged documents in
a manner that will permit the
information for each class to be
separately identified because expense
and performance information in the
risk/return summary is class-specific.48
The amendments we are proposing
also would provide mutual funds with
an additional option to submit tagged
financial highlights or condensed
financial information. Currently, mutual
funds may submit this information as an
exhibit to Form N–CSR.49 The
proposals, if adopted, also would permit
mutual funds to submit their financial
highlights or condensed financial
information as a tagged exhibit to an
amendment to the Form N–1A filing to
which the information relates.50
We request comment on the proposed
expansion of the voluntary program to
include risk/return summary
information.
• Is it beneficial to tag mutual fund
risk/return summary information? Is
this portion of the mutual fund
prospectus an appropriate place to begin
evaluating the tagging of non-financial
information? Is there other mutual fund
information that should be included in
the voluntary program?
• What effect would tagged data have
on investors’, analysts’, and other users’
ability to analyze mutual funds’ risk/
return summary disclosure? Would
tagged risk/return summary information
have an effect on the usefulness of
disclosure in Commission filings?
• We are not proposing to amend that
portion of rule 401(b)(1) that currently
48 We have previously indicated that rule 8b–33
would require investment companies to submit
tagged XBRL documents separately for each series
of an investment company registrant. See XBRL
Proposing Release, supra note 13, 69 FR at 59097
n. 49. Under proposed amended rule 8b–33, a
mutual fund would not be required to submit
tagged risk/return summary information in separate
documents for each series or class, provided that
the information is tagged in such a manner that the
information may be separately identified by series
and class.
49 Rule 401(a) and (b)(1)(iii) of Regulation S–T [17
CFR 401(a) and (b)(1)(iii)] (permitting financial
highlights or condensed financial information set
forth in Item 8(a) of Form N–1A to be submitted as
Mandatory Content); rule 8b–33. Mutual funds must
include their financial highlights or condensed
financial information in every annual and semiannual report transmitted to shareholders. Items
22(b)(2) and (c)(2) of Form N–1A (requiring annual
or semi-annual reports to include the information
required by Item 8(a) of Form N–1A). Mutual funds
must include a copy of their annual or semi-annual
report transmitted to shareholders with their Form
N– CSR filed with the Commission. Item 1 of Form
N–CSR.
50 Proposed rule 8b–33 (permitting tagged
exhibits under the voluntary program to be
submitted on Form N–1A); Item 8(a) of Form N–1A
(requiring mutual funds to provide financial
highlights information); rule 401(a) and (b)(1)(iii) of
regulation S–T (permitting information set forth in
Item 8(a) of Form N–1A as Mandatory Content
under the voluntary program).
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requires that Mandatory Content
‘‘consist of a complete set of information
for all periods presented in the
corresponding official EDGAR filing.’’
Should mutual funds that submit tagged
risk/return summary information be
required to tag all of the information in
the risk/return summary section of the
corresponding official filing or should
they be permitted to tag some, but not
all, of the information? For example, if
a fund’s official filing contains
information for more than one series or
class, should the fund be permitted to
submit tagged risk/return summary
information for fewer than all of the
series and classes? As another example,
should a mutual fund be permitted to
tag discrete portions of the risk/return
summary information, such as cost and
performance information, while not
tagging others, such as narrative
information?
• Should mutual funds be permitted
to submit tagged risk/return information
related to registration statements or
post-effective amendments that are not
yet effective? Would this raise any
liability issues? If mutual funds are
permitted to submit tagged risk/return
summary information prior to
effectiveness, what safeguards would be
appropriate? For example, should funds
be required to submit revised tagged
documents if there are any changes (or
any material changes) to the risk/return
summary disclosure in the effective
registration statement or amendment
and/or should there be additional
required disclosure to specifically
caution investors and others that the
information may differ from that in the
effective filing?
• The proposed amendments would
not create a continuing obligation for a
volunteer to submit tagged risk/return
summary information as an exhibit to a
subsequent post-effective amendment.
When a mutual fund that has submitted
tagged risk/return summary information
amends its registration statement,
should we require the fund to submit
updated tagged risk/return summary
information? Should it depend on the
materiality of the amendments? How
would a requirement to update tagged
exhibits affect participation in the
voluntary program? If we do not impose
a continuing obligation to update tagged
exhibits, should we require additional
disclosure or other safeguards?
• Will the proposed amendment to
rule 8b–33, providing that investment
companies must tag information in a
manner that will permit the information
for each class to be separately identified,
raise any issues with respect to any
investment company information that
may be tagged under the voluntary
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program? Should we specify that only
risk/return summary information must
be tagged in a manner that will permit
the information for each class to be
separately identified? Will the risk/
return summary taxonomy in its current
state of development permit the
information for each series and class to
be separately identified? If not, how
should it be modified to permit this?
• Should mutual funds be required to
submit separate tagged risk/return
summary exhibits for each series or
class? Instead, should they be permitted
to submit exhibits that combine
multiple series or classes of the same
registrant, provided that the information
is tagged in such a manner that the
information may be separately
identified by series and class?
• We plan to permit all filers on Form
N–1A to submit documents containing
tagged risk/return summary information
as exhibits to their official Form N–1A
filings so long as they comply with the
requirements of the voluntary program.
Should we limit participation, such as
by size or type of mutual fund? If so,
what should be the criteria for
participating? If so, why?
• What steps can we take to
encourage mutual funds to participate
in the expanded voluntary program?
B. Required Disclosure
Under the current voluntary program,
any official filing with which tagged
exhibits are submitted must disclose
that the purpose of submitting the
tagged exhibits is to test the related
format and technology and, as a result,
investors should not rely on the exhibits
in making investment decisions.51 We
are proposing that this disclosure be
required in the exhibit index of any
Form N–1A filing that includes a tagged
exhibit.52
The current voluntary program also
requires any official filing with which
tagged exhibits are submitted to disclose
that the information contained in the
exhibits is ‘‘unaudited’’ or
‘‘unreviewed.’’ 53 We are proposing to
require this disclosure in a Form N–1A
filing with which tagged financial
highlights or condensed financial
information is submitted. We are not
proposing to require this disclosure in a
Form N–1A filing when the tagged
51 Rule 401(d)(1)(ii) of Regulation S–T [17 CFR
232.401(d)(1)(ii)].
52 Proposed rule 401(d)(2)(i). Rule 483(a) of
Regulation C [17 CFR 230.483(a)] requires, among
other things, that a registration statement of a
registered investment company ‘‘contain an exhibit
index, which should immediately precede the
exhibits filed with such registration statement.’’
53 Rule 401(d)(1)(i) of Regulation S–T [17 CFR
232.401(d)(1)(i)].
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exhibits to the filing contain only risk/
return summary information because
this information is not ordinarily
audited or reviewed by an independent
auditor.54
We request comment on the proposed
cautionary disclosures that would be
required to accompany the submission
of tagged information that accompanies
a Form N–1A filing.
• Should we require the disclosure
concerning whether the information is
‘‘unaudited’’ or ‘‘unreviewed’’ to
accompany exhibits containing tagged
risk/return summary information?
• Is additional or different language
necessary for the cautionary
disclosures?
• Is the exhibit index to a Form N–
1A filing the appropriate place for the
cautionary disclosures?
C. Liability Issues
We propose to extend to tagged risk/
return summary information limited
protection from liability that is similar
to the protection provided under the
current voluntary program. As is the
case with the current program, we
would provide this protection because
liability remains for the official filing,
and the program is experimental,
contains certain safeguards, and should
not unnecessarily deter volunteers from
participating.
Currently, tagged exhibits are not
deemed filed for purposes of Section 18
of the Securities Exchange Act of 1934
(‘‘Exchange Act’’) 55 or Section 34(b) of
the Investment Company Act,56 or
otherwise subject to the liability of these
sections.57 In addition, the current rules
also provide more general relief from
liability under the securities laws,
including the Securities Act, the
Exchange Act, the Trust Indenture Act
of 1939, and the Investment Company
Act, 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.58
Unlike the filings currently included
in the voluntary program, Form N–1A is
54 Proposed
rule 401(d)(1)(i).
U.S.C. 78r.
56 15 U.S.C. 80a–33(b).
57 Rule 402(a)(1) under Regulation S–T [17 CFR
232.402(a)(1)]. Further, because the tagged
documents are not filed under the Exchange Act,
they are not incorporated by reference into
registration statements filed under the Securities
Act or prospectuses they contain. These protections
apply regardless of whether the documents are
exhibits to a document otherwise incorporated by
reference into a filing.
58 Rule 402(b) of Regulation S–T [17 CFR
232.402(b)].
55 15
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a registration form under both the
Securities Act and the Investment
Company Act; and volunteers
submitting tagged exhibits to that form
also could face potential registration
statement liability under the Securities
Act. As a result, we propose to extend
the liability protection under the
voluntary program to include Section 11
of the Securities Act.59 Specifically, we
propose to amend rule 402(a) to provide
that tagged exhibits are not deemed filed
for purposes of Section 11 or otherwise
subject to the liabilities of that section.
In addition, we propose to amend rule
402(a) to state explicitly that tagged
exhibits are not part of any registration
statement to which they relate.60 We
will continue to caution users on the
Commission’s Web site that documents
submitted under the voluntary program
should not be relied upon for making
investment decisions, and users should
continue to rely on the company’s
official filing.61
We do not propose to modify the
provision that affords volunteers general
relief from liability under the federal
securities laws to the extent that the
information in the corresponding
portion of the official EDGAR filing was
not materially false or misleading.62
That provision includes liability
protections under the Securities Act,
and it would apply to tagged documents
submitted as exhibits on Form N–1A.
We request comment on the proposed
liability protections for tagged risk/
return summary information.
• Is it necessary or appropriate to
extend liability protection to Section 11
of the Securities Act? Should we modify
59 In addition, the current provisions of rule
402(a) would apply to tagged risk/return summary
information. In particular, a tagged exhibit on Form
N–1A would not be deemed incorporated by
reference into another filing, regardless of whether
the tagged exhibit is an exhibit to a document
otherwise incorporated by reference into another
filing. Rule 402(a)(2) under Regulation S–T [17 CFR
232.402(a)(2)]. All other liability and antifraud
provisions of the Securities Act, Exchange Act, and
Investment Company Act would apply. Rule
402(a)(3) under Regulation S–T [17 CFR
232.402(a)(3)]. For example, material misstatements
or omissions in a tagged submission would
continue to be subject to liability under Section
10(b) [15 U.S.C. 78j(b)] and rule 10b–5 [17 CFR
240.10b–5] under the Exchange Act.
60 Section 11 of the Securities Act applies to ‘‘any
part of the registration statement, when such part
became effective.’’ The Commission takes a similar
approach with unofficial PDF copies contained in
electronic submissions. See Rule 104(d) of
Regulation S–T [17 CFR 232.104(d)]. Similar to the
other protections in the current voluntary program,
Section 11 liability relief, under the proposed rules,
would not extend to the information the official
filing contains.
61 See supra note 20.
62 Rule 402(b). We are, however, proposing
technical amendments to rule 402(b) to replace each
reference to ‘‘Item 401’’ with ‘‘Rule 401.’’ Proposed
rule 402(b).
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the proposed liability provisions in any
way?
• Should the tagged risk/return
summary information be considered
filed or furnished for purposes of the
voluntary program? Should the tagged
risk/return summary documents be
deemed not to be part of any registration
statement to which they relate?
• With regard to risk/return summary
submissions, are the proposed liability
provisions sufficient to protect
volunteers and to encourage
participation in the voluntary program?
To encourage participation in the
voluntary program, should liability
protections be increased beyond those
proposed? Would investors have
sufficient protection under the proposed
amendments? For the protection of
investors, should liability protections be
decreased from those proposed?
