Extension of Interactive Data Voluntary Reporting Program on the Edgar System To Include Mutual Fund Risk/Return Summary Information, 39290-39300 [E7-13738]
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Federal Register / Vol. 72, No. 136 / Tuesday, July 17, 2007 / Rules and Regulations
Table of Contents
SECURITIES AND EXCHANGE
COMMISSION
17 CFR Parts 232, 239, 270 and 274
[Release Nos. 33–8823; IC–27884; 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: Final rule.
AGENCY:
SUMMARY: We are adopting 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: Effective Date: August 20, 2007.
FOR FURTHER INFORMATION CONTACT:
Alberto H. Zapata, Senior Counsel, 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, 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 adopting
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’’). 6
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.
6 The Commission proposed these amendments in
February 2007. Securities Act Release No. 8781
(Feb. 6, 2007) [72 FR 6676 (Feb. 12, 2007)]
(‘‘Proposing Release’’).
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I. Background
A. Interactive Data and XBRL
B. The Voluntary Program and 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. Paperwork Reduction Act
IV. Cost/Benefit Analysis
V. Promotion Of Efficiency, Competition, and
Capital Formation
VI. Final Regulatory Flexibility Analysis
VII. Statutory Authority
Text of Rule and Form Amendments
I. Background
A. Interactive Data and XBRL
For the past several years, the
Commission has been evaluating the 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.7 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.8
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
platforms automatically. Through
interactive data, static text-based
7 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 (‘‘September 25 Press Release’’);
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
(‘‘January 11 Press Release’’); 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.
8 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 can be transformed into
dynamic databases that can readily be
searched and analyzed, facilitating the
comparison of information across
companies, reporting periods, and
industries. 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.
Tags are defined in 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’’).
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 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 has contracted with
XBRL US, Inc., the U.S. based
jurisdiction 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.11
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 September 25 Press Release, supra note 7.
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B. The Voluntary Program and Tagging
of Mutual Fund Information
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 financial information tagged in
XBRL format as an exhibit to certain
filings on the Commission’s Electronic
Data Gathering, Analysis and Retrieval
System (‘‘EDGAR’’).12 The Commission
adopted the voluntary program to help
evaluate the usefulness of data tagging
and XBRL to registrants, investors, the
Commission, and the marketplace.13 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.14 The data currently
permitted in XBRL exhibits is limited to
financial information.
The current voluntary program
extends to financial information for
investment companies, including open
end management investment companies
(‘‘mutual funds’’).15 In February of this
year, we proposed amendments to the
voluntary program that would permit
mutual funds to tag the information in
the risk/return summary section of their
prospectuses using a taxonomy
developed by the Investment Company
Institute (‘‘ICI’’).16
12 See Securities Act Release No. 8529 (Feb. 3,
2005) [70 FR 6556 (Feb. 8, 2005)] (‘‘XBRL Adopting
Release’’); Securities Act Release No. 8496 (Sept.
27, 2004) [69 FR 59094 (Oct. 1, 2004)] (‘‘XBRL
Proposing Release’’). See also Securities Act Release
No. 8497 (Sept. 27, 2004) [69 FR 59111 (Oct. 1,
2004)] (concept release soliciting comment on data
tagging).
13 XBRL Adopting Release, supra note 12, 70 FR
at 6556–57.
14 January 11 Press Release, supra note 7. 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.
15 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.
16 The ICI is a national association of the
American investment company industry. In March
2006, the ICI announced an initiative to create a
taxonomy to cover the risk/return summary
information. See 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/
2006/06_news_mfimc.html#TopOfPage; ICI Unveils
Draft XBRL Taxonomy For Public Review, ICI Press
Release, Jan. 4, 2007, available at: https://
www.ici.org/statements/nr/
07_news_xbrl_txnmy.html#TopOfPage.
In a letter to the Commission staff, dated May 18,
2007, the ICI advised that the risk/return summary
taxonomy is ready for use and described its
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The risk/return summary section of
the mutual fund prospectus contains
important information about investment
objectives and strategies, risks, and
costs,17 and tagging this information
could provide powerful tools for
investors. With almost half of all U.S.
households owning mutual funds,18
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.
The Commission received eight
comment letters on the proposed rule
amendments, including comments from
software vendors, an accounting firm, a
trade association, and several
individuals.19 These commenters
generally supported the proposed rules
to extend the interactive data voluntary
reporting program to the risk/return
summary section of mutual fund
prospectuses. We are adopting the
proposed amendments, with minor
modifications to address commenters’
recommendations. The rule
amendments are intended to help us
evaluate the usefulness to investors,
third-party analysts, registrants, the
Commission, and the marketplace of
response to comments received regarding the
taxonomy development. See Letter from Donald J.
Boteler, Vice President—Operations and Continuing
Education, ICI, to Andrew J. Donohue, Director,
Division of Investment Management (May 18, 2007)
(‘‘Boteler Letter’’), available at: https://www.sec.gov/
comments/s7–05–07/s70507–21.pdf. The ICI also
indicated that the schema files and reference
materials for the taxonomy are available at:
https://xbrl.ici.org.
17 Items 2 and 3 of Form N–1A [17 CFR 239.15A
and 274.11A].
18 2007 Investment Company Fact Book, at 57–58,
Investment Company Institute (2007), available at:
https://www.ici.org/home/2007_factbook.pdf.
19 See comment letters of Confluence (Mar. 14,
2007); Walter S. Hamscher (‘‘Hamscher’’) (Mar. 2,
2007); Charles S. Hoffman (‘‘Hoffman’’) (Feb. 10,
2007); ICI (Mar. 14, 2007); NewRiver, Inc.
(‘‘NewRiver’’) (Mar. 14, 2007);
PricewaterhouseCoopers LLP (‘‘PWC’’) (Mar. 14,
2007); Rivet Software, Inc. (‘‘Rivet’’) (Mar. 14,
2007); Ayal Rosenthal (‘‘Rosenthal’’) (Mar. 6, 2007).
The ICI contracted with PWC to design and
construct the risk/return taxonomy, and Hamscher
was a subcontractor to PWC. The comment letters
are available on the Commission’s Web site at:
https://www.sec.gov/comments/s7–05–07/
s70507.shtml.
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39291
data tagging and, in particular, of
tagging mutual fund information.
II. Discussion
As part of our ongoing effort to
evaluate the usefulness of data tagging,
we are adopting amendments to extend
the voluntary program to enable mutual
funds to submit exhibits containing
tagged risk/return summary information
attached to EDGAR filings.20 Any
mutual fund may 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.21 We are adding
the risk/return summary information set
forth in Items 2 and 3 of Form N–1A as
a new item of Mandatory Content, with
two modifications to our proposal that
address commenters’ recommendations.
Our proposal, like the current
voluntary program, would have required
that Mandatory Content ‘‘consist of a
complete set of information for all
periods presented in the corresponding
official EDGAR filing.’’ 22 First, the
adopted amendments clarify that, in the
case of a Form N 1A filing that includes
more than one series,23 a filer may tag
a complete set of risk/return summary
information for any one or more
series.24 For example, if a filing contains
information about four series, a filer
could tag information for one, two,
20 The amendments do not alter the current
voluntary program as it applies to the furnishing of
XBRL information by non-investment companies.
21 Rule 401(b)(1) of Regulation S–T [17 CFR
232.401(b)(1)].
22 Rule 401(b)(1)(i) of Regulation S–T [17 CFR
232.401(b)(1)(i)].
23 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.
24 Rule 401(b)(1)(iv) of Regulation S–T [17 CFR
232.401(b)(1)(iv)].
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three, or four series. Filers who choose
to tag the information for a particular
series would be required to tag all the
information for that series, including the
information for each class of the
series.25 Second, we have modified the
proposed amendments, which would
have required the information for each
class to be separately identified, to
clarify, as suggested by a commenter,26
that this requirement applies only to
information that does not relate to all of
the classes in a series.27 Thus, classspecific information, such as expenses
and performance, would be required to
be separately identified by class.
Information that is not class-specific,
such as investment objectives, would
not be required to be separately
identified by class.
Three commenters stated that if a
mutual fund’s official filing contains
information for more than one series or
class, the fund should be permitted to
submit tagged risk/return summary
information for one or more, but fewer
than all, series or classes.28 One of these
commenters indicated that this
approach would provide the broadest
possible participation in the voluntary
program.29 We agree with these
commenters that mutual funds
volunteering to participate in the
reporting program that include more
than one series in an official filing
should not be required to tag the
information for all series in the filing. A
mutual fund’s series represent separate
portfolios of securities, each with its
own discrete investment objectives and
strategies. Each series of a registered
investment company is a distinct
mutual fund though they are organized
as part of a single legal entity. As a
result, we have concluded that tagging
one or more series should not require
tagging all the series of a fund.
Therefore, our rule amendments permit
mutual funds to submit tagged risk/
return summary information for one or
more series in an official filing.30 This
flexibility should encourage
participation in the voluntary
program.31
25 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].
26 See letter from ICI, supra note 19.
27 Rule 8b–33 under the Investment Company Act
[17 CFR 270.8b–33].
28 See letters from Hamscher, ICI, and PWC, supra
note 19.
