Interactive Data for Mutual Fund Risk/Return Summary, 35442-35469 [E8-13356]
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Federal Register / Vol. 73, No. 121 / Monday, June 23, 2008 / Proposed Rules
SECURITIES AND EXCHANGE
COMMISSION
17 CFR Parts 230, 232, 239, 270, and
274
[Release Nos. 33–8929, 34–57942, 39–2457,
IC–28298; File Number S7–12–08]
RIN 3235–AK13
Interactive Data for Mutual Fund Risk/
Return Summary
Securities and Exchange
Commission.
ACTION: Proposed rule.
AGENCY:
SUMMARY: We are proposing rules
requiring mutual funds to provide risk/
return summary information in a form
that would improve its usefulness to
investors. Under the proposed rules,
risk/return summary information could
be downloaded directly into
spreadsheets, analyzed in a variety of
ways using commercial off-the-shelf
software, and used within investment
models in other software formats.
Mutual funds would provide the risk/
return summary section of their
prospectuses to the Commission and on
their Web sites in interactive data
format using the eXtensible Business
Reporting Language (‘‘XBRL’’). The
interactive data would be provided as
an exhibit to registration statements.
The proposed rules are intended not
only to make risk/return summary
information easier for investors to
analyze, but also to assist in automating
regulatory filings and business
information processing. Interactive data
has the potential to increase the speed,
accuracy, and usability of mutual fund
disclosure, and eventually reduce costs.
We are also proposing to permit
investment companies to submit
portfolio holdings information in our
interactive data voluntary program
without being required to submit other
financial information.
DATES: Comments should be submitted
on or before August 1, 2008.
ADDRESSES: Comments may be
submitted by any of the following
methods:
jlentini on PROD1PC65 with PROPOSALS2
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/proposed.shtml);
• Send an e-mail to rulecomments@sec.gov. Please include File
Number S7–12–08 on the subject line;
or
• Use the Federal eRulemaking Portal
(https://www.regulations.gov). Follow the
instructions for submitting comments.
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Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street, NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number S7–12–08. This file number
should be included on the subject line
if e-mail is used. To help us process and
review your comments more efficiently,
please use only one method. The
Commission will post all comments on
the Commission’s Internet Web site
(https://www.sec.gov/rules/
proposed.shtml). Comments are also
available for public inspection and
copying in the Commission’s Public
Reference Room, 100 F Street, NE.,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. All comments received
will be posted without change; we do
not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly.
FOR FURTHER INFORMATION CONTACT:
Alberto H. Zapata, Senior Counsel, or
Tara R. Buckley, Branch Chief, Office of
Disclosure Regulation, Division of
Investment Management, at (202) 551–
6784, U.S. Securities and Exchange
Commission, 100 F Street, NE.,
Washington, DC 20549–5720.
SUPPLEMENTARY INFORMATION: The
Securities and Exchange Commission
(‘‘Commission’’) is proposing
amendments to Rule 485 1 under the
Securities Act of 1933 (‘‘Securities
Act’’), Rules 11,2 202,3 and 401 4 of
Regulation S–T, 5 Rule 8b–33 6 under
the Investment Company Act of 1940
(‘‘Investment Company Act’’), and Form
N–1A 7 under the Securities Act and the
Investment Company Act. We are also
proposing amendments to proposed
Rule 405 of Regulation S–T.8
Table of Contents
I. Introduction and Background
A. Introduction
B. Current Filing Technology and
Interactive Data
C. The Commission’s Multiyear Evaluation
of Interactive Data and Overview of
Proposed Rules
II. Discussion of the Proposed Amendments
A. Submission of Risk/Return Summary
Information Using Interactive Data
1 17
CFR 230.485.
CFR 232.11.
3 17 CFR 232.202.
4 17 CFR 232.401.
5 17 CFR 232.10 et seq.
6 17 CFR 270.8b–33.
7 17 CFR 239.15A and 274.11A.
8 See Securities Act Release No. 8924 (May 30,
2008) [73 FR 32794 (June 10, 2008)] (‘‘Interactive
Data Proposing Release’’).