D. The Risk/Return Summary
Taxonomy and Software Tools
As discussed above, the taxonomy to
tag the risk/return summary information
is being developed by the Investment
Company Institute. The ICI has released
the draft risk/return summary taxonomy
for public review and comment, and we
expect that the ICI will submit the
taxonomy to XBRL US, Inc., for
evaluation and approval in accordance
with their procedures.63 In light of the
purpose of the voluntary program,
which is to test and evaluate tagging
technology, we anticipate permitting
mutual funds to submit documents
containing risk/return summary
information that is tagged using the ICI’s
taxonomy prior to final approval of the
taxonomy by XBRL US, Inc.
Commercial off-the-shelf products
that provide means to view tagged
information in a rendered, or human
readable, format and to compare or
analyze tagged information are
available. We will assess whether to
provide such software tools on our Web
site for use with risk/return summary
information. For example, the
Commission Web site currently
provides access to a prototype XBRL
Web application that converts tagged
data received in the current voluntary
program into rendered format.64 If we
do provide rendering or analysis tools,
we intend to include appropriate
cautionary language to the effect that
63 XBRL US, Inc., represents the United States to
XBRL International. XBRL US, Inc., is responsible
for organizing and sponsoring taxonomies from the
United States, including the main accounting
standards for United States business reporting.
64 See ‘‘Interactive Financial Report Viewer—
Preview Release’’ Web page on the Commission
Web site, available at: https://www.sec.gov/spotlight/
xbrl/xbrlwebapp.htm
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6681
investors should rely only on the
information in the official version of a
filing and not on the tagged documents
submitted as part of the voluntary
program in making investment
decisions. While we may decide to
proceed with the expansion of the
voluntary program without providing
rendering or analysis tools, we will
continue to evaluate the use of such
tools to aid the investing public.
We request comment on the proposed
use of the ICI’s risk/return summary
taxonomy and the need for the
development of rendering and other
tools.
• Is the taxonomy for risk/return
summary information created by the ICI
sufficiently developed that we should
permit its use in the voluntary program?
If not, explain what changes or
procedural steps are needed prior to
use. What specific criteria should be
applied to determine whether the risk/
return summary taxonomy is
sufficiently developed?
• Is there anything related to the
process for developing and approving
the risk/return summary taxonomy that
should affect its use or otherwise raise
concerns?
• The process for approving a
taxonomy as XBRL includes testing and
technical modification. Should the
Commission permit use of a risk/return
summary taxonomy in the voluntary
program that has not been
acknowledged or approved as XBRL?
• A tagged submission that a
volunteer creates can adhere to either a
standard taxonomy or a standard
taxonomy with extensions. Extensions
to a standard taxonomy are additional
tags defined by a particular user that
further refine the tags contained in the
standard taxonomy. We expect that
mutual funds will be permitted to
submit extensions to the standard risk/
return summary taxonomy. Given the
narrative format of much risk/return
summary information, does tagging of
this information raise particular
problems with regard to extensions or
other facets of data tagging? For what
purposes would mutual funds want or
need to make use of extensions? Are
there sufficient software tools available
to develop extensions to the risk/return
summary taxonomy, if necessary? To
what extent would the use of extensions
reduce the comparability among risk/
return summary information that is
tagged? Are there any reasons why the
use of extensions would be
inappropriate with regard to risk/return
summary information?
• What are the advantages and
disadvantages of the Commission
providing on its Web site tools to render
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the tagged risk/return summary
information in human readable form or
to permit users to analyze and compare
tagged risk/return summary information
submitted by different mutual funds? If
we were to provide a rendering tool,
what, if any, liability or other concerns
would be raised by the fact that the
presentation would be different from the
risk/return summary information as
presented in a registrant’s official
prospectus? What, if any, liability or
other concerns would analytical or
comparison tools raise? What, if any,
disclaimers would be necessary to
address any liability concerns related to
rendering, analytical, or comparison
tools? If we were to provide a rendering
tool, would it hinder the ability of a
volunteer to present its tagged risk/
return summary information in as much
detail as, and in a manner substantially
similar to, its official filing? If we do not
provide rendering, analytical, or
comparison tools, would it hinder
participation in the voluntary program
or limit our ability to explore the
usefulness of tagged risk/return
summary information?
E. Effective Date
If we adopt the proposed
amendments, we expect the effective
date to be thirty days after publication
of the adopting release in the Federal
Register. The Commission requests
comment on this proposed effective
date.
hsrobinson on PROD1PC76 with PROPOSALS2
III. General Request for Comments
We request comment not only on the
specific issues we discuss in this
release, but on any other approaches or
issues that we should consider in
connection with the proposed
amendments. We seek comment from
any interested persons, including those
required to file information with us on
the EDGAR system, as well as investors,
disseminators of EDGAR data, industry
analysts, EDGAR filing agents, and any
other members of the public.
IV. Paperwork Reduction Act
The proposed rule and form
amendments contain ‘‘collection of
information’’ requirements within the
meaning of the Paperwork Reduction
Act of 1995 (‘‘PRA’’).65 We are
submitting the proposed collection of
information to the Office of
Management and Budget (‘‘OMB’’) for
review in accordance with 44 U.S.C.
3507(d) and 5 CFR 1320.11. Provision of
information under the proposed
amendments would be voluntary and
would not be kept confidential. An
65 44
U.S.C. 3501 et seq.
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agency may not conduct or sponsor, and
a person is not required to respond to,
an information collection unless it
displays a currently valid OMB control
number.
The title for the collection of
information is ‘‘Voluntary XBRL-Related
Documents’’ (OMB Control No. 3235–
0611). The proposed amendments
would extend the current interactive
data voluntary reporting program to
enable mutual funds voluntarily to
submit tagged information contained in
the risk/return summary section of their
prospectuses on EDGAR as exhibits to
Form N–1A filings.
A. Reporting and Cost Burden Estimate
1. The Voluntary Program
We are proposing to increase the
burden associated with the existing
collection of information for Voluntary
XBRL-Related Documents to reflect the
proposed amendments, which would
extend the current interactive data
voluntary reporting program to enable
mutual funds voluntarily to submit
tagged information contained in the
risk/return summary section of their
prospectuses on EDGAR as exhibits to
Form N–1A filings. The proposed
expansion of the voluntary program
would be open to any mutual fund
choosing to participate. We estimate
that 10% of the 545 fund complexes that
have mutual funds, or 55 fund
complexes, would each submit
documents containing tagged risk/return
summary information for one mutual
fund.66 This estimate is higher than the
number of mutual funds participating in
the current voluntary program.
However, we believe that additional
mutual funds will participate in the
proposed expanded voluntary
program.67
Submission of tagged risk/return
summary information would not
directly affect the burden of preparing
the mutual funds’ registration
statements or the registrants’ official
EDGAR filings. In order to provide
tagged risk/return summary
information, a participating mutual fund
would have to tag the risk/return
summary section of its prospectus using
the risk/return summary taxonomy and
potentially develop taxonomy
66 In the case of a mutual fund with multiple
series, our estimate treats each series as a separate
mutual fund.
67 The ICI has stated that it will launch an
educational effort to encourage mutual funds to use
the risk/return summary taxonomy to tag the
information in their EDGAR filings. ICI Details
Project to Extend XBRL to Key Investor Information,
Investment Company Institute Press Release, June
12, 2006, available at: https://www.ici.org/
statements/nr/06_news_xbrl.html#TopOfPage.
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extensions and would submit an exhibit
to its filing. Based on our previous
estimates and our experience with
registrants who have submitted tagged
financial information in the current
voluntary program, we estimate that the
initial creation of tagged documents
containing risk/return summary
information would require, on average,
approximately 110 burden hours per
mutual fund,68 and the creation of such
tagged documents in subsequent years
would require an average 10 burden
hours per mutual fund.69 Because the
PRA estimates represent the average
burden over a three-year period, we
estimate the average hour burden for the
submission of tagged documents
containing risk/return summary
information for one mutual fund to be
approximately 43 hours.70
Based on the estimates of 55
participants submitting tagged
documents containing risk/return
summary information for one mutual
fund per year and incurring 43 hours
per submission we estimate that, in the
aggregate, the industry would incur an
additional 2,365 burden hours
associated with the proposed
amendments.71 We further estimate that
75% of this burden increase, or
68 In the current voluntary program, we estimated
that an initial set of submissions would require an
average of 130 burden hours, 75% of which (or 97.5
hours) represents the internal burden hour estimate.
See XBRL Adopting Release, supra note 13, at 70
FR 6563; XBRL Proposing Release, supra note 13,
69 FR at 59101. Based upon our experience with
filers who have submitted tagged financial
information in the current voluntary program, we
believe that this burden estimate for submitting an
initial set of submissions may have been too high.
See, e.g., Indra K. Nooyi, Chief Executive Officer,
PepsiCo, Inc., October 3 Roundtable Webcast, supra
note 25 (initial submission in voluntary program
required approximately 60 to 80 total labor hours);
John Stantial, Director of Financial Reporting,
United Technologies Corporation, June 12
Roundtable Transcript, supra note 25, at 160 (initial
submission in voluntary program required about 80
hours of effort). We, therefore, estimate that the
initial creation of tagged documents containing
risk/return summary information would require, on
average, approximately 110 burden hours per
mutual fund, 75% of which (or 82.5 hours)
represents the internal burden hour estimate. These
estimates more closely approximate the experience
of filers in the current voluntary program.
69 In the current voluntary program, we estimated
that each set of submissions, after the initial set,
would take 10 burden hours. See XBRL Adopting
Release, supra note 13, at 70 FR 6563; XBRL
Proposing Release, Supra note 13, 69 FR at 59101.
We continue to believe that this estimate is
appropriate.
70 (110 hours in the first year + 10 hours in the
second year + 10 hours in the third year) ÷ 3 years
= 43 hours. While the PRA requires an estimate
based on a hypothetical three years of participation,
a registrant, as noted earlier, could participate in
the expanded voluntary program by submitting
tagged risk/return summary information over a
shorter period or even just once as the registrant
chooses.
71 55 documents per year x 43 hours per
submission = 2,365 hours.
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approximately 1,774 hours, would be
borne internally by the mutual fund
complex. We estimate that this internal
burden increase converted to dollars
would amount to approximately
$384,958.72
We also estimate that 25% of the
burden, or approximately 591 hours,
would be outsourced to external
professionals and consultants retained
by the mutual fund complex at an
average cost of $266.25 per hour for a
total annual increase of approximately
$157,354.73 In addition, it is our
understanding that many participants
would also have annual software
licensing costs. We estimate that the
cost of licensing software would be $333
per participant per year, for a total
annual increase of $18,315.74 Altogether
the total annual increase in external
72 This cost increase is estimated by multiplying
the increase in annual internal hour burden (1,774)
by the estimated hourly wage rate of $217.00. The
estimated wage figure is based on published rates
for compliance attorneys and programmer analysts
outside New York City, modified to account for an
1800-hour work-year and multiplied by 5.35 to
account for bonuses, firm size, employee benefits,
and overhead, yielding effective hourly rates of
$271 and $199, respectively. See Securities Industry
Association, Report on Management & Professional
Earnings in the Securities Industry 2005 (Sept.
2005) (‘‘SIA Report’’). The estimated wage rate was
further based on the estimate that compliance
attorneys would account for one quarter of the
hours worked and senior system analysts would
account for the remaining three quarters, resulting
in a weighted wage rate of $217.00 (($271 x .25) +
($199 x .75)).
73 591 hours × $266.25 per hour = $157,354. The
estimated wage figure is based on published rates
for attorneys and senior programmers outside New
York City, modified to account for an 1800-hour
work-year and multiplied by 5.35 to account for
bonuses, firm size, employee benefits, and
overhead, yielding effective hourly rates of $312
and $251, respectively. See SIA Report, supra note
72. The estimated wage rate was further based on
the estimate that attorneys would account for one
quarter of the hours worked and senior
programmers would account for the remaining three
quarters, resulting in a weighted wage rate of
$266.25 (($312 × .25) + ($251 × .75)).