29 See letter from ICI, supra note 19.
30 Rule 401(b)(1)(iv).
31 We have previously indicated that rule 8b–33
would require investment companies to submit
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We disagree, however, with
commenters’ recommendations 32 that
volunteers be permitted to tag the risk/
return summary information for less
than all classes for any mutual fund or
series selected. Permitting tagged
submissions for less than all the classes
of a fund or series would significantly
impair the Commission’s and users’
ability to evaluate the effectiveness of
the ICI’s risk/return summary taxonomy
in tagging class-specific information. In
addition, it would limit the ability to
assess the usefulness of the taxonomy in
facilitating the comparison of classspecific information, such as expenses
and performance, within a fund.
As with all tagged exhibits under the
voluntary program, submissions of
tagged exhibits containing risk/return
summary information will be
supplemental and will not replace the
required HTML or ASCII version of the
information called for in Form N–1A.
Volunteers will 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.33 While tagged
exhibits will 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.
We are adopting, as proposed, the
requirement that mutual funds
submitting tagged risk/return summary
information must include this
information as an exhibit to an
amendment to a previous filing on Form
tagged XBRL documents separately for each series
of an investment company registrant. See XBRL
Proposing Release, supra note 12, 69 FR at 59097
n. 49. Under amended rule 8b–33, a mutual fund
will 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.
32 See letters from Hamscher, ICI, and PWC, supra
note 19.
33 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 will
undergo technical validations. The official filing
will continue to follow the normal process for
receipt and acceptance. That is, it will 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 will be
removed and the official filing will be accepted and
disseminated without the tagged documents. The
volunteer will be notified of the submission
problem with the tagged documents. If the official
filing fails to meet the required receipt and
acceptance process and is suspended for any
reason, any tagged risk/return summary information
submitted with the official filing will also be
suspended.
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N–1A.34 Form N–1A filings, which
contain mutual fund registration
statements (or amendments thereto), are
often subject to revision prior to
effectiveness. For this reason, the rules
do 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 rules
provide that a tagged exhibit to a Form
N–1A filing, whether the filing is an
initial registration statement or an
amendment thereto, may be submitted
only as an amendment to the filing to
which the tagged exhibit relates and
only after the effective date of such
filing.35 An exhibit containing tagged
risk/return summary information may
be submitted under rule 485(b) of the
Securities Act, which provides for
immediate effectiveness of amendments
that make non-material changes, and
will only need to contain the new
exhibit, a facing page, a signature page,
a cover letter explaining the nature of
the amendment, and a revised exhibit
index.
The voluntary program requires all
volunteers to use the appropriate
version of a standard taxonomy,
supplemented with extension
taxonomies as specified by the EDGAR
Filer Manual. Filers submitting tagged
risk/return summary information should
not include the risk/return summary
taxonomy in their submissions as this
taxonomy will be stored as a part of the
EDGAR system. Section 5.2.4 of the
EDGARLink Filer Manual (Volume II):
‘‘EDGAR Filing’’ will provide
instructions and guidance on the
preparation, submission, and validation
of EDGAR-acceptable electronic filings
with attached tagged risk/return
summary information.36 The EDGAR
system upgrade to Release 9.7 is
scheduled to become available on
August 20, 2007, to, among other things,
34 See Rule 401(a) of Regulation S–T [17 CFR
232.401(a)]; rule 8b–33. A mutual fund submitting
tagged risk/return summary information as an
exhibit to Form N–1A will be required to name each
document ‘‘EX–100’’ as specified in the EDGAR
Filer Manual. We also are adopting 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.
35 Rule 401(a); rule 8b–33.
36 Rule 301 of Regulation S–T, the regulation that
governs the preparation and transmission of
electronic filings on the Commission’s EDGAR
system, requires electronic filings to be prepared in
accordance with the provisions of the EDGAR Filer
Manual. The Filer Manual contains the technical
formatting requirements for electronic submissions.
Filers must comply with those requirements to
ensure the timely receipt and acceptance of
documents submitted to the Commission in an
electronic format. The Commission’s EDGAR Filer
Manual is available at: https://www.sec.gov/info/
edgar.shtml.
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enable EDGAR to process tagged risk/
return summary information when the
expanded voluntary program becomes
effective.
Similar to the current voluntary
program, volunteers will be free to
submit tagged risk/return summary
information regularly or from time to
time, and volunteers may stop and start
as they choose. Participating in the
voluntary program will 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 will, 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.37
One commenter, while agreeing that
participation in the voluntary program
should not create a continuing
obligation to submit tagged risk/return
summary information as an exhibit to a
subsequent post-effective amendment,
noted that rendering tools may not be
able to detect that tagged data is no
longer current.38 The commenter
encouraged the Commission to consider
whether additional safeguards, such as
the option to withdraw tagged exhibits,
should be made available to ensure that
there is no liability to funds or harm to
investors if rendering tools utilize
outdated information. As we noted in
response to similar comments when the
voluntary program rules were initially
adopted, submissions to EDGAR cannot,
as a practical matter, be withdrawn after
public dissemination.39 In order to
address questions of potential harm to
investors and liability to mutual funds,
the rules provide for cautionary
disclosures 40 and liability protections.41
The amendments we are adopting
will, as proposed, provide mutual funds
with the option to submit tagged
financial highlights or condensed
financial information as a tagged exhibit
to an amendment to the Form N 1A
filing to which the information relates.42
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37 See
rule 401(c)(1) of Regulation S–T [17 CFR
232.401(c)(1)] (requires tagged exhibits to reflect the
same information as corresponding official filing);
XBRL Adopting Release, supra note 12, 70 FR at
6559 n. 48.
38 See letter from ICI, supra note 19.
39 XBRL Adopting Release, supra note 12, 70 FR
at 6559.
40 See infra Section II.B.
41 See infra Section II.C.
42 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 [17 CFR
232.401(a) and (b)(1)(iii)] (permitting information
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Mutual funds also may continue to
submit this information as an exhibit to
Form N–CSR, as currently permitted,
whether or not they submit tagged risk/
return summary information.43 A
mutual fund submitting tagged risk/
return summary information may, but is
not required to, submit tagged financial
highlights or condensed financial
information. Similarly, a mutual fund
that submits tagged financial highlights
or condensed financial information
may, but is not required to, submit
tagged risk/return summary
information.
versions of funds’ risk/return summary
information.
The adopted rules, like the proposed
rules and consistent with one
commenter’s recommendation,47 do not
require a Form N–1A filing that
includes tagged exhibits containing only
risk/return summary information to
disclose that the information in the
exhibits is ‘‘unaudited’’ or
‘‘unreviewed.’’ This disclosure will be
required in a Form N 1A filing with
which tagged financial highlights or
condensed financial information is
submitted.48
B. Required Disclosure
The Commission is adopting, as
proposed, a requirement that the exhibit
index of any Form N–1A filing that
includes a tagged exhibit disclose that
the purpose of submitting the tagged
exhibit is to test the related format and
technology and, as a result, investors
should not rely on the exhibit in making
investment decisions.44 In addition, we
are requiring this disclosure to appear
within a tagged exhibit, as
recommended by some commenters.45
We believe that the inclusion of the
cautionary disclosure within tagged
risk/return summary exhibits may help
to alert investors and other users that
the exhibits should not be relied on in
making investment decisions. We are
modifying the proposed rule to require
that the disclosure be included within
the exhibits as a tagged data element.46
The ICI indicated in its comment letter
that an element could be added to the
risk/return summary taxonomy for the
display of this disclosure and has now
done so. We encourage parties that are
developing rendering tools for the risk/
return summary taxonomy to make use
of this data tag in order to display the
cautionary disclosure in rendered
C. Liability Issues
The two commenters who addressed
liability issues supported the proposal
to extend to tagged risk/return summary
information limited protection from
liability that is similar to the protection
provided under the current voluntary
program,49 and we are adopting the
liability protection as proposed. We are
providing this protection because
liability remains for the official filing,
and because the program is
experimental, it contains certain
safeguards, and the program should not
unnecessarily deter volunteers from
participating.
Under the current voluntary program,
tagged exhibits are not deemed filed for
purposes of Section 18 of the Securities
Exchange Act of 1934 (‘‘Exchange
Act’’) 50 or Section 34(b) of the
Investment Company Act,51 or
otherwise subject to the liability of these
sections.52 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.53
The amendments we are adopting, as
proposed, extend the liability protection
set forth in Item 8(a) of Form N–1A as Mandatory
Content under the voluntary program).
43 Rule 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.
44 Rule 401(d)(1)(ii) and (d)(2)(i) of Regulation S–
T [17 CFR 232.401(d)(1)(ii) and (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.’’
45 See letters from ICI and PWC, supra note 19.
46 Rule 401(d)(2)(i).
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Fmt 4701
Sfmt 4700
47 See
letter from ICI, supra note 19.
401(d)(1)(i) of Regulation S–T [17 CFR
232.401(d)(1)(i)].
49 See letters from ICI and PWC, supra note 19.
50 15 U.S.C. 78r.
51 15 U.S.C. 80a–33(b).
52 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.
53 Rule 402(b) of Regulation S–T [17 CFR
232.402(b)].