2 17
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B. Compliance Date
C. Documents and Information Covered by
the Proposed Rules
D. Filing Period
E. Web Site Posting of Interactive Data
F. Accuracy and Reliability of Interactive
Data
G. Required Items
H. Consequences of Non-Compliance and
Hardship Exemption
I. Changes to the Voluntary Program
III. General Request for Comments
IV. Paperwork Reduction Act
V. Cost/Benefit Analysis
VI. Consideration of Burden on Competition
and Promotion of Efficiency,
Competition, and Capital Formation
VII. Initial Regulatory Flexibility Analysis
VIII. Small Business Regulatory Enforcement
Fairness Act
IX. Statutory Authority
X. Text of Proposed Rule and Form
Amendments
I. Introduction and Background
A. Introduction
Over the last several decades,
developments in technology and
electronic data communication have
significantly decreased the time and
cost of filing disclosure documents with
us. Technological developments also
have facilitated greater transparency in
the form of easier access to, and analysis
of, financial reporting and disclosures.
Most notably, in 1993 we began to
require electronic filing on our
Electronic Data Gathering, Analysis and
Retrieval System (‘‘EDGAR’’).9 Since
then, widespread use of the Internet has
vastly decreased the time and expense
of accessing disclosure filed with us.
We continue to update our filing
standards and systems as technologies
improve. These developments assist us
in our goal to promote efficient and
transparent capital markets. For
example, since 2003 we have required
electronic filing of certain ownership
reports filed on Forms 3,10 4,11 and 5 12
in a format that provides interactive
data, and recently we adopted similar
rules governing the filing of Form D.13
In addition, recently we have
encouraged, and in some cases required,
open-end management investment
companies (‘‘mutual funds’’) 14 and
9 In 1993, we began to require domestic issuers to
file most documents electronically. Securities Act
Release No. 6977 (Feb. 23, 1993) [58 FR 14628 (Mar.
18, 1993)]. Electronic filing began with a pilot
program in 1984. Securities Act Release No. 6539
(June 27, 1984) [49 FR 28044 (July 10, 1984)].
10 17 CFR 249.103 and 274.202.
11 17 CFR 249.104 and 274.203.
12 17 CFR 249.105.
13 17 CFR 239.500.
14 An open-end management investment
company is an investment company, other than a
unit investment trust or face-amount certificate
company, that offers for sale or has outstanding any
redeemable security of which it is the issuer. See
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public reporting companies to provide
disclosures and communicate with
investors using the Internet.15 Now, as
part of our continuing efforts to assist
filers as well as investors who use
Commission disclosures, we propose to
require that mutual fund risk/return
summary information be provided in a
format that makes the information
interactive.
Our proposal builds on our voluntary
filer program, started in 2005,16 that
allowed us to evaluate the merits of
interactive data. The voluntary program
allows companies to submit financial
statements on a supplemental basis in
interactive format as exhibits to
specified filings under the Securities
Exchange Act of 1934 (‘‘Exchange Act’’)
and the Investment Company Act.17
Over 75 companies have participated in
the voluntary program. These
companies span a wide range of
industries and company characteristics,
and have a total market capitalization of
over $2 trillion. Companies that
participate in the program still are
required to file their financial
statements in American Standard Code
for Information Interchange (‘‘ASCII’’) or
HyperText Markup Language
(‘‘HTML’’).18
In 2007, we extended the program to
enable mutual funds voluntarily to
submit in interactive data format
supplemental information contained in
the risk/return summary section of their
prospectuses.19 The risk/return
summary contains key information
about a fund’s investment objectives
and strategies, costs, risks, and past
performance.20 Approximately 20
mutual funds from a wide variety of
fund families have submitted risk/return
summary information in interactive
format.
In a recently issued release, we
proposed to require companies, other
than investment companies that are
Sections 4 and 5(a)(1) of the Investment Company
Act [15 U.S.C. 80a–4 and 80a–5(a)(1)].
15 See, e.g. , Exchange Act Release No. 57172 (Jan.
18, 2008) [73 FR 4450 (Jan. 25, 2008)]; Securities
Act Release No. 8861 (Nov. 21, 2007) [72 FR 67790
(Nov. 30, 2007)] (‘‘Summary Prospectus Proposing
Release’’); Exchange Act Release No. 56135 (July 26,
2007) [72 FR 42222 (Aug. 1, 2007)]; Exchange Act
Release No. 55146 (Jan. 22, 2007) [72 FR 4148 (Jan.
29, 2007)]; Securities Act Release No. 8591 (July 19,
2005) [70 FR 44722 (Aug. 3, 2005)].
16 Securities Act Release No. 8529 (Feb. 3, 2005)
[70 FR 6556 (Feb. 8, 2005)] (‘‘Voluntary Program
Adopting Release’’).