74 $333 per participant × 55 participants =
$18,315. The estimated annual cost of the software
comes from our previous voluntary program
estimate PRA. See XBRL Adopting Release, supra
note 13, at 70 FR 6563 and n. 113 That estimate was
based on our discussions with software providers
and others familiar with XBRL. We estimated that
the cost of licensing software would range from
$200 to $3,000 each year, with the majority of
companies licensing less complex software in the
$200 to $500 range. We set our software cost
estimate at $500, which is the highest cost for the
simpler XBRL software license, and we assumed
that the first year license fee would be waived
(based upon our understanding that software
providers indicated that they would provide these
products for free in the initial stages of the
voluntary program). Because the PRA estimates
represent the average burden over a three-year
period, we estimated the average burden for
software license costs to be $333 per year. Id.
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costs related to the proposed
amendment would be $175,669.75
Our cost estimates are intended to
reflect both initial and ongoing costs
over a three-year period. In calculating
these costs, we have tried to take into
account, among other things, the current
state of reporting process automation,
automation that likely would be
introduced in connection with the
initial cost incurred, and the efficiencies
that likely would be realized over the
course of three years.
2. Regulation S–T
Regulation S–T (OMB Control No.
3235–0424) specifies the requirements
that govern the electronic submission of
documents. The proposed amendments
would revise rules under Regulation S–
T, but the associated increase in burden
is reflected in the ‘‘Voluntary XBRLRelated Documents’’ collection of
information as described above.
B. Request for Comments
We request comment to evaluate the
accuracy of our estimates pursuant to 44
U.S.C. 3506(c)(2)(B) and solicit
comments with regard to:
• Whether the proposed collection of
information is necessary for the proper
performance of the functions of the
agency, including whether the
information will have practical utility;
• Whether our estimate of the burden
of the proposed collection of
information is accurate;
• Whether there are ways to enhance
the quality, utility, and clarity of the
information to be collected; and
• Whether there are ways to minimize
the burden of collection of information
on those who are to respond, including
through the use of automated collection
techniques or other forms of information
technology.
Any member of the public may direct
to the Commission any comments
concerning the accuracy of these cost
and burden estimates and any
suggestions for reducing them. Persons
who desire to submit comments on the
collection of information requirements
should direct their comments to the
OMB, Attention: Desk Officer for the
Securities and Exchange Commission,
Office of Information and Regulatory
Affairs, Washington, DC 20503, and
send a copy of the comments to Nancy
M. Morris, Secretary, Securities and
Exchange Commission, 100 F Street,
NE., Washington, DC 20549, with
reference to File No. S7–05–07.
Requests for materials submitted to
75 This annual total consists of $157,354 in
outside professional costs plus $18,315 in software
costs.
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OMB by the Commission with regard to
this collection of information should be
in writing, refer to File No. S7–05–07,
and be submitted to the Securities and
Exchange Commission, Records
Management, Office of Filings and
Information Services, 100 F Street, NE.,
Washington, DC 20549. Because OMB is
required to make a decision concerning
the collection of information between 30
and 60 days after publication, your
comments are best assured of having
their full effect if OMB receives them
within 30 days of publication.
V. Cost/Benefit Analysis
The Commission is sensitive to the
costs and benefits imposed by its rules.
The goal of the voluntary program is to
increase EDGAR’s efficiency and utility
and to enhance the usefulness to
investors of the information collected
through EDGAR. In order to evaluate
data tagging further, we have proposed
amendments to extend the current
interactive data voluntary reporting
program to enable mutual funds
voluntarily to submit tagged information
contained in the risk/return summary
section of their prospectuses on EDGAR
as exhibits to Form N–1A filings.
A. Benefits
We believe that tagged information
may allow more efficient and effective
retrieval, research, and analysis of
company information through
automated means. The proposed
expansion of the voluntary program
would assist us in assessing whether
using interactive data tags enhances
users’ ability to analyze and compare
mutual fund risk/return summary
information included in mutual funds’
filings with the Commission. The
proposed expansion of the voluntary
program to include narrative, nonfinancial information, such as that
contained in the risk/return summary,
also would facilitate our ability to assess
further the technical requirements of
processing tagged documents using
EDGAR.
Currently, a number of companies use
computers and data entry staff to mine
risk/return summary information
provided by mutual funds on EDGAR in
order to populate databases that are
used to package information for sale to
analysts, funds, investors, and others.
Permitting funds to tag risk/return
summary information in Commission
filings would aid this data-mining
process in that it would identify points
of data at the source, which could
reduce the cost to populate databases
and improve the accuracy of that data.
Additionally, the expanded voluntary
program may benefit funds and the
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hsrobinson on PROD1PC76 with PROPOSALS2
public by permitting experimentation
with data tagged using the risk/return
summary taxonomy.
In the future, the availability of
potentially more accurate tagged
information about mutual funds could
also reduce the cost of research and
analysis and create new opportunities
for companies that compile, provide,
and analyze data to produce more value
added services. Enhanced access to
tagged information also has the
potential to allow retail investors (or
financial advisers assisting such
investors) to perform more personalized
and sophisticated analyses and
comparisons of mutual funds, which
could result in investors making better
informed investment decisions, and
therefore in a more efficient distribution
of assets by investors among different
funds. This may, in turn, also contribute
to increased competition among mutual
funds and result in a more efficient
allocation of resources among
competing investment products.
Although it is not possible to quantify
precisely the beneficial effects of more
efficient allocation of investors’ assets
and increased competition, they may be
significant, given the size of the mutual
fund industry.
B. Costs
The proposed expansion of the
voluntary program would lead to some
additional costs for funds choosing to
submit tagged documents containing
risk/return summary information as
exhibits to their Form N–1A filings. For
purposes of the PRA, we estimated that
the increase in annual internal burden
hours to the industry would be 1,774
hours, which would amount to
approximately $384,958 and that the
increase in annual external costs would
amount to approximately $175,669 for a
total estimated increase of $560,627 on
an annual basis.76
We based these cost estimates upon,
among other things, experience with
filers who have submitted tagged
financial information in the current
voluntary program.77 Due to the ongoing
nature of the project to develop the risk/
return summary taxonomy, however, we
have limited data to quantify the cost of
implementing the use of interactive data
tags applied to risk/return summary
information, and we seek comments and
supporting data on our estimates with
regard to the proposed amendments. In
the future, there may be additional costs
to current users of EDGAR data. For
example, companies that currently
provide tagging and dissemination of
76 See
77 See
supra Section IV.A.1.
supra note 68.
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EDGAR data may experience decreased
demand for their services. These entities
have developed certain products and
services based on data in EDGAR; many
entities disseminate, repackage, analyze,
and sell the information. Allowing
mutual funds to submit tagged risk/
return summary information, even
voluntarily, may have an impact on
entities providing EDGAR-based
services and products. Because the
Commission does not regulate all these
entities, it is currently not feasible to
accurately estimate the number or size
of these potentially affected entities.
The limited, voluntary nature of the
program will help the Commission
assess the effect, if any, on these
entities. Additionally, the availability of
mutual fund tagged data on EDGAR may
provide these companies with
alternative business opportunities.
C. Request for Comments
We request comment on all aspects of
this cost-benefit analysis, including
identification of any additional costs or
benefits of, or suggested alternatives to,
the proposed rule and form
amendments. Commenters are requested
to provide empirical data and other
factual support for their views to the
extent possible.
VI. Promotion of Efficiency,
Competition, and Capital Formation
Section 2(c) of the Investment
Company Act 78 and section 2(b) of the
Securities Act 79 require the
Commission, when engaging in
rulemaking that requires it to consider
or determine whether an action is
necessary or appropriate in the public
interest, to consider, in addition to the
protection of investors, whether the
action will promote efficiency,
competition, and capital formation.
The proposed amendments would
extend the current interactive data
voluntary reporting program to enable
mutual funds voluntarily to submit
tagged information contained in the
risk/return summary section of their
prospectuses on EDGAR as exhibits to
Form N–1A filings. The expansion of
the voluntary program is intended to
help us evaluate the usefulness to
investors, third-party analysts, mutual
funds, the Commission, and the
marketplace of data tagging and, in
particular, of tagging mutual fund
information. Because compliance with
the proposed amendments would be
voluntary, the Commission estimates
that the impact of the proposal would be
limited. However, because the tagging of
78 15
79 15
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U.S.C. 77(b).
Frm 00010
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risk/return summary information has
the potential to facilitate analysis of that
information, we believe that the
proposed amendments could promote
efficiency by allowing us and others to
gain experience with tagged mutual
fund information in Commission filings.
Further, tagging of the risk/return
summary information has the potential
to help streamline the delivery of
mutual fund information, and provide
investors and others with improved
tools to compare funds based upon,
among other things, costs, investment
objectives, strategies, and risks. We
believe that the potential to streamline
the delivery of mutual fund information
and to provide investors and others with
improved mutual fund comparison tools
could promote efficiency and
competition through more efficient
allocation of investments by investors
and more efficient allocation of assets
among competing funds. In the future,
companies that currently provide
tagging and dissemination of EDGAR
data may experience decreased demand
for their services. The availability of
mutual fund tagged data on EDGAR,
however, may provide these companies
with alternative business opportunities.
We do not anticipate that the proposed
amendments would have a significant
impact on capital formation. Finally,
because the proposals are designed to
permit mutual funds to provide
information in a format that we believe
would be more useful to investors, we
believe that the proposed amendments
are appropriate in the public interest
and for the protection of investors.
We request comment on whether the
proposed amendments, if adopted,
would promote efficiency, competition,
and capital formation. Commenters are
requested to provide empirical data and
other factual support for their views if
possible.
VII. Initial Regulatory Flexibility
Analysis
We prepared this Initial Regulatory
Flexibility Analysis (‘‘IRFA’’) in
accordance with the Regulatory
Flexibility Act.80 The proposed
amendments would extend the current
interactive data voluntary reporting
program to enable mutual funds
voluntarily to submit tagged information
contained in the risk/return summary
section of their prospectuses on EDGAR
as exhibits to Form N–1A filings.
A. Reasons for, and Objectives of, the
Proposals
The purpose of the proposed
amendments is to help us evaluate the
80 5
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usefulness to investors, third-party
analysts, mutual funds, the
Commission, and the marketplace of
data tagging and, in particular, of
tagging mutual fund information. We
believe the proposed expanded
voluntary program would enable us to
further study the extent to which
interactive data tags enhance the
comparability of that data, the
usefulness of data tags for
dissemination, and our staff’s ability to
review and assess the accuracy and
adequacy of that data. The proposed
expanded voluntary program would also
help us assess the effect of interactive
data tags on the quality and
transparency of risk/return summary
information, as well as the compatibility
of data tagging with the Commission’s
disclosure requirements.
More specifically, we believe that the
proposed expanded voluntary program
would better enable us to study the
extent to which interactive data
enhances the:
• Search capability of the EDGAR
database to allow more efficient and
effective extraction and analysis of
specific data,
• Capability to perform comparisons
among mutual funds, and
• Ability to perform analyses of
mutual fund data and whether it would
reduce the resources needed for data
analysis.
In addition, we believe the proposed
expanded voluntary program would
enhance our ability to evaluate the:
• Impact on the staff’s ability to
review filings on a more timely and
efficient basis,
• Use of tagged data for risk
assessment and surveillance procedures,
and
• Compatibility of interactive data
with reporting quality, transparency,
and other Commission reporting
requirements.
hsrobinson on PROD1PC76 with PROPOSALS2
B. Legal Basis
We are proposing rule and form
amendments under the authority set
forth in Sections 5, 6, 7, 10, 19(a), and
28 of the Securities Act and Sections
6(c), 8, 24(a), 30, and 38 of the
Investment Company Act.