48 Rule
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under the voluntary program to include
Section 11 of the Securities Act.54
Specifically, we are amending 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
are amending rule 402(a) to state
explicitly that tagged exhibits are not
part of any registration statement to
which they relate.55 Finally, the
provision in the current rules 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 includes liability
protections under the Securities Act,
and it will apply to tagged documents
submitted as exhibits on Form N–1A.56
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.57
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D. The Risk/Return Summary
Taxonomy and Software Tools
The taxonomy for tagging the risk/
return summary information was
developed by the ICI. Mutual funds will
be permitted to submit documents
containing risk/return summary
information that is tagged using the ICI’s
taxonomy commencing on the effective
date of the rules that we are adopting.
In January 2007, the ICI released a draft
risk/return summary taxonomy for
54 In addition, the current provisions of rule
402(a) will apply to tagged risk/return summary
information. In particular, a tagged exhibit on Form
N–1A will 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 will 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 will 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.
55 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 voluntary program, Section
11 liability relief will not extend to the information
that the official filing contains.
56 Rule 402(b). We are adopting technical
amendments to rule 402(b) to replace each reference
to ‘‘Item 401’’ with ‘‘Rule 401.’’
57 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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public review and comment.58 The final
taxonomy was submitted for
acknowledgement by the ICI to XBRL
International on May 16, 2007,59 in
accordance with XBRL International
procedures.60 The taxonomy received
acknowledgement in June 2007.61 The
ICI also intends to seek approval of the
taxonomy in accordance with the
procedures of XBRL International, but
has indicated that requiring the
taxonomy to be approved prior to use in
the voluntary program could introduce
delay, the length of which is
unpredictable.62
We have concluded that the ICI’s
taxonomy is sufficiently developed to
permit its use in the voluntary program.
Three commenters involved in the
taxonomy development process stated
that the risk/return summary taxonomy
is sufficiently developed for use in the
voluntary program, noting that the
taxonomy was developed through the
use of a broad working group that was
given the opportunity to review and
comment on the taxonomy as it was
developed and that the taxonomy was
subjected to a public review and
comment period.63 While some
commenters suggested changes to the
taxonomy, such as reducing the number
of elements in the taxonomy 64 or
58 See ICI Unveils Draft XBRL Taxonomy For
Public Review, Investment Company Institute Press
Release, Jan. 4, 2007, available at: https://
www.ici.org/statements/nr/
07_news_xbrl_txnmy.html#TopOfPage. 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.
59 See Boteler Letter, supra note 16.
60 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.
There are two levels of XBRL taxonomy recognition:
(1) ‘‘acknowledgement’’ is formal recognition that a
taxonomy complies with XBRL specifications,
including testing by a defined set of validation
tools; and (2) ‘‘approval’’ is a formal recognition
requiring more detailed quality assurance and
testing, including compliance with official XBRL
guidelines for the type of taxonomy under review,
creation of a number of instance documents, and an
open review period after acknowledgement. For
more information regarding the XBRL taxonomy
recognition process, see ‘‘Taxonomy Recognition
Process’’ on the XBRL International Web site
available at: https://www.xbrl.org/
TaxonomyRecognition/.
61 The taxonomy is available on XBRL
International’s Web site at: https://www.xbrl.org/
Taxonomy/ici/ici-rr-summarydocument-20070516acknowledged.htm.
62 See letter from ICI, supra note 19. See also
letter from Hamscher, supra note 19.
63 See letters from Hamscher, ICI, and PWC, supra
note 19.
64 See letter from NewRiver, supra note 19.
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avoiding the use of complex
structures,65 these commenters did not
suggest that the voluntary program
should be delayed unless the taxonomy
is modified. The ICI has considered the
comments it received on the taxonomy,
as well as the comments on the
taxonomy submitted to the Commission,
and has submitted a letter to the
Commission’s staff summarizing its
response to the commenters and the
taxonomy changes that were made.66 In
its letter, the ICI asserts that the
taxonomy is ready for use with the
Commission’s interactive data voluntary
reporting program. In light of the ICI’s
consideration of comments related to
the taxonomy, and the comments that
we received favoring the expansion of
the voluntary program to the risk/return
summary,67 we have concluded that it is
appropriate to permit use of the
taxonomy in its present state of
development. Further, the purpose of
the voluntary program is to test and
evaluate tagging technology, and, as a
result, we agree with commenters’
recommendations that it is not
necessary for approval of the taxonomy
to be obtained before permitting
volunteers to submit tagged documents.
As in the current voluntary program,
filers will be permitted to use
extensions to the risk/return summary
taxonomy, which are additional tags
created by a particular user that further
refine the tags contained in a standard
taxonomy. Some commenters supported
permitting the use of at least some
extensions with the risk/return
summary taxonomy,68 but one
commenter opposed the use of
extensions to the risk/return summary
taxonomy, stating that the extensions
would introduce complexity.69 While
we recognize that permitting the use of
extensions to the risk/return summary
taxonomy may affect the ability to
compare or render tagged submissions,
we believe that it will be helpful to
permit extensions on an unrestricted
basis at this time. Experimentation with
extensions will permit the Commission,
filers, and users of tagged filings to
better assess the need for extensions to
the risk/return summary taxonomy and
the impact that extensions may have on
tagged documents.
One commenter recommended that
the Commission impose validity testing
on tagged risk/return summary exhibits
65 See
letter from Rivet, supra note 19.
Boteler Letter, supra note 16.
67 See letters from Confluence, Hamscher,
Hoffman, ICI, NewRiver, PWC, and Rosenthal,
supra note 19.
68 See letters from ICI, PWC, and Rivet, supra note
19.
69 See letter from Confluence, supra note 19.
66 See
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in addition to the tests currently
performed under the voluntary program,
but we have determined not to impose
additional testing at this time.70 The
commenter stated that additional
validity testing would improve the
quality of tagged exhibits submitted.
Currently, under the voluntary program,
validity testing of tagged exhibits
consists of testing for: (1) Content
validation (i.e., validating for invalid
ASCII characters); (2) document-type
validation (e.g., ensuring that EX–
100.INS documents have .xml
extensions and ‘‘XBRL tags’’); and (3)
XBRL validation (e.g., ensuring that
exhibits follow appropriate XBRL
standards and are structured according
to the taxonomy). We agree that
increased validity testing of tagged
submissions might improve their
quality. The purpose of the voluntary
program, however, is to test the
technology and the taxonomy. We,
therefore, believe that it is premature to
impose additional validity testing upon
tagged risk/return summary documents.
The Commission’s Web site currently
provides access to a prototype XBRL
Web application that converts tagged
financial information submitted in the
voluntary program into a rendered, or
human readable, format.71 At present,
our Web site does not provide access to
any rendering or analytical tools for use
with tagged risk/return summary
information. Some commenters favored
a tool on the Commission’s Web site
that would render tagged risk/return
summary documents.72 One commenter
noted that such a tool could help both
investors and mutual funds to better
understand and explore the benefits of
tagging and could stimulate the
development of other, more
sophisticated tools for rendering tagged
data.73 We agree that the availability of
rendering and analysis tools will help
investors and mutual funds, as well as
third party users, to evaluate the
benefits of tagged risk/return summary
data.
We will continue to analyze rendering
and other capabilities specifically
developed for the risk/return summary
taxonomy, and we may add these
features to our Web site in the future.
The Commission also encourages funds
and third parties to develop these tools.
Users of EDGAR data on the
70 See
comment letter from Hoffman, supra note
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19.
71 See ‘‘Interactive Financial Report Viewer—
Preview Release’’ Web page on the Commission
Web site, available at: https://www.sec.gov/spotlight/
xbrl/xbrlwebapp.htm.
72 See letters from Hamscher, ICI, and PWC, supra
note 19.
73 See letter from ICI, supra note 19.
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Commission’s Web site will be able to
download the tagged risk/return
summary information to perform their
own analysis if they have appropriate
software. Users will continue to be able
to view the official filing in ASCII or
HTML format, as they can today.
E. Effective Date
The effective date of these
amendments is August 20, 2007, in
order to provide sufficient time to
implement EDGAR system changes
necessary to provide for risk/return
summary functionality.
III. Paperwork Reduction Act
The rule and form amendments
contain ‘‘collection of information’’
requirements within the meaning of the
Paperwork Reduction Act of 1995
(‘‘PRA’’).74 Provision of information
under the 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 Office of Management and Budget
(‘‘OMB’’) control number.
The title for the collection of
information is ‘‘Voluntary XBRL-Related
Documents’’ (OMB Control No. 3235–
0611). The rule and form amendments
expand 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. We published notice
soliciting comments on the collection of
information requirements in the release
proposing the amendments and
submitted the proposed collection of
information to OMB for review in
accordance with 44 U.S.C. 3507(d) and
5 CFR 1320.11.75 OMB pre-approved
these collection requirements. We
received no comments on the collection
of information requirements.
The Voluntary Program
The amendments, which will expand
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, will increase the burden
associated with the existing collection
of information for Voluntary XBRLRelated Documents. The expansion of
the voluntary program will be open to
U.S.C. 3501 et seq.
Proposing Release, supra note 6, 72 FR at
6682–83.
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75 See
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39295
any mutual fund choosing to
participate. We estimate that 10% of the
approximately 545 fund complexes that
have mutual funds, or 55 fund
complexes, will each submit documents
containing tagged risk/return summary
information for one mutual fund.76 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 expanded
voluntary program.77
Submission of tagged risk/return
summary information will 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 will have to tag the risk/
return summary section of its
prospectus using the risk/return
summary taxonomy and potentially
develop taxonomy extensions and will
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 will require, on
average, approximately 110 burden
hours per mutual fund,78 and the
76 In the case of a mutual fund with multiple
series, our estimate treats each series as a separate
mutual fund.