17 15 U.S.C. 80a–1 et seq.
18 HTML is a standardized language commonly
used to present text and other information on Web
sites.
19 Securities Act Release No. 8823 (July 11, 2007)
[72 FR 39290 (July 17, 2007)] (‘‘Risk/Return
Voluntary Program Adopting Release’’).
20 Items 2 and 3 of Form N–1A.
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registered under the Investment
Company Act, business development
companies,21 and other entities that
report under the Exchange Act and
prepare their financial statements in
accordance with Article 6 of Regulation
S–X, to submit financial information to
the Commission in interactive data
format.22 In this release, we propose to
extend similar requirements to mutual
fund risk/return summary information.
The submission of mutual fund risk/
return summary information based on
interactive data would create new ways
for investors, analysts, and others to
retrieve and use the information. For
example, users of risk/return summary
information could download cost and
performance information directly into
spreadsheets, analyze it using
commercial off-the-shelf software, or
use it within investment models in
other software formats. Through
interactive data, what is currently static,
text-based information can be
dynamically searched and analyzed,
facilitating the comparison of mutual
fund cost, performance, and other
information across multiple classes of
the same fund and across the more than
8,000 funds currently available.23
Interactive data also could provide a
significant opportunity to automate
regulatory filings and business
information processing, with the
potential to increase the speed,
accuracy, and usability of mutual fund
disclosure. Such automation could
eventually reduce costs. A mutual fund
that uses a standardized interactive data
format at earlier stages of its reporting
cycle could reduce the need for
repetitive data entry and, therefore, the
likelihood of human error. In this way,
interactive data may improve the quality
of information while reducing its cost.
Also, to the extent investors currently
are required to pay for access to mutual
fund risk/return summary information
that has been extracted and reformatted
into an interactive data format by thirdparty sources, the availability of
interactive data in Commission filings
could allow investors to avoid
additional costs associated with thirdparty sources.
We believe that requiring mutual
funds to file the risk/return summary
section of their prospectuses using
21 Business
development companies are a
category of closed-end investment companies that
are not required to register under the Investment
Company Act. 15 U.S.C. 80a–2(a)(48).
22 See Interactive Data Proposing Release, supra
note 8.
23 Investment Company Institute, 2008
Investment Company Fact Book, at 15 (2008),
available at: https://www.icifactbook.org/pdf/
2007_factbook.pdf (as of year-end 2007, there were
8,752 mutual funds).
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interactive data format would enable
investors, analysts, and the Commission
staff to capture and analyze that
information more quickly and at less
cost than is possible using the same
information provided in a static format.
Any investor with a computer would
have the ability to acquire and
download interactive data that have
generally been available only to
intermediaries and third-party analysts.
The proposed interactive data
requirements would not change what is
currently disclosed, but would add a
requirement to include risk/return
summary information in a new format
as an exhibit. Thus the proposal to
require that filers provide risk/return
summary information using interactive
data will not alter the disclosure or
formatting standards of mutual fund
prospectuses, which would continue to
be available as they are today for those
who prefer to view the traditional textbased document.
Throughout this release, we solicit
comment on many issues concerning
the use of interactive data, including
specifically whether mutual fund risk/
return summary information in
interactive data format should be
required as exhibits to Securities Act
registration statements filed with us. We
are seeking comment from investors,
mutual funds, financial intermediaries,
analysts, accountants, and any other
parties or individuals who may be
affected by the use of interactive
disclosure in Commission filings, and
any other members of the public.
B. Current Filing Technology and
Interactive Data
Companies filing electronically are
required to file their registration
statements and periodic reports in
ASCII or HTML format.24 Also, to a
limited degree, our electronic filing
system uses other formats for internal
processing and document-type
identification. For example, our system
uses eXtensible Markup Language
(‘‘XML’’) to process reports of beneficial
ownership of equity securities on Forms
3, 4, and 5 under section 16(a) of the
Exchange Act.25
24 Rule 301 of Regulation S–T [17 CFR 232.301]
requires electronic filings to comply with the
EDGAR Filer Manual, and Section 5.2 of the
EDGAR Filer Manual requires that electronic filings
be in ASCII or HTML format. Rule 104 of
Regulation S–T [17 CFR 232.104] permits filers to
submit voluntarily as an adjunct to their official
filings in ASCII or HTML unofficial PDF copies of
filed documents. Unless otherwise stated, we refer
to filings in ASCII or HTML as traditional format
filings.