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D. Reporting, Recordkeeping, and Other
Compliance Requirements
The voluntary program is designed to
assist us in assessing the feasibility of
using interactive data on a broader
basis. Experience with the current
voluntary program indicates that the
cost of participating in the expanded
program, the associated burden on the
EDGAR system, and the possible effect
of the expanded voluntary program on
those entities that use the EDGAR data
would be minimal. Nevertheless, the
impact of the proposed amendments
remains somewhat speculative at this
point.
No registrant would be required to
submit tagged documents under the
proposed extension to the voluntary
program. The submission of tagged risk/
return summary information would
require a participating mutual fund to
tag the risk/return summary section of
its prospectus using the risk/return
summary taxonomy and potentially
develop extensions and to submit
exhibits to its filing. Volunteers may
also need to purchase software or retain
a consultant to assist in tagging data. For
purposes of the PRA, we estimated that
each volunteer, including small entities,
would incur approximately 43 burden
hours and $333 in software costs
annually.
E. Duplicative, Overlapping, or
Conflicting Federal Rules
We believe that there are no rules that
duplicate, overlap, or conflict with the
proposals.
C. Small Entities Subject to the
Proposed Rules
The proposed expansion of the
voluntary program may have an effect
on mutual fund participants in the
voluntary program. Under Rule 0–10
under the Investment Company Act, an
investment company is a small entity if
it, together with other investment
companies in the same group of related
investment companies, has net assets of
VerDate Aug<31>2005
$50 million or less as of the end of its
most recent fiscal year.81 We estimate
that there are approximately 131 mutual
funds that meet this definition. A
smaller subset of those issuers may
voluntarily submit tagged risk/return
summary information under the
voluntary program, but, because
submitting risk/return summary
information would be voluntary, we
anticipate that only complexes with
sufficient resources would elect to
participate. To date, no small entity
mutual funds have elected to participate
in the current voluntary program.
F. Agency Action to Minimize the Effect
on Small Entities
The Regulatory Flexibility Act directs
us to consider significant alternatives
that would accomplish the stated
objective, while minimizing any
significant adverse impact on small
entities. The purpose of the proposed
amendments is to help us evaluate the
usefulness to investors, third-party
81 17
PO 00000
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6685
analysts, mutual funds, the
Commission, and the marketplace of
data tagging and, in particular, of
tagging mutual fund information.
Submitting documents containing
tagged risk/return summary information
would be entirely voluntary. We have
considered different or simpler
procedures for small entities, including:
• The establishment of different
compliance or reporting requirements or
timetables;
• The clarification, consolidation, or
simplification of the proposed
requirements;
• The use of performance rather than
design standards; and
• Exemption from coverage.
For tagged data to provide benefits
such as ready comparability, however,
the data tagging system cannot have
alternative procedures. Similarly, in
order to achieve the benefits of
interactive data tagging, use of a single
data tagging technology is necessary. If
we determine to require data tagging in
the future, we will look to the results of
the voluntary program, including those
of the proposed expansion of the
program to risk/return summary
information, to find alternatives to
minimize any burden on small entities.
We solicit comment on how the
proposals could be modified to
minimize the effect on small entities.
G. Request for Comments
We encourage the submission of
comments with respect to any aspect of
this Initial Regulatory Flexibility
Analysis. In particular, we request
comment on the number of small
entities that would be affected by the
proposals; the existence or nature of the
potential effect of the proposals on
small entities as discussed in the
analysis; how to quantify the effect of
the proposal; and how different
procedures, if necessary, could be
provided for small entities while
remaining consistent with our goal to
assess tagged data. We ask commenters
to describe the nature of any effect and
provide empirical data and other factual
support for their views, if possible.
These comments will be considered in
preparing the Final Regulatory
Flexibility Analysis, if the proposals are
adopted, and will be placed in the same
public file as comments on the proposal.
VIII. Consideration of Impact on the
Economy
For purposes of the Small Business
Regulatory Enforcement Fairness Act of
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1996,82 a rule is ‘‘major’’ if it results or
is likely to result in:
• An annual effect on the economy of
$100 million or more;
• A major increase in costs or prices
for consumers or individual industries;
or
• Significant adverse effects on
competition, investment, or innovation.
The Commission requests comment
on the potential impact of the proposed
amendments on the U.S. economy on an
annual basis. Commenters are requested
to provide empirical data to support
their views.
IX. Statutory Authority
The Commission is proposing the rule
amendments outlined above under
Sections 5, 6, 7, 10, 19(a), and 28 of the
Securities Act [15 U.S.C. 77e, 77f, 77g,
77j, 77s(a), and 77z–3] and Sections
6(c), 8, 24(a), 30, and 38 of the
Investment Company Act [15 U.S.C.
80a–6(c), 80a–8, 80a–24(a), 80a–29, and
80a–37].
List of Subjects
17 CFR Parts 232 and 239
Reporting and recordkeeping
requirements, Securities.
17 CFR Parts 270 and 274
Investment Companies, Reporting and
recordkeeping requirements, Securities.
Text of Proposed Rule and Form
Amendments
For the reasons set forth above, the
Commission proposes to amend title 17,
Chapter II of the Code of Federal
Regulations as follows:
PART 232—REGULATION S–T—
GENERAL RULES AND REGULATIONS
FOR ELECTRONIC FILINGS
1. The general authority citation for
Part 232 is revised to read as follows:
Authority: 15 U.S.C. 77f, 77g, 77h, 77j,
77s(a), 77z–3, 77sss(a), 78c(b), 78l, 78m, 78n,
78o(d), 78w(a), 78ll, 80a–6(c), 80a–8, 80a–29,
80a–30, 80a–37, and 7201 et seq.; and 18
U.S.C. 1350.
hsrobinson on PROD1PC76 with PROPOSALS2
*
*
*
*
*
2. Amend § 232.401 by:
a. Revising the first sentence of
paragraph (a);
b. Removing the word ‘‘or’’ at the end
of paragraph (b)(1)(ii);
c. Removing the period at the end of
paragraph (b)(1)(iii) and adding in its
place ‘‘; or’’;
d. Adding new paragraph (b)(1)(iv);
e. Revising paragraph (d)(1)(i); and
f. Removing the term ‘‘or 20–F’’ and
in its place adding ‘‘, 20–F or N–1A
82 Pub.
L. 104–121, Title II, 110 Stat. 857 (1996).
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(§§ 239.15A and 274.11A of this
chapter)’’ in paragraph (d)(2)(i).
The addition and revisions read as
follows:
PART 239—FORMS PRESCRIBED
UNDER THE SECURITIES ACT OF 1933
§ 232.401 XBRL-Related Document
Submissions.
Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s,
77z–2, 77z–3, 77sss, 78c, 78l, 78m, 78n,
78o(d), 78u–5, 78w(a), 78ll, 78mm, 80a–2(a),
80a–3, 80a–8, 80a–9, 80a–10, 80a–13, 80a–
24, 80a–26, 80a–29, 80a–30, and 80a–37,
unless otherwise noted.
(a) An electronic filer that participates
in the voluntary XBRL (eXtensible
Business Reporting Language) program
may submit XBRL-Related Documents
(§ 232.11) in electronic format as an
exhibit to: The filing (other than a Form
N–1A filing) to which the XBRL-Related
Documents relate; an amendment to
such filing, but, in the case of a Form
N–1A filing, an amendment made only
after the effective date of the Form N–
1A filing to which the XBRL-Related
Documents relate; or if the electronic
filer is eligible to file a Form 8–K
(§ 249.308 of this chapter) or a Form 6–
K (§ 249.306 of this chapter), a Form 8–
K or a Form 6–K, as applicable, that
references the filing to which the XBRLRelated Documents relate if such Form
8–K or Form 6–K is submitted no earlier
than the date of that filing. * * *
(b) * * *
(1) * * *
(iv) The risk/return summary
information set forth in Items 2 and 3 of
Form N–1A (§ 239.15A and § 274.11A of
this chapter).
*
*
*
*
*
(d) * * *
(1) * * *
(i) That the financial information
contained in the XBRL-Related
Documents is ‘‘unaudited’’ or
‘‘unreviewed,’’ as applicable (but only if
the mandatory content contained in the
XBRL-Related Documents contains
information other than risk/return
summary information submitted under
paragraph (b)(1)(iv) of this section);
*
*
*
*
*
3. Revise § 232.402(a)(1) to read as set
forth below, and amend paragraph (b)
by removing each reference to ‘‘Item
401’’ and adding in its place ‘‘Rule
401’’.
§ 232.402 Liability for XBRL-Related
Documents.
(a) * * *
(1) Are not deemed filed for purposes
of section 11 of the Securities Act (15
U.S.C 77k), section 18 of the Exchange
Act (15 U.S.C. 78r), or section 34(b) of
the Investment Company Act (15 U.S.C.
80a–33(b)), or otherwise subject to the
liabilities of these sections, and are not
part of any registration statement to
which they relate;
*
*
*
*
*
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4. The general authority citation for
Part 239 is revised to read as follows:
*
*
*
*
*
PART 270—GENERAL RULES AND
REGULATIONS, INVESTMENT
COMPANY ACT OF 1940
5. The authority citation for Part 270
continues to read in part as follows:
Authority: 15 U.S.C. 80a–1 et seq., 80a–
34(d), 80a–37, and 80a–39, unless otherwise
noted.
*
*
*
*
*
6. Revise § 270.8b–33 to read as
follows:
§ 270.8b–33
XBRL-Related Documents.
A registrant that participates in the
voluntary XBRL (eXtensible Business
Reporting Language) program may
submit, in electronic format as an
exhibit to a filing on Form N–1A
(§§ 239.15A and 274.11A of this
chapter), Form N–CSR (§§ 249.331 and
274.128 of this chapter), or Form N–Q
(§§ 249.332 and 274.130 of this chapter)
to which they relate, XBRL-Related
Documents (§ 232.11 of this chapter). A
registrant that submits XBRL-Related
Documents as an exhibit to a form must
name each XBRL-Related Document
‘‘EX 100’’ as specified in the EDGAR
Filer Manual and submit the XBRLRelated Documents in such a manner
that will permit the information for each
series and class of an investment
company registrant and each contract of
an insurance company separate account
to be separately identified. A registrant
may submit such exhibit with, or in an
amendment to, the Form N–CSR or
Form N–Q filing to which it relates, or
in an amendment to the Form N–1A
filing to which it relates, in accordance
with rule 401 of Regulation S–T
(§ 232.401).
PART 274—FORMS PRESCRIBED
UNDER THE INVESTMENT COMPANY
ACT OF 1940
7. The authority citation for Part 274
continues to read in part as follows:
Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s,
78c(b), 78l, 78m, 78n, 78o(d), 80a–8, 80a–24,
80a–26, and 80a–29, unless otherwise noted.
*
*
*
*
*
8. Amend General Instruction B.4.(b)
of Form N–1A (referenced in §§ 239.15A
and 274.11A) by revising ‘‘8b–32 [17
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CFR 270.8b–1–270.8b–32]’’ to read ‘‘8b–
33 [17 CFR 270.8b–1–270.8b–33]’’.
Note: The text of Form N–1A will not
appear in the Code of Federal Regulations.
Dated: February 6, 2007.
By the Commission.
Nancy M. Morris,
Secretary.
[FR Doc. E7–2254 Filed 2–9–07; 8:45 am]
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]]>Agencies
[Federal Register Volume 72, Number 28 (Monday, February 12, 2007)]
[Proposed Rules]
[Pages 6676-6687]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-2254]
[[Page 6675]]
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Part III
Securities and Exchange Commission
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17 CFR Parts 232, 239, 270, and 274
Extension of Interactive Data Voluntary Reporting Program on the EDGAR
System To Include Mutual Fund Risk/Return Summary Information; Proposed
Rule
Federal Register / Vol. 72, No. 28 / Monday, February 12, 2007 /
Proposed Rules
[[Page 6676]]
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SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 232, 239, 270 and 274
[Release Nos. 33-8781, IC-27697; File Number S7-05-07]
RIN 3235-AJ59
Extension of Interactive Data Voluntary Reporting Program on the
EDGAR System To Include Mutual Fund Risk/Return Summary Information
AGENCY: Securities and Exchange Commission.