77 The ICI is undertaking 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/2006/
06_news_xbrl.html#TopOfPage.
One commenter suggested that the Commission
offer incentives to encourage volunteers to
participate in the expanded voluntary program. See
letter from ICI, supra note 19. Specifically, the
commenter suggested that the Commission: (1)
Offer expedited review of mutual fund exemptive
applications; or (2) offer expedited review of an
initial registration statement on Form N–1A or an
amendment to a registration statement to add a new
fund or series. Id. The Commission did not initially
offer incentives for volunteers to submit tagged
information as part of the current voluntary
program. The Commission subsequently offered
expedited review of registration statements and
annual reports to volunteers agreeing to participate
in a test group. See January 11 Press Release, supra
note 7. Volunteers that participate in the test group
agree to furnish financial data contained in their
periodic and investment company reports in XBRL
format for at least one year and provide feedback
on their experiences. Id. At this time, we are not
offering specific incentives to encourage volunteers
to participate in the expanded voluntary program,
however, we will continue to assess the need for
incentives going forward.
78 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
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mstockstill on PROD1PC66 with RULES4
creation of such tagged documents in
subsequent years will require an average
10 burden hours per mutual fund.79
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.80
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 will incur an
additional 2,365 burden hours
associated with the amendments.81 We
further estimate that 75% of this burden
increase, or approximately 1,774 hours,
will be borne internally by the mutual
fund complex. We estimate that this
internal burden increase converted to
dollars will amount to approximately
$393,828.82
hours) represents the internal burden hour estimate.
See XBRL Adopting Release, supra note 12, 70 FR
at 6563; XBRL Proposing Release, supra note 12, 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., Webcast Archive of October 3 Interactive Data
Roundtable, Oct. 3, 2006, available at: https://www.
connectlive.com/events/secinteractivedata100306/
(initial submission in voluntary program required
approximately 60 to 80 total labor hours); John
Stantial, Director of Financial Reporting, United
Technologies Corporation, Transcript of June 12
Interactive Data Roundtable, June 12, 2006,
available at: https://www.sec.gov/spotlight/xbrl/xbrl
officialtranscript0606.pdf, 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 will 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.
79 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 12, 70 FR at 6563; XBRL
Proposing Release, supra note 12, 69 FR at 59101.
We continue to believe that this estimate is
appropriate.
80 (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.
81 55 documents per year × 43 hours per
submission = 2,365 hours.
82 This cost increase is estimated by multiplying
the increase in annual internal hour burden (1,774)
by the estimated hourly wage rate of $222.00. The
estimated wage figure is based on published rates
for compliance attorneys and programmer analysts,
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We also estimate that 25% of the
burden, or approximately 591 hours,
will be outsourced to external
professionals and consultants retained
by the mutual fund complex at an
average cost of $256.00 per hour for a
total annual increase of approximately
$151,296.83 In addition, it is our
understanding that many participants
will also have annual software licensing
costs. We estimate that the cost of
licensing software will be $333 per
participant per year, for a total annual
increase of $18,315.84 Altogether, the
total annual increase in external costs
related to the amendments will be
$169,611.85
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
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 $261 and $209,
respectively. See Securities Industry Association,
Report on Management & Professional Earnings in
the Securities Industry 2006 (Sept. 2006) (‘‘SIA
Report’’). The estimated wage rate is further based
on the estimate that compliance attorneys would
account for one quarter of the hours worked and
programmer analysts would account for the
remaining three quarters, resulting in a weighted
wage rate of $222.00 (($261 × .25) + ($209 × .75)).
The wage rates used in the Proposing Release were
based upon the Securities Industry Association,
Report on Management & Professional Earnings in
the Securities Industry 2005 (Sept. 2005), and the
total internal and external burden increases
converted to dollars differs from the estimates in
the Proposing Release due to changes in wage rates
in the 2006 SIA Report.
83 591 hours × $256.00 per hour = $151,296. The
estimated wage figure is based on published rates
for attorneys and senior programmers, 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 $292 and $244, respectively. See SIA
Report, supra note 82. The estimated wage rate is
further based on the estimate that attorneys will
account for one quarter of the hours worked and
senior programmers will account for the remaining
three quarters, resulting in a weighted wage rate of
$256.00 (($292 × .25) + ($244 × .75)).
84 $333 per participant × 55 participants =
$18,315. The estimated annual cost of the software
comes from our previous PRA estimate for the
current voluntary program. See XBRL Adopting
Release, supra note 12, 70 FR at 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 will
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 will be
waived (based upon our understanding that
software providers indicated that they will 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.
85 This annual total consists of $151,296 in
outside professional costs plus $18,315 in software
costs.
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Sfmt 4700
account, among other things, the current
state of reporting process automation,
automation that likely will be
introduced in connection with the
initial cost incurred, and the efficiencies
that likely will be realized over the
course of three years.
Regulation S–T
Regulation S–T (OMB Control No.
3235–0424) specifies the requirements
that govern the electronic submission of
documents. The amendments will 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.
IV. 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 are adopting
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 expansion of the
voluntary program will 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 expansion of the
voluntary program to include narrative,
non-financial information, such as that
contained in the risk/return summary,
also will 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 will aid this data-mining process
in that it will identify points of data at
the source, which could reduce the cost
to populate databases and improve the
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mstockstill on PROD1PC66 with RULES4
accuracy of that data. Additionally, the
expanded voluntary program may
benefit funds and the 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.
In the Proposing Release, we sought
comments on our cost-benefit
analysis,86 and several commenters
discussed the potential benefits
resulting from the expansion of the
interactive data voluntary reporting
program and from interactive data in
general. Two commenters stated that
interactive data will increase the
accuracy of information.87 One
commenter also noted the potential for
increased timeliness of critical data that
investors require to make informed
investment decisions.88 Another
commenter stated that a prospectus
tagged using the risk/return summary
taxonomy will allow automated,
instantaneous extraction of every fact
disclosed in the risk/return summary.89
Further, commenters stated that
allowing funds to file tagged risk/return
summary information would serve the
objective of providing investors with
more user-friendly access to key fund
information.90 Commenters also noted
potential cost savings of interactive data
86 See Proposing Release, supra note 6, 72 FR at
6684.
87 See letters from Confluence and Hamscher,
supra note 19.
88 See letter from PWC, supra note 19.
89 See letter from Hamscher, supra note 19.
90 See letters from ICI and PWC, supra note 19.
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which would benefit investors.91
Finally, one commenter noted that the
investment analysis process would
become more efficient and effective
through the increased use of automation
and reduced human intervention that
would result from the use of interactive
data.92
B. Costs
The expansion of the voluntary
program will 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 will be 1,774
hours, which will amount to
approximately $393,828 and that the
increase in annual external costs will
amount to approximately $169,611 for a
total estimated increase of $563,439 on
an annual basis.93
We based these cost estimates upon,
among other things, experience with
filers who have submitted tagged
financial information in the current
voluntary program.94 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. In the Proposing Release,
we sought comments and supporting
data on our cost estimates with regard
to the proposed amendments.95 We did
not receive any comments or supporting
data specific to our cost estimates.96
In the future, there may be additional
costs to current users of EDGAR data.
For example, companies that currently
provide tagging and dissemination of
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
91 See letters from Confluence and PWC, supra
note 19.
92 See letter from PWC, supra note 19.
93 See supra Section III.
94 See supra note 78.
95 See Proposing Release, supra note 6, 72 FR at
6684.
96 One commenter noted that it is difficult to
estimate the likely cost of participation in the
voluntary program at this time but noted that it may
wish to provide cost data to the Commission in the
future. See letter from ICI, supra note 19.
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39297
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. In addition, the availability of
mutual fund tagged data on EDGAR may
provide these companies with
alternative business opportunities.
V. Promotion of Efficiency,
Competition, and Capital Formation
Section 2(c) of the Investment
Company Act 97and section 2(b) of the
Securities Act 98 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 amendments will extend the
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
amendments will be voluntary, the
Commission estimates that the impact of
the amendments will be limited.
However, because the tagging of risk/
return summary information has the
potential to facilitate analysis of that
information, we believe that the
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,
97 15
98 15
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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
amendments will have a significant
impact on capital formation. Finally,
because the amendments are designed
to permit mutual funds to provide
information in a format that we believe
will be more useful to investors, we
believe that the amendments are
appropriate in the public interest and
for the protection of investors.
We requested comment on whether
the proposed amendments would
promote efficiency, competition, and
capital formation. We received no
comment on this issue.
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VI. Final Regulatory Flexibility
Analysis
This Final Regulatory Flexibility
Analysis was prepared in accordance
with 5 U.S.C. 604 and relates to the
amendments we are adopting that will
expand 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. An Initial
Regulatory Flexibility Analysis
(‘‘IRFA’’), which was prepared in
accordance with the 5 U.S.C. 603, was
published in the release proposing the
amendments.
A. Need for the Amendments
The purpose of the amendments is 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. We believe that the
expanded voluntary program will
enable us to study further 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 expanded
voluntary program will 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
expanded voluntary program will better
enable us to study the extent to which
interactive data enhances the:
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• 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 that the
expanded voluntary program will
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.