25 15 U.S.C. 78p(a).
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Electronic formats such as HTML,
XML, and XBRL are open standards 26
that define or ‘‘tag’’ data using standard
definitions. The tags establish a
consistent structure of identity and
context. This consistent structure can be
recognized and processed by a variety of
different software applications. In the
case of HTML, the standardized tags
enable Web browsers to present Web
sites’ embedded text and information in
predictable format. In the case of XBRL,
software applications, such as
databases, financial reporting systems,
and spreadsheets, recognize and process
tagged information.
XBRL was derived from the XML
standard. It was developed and
continues to be supported by XBRL
International, a collaborative
consortium of approximately 550
organizations representing many
elements of the financial reporting
community worldwide in more than 20
jurisdictions, national and regional.
XBRL U.S., the international
organization’s U.S. jurisdiction
representative, is a non-profit
organization that includes companies,
public accounting firms, software
developers, filing agents, data
aggregators, stock exchanges, regulators,
financial services companies, and
industry associations.27
Risk/return summary information in
interactive format requires a standard
list of tags. These tags are similar to
definitions in an ordinary dictionary,
and they cover a variety of concepts that
can be read and understood by software
applications. For the risk/return
summary, a mutual fund would use the
list of tags for risk/return summary
information developed by the
Investment Company Institute (‘‘ICI’’).28
This list of tags contains descriptive
26 The term ‘‘open standard’’ is generally applied
to technological specifications that are widely
available to the public, royalty-free, at minimal or
no cost.
27 XBRL U.S. supports efforts to promote
interactive financial and business data specific to
the U.S.
28 Unless stated otherwise, when we refer to the
‘‘list of tags for risk/return summary information’’
we mean the interactive data taxonomy developed
by the ICI, including any modifications. We
anticipate entering into a contract to update the
architecture of the taxonomy developed by the ICI
and conform the taxonomy to any changes in the
risk/return summary that we adopt pursuant to a
pending rule proposal. See Summary Prospectus
Proposing Release, supra note 15.
The ICI is a national association of the U.S.
investment company industry. The taxonomy
developed by the ICI received acknowledgement
from XBRL International in June 2007 and is used
by mutual funds participating in the Commission’s
voluntary program. The taxonomy is available on
XBRL International’s Web site at: https://
www.xbrl.org/Taxonomy/ici/ici-rrsummarydocument-20070516-acknowledged.htm.
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labels, authoritative references to
Commission regulations where
applicable, and other elements, all of
which provide the contextual
information necessary for interactive
data 29 to be recognized and processed
by software.30
To apply data tags to risk/return
summary information, a preparer uses
commercially available software that
guides the preparer in mapping
information in the risk/return summary,
such as line item costs in a mutual
fund’s fee table, to the appropriate tags
in the standard list. This involves
locating an element in the list of tags
that represents the particular disclosure
that is to be tagged. Occasionally,
because mutual funds have some
flexibility in preparing the risk/return
summary, particularly the narrative
portions, it is possible that a mutual
fund may wish to use a non-standard
disclosure that is not included in the
standard list of tags. In this situation, a
fund would create a company-specific
element, called an extension.
A mutual fund may choose to tag its
own risk/return summary using
commercially available software, or it
may choose instead to outsource the
tagging process. In the event a mutual
fund relies upon a service provider to
tag the fund’s risk/return summary, the
mutual fund would want to carefully
review the tagging done by the service
provider in order to make sure that the
tagged risk/return summary information
is accurate and consistent with the
information the mutual fund presents in
its traditional format filing.
29 The proposed rules would define the
interactive data necessary to create human-readable
disclosure as the ‘‘interactive data file,’’ which
would be required with every interactive data
submission. See Interactive Data Proposing Release,
supra note 8 (proposing new definitions under 17
CFR 232.11). The EDGAR Filer Manual would
identify any necessary supporting files.
30 For example, contextual information would
identify the entity to which it relates, usually by
using the filer’s CIK number. A hypothetical filer
converting its traditional electronic disclosure of
total annual fund operating expenses of 0.73%
would have to create interactive data that identify
what the 0.73% represents, total annual fund
operating expenses, and that the number is a
percentage. The contextual information would
include other information as necessary; for
example, the date of the prospectus to which it
relates and the series and class to which it applies.
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.
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].