ACTION: Proposed rule.
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SUMMARY: We are proposing rule amendments to extend the current
interactive data voluntary reporting program to enable mutual funds
voluntarily to submit supplemental tagged information contained in the
risk/return summary section of their prospectuses. A mutual fund
choosing to tag its risk/return summary information also would continue
to file this information in HTML or ASCII format, as currently
required. This extension of the voluntary program is intended to help
us evaluate the usefulness to investors, third-party analysts,
registrants, the Commission, and the marketplace of data tagging and,
in particular, of tagging mutual fund information.
DATES: Comments should be submitted on or before March 14, 2007.
ADDRESSES: Comments may be submitted by any of the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://
www.sec.gov/rules/proposed.shtml);
Send an e-mail to rule-comments@sec.gov. Please include
File Number S7-05-07 on the subject line; or
Use the Federal eRulemaking Portal (https://
www.regulations.gov). Follow the instructions for submitting comments.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number S7-05-07. This file number
should be included on the subject line if e-mail is used. To help us
process and review your comments more efficiently, please use only one
method. The Commission will post all comments on the Commission's
Internet Web site (https://www.sec.gov/rules/proposed.shtml). Comments
are also available for public inspection and copying in the
Commission's Public Reference Room, 100 F Street, NE., Washington, DC
20549. All comments received will be posted without change; we do not
edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly.
FOR FURTHER INFORMATION CONTACT: If you have questions about the
proposed rules, please contact Alberto H. Zapata, Senior Counsel,
Christopher Kaiser, Branch Chief, or Brent J. Fields, Assistant
Director, Office of Disclosure Regulation, Division of Investment
Management, at (202) 551-6784, Securities and Exchange Commission, 100
F Street, NE., Washington, DC 20549-5720. If you have questions about
the EDGAR system, please contact Richard Heroux, EDGAR Program Manager,
at (202) 551-8800, in the Office of Information Technology.
SUPPLEMENTARY INFORMATION: The Securities and Exchange Commission
(``Commission'') is proposing for comment amendments to rules 401 \1\
and 402 \2\ of Regulation S-T \3\, rule 8b-33 \4\ under the Investment
Company Act of 1940 (``Investment Company Act''), and Form N-1A \5\
under the Investment Company Act and the Securities Act of 1933
(``Securities Act'').
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\1\ 17 CFR 232.401.
\2\ 17 CFR 232.402.
\3\ 17 CFR 232.10 et seq.
\4\ 17 CFR 270.8b-33.
\5\ 17 CFR 239.15A and 274.11A.
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Table of Contents
I. Background
A. Interactive Data and XBRL
B. The Voluntary Program
C. Tagging of Mutual Fund Information
II. Discussion
A. Expansion of Voluntary Program Content
B. Required Disclosure
C. Liability Issues
D. The Risk/Return Summary Taxonomy and Software Tools
E. Effective Date
III. General Request For Comments
IV. Paperwork Reduction Act
V. Cost/Benefit Analysis
VI. Promotion of Efficiency, Competition, and Capital Formation
VII. Initial Regulatory Flexibility Analysis
VIII. Consideration of Impact on the Economy
IX. Statutory Authority
Text of Proposed Rule and Form Amendments
I. Background
A. Interactive Data and XBRL
For the past several years, the Commission has been evaluating the
expanded use of interactive data tagging as a tool to improve the
timeliness and accessibility of the information contained in filings
with the Commission under the federal securities laws.\6\ Data tagging
uses standard definitions (or data tags) to translate text-based
information into data that is interactive, that is, data that can be
retrieved, searched, and analyzed through automated means.\7\
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\6\ See SEC to Rebuild Public Disclosure System to Make It
'Interactive', Securities and Exchange Commission Press Release,
Sept. 25, 2006, available at: https://www.sec.gov/news/press/2006/
2006-158.htm (Commission awards contracts totaling $54 million to
transform public company disclosure system to create a dynamic real-
time search tool with interactive capabilities) (``September 25
Press Release''); Commission Announces Interactive Data Roundtable
on New Software to Make Better Information a Reality, Securities and
Exchange Commission Press Release, Sept. 25, 2006, available at:
https://www.sec.gov/news/press/2006/2006-160.htm; Commission
Announces Roundtable Series Giving Investors and Analysts Better
Financial Data via Internet, Securities and Exchange Commission
Press Release, Mar. 9, 2006, available at: https://www.sec.gov/news/
press/2006-34.htm; SEC Offers Incentives for Companies to File
Financial Reports with Interactive Data, Securities and Exchange
Commission Press Release, Jan. 11 2006, available at: https://
www.sec.gov/news/press/2006-7.htm; SEC Announces Initiative to
Assess Benefits of Tagged Data in Commission Filings, Securities and
Exchange Commission Press Release, July 22, 2004, available at:
https://www.sec.gov/news/press/2004-97.htm.
\7\ The Commission's Electronic Data Gathering, Analysis, and
Retrieval System (``EDGAR'') has allowed certain tagged data since
its inception, for example, by using Standard Generalized Markup
Language and Extensible Markup Language (``XML'') to tag form-
specific information (such as the form type, central index key, and
file number) that accompanies electronic documents submitted on
EDGAR. More recently, EDGAR has employed HyperText Markup Language
(``HTML'') to format documents and made limited use of XML related
to financial and business information contained within certain EDGAR
submissions.
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Interactive data has enormous potential to enable investors and
other market participants to analyze and compare data from different
sources more efficiently and effectively and to exchange information
across various software platforms automatically. Through interactive
data, static text-based information can be transformed into dynamic
databases that can readily be searched and analyzed, facilitating the
comparison of information across companies, reporting periods, and
industries. Tagged information can help investors, analysts, and other
users to mine the wealth of information contained in detailed paper
disclosure documents, providing users with the ability to access
precisely the
[[Page 6677]]
information in which they are interested and to analyze that data.
Interactive data also provides a significant opportunity to
automate information processing throughout the business and reporting
cycle, with the potential to increase accuracy and reduce costs. By
ensuring that information is classified properly at each step of the
cycle, and minimizing the need for human intervention and, therefore,
human error, interactive data may improve the quality of information at
decreased cost. These benefits can begin at the time of an initial
transaction and carry forward to the point of disclosure in a
Commission filing and, ultimately, to the use of the disclosed
information by investors and other market participants. At each step in
the process, interactive data offers the potential to replace manual
reentry of information with automated processing of previously tagged
data.
Tags are standardized through the development of taxonomies, which
are essentially data dictionaries that describe individual items of
information and mathematical and definitional relationships among the
items. As tagging has continued to gain prominence in recent years,
there has been substantial progress in developing data tagging
taxonomies related to a language for the electronic communication of
business and financial data known as eXtensible Business Reporting
Language (``XBRL'').\8\ XBRL was developed as an open source
specification that describes a standard format for tagging financial
and other information to facilitate the preparation, publication, and
analysis of that information by software applications.\9\ XBRL was
developed and continues to be supported by XBRL International, a
collaborative consortium of approximately 450 organizations
representing many perspectives in the financial reporting
community.\10\ Organizations in the consortium include issuers, public
accounting firms, software companies, filing agents, data aggregators,
stock exchanges, regulators, financial services companies, and industry
associations.\11\ XBRL International and its related entities have been
developing standard taxonomies that are designed to classify and define
financial information in accordance with U.S. Generally Accepted
Accounting Principles (``GAAP'') and Commission regulations. The
Commission recently announced that it is contracting with XBRL US,
Inc., the U.S. based arm of XBRL International, to help complete the
writing of XBRL taxonomies that would enable companies in all
industries to file financial reports with the Commission using
XBRL.\12\
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\8\ See Edward Hand, ``XBRL: The Future of Business Reporting,''
NETWORK COMPUTING, Aug. 31, 2006, available at: https://
www.networkcomputing.com/
showArticle.jhtml?articleID=192202551&pgno=1.
\9\ ``Open Source'' means that the software can be used by
anyone without charge and is being developed in an open and
collaborative setting. For a more detailed discussion about XBRL,
see ``How XBRL Works'' on the XBRL International Web site available
at: https://www.xbrl.org/HowXBRLWorks/.
\10\ See ``About the Organisation'' page and subpages on the
XBRL International Web site, available at: https://www.xbrl.org/
AboutTheOrganisation/.
\11\ See ``Member Organisations'' page and subpages on the XBRL
International Web site, available at: https://xbrl.org/
viewmembers.aspx.
\12\ September 25 Press Release, supra note 6.
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B. The Voluntary Program
As part of our evaluation of the potential of interactive data
tagging technology, the Commission adopted rules in 2005 instituting a
program that permits filers, on a voluntary basis, to submit specified,
supplemental disclosure tagged in XBRL format as an exhibit to certain
filings on the Commission's Electronic Data Gathering, Analysis and
Retrieval System (``EDGAR'').\13\ The Commission adopted the voluntary
program to help evaluate the usefulness of data tagging and XBRL to
registrants, investors, the Commission, and the marketplace.\14\ In
2006, the Commission initiated an interactive data test program, in
which companies, including investment companies, voluntarily agree to
furnish financial data in XBRL format for at least one year and provide
feedback on their experiences, including the costs and benefits.\15\
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\13\ Securities Act Release No. 8529 (Feb. 3, 2005) [70 FR 6556
(Feb. 8, 2005)] (``XBRL Adopting Release''). See also Securities Act
Release No. 8496 (Sept. 27, 2004) [69 FR 59094 (Oct. 1, 2004)]
(``XBRL Proposing Release''); Securities Act Release No. 8497 (Sept.
27, 2004) [69 FR 59111 (Oct. 1, 2004)] (concept release soliciting
comment on data tagging).
\14\ XBRL Adopting Release, supra note 13, 70 FR at 6556.
\15\ More Companies Join SEC's Program to Use Interactive Data
for Financial Statements, Securities and Exchange Commission Press
Release, June 20, 2006, available at: https://www.sec.gov/news/press/
2006/2006-99.htm; 17 Companies Join SEC Pilot Program to Use
``Interactive Data'' in Financial Reports, Securities and Exchange
Commission Press Release, Mar. 29, 2006, available at: https://
www.sec.gov/news/press/2006-43.htm; SEC Offers Incentives for
Companies to File Financial Reports with Interactive Data,
Securities and Exchange Commission Press Release, Jan. 11, 2006,
available at: https://www.sec.gov/news/press/2006-7.htm. For more
information about the Commission's interactive data initiatives, see
the Commission Web page ``Spotlight On: Interactive Data and XBRL
Initiatives'' available at: https://www.sec.gov/spotlight/xbrl.htm.
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Under the voluntary program, filers may submit financial
information using XBRL as an exhibit to the filing to which it relates,
an amendment to such filing, or, if the filer is eligible, to a filing
on Form 8-K \16\ or Form 6-K.\17\ The XBRL exhibits submitted in the
voluntary program are supplemental submissions that do not replace the
required American Standard Code for Information Interchange (``ASCII'')
or Hypertext Markup Language (``HTML'') versions of the financial
information they contain.\18\ The data currently permitted in XBRL
exhibits is limited to financial information.
The voluntary program permits any registrant to participate merely
by submitting an XBRL exhibit in the required manner. XBRL exhibits are
publicly available but are considered furnished rather than filed.\19\
Although XBRL exhibits are required to accurately reflect the
information that appears in the corresponding part of the official
filing, the purpose of submitting XBRL data is to test the related
format and technology and, as a result, investors and others should
continue to rely only on the official version of a filing and not on
the XBRL exhibit in making investment decisions. We have included
cautionary language to this effect on the Commission Web site.\20\
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\16\ 17 CFR 249.308.