B. Significant Issues Raised by Public
Comment
In the IRFA for the proposed
amendments, we requested comment on
the number of small entities that would
be affected by the proposed
amendments, the existence or nature of
the potential effect of the proposals on
small entities, how to quantify the effect
of the proposals, how different
procedures could be provided for small
entities, and we asked commenters to
provide any empirical data supporting
the extent of the impact. We received no
comment letters specifically addressing
the IRFA in the Proposing Release;
however, one commenter suggested that
the Commission could lower the barrier
for participation for small funds by
providing a ‘‘literal’’ or structured form
using some commonly used software
applications.99
C. Small Entities Subject to the Rules
The 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
$50 million or less as of the end of its
most recent fiscal year.100 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
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99 See
100 17
letter from Hamscher, supra note 19.
CFR 270.0–10.
Frm 00010
Fmt 4701
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information will be voluntary, we
anticipate that only complexes with
sufficient resources will elect to
participate. To date, no small entity
mutual funds have elected to participate
in the current voluntary program.
D. Projected 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
will be minimal. Nevertheless, the
impact of the amendments remains
somewhat speculative at this point.
No registrant will be required to
submit tagged documents under the
expansion of the voluntary program.
The submission of tagged risk/return
summary information will 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. Agency Action To Minimize 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
amendments is 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.
Submitting documents containing
tagged risk/return summary information
is 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.
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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.
Additionally, providing structured
input forms, as suggested by one
commenter,101 is not appropriate at this
time given the cost of deploying and
maintaining such forms and the
difficulty of permitting extensions to be
used with a structured input form. If we
determine to require data tagging in the
future, we will look to the results of the
voluntary program, including those of
the expansion of the program to risk/
return summary information, in
considering alternatives to minimize
any burden on small entities.
VII. Statutory Authority
The Commission is adopting 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 Rule and Form Amendments
For the reasons set forth above, the
Commission amends title 17, Chapter II
of the Code of Federal Regulations as
follows:
I
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:
I
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.
*
*
*
*
*
2. Amend § 232.401 by:
I a. Revising the first sentence of
paragraph (a);
I b. Removing the word ‘‘or’’ at the end
of paragraph (b)(1)(ii);
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I
101 See
supra note 99.
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c. Removing the phrase ‘‘(§ 239.15A
and § 274.11A of this chapter)’’ in
paragraph (b)(1)(iii);
I d. Removing the period at the end of
paragraph (b)(1)(iii) and adding in its
place ‘‘; or’’;
I e. Adding new paragraph (b)(1)(iv);
and
I f. Revising paragraphs (d)(1)(i) and
(d)(2)(i).
The addition and revisions read as
follows:
I
§ 232.401 XBRL-Related Document
submissions.
(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 (§ 239.15A and § 274.11A of this
chapter) 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 XBRL-Related
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 provided that, in the case of
a Form N 1A filing that includes more
than one series (as that term is used in
rule 18f–2(a) under the Investment
Company Act (§ 270.18f 2(a) of this
chapter), a filer may include in
mandatory content complete risk/return
summary information for any one or
more of those series.
*
*
*
*
*
(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);
*
*
*
*
*
(2) * * *
(i) The exhibit index of a Form 10–K
(§ 249.310 of this chapter), 10–Q
(§ 249.308a of this chapter), 10
(§ 249.210 of this chapter), 10–SB
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39299
(§ 249.210b of this chapter), 10–KSB
(§ 249.310b of this chapter), 10–QSB
(§ 249.308b of this chapter), 20–F or N–
1A and, in the case of risk/return
summary information submitted under
paragraph (b)(1)(iv) of this section,
within the XBRL-Related Documents as
a tagged data element;
*
*
*
*
*
3. Revise § 232.402(a)(1) to read as set
forth below and amend § 232.402(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;
*
*
*
*
*
PART 239—FORMS PRESCRIBED
UNDER THE SECURITIES ACT OF 1933
4. The general authority citation for
Part 239 is revised to read as follows:
I
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.
*
*
*
*
*
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:
I
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:
I
§ 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
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mstockstill on PROD1PC66 with RULES4
‘‘EX 100’’ as specified in the EDGAR
Filer Manual and submit the XBRL
Related Documents in such a manner
that will permit the information for each
series and, for any information that does
not relate to all of the classes in a filing,
each 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
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17:21 Jul 16, 2007
Jkt 211001
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:
I
8. Amend General Instruction B.4.(b)
of Form N 1A (referenced in §§ 239.15A
and 274.11A) by revising ‘‘8b–32 [17
CFR 270.8b–1—270.8b–32]’’ to read
‘‘8b–33 [17 CFR 270.8b–1—270.8b–33]’’.
I
Note: The text of Form N–1A will not
appear in the Code of Federal Regulations.
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.
Dated: July 11, 2007.
By the Commission.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–13738 Filed 7–16–07; 8:45 am]
*
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]]>Agencies
[Federal Register Volume 72, Number 136 (Tuesday, July 17, 2007)]
[Rules and Regulations]
[Pages 39290-39300]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-13738]
[[Page 39289]]
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Part V
Securities and Exchange Commission
-----------------------------------------------------------------------
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; Final
Rule
Federal Register / Vol. 72 , No. 136 / Tuesday, July 17, 2007 / Rules
and Regulations
[[Page 39290]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 232, 239, 270 and 274
[Release Nos. 33-8823; IC-27884; 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: Final rule.
-----------------------------------------------------------------------
SUMMARY: We are adopting 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: Effective Date: August 20, 2007.
FOR FURTHER INFORMATION CONTACT: Alberto H. Zapata, Senior Counsel, 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, 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 adopting 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''). \6\
---------------------------------------------------------------------------
\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.
\6\ The Commission proposed these amendments in February 2007.
Securities Act Release No. 8781 (Feb. 6, 2007) [72 FR 6676 (Feb. 12,
2007)] (``Proposing Release'').
---------------------------------------------------------------------------
Table of Contents
I. Background
A. Interactive Data and XBRL
B. The Voluntary Program and 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. Paperwork Reduction Act
IV. Cost/Benefit Analysis
V. Promotion Of Efficiency, Competition, and Capital Formation
VI. Final Regulatory Flexibility Analysis
VII. Statutory Authority
Text of Rule and Form Amendments
I. Background
A. Interactive Data and XBRL
For the past several years, the Commission has been evaluating the
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.\7\ 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.\8\
---------------------------------------------------------------------------
\7\ 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 (``September 25 Press Release''); 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 (``January 11 Press Release''); 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.
\8\ 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 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.
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.
Tags are defined in 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''). 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\ 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 has contracted with XBRL US, Inc., the U.S. based
jurisdiction 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.\11\
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\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\ September 25 Press Release, supra note 7.
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[[Page 39291]]
B. The Voluntary Program and Tagging of Mutual Fund Information
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 financial
information tagged in XBRL format as an exhibit to certain filings on
the Commission's Electronic Data Gathering, Analysis and Retrieval
System (``EDGAR'').\12\ The Commission adopted the voluntary program to
help evaluate the usefulness of data tagging and XBRL to registrants,
investors, the Commission, and the marketplace.\13\ 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.\14\
The data currently permitted in XBRL exhibits is limited to financial
information.
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\12\ See Securities Act Release No. 8529 (Feb. 3, 2005) [70 FR
6556 (Feb. 8, 2005)] (``XBRL Adopting Release''); Securities Act
Release No. 8496 (Sept. 27, 2004) [69 FR 59094 (Oct. 1, 2004)]
(``XBRL Proposing Release''). See also Securities Act Release No.
8497 (Sept. 27, 2004) [69 FR 59111 (Oct. 1, 2004)] (concept release
soliciting comment on data tagging).
\13\ XBRL Adopting Release, supra note 12, 70 FR at 6556-57.
\14\ January 11 Press Release, supra note 7. 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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The current voluntary program extends to financial information for
investment companies, including open end management investment
companies (``mutual funds'').\15\ In February of this year, we proposed
amendments to the voluntary program that would permit mutual funds to
tag the information in the risk/return summary section of their
prospectuses using a taxonomy developed by the Investment Company
Institute (``ICI'').\16\
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\15\ 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.
\16\ The ICI is a national association of the American
investment company industry. In March 2006, the ICI announced an
initiative to create a taxonomy to cover the risk/return summary
information. See 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/2006/06_news_mfimc.html#TopOfPage; ICI Unveils Draft
XBRL Taxonomy For Public Review, ICI Press Release, Jan. 4, 2007,
available at: https://www.ici.org/statements/nr/07_news_xbrl_
txnmy.html#TopOfPage.
In a letter to the Commission staff, dated May 18, 2007, the ICI
advised that the risk/return summary taxonomy is ready for use and
described its response to comments received regarding the taxonomy
development. See Letter from Donald J. Boteler, Vice President--
Operations and Continuing Education, ICI, to Andrew J. Donohue,
Director, Division of Investment Management (May 18, 2007)
(``Boteler Letter''), available at: https://www.sec.gov/comments/s7-
05-07/s70507-21.pdf. The ICI also indicated that the schema files
and reference materials for the taxonomy are available at: https://
xbrl.ici.org.