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Because mutual fund risk/return
summary information in interactive data
format, referred to as the interactive data
file, is intended to be processed by
software applications, the unprocessed
interactive data is not readable. Thus,
viewers are necessary to convert the
interactive data file to human readable
format. Some viewers are similar to Web
browsers used to read HTML files.
The Commission’s Web site currently
provides links to four viewers that allow
the public to easily read mutual fund
and other company disclosures
submitted using interactive data.31 One
of these viewers allows users to view
and compare mutual fund risk/return
summary information, including
investment objectives and strategies,
risks, costs, and performance, that is
submitted in interactive data format.32
These viewers demonstrate the
capability of downloading interactive
data into software such as Microsoft
Excel as well as into other applications
that are widely available on the Internet.
In addition, we are aware of other
applications under development that
may provide additional and advanced
functionality.
C. The Commission’s Multiyear
Evaluation of Interactive Data and
Overview of Proposed Rules
In 2004, we began assessing the
benefits of interactive data and its
potential for improving the timeliness
and accuracy of financial disclosure and
analysis of Commission filings.33 As
part of this evaluation, we adopted rules
in 2005 permitting filers, on a voluntary
basis, to provide financial disclosure in
interactive data format as an exhibit to
certain filings on our electronic filing
system. After more than two years of
increasing participation, over 75
companies have chosen to provide
interactive data financial reporting.34
In 2007, we extended the program to
enable mutual funds voluntarily to
submit risk/return summary information
in interactive data format. To date,
31 See viewers available at https://www.sec.gov/
xbrl.
32 A mutual fund information viewer for the
voluntary program is available at: https://
a.viewerprototype1.com/viewer.
33 See 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.
34 A viewer for this interactive data is available
at: https://www.sec.gov/spotlight/xbrl/
xbrlwebapp.shtml. This viewer, one of several
funded by the Commission to demonstrate
interactive data, maintains a running total of
companies and filers submitting data as part of the
voluntary program. As of April 17, 2008, 78
companies had submitted 350 interactive data
reports.
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approximately 20 mutual funds have
chosen to provide interactive data risk/
return summaries.35
During this time, we have kept
informed of technology advances and
other interactive data developments. We
note that several U.S. and foreign
regulators have begun to incorporate
interactive data into their financial
reporting systems. The Federal Deposit
Insurance Corporation (‘‘FDIC’’), the
Federal Reserve, and the Office of the
Comptroller of the Currency (‘‘OCC’’)
require the use of XBRL.36 As of 2006,
approximately 8,200 U.S. financial
institutions were using XBRL to submit
quarterly reports to banking
regulators.37 Countries that have
required or instituted voluntary or pilot
programs for XBRL financial reporting
include Australia, Belgium, Canada,
China, Denmark, France, Germany,
Ireland, Israel, Japan, Korea,
Luxembourg, the Netherlands, New
Zealand, Norway, Singapore, Spain,
Sweden, Thailand, and the United
Kingdom.38
We also have kept informed of
relevant advances and developments by
hosting roundtables on the topic of
interactive data reporting,39 creating the
Commission’s Office of Interactive
Disclosure,40 and meeting with
international securities regulators to
discuss, among other items, timetables
for implementation of interactive data
initiatives for financial reporting.41
Also, staff of the Commission have
attended meetings of the Advisory
Committee on Improvements to
35 The mutual fund information viewer contains
all mutual fund submissions under the voluntary
program. As of May 1, 2008, 21 mutual funds had
submitted 33 interactive data reports.
36 Since 2005, the FDIC, Federal Reserve, and the
OCC have required the insured institutions that
they oversee to file their quarterly Consolidated
Reports of Condition and Income (called ‘‘Call
Reports’’) in interactive data format using XBRL.
Call Reports, which include data about an
institution’s balance sheet and income statement,
are used by these federal agencies to assess the
financial health and risk profile of the financial
institution.
37 See Improved Business Process Through XBRL:
A Use Case for Business Reporting, available at
https://www.xbrl.org/us/us/
FFIEC%20White%20Paper%2002Feb2006.pdf.
38 See XBRL International Progress Report
(November 2007), available at https://www.xbrl.org/
ProgressReports/
2007_11_XBRL_Progress_Report.pdf.
39 See materials available at https://www.sec.gov/
spotlight/xbrl/xbrl-meetings.shtml.
40 See SEC Announces New Unit to Lead Global
Move to Interactive Data, Securities and Exchange
Commission Press Release, October 9, 2007,
available at: https://www.sec.gov/news/press/2007/
2007-213.htm.