\17\ 17 CFR 249.306.
\18\ See EDGAR Filer Manual, Volume II, Section 5.1 (Version 3,
Feb. 2006).
\19\ See infra note 57 and accompanying text.
\20\ See ``XBRL Data Submitted in the XBRL Voluntary Program on
EDGAR'' page on the Commission Web site, available at: https://
www.sec.gov/Archives/edgar/xbrl.html.
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C. Tagging of Mutual Fund Information
The current voluntary program extends to investment companies,
including open-end management investment companies (``mutual
funds'').\21\ Investment companies may presently submit XBRL exhibits
only to Form N-CSR,\22\ the semi-annual filing to submit certified
shareholder reports, or to Form N-Q,\23\ the quarterly report of
portfolio holdings.\24\
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\21\ See SEC XBRL Voluntary Program Extends to Investment
Companies, Securities and Exchange Commission Press Release, Aug. 8,
2005, available at: https://www.sec.gov/news/press/2005-112.htm.
\22\ 17 CFR 249.331 and 274.128.
\23\ 17 CFR 249.332 and 274.130.
\24\ Voluntary participants must use the standard U.S. GAAP
investment management taxonomy (Version 2.1) approved by XBRL
International. See EDGAR Filer Manual, Volume II, Section 5.2.4.1
(Version 3, Feb. 2006); ``Frequently Asked Questions about the XBRL
Voluntary Filing Program'' page on the Commission Web site,
available at: https://www.sec.gov/info/edgar/xbrlfaq032105.htm.
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As part of our evaluation of data tagging, the Commission held a
[[Page 6678]]
roundtable in June 2006 that focused, in part, on the role of data
tagging and interactive data in improving the quality of mutual fund
disclosures. Representatives from investor groups, the mutual fund
industry, analysts, and others discussed how the Commission could
leverage the power of interactive data and other technology to provide
mutual fund investors with better information.\25\
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\25\ See Transcript of June 12 Interactive Data Roundtable, June
12, 2006, available at: https://www.sec.gov/spotlight/xbrl/
xbrlofficialtranscript0606.pdf (``June 12 Roundtable Transcript'');
Webcast Archive of June 12 Interactive Data Roundtable, June 12,
2006, available at: https://www.connectlive.com/events/secxbrl/. See
also Agenda of October 3 Interactive Roundtable, Oct. 3, 2006
available at: https://www.sec.gov/spotlight/xbrl/xbrlroundagenda-
100306.htm; Webcast Archive of October 3 Interactive Data
Roundtable, Oct. 3, 2006, available at: https://www.connectlive.com/
events/secinteractivedata100306/ (``October 3 Roundtable Webcast'')
(second Commission interactive data roundtable, focusing on new
software using interactive data to provide investor-friendly
research tools).
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Significant discussion at the June roundtable concerned the
importance of providing mutual fund investors with better, more user-
friendly access to key information, such as information about
investment objectives and strategies, risks, and costs.\26\ This key
information is included in the mutual fund prospectus,\27\ but it can
be difficult for investors to extract this key information from lengthy
prospectuses, which often cover multiple funds and contain a wealth of
other information. Much of this information is required to be included
in the risk/return summary section of the prospectus,\28\ and tagging
this information could provide powerful tools for investors.\29\
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\26\ See Barbara Roper, Director of Investor Protection,
Consumer Federation of America, June 12 Roundtable Transcript, supra
note 25, at 20 & 22. See also Paul G. Haaga, Jr., Executive Vice
President, Capital Research and Management Company, id. at 90;
William D. Lutz, Ph.D., Professor of English, Rutgers University,
id. at 88; Elisse B. Walter, Senior Executive Vice President, NASD,
id. at 40-41.
\27\ Items 2 and 3 of Form N-1A [17 CFR 239.15A and 274.11A]
(risk/return summary section of the prospectus).
\28\ Id.
\29\ See Chairman Christopher Cox, June 12 Roundtable
Transcript, supra note 25, at 8 (``Interactive data, the tagging of
these key facts [in the prospectus] so that they can easily be
identified and extracted[,] offers the possibility of dramatic
improvement over traditional disclosure delivery for mutual fund
investors.''); Paul Schott Stevens, President and Chief Executive
Officer, Investment Company Institute, id. at 72 (``XBRL tagging can
help turn the Risk/Return Summary into an even more powerful tool
than the Commission envisioned when it first adopted it in 1998 as a
way to help investors compare one fund with another through the
standardization of the information and the format in which it's
presented.'').
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We believe that exploring the tagging of the information in the
risk/return summary section is an important step in our interactive
data program. With almost half of all U.S. households owning mutual
funds,\30\ typically to fund their education, retirement, and other
basic needs, improving the quality of mutual fund disclosure is
important to millions of Americans. Tagging of key mutual fund
information could help to streamline the delivery of mutual fund
information and provide investors, analysts, and others with improved
tools to compare funds based upon, among other things, costs,
investment objectives, strategies, and risks. In addition, the risk/
return summary information is largely narrative in format, and
exploring the viability of tagging this information will provide us
with valuable insights as we assess the potential for tagging other
primarily narrative information.
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\30\ 2006 Investment Company Fact Book, at 47, Investment
Company Institute (2006), available at: https://www.icifactbook.org/
pdf/2006_factbook.pdf.
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As noted above, XBRL International has approved an investment
management XBRL U.S. GAAP financial reporting taxonomy.\31\ That
taxonomy generally does not extend to the information in the risk/
return summary section. In March 2006, the Investment Company Institute
(the ``ICI'') \32\ announced an initiative to create a taxonomy to
cover the risk/return summary information in the prospectus.\33\ The
ICI recently released its draft risk/return summary taxonomy and
announced that it would provide a 45-day period for public review and
comment.\34\ We are proposing amendments to the voluntary program that
would, if adopted, permit mutual funds to tag the information in the
risk/return summary section of their prospectuses using the taxonomy
developed by the ICI.
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\31\ Supra note 24.
\32\ The ICI is a national association of the American
investment company industry.
\33\ Stevens Calls for Greater Use of Internet; Announces
Initiative to Develop XBRL Data Tagging Technology, ICI Press
Release, Mar. 20, 2006, available at: https://ici.org/statements/nr/
06_news_mfimc.html#TopOfPage; Remarks of Paul Schott Stevens,
President and Chief Executive Officer, Investment Company Institute,
at the Mutual Funds and Investment Management Conference, Mar. 20,
2006, available at: https://ici.org/statements/remarks/06_mfimc_
stevens_spch.html#TopOfPage; Statement of the Investment Company
Institute at the June 12, 2006 Interactive Data Roundtable,
available at: https://www.sec.gov/news/press/4-515/ici050906.pdf.
\34\ ICI Unveils Draft XBRL Taxonomy For Public Review,
Investment Company Institute Press Release, Jan. 4, 2007, available
at: https://www.ici.org/home/07_news_xbrl_txnmy.html#TopOfPage.
The taxonomy, as well as instructions for commenting on the
taxonomy, are available at https://members.ici.org/xbrl. See also
Statements of SEC Chairman Christopher Cox and Division of
Investment Management Director Andrew Donohue Regarding the
Investment Company Institute's Mutual Fund Interactive Data
Taxonomy, Securities and Exchange Commission Press Release, Jan. 4,
2007, available at: https://www.sec.gov/news/press/2007/2007-2.htm.
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II. Discussion
As part of our ongoing effort to evaluate the usefulness of data
tagging, we are proposing amendments to extend the voluntary program to
enable mutual funds to submit exhibits containing tagged risk/return
summary information attached to EDGAR filings.\35\ We expect to permit
any mutual fund to participate, without pre-approval, merely by
submitting the risk/return summary information in the required manner.
As we continue to gain experience with interactive data, we will
evaluate the benefits of data tagging to investors, analysts, and
others. If, in the future, we consider requiring filers to tag the
risk/return summary information, that would be the subject of a
separate rulemaking proposal.
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\35\ The proposed amendments, if adopted, would not alter the
voluntary program as it applies to the furnishing of XBRL
information by non-investment companies.
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A. Expansion of Voluntary Program Content
Currently, the XBRL data furnished under the voluntary program must
consist of at least one item from a list of enumerated mandatory
content (``Mandatory Content''), including financial statements,
earnings information, and, for registered management investment
companies, financial highlights or condensed financial information.\36\
This may be accompanied by one or more related items from a list of
optional content, including (1) audit opinions; (2) interim review
reports; (3) reports of management on the financial statements; (4)
certifications; (5) management's discussion and analysis of financial
condition and results of operations; (6) management's discussion and
analysis or plan of operation; (7) operating and financial review and
prospects; and (8) management's discussion of fund performance.\37\
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\36\ Rule 401(b)(1) of Regulation S-T [17 CFR 232.401(b)(1)].
\37\ Rule 401(b)(2) of Regulation S-T [17 CFR 232.401(b)(2)].
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We propose to add the risk/return summary information set forth in
Items 2 and 3 of Form N-1A as a new item of Mandatory Content.\38\ As
with all tagged exhibits under the voluntary program, submissions of
tagged exhibits containing risk/return summary
[[Page 6679]]
information would be supplemental and would not replace the required
HTML or ASCII version of the information called for in Form N-1A.
Volunteers would be required to file their complete official
registration statements to ensure that all investors have access to
information upon which to base their investment decisions.\39\ While
tagged exhibits would be required to reflect the same information
contained in the risk/return summary section of the related official
Form N-1A filing, we emphasize that investors and others should
continue to rely on the official filing rather than the tagged exhibit.
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\38\ Proposed rule 401(b)(1)(iv).
\39\ Consistent with the current voluntary program, once
received by the Commission, the official filing and the tagged risk/
return summary information submitted as exhibits to the official
filing would undergo technical validations. The official filing
would continue to follow the normal process for receipt and
acceptance. That is, it would be suspended if it fails its
validation criteria. If the official filing meets its validation
criteria, but any tagged risk/return summary document submitted as
an exhibit to the official filing fails its own validation criteria,
all tagged documents would be removed and the official filing would
be accepted and disseminated without the tagged documents. The
volunteer would be notified of the submission problem with the
tagged documents. If the official filing failed to meet the required
receipt and acceptance process and was suspended for any reason, any
tagged risk/return summary information submitted with the official
filing would also be suspended.
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Any mutual fund submitting tagged risk/return summary information
would be required to include this information as an exhibit to an
amendment to a previous filing on Form N-1A.\40\ Form N-1A filings,
which contain mutual fund registration statements (or amendments
thereto), differ from the other filings used in the voluntary program
in that they are often subject to revision prior to effectiveness. For
this reason, the proposed rules would not permit the submission of a
tagged exhibit that is related to a registration statement or an
amendment that is not yet effective. More specifically, the proposed
rules would provide that a tagged exhibit to a Form N-1A filing,
whether the filing is an initial registration statement or an amendment
thereto, could be submitted only as an amendment to the filing to which
the tagged exhibit relates and only after the effective date of such
filing.\41\ An exhibit containing tagged risk/return summary
information could be submitted under rule 485(b) of the Securities Act,
which provides for immediate effectiveness of amendments filed to make
non-material changes and for certain other purposes, and would only
need to contain the new exhibit, a facing page, a signature page, a
cover letter explaining the nature of the filing, and a revised exhibit
index. Filers submitting tagged risk/return summary information should
not include the ICI taxonomy in their submissions as this taxonomy will
be stored as a part of the EDGAR system.
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\40\ See proposed rule 401(a) of Regulation S-T; proposed rule
8b-33. A mutual fund submitting tagged risk/return summary
information as an exhibit to Form N-1A would be required to name
each document ``EX-100'' as specified in the EDGAR Filer Manual.
Proposed rule 8b-33. We also propose a technical amendment to
General Instruction B.4.(b) of Form N-1A to add rule 8b-33 to the
list of general provisions that apply to the filing of registration
statements on Form N-1A.