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The risk/return summary section of the mutual fund prospectus
contains important information about investment objectives and
strategies, risks, and costs,\17\ and tagging this information could
provide powerful tools for investors. With almost half of all U.S.
households owning mutual funds,\18\ 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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\17\ Items 2 and 3 of Form N-1A [17 CFR 239.15A and 274.11A].
\18\ 2007 Investment Company Fact Book, at 57-58, Investment
Company Institute (2007), available at: https://www.ici.org/home/
2007_factbook.pdf.
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The Commission received eight comment letters on the proposed rule
amendments, including comments from software vendors, an accounting
firm, a trade association, and several individuals.\19\ These
commenters generally supported the proposed rules to extend the
interactive data voluntary reporting program to the risk/return summary
section of mutual fund prospectuses. We are adopting the proposed
amendments, with minor modifications to address commenters'
recommendations. The rule amendments are 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.
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\19\ See comment letters of Confluence (Mar. 14, 2007); Walter
S. Hamscher (``Hamscher'') (Mar. 2, 2007); Charles S. Hoffman
(``Hoffman'') (Feb. 10, 2007); ICI (Mar. 14, 2007); NewRiver, Inc.
(``NewRiver'') (Mar. 14, 2007); PricewaterhouseCoopers LLP (``PWC'')
(Mar. 14, 2007); Rivet Software, Inc. (``Rivet'') (Mar. 14, 2007);
Ayal Rosenthal (``Rosenthal'') (Mar. 6, 2007). The ICI contracted
with PWC to design and construct the risk/return taxonomy, and
Hamscher was a subcontractor to PWC. The comment letters are
available on the Commission's Web site at: https://www.sec.gov/
comments/s7-05-07/s70507.shtml.
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II. Discussion
As part of our ongoing effort to evaluate the usefulness of data
tagging, we are adopting amendments to extend the voluntary program to
enable mutual funds to submit exhibits containing tagged risk/return
summary information attached to EDGAR filings.\20\ Any mutual fund may
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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\20\ The amendments do not alter the current 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.\21\
We are adding the risk/return summary information set forth in Items 2
and 3 of Form N-1A as a new item of Mandatory Content, with two
modifications to our proposal that address commenters' recommendations.
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\21\ Rule 401(b)(1) of Regulation S-T [17 CFR 232.401(b)(1)].
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Our proposal, like the current voluntary program, would have
required that Mandatory Content ``consist of a complete set of
information for all periods presented in the corresponding official
EDGAR filing.'' \22\ First, the adopted amendments clarify that, in the
case of a Form N 1A filing that includes more than one series,\23\ a
filer may tag a complete set of risk/return summary information for any
one or more series.\24\ For example, if a filing contains information
about four series, a filer could tag information for one, two,
[[Page 39292]]
three, or four series. Filers who choose to tag the information for a
particular series would be required to tag all the information for that
series, including the information for each class of the series.\25\
Second, we have modified the proposed amendments, which would have
required the information for each class to be separately identified, to
clarify, as suggested by a commenter,\26\ that this requirement applies
only to information that does not relate to all of the classes in a
series.\27\ Thus, class-specific information, such as expenses and
performance, would be required to be separately identified by class.
Information that is not class-specific, such as investment objectives,
would not be required to be separately identified by class.
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\22\ Rule 401(b)(1)(i) of Regulation S-T [17 CFR
232.401(b)(1)(i)].
\23\ 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.
\24\ Rule 401(b)(1)(iv) of Regulation S-T [17 CFR
232.401(b)(1)(iv)].
\25\ 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].
\26\ See letter from ICI, supra note 19.
\27\ Rule 8b-33 under the Investment Company Act [17 CFR 270.8b-
33].
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Three commenters stated that if a mutual fund's official filing
contains information for more than one series or class, the fund should
be permitted to submit tagged risk/return summary information for one
or more, but fewer than all, series or classes.\28\ One of these
commenters indicated that this approach would provide the broadest
possible participation in the voluntary program.\29\ We agree with
these commenters that mutual funds volunteering to participate in the
reporting program that include more than one series in an official
filing should not be required to tag the information for all series in
the filing. A mutual fund's series represent separate portfolios of
securities, each with its own discrete investment objectives and
strategies. Each series of a registered investment company is a
distinct mutual fund though they are organized as part of a single
legal entity. As a result, we have concluded that tagging one or more
series should not require tagging all the series of a fund. Therefore,
our rule amendments permit mutual funds to submit tagged risk/return
summary information for one or more series in an official filing.\30\
This flexibility should encourage participation in the voluntary
program.\31\
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\28\ See letters from Hamscher, ICI, and PWC, supra note 19.
\29\ See letter from ICI, supra note 19.
\30\ Rule 401(b)(1)(iv).
\31\ 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 12, 69 FR at 59097 n. 49. Under amended rule 8b-
33, a mutual fund will 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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We disagree, however, with commenters' recommendations \32\ that
volunteers be permitted to tag the risk/return summary information for
less than all classes for any mutual fund or series selected.
Permitting tagged submissions for less than all the classes of a fund
or series would significantly impair the Commission's and users'
ability to evaluate the effectiveness of the ICI's risk/return summary
taxonomy in tagging class-specific information. In addition, it would
limit the ability to assess the usefulness of the taxonomy in
facilitating the comparison of class-specific information, such as
expenses and performance, within a fund.
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\32\ See letters from Hamscher, ICI, and PWC, supra note 19.
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As with all tagged exhibits under the voluntary program,
submissions of tagged exhibits containing risk/return summary
information will be supplemental and will not replace the required HTML
or ASCII version of the information called for in Form N-1A. Volunteers
will 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.\33\ While tagged exhibits
will 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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\33\ 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 will undergo technical validations. The official filing will
continue to follow the normal process for receipt and acceptance.
That is, it will 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 will
be removed and the official filing will be accepted and disseminated
without the tagged documents. The volunteer will be notified of the
submission problem with the tagged documents. If the official filing
fails to meet the required receipt and acceptance process and is
suspended for any reason, any tagged risk/return summary information
submitted with the official filing will also be suspended.
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We are adopting, as proposed, the requirement that mutual funds
submitting tagged risk/return summary information must include this
information as an exhibit to an amendment to a previous filing on Form
N-1A.\34\ Form N-1A filings, which contain mutual fund registration
statements (or amendments thereto), are often subject to revision prior
to effectiveness. For this reason, the rules do 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 rules provide that a tagged exhibit to a Form N-1A filing, whether
the filing is an initial registration statement or an amendment
thereto, may be submitted only as an amendment to the filing to which
the tagged exhibit relates and only after the effective date of such
filing.\35\ An exhibit containing tagged risk/return summary
information may be submitted under rule 485(b) of the Securities Act,
which provides for immediate effectiveness of amendments that make non-
material changes, and will only need to contain the new exhibit, a
facing page, a signature page, a cover letter explaining the nature of
the amendment, and a revised exhibit index.
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\34\ See Rule 401(a) of Regulation S-T [17 CFR 232.401(a)]; rule
8b-33. A mutual fund submitting tagged risk/return summary
information as an exhibit to Form N-1A will be required to name each
document ``EX-100'' as specified in the EDGAR Filer Manual. We also
are adopting 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.
\35\ Rule 401(a); rule 8b-33.
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The voluntary program requires all volunteers to use the
appropriate version of a standard taxonomy, supplemented with extension
taxonomies as specified by the EDGAR Filer Manual. Filers submitting
tagged risk/return summary information should not include the risk/
return summary taxonomy in their submissions as this taxonomy will be
stored as a part of the EDGAR system. Section 5.2.4 of the EDGARLink
Filer Manual (Volume II): ``EDGAR Filing'' will provide instructions
and guidance on the preparation, submission, and validation of EDGAR-
acceptable electronic filings with attached tagged risk/return summary
information.\36\ The EDGAR system upgrade to Release 9.7 is scheduled
to become available on August 20, 2007, to, among other things,
[[Page 39293]]
enable EDGAR to process tagged risk/return summary information when the
expanded voluntary program becomes effective.
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\36\ Rule 301 of Regulation S-T, the regulation that governs the
preparation and transmission of electronic filings on the
Commission's EDGAR system, requires electronic filings to be
prepared in accordance with the provisions of the EDGAR Filer
Manual. The Filer Manual contains the technical formatting
requirements for electronic submissions. Filers must comply with
those requirements to ensure the timely receipt and acceptance of
documents submitted to the Commission in an electronic format. The
Commission's EDGAR Filer Manual is available at: https://www.sec.gov/
info/edgar.shtml.
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Similar to the current voluntary program, volunteers will be free
to submit tagged risk/return summary information regularly or from time
to time, and volunteers may stop and start as they choose.
Participating in the voluntary program will 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 will, 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.\37\
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\37\ See rule 401(c)(1) of Regulation S-T [17 CFR 232.401(c)(1)]
(requires tagged exhibits to reflect the same information as
corresponding official filing); XBRL Adopting Release, supra note
12, 70 FR at 6559 n. 48.