41 See Chairman Cox, Overseas Counterparts
Meet to Discuss Interactive Data Timetable,
Securities and Exchange Commission Press Release,
November 9, 2007, available at: https://www.sec.gov/
news/press/2007/2007-227.htm.
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Financial Reporting (‘‘CIFiR’’) in which
the committee discussed proposals for
financial reporting using interactive
data.42 We also have reviewed written
statements and public comments
received by CIFiR on its XBRL
developed proposal.43
Building on our experience
monitoring the voluntary program and
our participation in the other initiatives
described above, we are now proposing
rules to require mutual funds to provide
risk/return summary information using
interactive data as an exhibit to their
registration statements filed on Form
N–1A.44 Interactive data would be
required to be provided on a mutual
fund’s Web site 45 and with the fund’s
Securities Act registration statements
and post-effective amendments
thereto.46 We believe this has the
potential to provide advantages for the
investing public by making risk/return
42 The Commission established CIFiR to examine
the U.S. financial reporting system, with the goals
of reducing unnecessary complexity and making
information more useful and understandable for
investors. See SEC Establishes Advisory Committee
to Make U.S. Financial Reporting System More
User-Friendly for Investors, Securities and
Exchange Commission Press Release, June 27, 2007,
available at https://www.sec.gov/news/press/2007/
2007-123.htm.
CIFiR conducted an open meeting on March 14,
2008, in which it heard reactions from an invited
panel of participants to CIFiR’s developed proposal
regarding required filing of financial information
using interactive data. An archived Webcast of the
meeting is available at https://sec.gov/about/offices/
oca/cifir.shtml. The March 14, 2008 panelists
presented their views and engaged with CIFiR
members regarding issues relating to requiring
interactive data tagged financial statements,
including tag list and technological developments,
implications for large and small public companies,
needs of investors, necessity of assurance and
verification of such tagged financial statements, and
legal implications arising from such tagging. Also,
CIFiR has provided to the Commission an interim
progress report that contains a developed proposal
that the Commission, over the long term, require the
filing of financial information using interactive data
once specified conditions are satisfied. See Progress
Report of the Advisory Committee on
Improvements to the Financial Reporting to the
United States Securities and Exchange Commission
(Feb. 14, 2008) (‘‘Progress Report’’), available at
https://www.sec.gov/about/offices/oca/acifr/acifr-pr021408-final.pdf.
43 The XBRL developed proposal appears in
chapter 4 of the Progress Report. Written statements
of panelists at the March 14, 2008 meeting and
public comments received on the Progress Report
are available at https://sec.gov/comments/265-24/
265-24.shtml.
44 Form N–1A is the form used by mutual funds
to register under the Investment Company Act and
to offer securities under the Securities Act.
45 The proposed Web site posting requirement
would apply only to the extent a mutual fund
already maintains a Web site.
46 Interactive data would be required as an exhibit
to a Securities Act registration statement or posteffective amendment thereto that contains risk/
return summary information. Interactive data would
not be required as an exhibit to a post-effective
amendment that does not contain risk/return
summary information.
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35445
summary information more accessible,
timely, inexpensive, and easier to
analyze.
By enabling mutual funds to further
automate their disclosure processes,
interactive data may eventually help
funds improve the speed at which they
generate information, while reducing
the cost of filing and potentially
increasing the accuracy of the data. For
example, with standardized interactive
data tags, registration statements may
require less time for information
gathering and review. Also,
standardized interactive data tagging
may enhance the ability of a fund’s inhouse professionals to identify and
correct errors in the fund’s registration
statements filed in traditional electronic
format. Mutual funds also may gain
benefits not directly related to risk/
return summary information
disclosures. For example, mutual fund
families that use interactive data may be
able to compile information more
quickly and potentially more reliably
both for internal purposes and for
communications with financial
intermediaries, third party information
providers, and the public. However, we
recognize that at the outset, mutual
funds would most likely prepare their
interactive data as an additional step
after their prospectuses have been
prepared.