\41\ Proposed rule 401(a); see also proposed rule 8b-33.
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Similar to the current voluntary program, volunteers would be free
to submit tagged risk/return summary information regularly or from time
to time, and volunteers could stop and start as they choose.
Participating in the voluntary program would not create a continuing
obligation for a volunteer to submit tagged risk/return summary
information as an exhibit to a subsequent post-effective amendment. A
volunteer would, however, be required to amend any tagged risk/return
summary exhibits that do not comply with the content and format
requirements of rule 401, e.g., because they do not reflect the same
information as the corresponding official filing.\42\
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\42\ XBRL Adopting Release, supra note 13, 70 FR at 6559 n. 48.
See rule 401(c)(1) (requires tagged exhibits to reflect the same
information as corresponding official filing).
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We also propose amendments that will require investment companies
to tag information in a manner that will permit the information for
each class \43\ to be separately identified.\44\ Currently, rule 8b-33
under the Investment Company Act requires that investment companies
participating in the voluntary program submit tagged documents in a
manner that will permit the information for each series of an
investment company registrant \45\ and each contract of an insurance
company separate account \46\ to be separately identified.\47\ We
propose to amend this rule to require that investment companies submit
tagged documents in a manner that will permit the information for each
class to be separately identified because expense and performance
information in the risk/return summary is class-specific.\48\
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\43\ A mutual fund may issue more than one class of shares that
represent interests in the same portfolio of securities with each
class, among other things, having a different arrangement for
shareholder services or the distribution of securities, or both.
Rule 18f-3 under the Investment Company Act [17 CFR 270.18f-3].
\44\ Proposed rule 8b-33.
\45\ A mutual fund may issue multiple ``series'' of shares, each
of which is preferred over all other series in respect of assets
specifically allocated to that series. Rule 18f-2 under the
Investment Company Act [17 CFR 270.18f-2]. Each series is, in
effect, a separate investment portfolio.
\46\ Variable annuity contracts and variable life insurance
contracts are issued through insurance company separate accounts.
\47\ Rule 8b-33 under the Investment Company Act [17 CFR 270.8b-
33].
\48\ We have previously indicated that rule 8b-33 would require
investment companies to submit tagged XBRL documents separately for
each series of an investment company registrant. See XBRL Proposing
Release, supra note 13, 69 FR at 59097 n. 49. Under proposed amended
rule 8b-33, a mutual fund would not be required to submit tagged
risk/return summary information in separate documents for each
series or class, provided that the information is tagged in such a
manner that the information may be separately identified by series
and class.
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The amendments we are proposing also would provide mutual funds
with an additional option to submit tagged financial highlights or
condensed financial information. Currently, mutual funds may submit
this information as an exhibit to Form N-CSR.\49\ The proposals, if
adopted, also would permit mutual funds to submit their financial
highlights or condensed financial information as a tagged exhibit to an
amendment to the Form N-1A filing to which the information relates.\50\
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\49\ Rule 401(a) and (b)(1)(iii) of Regulation S-T [17 CFR
401(a) and (b)(1)(iii)] (permitting financial highlights or
condensed financial information set forth in Item 8(a) of Form N-1A
to be submitted as Mandatory Content); rule 8b-33. Mutual funds must
include their financial highlights or condensed financial
information in every annual and semi-annual report transmitted to
shareholders. Items 22(b)(2) and (c)(2) of Form N-1A (requiring
annual or semi-annual reports to include the information required by
Item 8(a) of Form N-1A). Mutual funds must include a copy of their
annual or semi-annual report transmitted to shareholders with their
Form N- CSR filed with the Commission. Item 1 of Form N-CSR.
\50\ Proposed rule 8b-33 (permitting tagged exhibits under the
voluntary program to be submitted on Form N-1A); Item 8(a) of Form
N-1A (requiring mutual funds to provide financial highlights
information); rule 401(a) and (b)(1)(iii) of regulation S-T
(permitting information set forth in Item 8(a) of Form N-1A as
Mandatory Content under the voluntary program).
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We request comment on the proposed expansion of the voluntary
program to include risk/return summary information.
Is it beneficial to tag mutual fund risk/return summary
information? Is this portion of the mutual fund prospectus an
appropriate place to begin evaluating the tagging of non-financial
information? Is there other mutual fund information that should be
included in the voluntary program?
What effect would tagged data have on investors',
analysts', and other users' ability to analyze mutual funds' risk/
return summary disclosure? Would tagged risk/return summary information
have an effect on the usefulness of disclosure in Commission filings?
We are not proposing to amend that portion of rule
401(b)(1) that currently
[[Page 6680]]
requires that Mandatory Content ``consist of a complete set of
information for all periods presented in the corresponding official
EDGAR filing.'' Should mutual funds that submit tagged risk/return
summary information be required to tag all of the information in the
risk/return summary section of the corresponding official filing or
should they be permitted to tag some, but not all, of the information?
For example, if a fund's official filing contains information for more
than one series or class, should the fund be permitted to submit tagged
risk/return summary information for fewer than all of the series and
classes? As another example, should a mutual fund be permitted to tag
discrete portions of the risk/return summary information, such as cost
and performance information, while not tagging others, such as
narrative information?
Should mutual funds be permitted to submit tagged risk/
return information related to registration statements or post-effective
amendments that are not yet effective? Would this raise any liability
issues? If mutual funds are permitted to submit tagged risk/return
summary information prior to effectiveness, what safeguards would be
appropriate? For example, should funds be required to submit revised
tagged documents if there are any changes (or any material changes) to
the risk/return summary disclosure in the effective registration
statement or amendment and/or should there be additional required
disclosure to specifically caution investors and others that the
information may differ from that in the effective filing?
The proposed amendments would not create a continuing
obligation for a volunteer to submit tagged risk/return summary
information as an exhibit to a subsequent post-effective amendment.
When a mutual fund that has submitted tagged risk/return summary
information amends its registration statement, should we require the
fund to submit updated tagged risk/return summary information? Should
it depend on the materiality of the amendments? How would a requirement
to update tagged exhibits affect participation in the voluntary
program? If we do not impose a continuing obligation to update tagged
exhibits, should we require additional disclosure or other safeguards?
Will the proposed amendment to rule 8b-33, providing that
investment companies must tag information in a manner that will permit
the information for each class to be separately identified, raise any
issues with respect to any investment company information that may be
tagged under the voluntary program? Should we specify that only risk/
return summary information must be tagged in a manner that will permit
the information for each class to be separately identified? Will the
risk/return summary taxonomy in its current state of development permit
the information for each series and class to be separately identified?
If not, how should it be modified to permit this?
Should mutual funds be required to submit separate tagged
risk/return summary exhibits for each series or class? Instead, should
they be permitted to submit exhibits that combine multiple series or
classes of the same registrant, provided that the information is tagged
in such a manner that the information may be separately identified by
series and class?
We plan to permit all filers on Form N-1A to submit
documents containing tagged risk/return summary information as exhibits
to their official Form N-1A filings so long as they comply with the
requirements of the voluntary program. Should we limit participation,
such as by size or type of mutual fund? If so, what should be the
criteria for participating? If so, why?
What steps can we take to encourage mutual funds to
participate in the expanded voluntary program?
B. Required Disclosure
Under the current voluntary program, any official filing with which
tagged exhibits are submitted must disclose that the purpose of
submitting the tagged exhibits is to test the related format and
technology and, as a result, investors should not rely on the exhibits
in making investment decisions.\51\ We are proposing that this
disclosure be required in the exhibit index of any Form N-1A filing
that includes a tagged exhibit.\52\
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\51\ Rule 401(d)(1)(ii) of Regulation S-T [17 CFR
232.401(d)(1)(ii)].
\52\ Proposed rule 401(d)(2)(i). Rule 483(a) of Regulation C [17
CFR 230.483(a)] requires, among other things, that a registration
statement of a registered investment company ``contain an exhibit
index, which should immediately precede the exhibits filed with such
registration statement.''
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The current voluntary program also requires any official filing
with which tagged exhibits are submitted to disclose that the
information contained in the exhibits is ``unaudited'' or
``unreviewed.'' \53\ We are proposing to require this disclosure in a
Form N-1A filing with which tagged financial highlights or condensed
financial information is submitted. We are not proposing to require
this disclosure in a Form N-1A filing when the tagged exhibits to the
filing contain only risk/return summary information because this
information is not ordinarily audited or reviewed by an independent
auditor.\54\
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\53\ Rule 401(d)(1)(i) of Regulation S-T [17 CFR
232.401(d)(1)(i)].
\54\ Proposed rule 401(d)(1)(i).
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We request comment on the proposed cautionary disclosures that
would be required to accompany the submission of tagged information
that accompanies a Form N-1A filing.
Should we require the disclosure concerning whether the
information is ``unaudited'' or ``unreviewed'' to accompany exhibits
containing tagged risk/return summary information?
Is additional or different language necessary for the
cautionary disclosures?
Is the exhibit index to a Form N-1A filing the appropriate
place for the cautionary disclosures?
C. Liability Issues
We propose to extend to tagged risk/return summary information
limited protection from liability that is similar to the protection
provided under the current voluntary program. As is the case with the
current program, we would provide this protection because liability
remains for the official filing, and the program is experimental,
contains certain safeguards, and should not unnecessarily deter
volunteers from participating.
Currently, tagged exhibits are not deemed filed for purposes of
Section 18 of the Securities Exchange Act of 1934 (``Exchange Act'')
\55\ or Section 34(b) of the Investment Company Act,\56\ or otherwise
subject to the liability of these sections.\57\ In addition, the
current rules also provide more general relief from liability under the
securities laws, including the Securities Act, the Exchange Act, the
Trust Indenture Act of 1939, and the Investment Company Act, 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.\58\
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\55\ 15 U.S.C. 78r.
\56\ 15 U.S.C. 80a-33(b).
\57\ Rule 402(a)(1) under Regulation S-T [17 CFR 232.402(a)(1)].
Further, because the tagged documents are not filed under the
Exchange Act, they are not incorporated by reference into
registration statements filed under the Securities Act or
prospectuses they contain. These protections apply regardless of
whether the documents are exhibits to a document otherwise
incorporated by reference into a filing.
\58\ Rule 402(b) of Regulation S-T [17 CFR 232.402(b)].
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Unlike the filings currently included in the voluntary program,
Form N-1A is
[[Page 6681]]
a registration form under both the Securities Act and the Investment
Company Act; and volunteers submitting tagged exhibits to that form
also could face potential registration statement liability under the
Securities Act. As a result, we propose to extend the liability
protection under the voluntary program to include Section 11 of the
Securities Act.\59\ Specifically, we propose to amend rule 402(a) to
provide that tagged exhibits are not deemed filed for purposes of
Section 11 or otherwise subject to the liabilities of that section. In
addition, we propose to amend rule 402(a) to state explicitly that
tagged exhibits are not part of any registration statement to which
they relate.\60\ We will continue to caution users on the Commission's
Web site that documents submitted under the voluntary program should
not be relied upon for making investment decisions, and users should
continue to rely on the company's official filing.\61\
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\59\ In addition, the current provisions of rule 402(a) would
apply to tagged risk/return summary information. In particular, a
tagged exhibit on Form N-1A would not be deemed incorporated by
reference into another filing, regardless of whether the tagged
exhibit is an exhibit to a document otherwise incorporated by
reference into another filing. Rule 402(a)(2) under Regulation S-T
[17 CFR 232.402(a)(2)]. All other liability and antifraud provisions
of the Securities Act, Exchange Act, and Investment Company Act
would apply. Rule 402(a)(3) under Regulation S-T [17 CFR
232.402(a)(3)]. For example, material misstatements or omissions in
a tagged submission would continue to be subject to liability under
Section 10(b) [15 U.S.C. 78j(b)] and rule 10b-5 [17 CFR 240.10b-5]
under the Exchange Act.