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One commenter, while agreeing that participation in the voluntary
program should not create a continuing obligation to submit tagged
risk/return summary information as an exhibit to a subsequent post-
effective amendment, noted that rendering tools may not be able to
detect that tagged data is no longer current.\38\ The commenter
encouraged the Commission to consider whether additional safeguards,
such as the option to withdraw tagged exhibits, should be made
available to ensure that there is no liability to funds or harm to
investors if rendering tools utilize outdated information. As we noted
in response to similar comments when the voluntary program rules were
initially adopted, submissions to EDGAR cannot, as a practical matter,
be withdrawn after public dissemination.\39\ In order to address
questions of potential harm to investors and liability to mutual funds,
the rules provide for cautionary disclosures \40\ and liability
protections.\41\
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\38\ See letter from ICI, supra note 19.
\39\ XBRL Adopting Release, supra note 12, 70 FR at 6559.
\40\ See infra Section II.B.
\41\ See infra Section II.C.
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The amendments we are adopting will, as proposed, provide mutual
funds with the option to submit tagged financial highlights or
condensed financial information as a tagged exhibit to an amendment to
the Form N 1A filing to which the information relates.\42\ Mutual funds
also may continue to submit this information as an exhibit to Form N-
CSR, as currently permitted, whether or not they submit tagged risk/
return summary information.\43\ A mutual fund submitting tagged risk/
return summary information may, but is not required to, submit tagged
financial highlights or condensed financial information. Similarly, a
mutual fund that submits tagged financial highlights or condensed
financial information may, but is not required to, submit tagged risk/
return summary information.
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\42\ 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 [17 CFR
232.401(a) and (b)(1)(iii)] (permitting information set forth in
Item 8(a) of Form N-1A as Mandatory Content under the voluntary
program).
\43\ Rule 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.
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B. Required Disclosure
The Commission is adopting, as proposed, a requirement that the
exhibit index of any Form N-1A filing that includes a tagged exhibit
disclose that the purpose of submitting the tagged exhibit is to test
the related format and technology and, as a result, investors should
not rely on the exhibit in making investment decisions.\44\ In
addition, we are requiring this disclosure to appear within a tagged
exhibit, as recommended by some commenters.\45\
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\44\ Rule 401(d)(1)(ii) and (d)(2)(i) of Regulation S-T [17 CFR
232.401(d)(1)(ii) and (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.''
\45\ See letters from ICI and PWC, supra note 19.
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We believe that the inclusion of the cautionary disclosure within
tagged risk/return summary exhibits may help to alert investors and
other users that the exhibits should not be relied on in making
investment decisions. We are modifying the proposed rule to require
that the disclosure be included within the exhibits as a tagged data
element.\46\ The ICI indicated in its comment letter that an element
could be added to the risk/return summary taxonomy for the display of
this disclosure and has now done so. We encourage parties that are
developing rendering tools for the risk/return summary taxonomy to make
use of this data tag in order to display the cautionary disclosure in
rendered versions of funds' risk/return summary information.
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\46\ Rule 401(d)(2)(i).
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The adopted rules, like the proposed rules and consistent with one
commenter's recommendation,\47\ do not require a Form N-1A filing that
includes tagged exhibits containing only risk/return summary
information to disclose that the information in the exhibits is
``unaudited'' or ``unreviewed.'' This disclosure will be required in a
Form N 1A filing with which tagged financial highlights or condensed
financial information is submitted.\48\
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\47\ See letter from ICI, supra note 19.
\48\ Rule 401(d)(1)(i) of Regulation S-T [17 CFR
232.401(d)(1)(i)].
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C. Liability Issues
The two commenters who addressed liability issues supported the
proposal to extend to tagged risk/return summary information limited
protection from liability that is similar to the protection provided
under the current voluntary program,\49\ and we are adopting the
liability protection as proposed. We are providing this protection
because liability remains for the official filing, and because the
program is experimental, it contains certain safeguards, and the
program should not unnecessarily deter volunteers from participating.
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\49\ See letters from ICI and PWC, supra note 19.
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Under the current voluntary program, tagged exhibits are not deemed
filed for purposes of Section 18 of the Securities Exchange Act of 1934
(``Exchange Act'') \50\ or Section 34(b) of the Investment Company
Act,\51\ or otherwise subject to the liability of these sections.\52\
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.\53\
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\50\ 15 U.S.C. 78r.
\51\ 15 U.S.C. 80a-33(b).
\52\ 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.
\53\ Rule 402(b) of Regulation S-T [17 CFR 232.402(b)].
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The amendments we are adopting, as proposed, extend the liability
protection
[[Page 39294]]
under the voluntary program to include Section 11 of the Securities
Act.\54\ Specifically, we are amending 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
are amending rule 402(a) to state explicitly that tagged exhibits are
not part of any registration statement to which they relate.\55\
Finally, the provision in the current rules 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 includes
liability protections under the Securities Act, and it will apply to
tagged documents submitted as exhibits on Form N-1A.\56\ 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.\57\
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\54\ In addition, the current provisions of rule 402(a) will
apply to tagged risk/return summary information. In particular, a
tagged exhibit on Form N-1A will 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 will
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 will 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.
\55\ 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
voluntary program, Section 11 liability relief will not extend to
the information that the official filing contains.
\56\ Rule 402(b). We are adopting technical amendments to rule
402(b) to replace each reference to ``Item 401'' with ``Rule 401.''
\57\ 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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D. The Risk/Return Summary Taxonomy and Software Tools
The taxonomy for tagging the risk/return summary information was
developed by the ICI. Mutual funds will be permitted to submit
documents containing risk/return summary information that is tagged
using the ICI's taxonomy commencing on the effective date of the rules
that we are adopting. In January 2007, the ICI released a draft risk/
return summary taxonomy for public review and comment.\58\ The final
taxonomy was submitted for acknowledgement by the ICI to XBRL
International on May 16, 2007,\59\ in accordance with XBRL
International procedures.\60\ The taxonomy received acknowledgement in
June 2007.\61\ The ICI also intends to seek approval of the taxonomy in
accordance with the procedures of XBRL International, but has indicated
that requiring the taxonomy to be approved prior to use in the
voluntary program could introduce delay, the length of which is
unpredictable.\62\
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\58\ See ICI Unveils Draft XBRL Taxonomy For Public Review,
Investment Company Institute Press Release, Jan. 4, 2007, available
at: https://www.ici.org/statements/nr/07_news_xbrl_
txnmy.html#TopOfPage. 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.
\59\ See Boteler Letter, supra note 16.
\60\ 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. There are
two levels of XBRL taxonomy recognition: (1) ``acknowledgement'' is
formal recognition that a taxonomy complies with XBRL
specifications, including testing by a defined set of validation
tools; and (2) ``approval'' is a formal recognition requiring more
detailed quality assurance and testing, including compliance with
official XBRL guidelines for the type of taxonomy under review,
creation of a number of instance documents, and an open review
period after acknowledgement. For more information regarding the
XBRL taxonomy recognition process, see ``Taxonomy Recognition
Process'' on the XBRL International Web site available at: https://
www.xbrl.org/TaxonomyRecognition/.
\61\ The taxonomy is available on XBRL International's Web site
at: https://www.xbrl.org/Taxonomy/ici/ici-rr-summarydocument-
20070516-acknowledged.htm.
\62\ See letter from ICI, supra note 19. See also letter from
Hamscher, supra note 19.
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We have concluded that the ICI's taxonomy is sufficiently developed
to permit its use in the voluntary program. Three commenters involved
in the taxonomy development process stated that the risk/return summary
taxonomy is sufficiently developed for use in the voluntary program,
noting that the taxonomy was developed through the use of a broad
working group that was given the opportunity to review and comment on
the taxonomy as it was developed and that the taxonomy was subjected to
a public review and comment period.\63\ While some commenters suggested
changes to the taxonomy, such as reducing the number of elements in the
taxonomy \64\ or avoiding the use of complex structures,\65\ these
commenters did not suggest that the voluntary program should be delayed
unless the taxonomy is modified. The ICI has considered the comments it
received on the taxonomy, as well as the comments on the taxonomy
submitted to the Commission, and has submitted a letter to the
Commission's staff summarizing its response to the commenters and the
taxonomy changes that were made.\66\ In its letter, the ICI asserts
that the taxonomy is ready for use with the Commission's interactive
data voluntary reporting program. In light of the ICI's consideration
of comments related to the taxonomy, and the comments that we received
favoring the expansion of the voluntary program to the risk/return
summary,\67\ we have concluded that it is appropriate to permit use of
the taxonomy in its present state of development. Further, the purpose
of the voluntary program is to test and evaluate tagging technology,
and, as a result, we agree with commenters' recommendations that it is
not necessary for approval of the taxonomy to be obtained before
permitting volunteers to submit tagged documents.
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\63\ See letters from Hamscher, ICI, and PWC, supra note 19.
\64\ See letter from NewRiver, supra note 19.
\65\ See letter from Rivet, supra note 19.
\66\ See Boteler Letter, supra note 16.
\67\ See letters from Confluence, Hamscher, Hoffman, ICI,
NewRiver, PWC, and Rosenthal, supra note 19.
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As in the current voluntary program, filers will be permitted to
use extensions to the risk/return summary taxonomy, which are
additional tags created by a particular user that further refine the
tags contained in a standard taxonomy. Some commenters supported
permitting the use of at least some extensions with the risk/return
summary taxonomy,\68\ but one commenter opposed the use of extensions
to the risk/return summary taxonomy, stating that the extensions would
introduce complexity.\69\ While we recognize that permitting the use of
extensions to the risk/return summary taxonomy may affect the ability
to compare or render tagged submissions, we believe that it will be
helpful to permit extensions on an unrestricted basis at this time.
Experimentation with extensions will permit the Commission, filers, and
users of tagged filings to better assess the need for extensions to the
risk/return summary taxonomy and the impact that extensions may have on
tagged documents.
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\68\ See letters from ICI, PWC, and Rivet, supra note 19.
\69\ See letter from Confluence, supra note 19.
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One commenter recommended that the Commission impose validity
testing on tagged risk/return summary exhibits
[[Page 39295]]
in addition to the tests currently performed under the voluntary
program, but we have determined not to impose additional testing at
this time.\70\ The commenter stated that additional validity testing
would improve the quality of tagged exhibits submitted. Currently,
under the voluntary program, validity testing of tagged exhibits
consists of testing for: (1) Content validation (i.e., validating for
invalid ASCII characters); (2) document-type validation (e.g., ensuring
that EX-100.INS documents have .xml extensions and ``XBRL tags''); and
(3) XBRL validation (e.g., ensuring that exhibits follow appropriate
XBRL standards and are structured according to the taxonomy). We agree
that increased validity testing of tagged submissions might improve
their quality. The purpose of the voluntary program, however, is to
test the technology and the taxonomy. We, therefore, believe that it is
premature to impose additional validity testing upon tagged risk/return
summary documents.
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\70\ See comment letter from Hoffman, supra note 19.
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The Commission's Web site currently provides access to a prototype
XBRL Web application that converts tagged financial information
submitted in the voluntary program into a rendered, or human readable,
format.\71\ At present, our Web site does not provide access to any
rendering or analytical tools for use with tagged risk/return summary
information. Some commenters favored a tool on the Commission's Web
site that would render tagged risk/return summary documents.\72\ One
commenter noted that such a tool could help both investors and mutual
funds to better understand and explore the benefits of tagging and
could stimulate the development of other, more sophisticated tools for
rendering tagged data.\73\ We agree that the availability of rendering
and analysis tools will help investors and mutual funds, as well as
third party users, to evaluate the benefits of tagged risk/return
summary data.
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\71\ See ``Interactive Financial Report Viewer--Preview
Release'' Web page on the Commission Web site, available at: https://
www.sec.gov/spotlight/xbrl/xbrlwebapp.htm.
\72\ See letters from Hamscher, ICI, and PWC, supra note 19.
\73\ See letter from ICI, supra note 19.
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We will continue to analyze rendering and other capabilities
specifically developed for the risk/return summary taxonomy, and we may
add these features to our Web site in the future. The Commission also
encourages funds and third parties to develop these tools. Users of
EDGAR data on the Commission's Web site will be able to download the
tagged risk/return summary information to perform their own analysis if
they have appropriate software. Users will continue to be able to view
the official filing in ASCII or HTML format, as they can today.
E. Effective Date
The effective date of these amendments is August 20, 2007, in order
to provide sufficient time to implement EDGAR system changes necessary
to provide for risk/return summary functionality.
III. Paperwork Reduction Act
The rule and form amendments contain ``collection of information''
requirements within the meaning of the Paperwork Reduction Act of 1995
(``PRA'').\74\ Provision of information under the 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 Office of Management
and Budget (``OMB'') control number.
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\74\ 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 rule and form
amendments expand 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. We published notice soliciting
comments on the collection of information requirements in the release
proposing the amendments and submitted the proposed collection of
information to OMB for review in accordance with 44 U.S.C. 3507(d) and
5 CFR 1320.11.\75\ OMB pre-approved these collection requirements. We
received no comments on the collection of information requirements.
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\75\ See Proposing Release, supra note 6, 72 FR at 6682-83.
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The Voluntary Program
The amendments, which will expand 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, will
increase the burden associated with the existing collection of
information for Voluntary XBRL-Related Documents. The expansion of the
voluntary program will be open to any mutual fund choosing to
participate. We estimate that 10% of the approximately 545 fund
complexes that have mutual funds, or 55 fund complexes, will each
submit documents containing tagged risk/return summary information for
one mutual fund.\76\ 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 expanded
voluntary program.\77\
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\76\ In the case of a mutual fund with multiple series, our
estimate treats each series as a separate mutual fund.
\77\ The ICI is undertaking 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/2006/06_news_xbrl.html#TopOfPage.
One commenter suggested that the Commission offer incentives to
encourage volunteers to participate in the expanded voluntary
program. See letter from ICI, supra note 19. Specifically, the
commenter suggested that the Commission: (1) Offer expedited review
of mutual fund exemptive applications; or (2) offer expedited review
of an initial registration statement on Form N-1A or an amendment to
a registration statement to add a new fund or series. Id. The
Commission did not initially offer incentives for volunteers to
submit tagged information as part of the current voluntary program.
The Commission subsequently offered expedited review of registration
statements and annual reports to volunteers agreeing to participate
in a test group. See January 11 Press Release, supra note 7.
Volunteers that participate in the test group agree to furnish
financial data contained in their periodic and investment company
reports in XBRL format for at least one year and provide feedback on
their experiences. Id. At this time, we are not offering specific
incentives to encourage volunteers to participate in the expanded
voluntary program, however, we will continue to assess the need for
incentives going forward.
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Submission of tagged risk/return summary information will 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 will have to tag the risk/return summary section of its prospectus
using the risk/return summary taxonomy and potentially develop taxonomy
extensions and will 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 will require, on average,
approximately 110 burden hours per mutual fund,\78\ and the
[[Page 39296]]
creation of such tagged documents in subsequent years will require an
average 10 burden hours per mutual fund.\79\ 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.\80\
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\78\ 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 12, 70 FR at
6563; XBRL Proposing Release, supra note 12, 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., Webcast Archive of October 3 Interactive
Data Roundtable, Oct. 3, 2006, available at: https://
www.connectlive.com/events/secinteractivedata100306/ (initial
submission in voluntary program required approximately 60 to 80
total labor hours); John Stantial, Director of Financial Reporting,
United Technologies Corporation, Transcript of June 12 Interactive
Data Roundtable, June 12, 2006, available at: https://www.sec.gov/
spotlight/xbrl/xbrlofficialtranscript0606.pdf, 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 will 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.
\79\ 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 12, 70 FR at 6563; XBRL
Proposing Release, supra note 12, 69 FR at 59101. We continue to
believe that this estimate is appropriate.
\80\ (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 will incur an additional 2,365 burden
hours associated with the amendments.\81\ We further estimate that 75%
of this burden increase, or approximately 1,774 hours, will be borne
internally by the mutual fund complex. We estimate that this internal
burden increase converted to dollars will amount to approximately
$393,828.\82\
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\81\ 55 documents per year x 43 hours per submission = 2,365
hours.
\82\ This cost increase is estimated by multiplying the increase
in annual internal hour burden (1,774) by the estimated hourly wage
rate of $222.00. The estimated wage figure is based on published
rates for compliance attorneys and programmer analysts, 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 $261 and $209, respectively. See
Securities Industry Association, Report on Management & Professional
Earnings in the Securities Industry 2006 (Sept. 2006) (``SIA
Report''). The estimated wage rate is further based on the estimate
that compliance attorneys would account for one quarter of the hours
worked and programmer analysts would account for the remaining three
quarters, resulting in a weighted wage rate of $222.00 (($261 x .25)
+ ($209 x .75)). The wage rates used in the Proposing Release were
based upon the Securities Industry Association, Report on Management
& Professional Earnings in the Securities Industry 2005 (Sept.
2005), and the total internal and external burden increases
converted to dollars differs from the estimates in the Proposing
Release due to changes in wage rates in the 2006 SIA Report.
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We also estimate that 25% of the burden, or approximately 591
hours, will be outsourced to external professionals and consultants
retained by the mutual fund complex at an average cost of $256.00 per
hour for a total annual increase of approximately $151,296.\83\ In
addition, it is our understanding that many participants will also have
annual software licensing costs. We estimate that the cost of licensing
software will be $333 per participant per year, for a total annual
increase of $18,315.\84\ Altogether, the total annual increase in
external costs related to the amendments will be $169,611.\85\
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 will be introduced
in connection with the initial cost incurred, and the efficiencies that
likely will be realized over the course of three years.
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\83\ 591 hours x $256.00 per hour = $151,296. The estimated wage
figure is based on published rates for attorneys and senior
programmers, 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 $292 and
$244, respectively. See SIA Report, supra note 82. The estimated
wage rate is further based on the estimate that attorneys will
account for one quarter of the hours worked and senior programmers
will account for the remaining three quarters, resulting in a
weighted wage rate of $256.00 (($292 x .25) + ($244 x .75)).
\84\ $333 per participant x 55 participants = $18,315. The
estimated annual cost of the software comes from our previous PRA
estimate for the current voluntary program. See XBRL Adopting
Release, supra note 12, 70 FR at 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 will
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 will be waived (based upon our understanding that
software providers indicated that they will 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.
\85\ This annual total consists of $151,296 in outside
professional costs plus $18,315 in software costs.
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Regulation S-T
Regulation S-T (OMB Control No. 3235-0424) specifies the
requirements that govern the electronic submission of documents. The
amendments will revise rules under Regulation S-T, but the associated
increase in burden is reflected in the `