\60\ Section 11 of the Securities Act applies to ``any part of
the registration statement, when such part became effective.'' The
Commission takes a similar approach with unofficial PDF copies
contained in electronic submissions. See Rule 104(d) of Regulation
S-T [17 CFR 232.104(d)]. Similar to the other protections in the
current voluntary program, Section 11 liability relief, under the
proposed rules, would not extend to the information the official
filing contains.
\61\ See supra note 20.
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We do not propose to modify the provision that affords volunteers
general relief from liability under the federal securities laws to the
extent that the information in the corresponding portion of the
official EDGAR filing was not materially false or misleading.\62\ That
provision includes liability protections under the Securities Act, and
it would apply to tagged documents submitted as exhibits on Form N-1A.
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\62\ Rule 402(b). We are, however, proposing technical
amendments to rule 402(b) to replace each reference to ``Item 401''
with ``Rule 401.'' Proposed rule 402(b).
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We request comment on the proposed liability protections for tagged
risk/return summary information.
Is it necessary or appropriate to extend liability
protection to Section 11 of the Securities Act? Should we modify the
proposed liability provisions in any way?
Should the tagged risk/return summary information be
considered filed or furnished for purposes of the voluntary program?
Should the tagged risk/return summary documents be deemed not to be
part of any registration statement to which they relate?
With regard to risk/return summary submissions, are the
proposed liability provisions sufficient to protect volunteers and to
encourage participation in the voluntary program? To encourage
participation in the voluntary program, should liability protections be
increased beyond those proposed? Would investors have sufficient
protection under the proposed amendments? For the protection of
investors, should liability protections be decreased from those
proposed?
D. The Risk/Return Summary Taxonomy and Software Tools
As discussed above, the taxonomy to tag the risk/return summary
information is being developed by the Investment Company Institute. The
ICI has released the draft risk/return summary taxonomy for public
review and comment, and we expect that the ICI will submit the taxonomy
to XBRL US, Inc., for evaluation and approval in accordance with their
procedures.\63\ In light of the purpose of the voluntary program, which
is to test and evaluate tagging technology, we anticipate permitting
mutual funds to submit documents containing risk/return summary
information that is tagged using the ICI's taxonomy prior to final
approval of the taxonomy by XBRL US, Inc.
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\63\ XBRL US, Inc., represents the United States to XBRL
International. XBRL US, Inc., is responsible for organizing and
sponsoring taxonomies from the United States, including the main
accounting standards for United States business reporting.
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Commercial off-the-shelf products that provide means to view tagged
information in a rendered, or human readable, format and to compare or
analyze tagged information are available. We will assess whether to
provide such software tools on our Web site for use with risk/return
summary information. For example, the Commission Web site currently
provides access to a prototype XBRL Web application that converts
tagged data received in the current voluntary program into rendered
format.\64\ If we do provide rendering or analysis tools, we intend to
include appropriate cautionary language to the effect that investors
should rely only on the information in the official version of a filing
and not on the tagged documents submitted as part of the voluntary
program in making investment decisions. While we may decide to proceed
with the expansion of the voluntary program without providing rendering
or analysis tools, we will continue to evaluate the use of such tools
to aid the investing public.
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\64\ See ``Interactive Financial Report Viewer--Preview
Release'' Web page on the Commission Web site, available at: https://
www.sec.gov/spotlight/xbrl/xbrlwebapp.htm
_____________________________________-
We request comment on the proposed use of the ICI's risk/return
summary taxonomy and the need for the development of rendering and
other tools.
Is the taxonomy for risk/return summary information
created by the ICI sufficiently developed that we should permit its use
in the voluntary program? If not, explain what changes or procedural
steps are needed prior to use. What specific criteria should be applied
to determine whether the risk/return summary taxonomy is sufficiently
developed?
Is there anything related to the process for developing
and approving the risk/return summary taxonomy that should affect its
use or otherwise raise concerns?
The process for approving a taxonomy as XBRL includes
testing and technical modification. Should the Commission permit use of
a risk/return summary taxonomy in the voluntary program that has not
been acknowledged or approved as XBRL?
A tagged submission that a volunteer creates can adhere to
either a standard taxonomy or a standard taxonomy with extensions.
Extensions to a standard taxonomy are additional tags defined by a
particular user that further refine the tags contained in the standard
taxonomy. We expect that mutual funds will be permitted to submit
extensions to the standard risk/return summary taxonomy. Given the
narrative format of much risk/return summary information, does tagging
of this information raise particular problems with regard to extensions
or other facets of data tagging? For what purposes would mutual funds
want or need to make use of extensions? Are there sufficient software
tools available to develop extensions to the risk/return summary
taxonomy, if necessary? To what extent would the use of extensions
reduce the comparability among risk/return summary information that is
tagged? Are there any reasons why the use of extensions would be
inappropriate with regard to risk/return summary information?
What are the advantages and disadvantages of the
Commission providing on its Web site tools to render
[[Page 6682]]
the tagged risk/return summary information in human readable form or to
permit users to analyze and compare tagged risk/return summary
information submitted by different mutual funds? If we were to provide
a rendering tool, what, if any, liability or other concerns would be
raised by the fact that the presentation would be different from the
risk/return summary information as presented in a registrant's official
prospectus? What, if any, liability or other concerns would analytical
or comparison tools raise? What, if any, disclaimers would be necessary
to address any liability concerns related to rendering, analytical, or
comparison tools? If we were to provide a rendering tool, would it
hinder the ability of a volunteer to present its tagged risk/return
summary information in as much detail as, and in a manner substantially
similar to, its official filing? If we do not provide rendering,
analytical, or comparison tools, would it hinder participation in the
voluntary program or limit our ability to explore the usefulness of
tagged risk/return summary information?
E. Effective Date
If we adopt the proposed amendments, we expect the effective date
to be thirty days after publication of the adopting release in the
Federal Register. The Commission requests comment on this proposed
effective date.
III. General Request for Comments
We request comment not only on the specific issues we discuss in
this release, but on any other approaches or issues that we should
consider in connection with the proposed amendments. We seek comment
from any interested persons, including those required to file
information with us on the EDGAR system, as well as investors,
disseminators of EDGAR data, industry analysts, EDGAR filing agents,
and any other members of the public.
IV. Paperwork Reduction Act
The proposed rule and form amendments contain ``collection of
information'' requirements within the meaning of the Paperwork
Reduction Act of 1995 (``PRA'').\65\ We are submitting the proposed
collection of information to the Office of Management and Budget
(``OMB'') for review in accordance with 44 U.S.C. 3507(d) and 5 CFR
1320.11. Provision of information under the proposed amendments would
be voluntary and would not be kept confidential. An agency may not
conduct or sponsor, and a person is not required to respond to, an
information collection unless it displays a currently valid OMB control
number.
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\65\ 44 U.S.C. 3501 et seq.
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The title for the collection of information is ``Voluntary XBRL-
Related Documents'' (OMB Control No. 3235-0611). The proposed
amendments would extend the current interactive data voluntary
reporting program to enable mutual funds voluntarily to submit tagged
information contained in the risk/return summary section of their
prospectuses on EDGAR as exhibits to Form N-1A filings.
A. Reporting and Cost Burden Estimate
1. The Voluntary Program
We are proposing to increase the burden associated with the
existing collection of information for Voluntary XBRL-Related Documents
to reflect the proposed amendments, which would extend the current
interactive data voluntary reporting program to enable mutual funds
voluntarily to submit tagged information contained in the risk/return
summary section of their prospectuses on EDGAR as exhibits to Form N-1A
filings. The proposed expansion of the voluntary program would be open
to any mutual fund choosing to participate. We estimate that 10% of the
545 fund complexes that have mutual funds, or 55 fund complexes, would
each submit documents containing tagged risk/return summary information
for one mutual fund.\66\ This estimate is higher than the number of
mutual funds participating in the current voluntary program. However,
we believe that additional mutual funds will participate in the
proposed expanded voluntary program.\67\
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\66\ In the case of a mutual fund with multiple series, our
estimate treats each series as a separate mutual fund.
\67\ The ICI has stated that it will launch an educational
effort to encourage mutual funds to use the risk/return summary
taxonomy to tag the information in their EDGAR filings. ICI Details
Project to Extend XBRL to Key Investor Information, Investment
Company Institute Press Release, June 12, 2006, available at: http:/
/www.ici.org/statements/nr/06_news_xbrl.html#TopOfPage.
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Submission of tagged risk/return summary information would not
directly affect the burden of preparing the mutual funds' registration
statements or the registrants' official EDGAR filings. In order to
provide tagged risk/return summary information, a participating mutual
fund would have to tag the risk/return summary section of its
prospectus using the risk/return summary taxonomy and potentially
develop taxonomy extensions and would submit an exhibit to its filing.
Based on our previous estimates and our experience with registrants who
have submitted tagged financial information in the current voluntary
program, we estimate that the initial creation of tagged documents
containing risk/return summary information would require, on average,
approximately 110 burden hours per mutual fund,\68\ and the creation of
such tagged documents in subsequent years would require an average 10
burden hours per mutual fund.\69\ Because the PRA estimates represent
the average burden over a three-year period, we estimate the average
hour burden for the submission of tagged documents containing risk/
return summary information for one mutual fund to be approximately 43
hours.\70\
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\68\ In the current voluntary program, we estimated that an
initial set of submissions would require an average of 130 burden
hours, 75% of which (or 97.5 hours) represents the internal burden
hour estimate. See XBRL Adopting Release, supra note 13, at 70 FR
6563; XBRL Proposing Release, supra note 13, 69 FR at 59101. Based
upon our experience with filers who have submitted tagged financial
information in the current voluntary program, we believe that this
burden estimate for submitting an initial set of submissions may
have been too high. See, e.g., Indra K. Nooyi, Chief Executive
Officer, PepsiCo, Inc., October 3 Roundtable Webcast, supra note 25
(initial submission in voluntary program required approximately 60
to 80 total labor hours); John Stantial, Director of Financial
Reporting, United Technologies Corporation, June 12 Roundtable
Transcript, supra note 25, at 160 (initial submission in voluntary
program required about 80 hours of effort). We, therefore, estimate
that the initial creation of tagged documents containing risk/return
summary information would require, on average, approximately 110
burden hours per mutual fund, 75% of which (or 82.5 hours)
represents the internal burden hour estimate. These estimates more
closely approximate the experience of filers in the current
voluntary program.
\69\ In the current voluntary program, we estimated that each
set of submissions, after the initial set, would take 10 burden
hours. See XBRL Adopting Release, supra note 13, at 70 FR 6563; XBRL
Proposing Release, Supra note 13, 69 FR at 59101. We continue to
believe that this estimate is appropriate.
\70\ (110 hours in the first year + 10 hours in the second year
+ 10 hours in the third year) / 3 years = 43 hours. While the PRA
requires an estimate based on a hypothetical three years of
participation, a registrant, as noted earlier, could participate in
the expanded voluntary program by submitting tagged risk/return
summary information over a shorter period or even just once as the
registrant chooses.
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Based on the estimates of 55 participants submitting tagged
documents containing risk/return summary information for one mutual
fund per year and incurring 43 hours per submission we estimate that,
in the aggregate, the industry would incur an additional 2,365 burden
hours associated with the proposed amendments.\71\ We further estimate
that 75% of this burden increase, or
[[Page 6683]]
approximately 1,774 hours, would be borne internally by the mutual fund
complex. We estimate that this internal burden increase converted to
dollars would amount to approximately $384,958.\72\
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\71\ 55 documents per year x 43 hours per submission = 2,365
hours.
\72\ This cost increase is estimated by multiplying the increase
in annual internal hour burden (1,774) by the estimated hourly wage
rate of $217.00. The estimated wage figure is based on published
rates for compliance attorneys and programmer analysts outside New
York City, modified to account for an 1800-hour work-year and
multiplied by 5.35 to account for bonuses, firm size, employee
benefits, and overhead, yielding effe