The principal elements of the
proposal are as follows:
• Mutual funds would provide to the
Commission a new exhibit with their
risk/return summary information in
interactive data format, beginning with
initial registration statements, and posteffective amendments that are annual
updates to effective registration
statements, that become effective after
December 31, 2009.47
• Mutual funds providing risk/return
summary information in interactive data
format would be required to use the
most recent list of tags released by XBRL
U.S. as required by the EDGAR Filer
Manual. Mutual funds also would be
required to tag a limited number of
document and entity identifier
elements, such as the form type and the
fund’s name. As with interactive data
for the risk/return summary, these
document and entity identifier elements
would be formatted using the
appropriate list of tags as required by
the EDGAR Filer Manual.48
47 The proposed schedule is premised on the
rules being adopted this fall in time for mutual
funds to implement this schedule, and could be
adjusted depending on when the Commission
adopts any final rules.
48 The appropriate list of tags for document and
entity identifier elements would be a list released
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• A mutual fund required to provide
risk/return summary information in
interactive data format to the
Commission also would be required to
post that information in interactive data
format on its Web site on the earlier of
the date that the interactive data is
submitted to the Commission or is
required to be submitted to the
Commission.
• The proposed rules would not alter
the requirements to provide risk/return
summary information with the
traditional format filings.49
• Risk/return summary information
in interactive data format would be
provided as exhibits identified in
General Instruction C.3.(g) of Form
N–1A.
• Viewable interactive data as
displayed through software available on
the Commission’s Web site, and to the
extent identical in all material respects
to the corresponding portion of the
traditional format filing, would be
subject to all the same liability
provisions of the federal securities laws
as the corresponding data in the
traditional format filing.
• Data in the interactive data file
submitted to us generally would be
subject to the federal securities laws in
a manner similar to that of the voluntary
program and, as a result, would be
Æ Deemed not filed for purposes of
specified liability provisions; and
Æ Protected from liability for failure
to comply with the proposed tagging
and related requirements if the
interactive data file either
I Met the requirements; or
I Failed to meet those requirements,
but the failure occurred despite the
mutual fund’s good faith and reasonable
effort, and the mutual fund corrected
the failure as soon as reasonably
practicable after becoming aware of it.
• The proposed rules would require
the risk/return summary information
and document and entity identifier
elements to be tagged according to
Regulation S–T and the EDGAR Filer
Manual.50
by XBRL U.S. and would be required to be used by
all issuers required to submit interactive data.
49 When we extended the voluntary program to
the mutual fund risk/return summary, we stated in
the adopting release that the interactive data
submission would be supplemental to filings and
not replace the required traditional electronic
format of the information it contains. We also said
that volunteers would be required to continue to
file their traditional electronic filings. See Part II.A.
of the Risk/Return Voluntary Program Adopting
Release, supra note 19, 72 FR at 39292.
50 Proposed Rule 405 of Regulation S–T would
directly set forth the basic tagging requirements and
indirectly set forth the rest of the tagging
requirements through the requirement to comply
with the EDGAR Filer Manual. Consistent with
proposed Rule 405, the Filer Manual would contain
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• Each interactive data submission
would be required to be filed as a posteffective amendment under Rule 485(b)
under the Securities Act 51 and would
be required to be filed after effectiveness
of the related filing, but no later than 15
business days after the effective date of
the related filing.
• If a mutual fund does not submit or
post interactive data as required, the
fund’s ability to file post-effective
amendments to its registration statement
under Rule 485(b) under the Securities
Act would be automatically suspended
until the fund submits and posts the
interactive data as required.
• We anticipate that the voluntary
program would be modified, if the
proposed rules are adopted, to exclude
participation by mutual funds with
respect to risk/return summary
information but continue to permit
investment companies to participate
with respect to financial statement
information. As a result, the voluntary
program would continue for the
financial statements of investment
companies that are registered under the
Investment Company Act, business
development companies, and other
entities that report under the Exchange
Act and prepare their financial
statements in accordance with Article 6
of Regulation S–X.
• Registered investment companies,
business development companies, and
other entities that report under the
Exchange Act and prepare their
financial statements in accordance with
Article 6 of Regulation S–X would be
permitted to submit exhibits under the
voluntary program containing a tagged
schedule of portfolio holdings without
having to submit other financial
information in interactive data format.
II. Discussion of the Proposed
Amendments
A. Submission of Risk/Return Summary
Information Using Interactive Data
The ICI’s risk/return summary list of
tags received acknowledgement from
XBRL International in June 2007.52 The
the technical tagging requirements. See Interactive
Data Proposing Release, supra note 8 (proposing
Rule 405 of Regulation S–T).
51 Rule 485(b) under the Securities Act provides
for immediate effectiveness of amendments to
registration statements that make certain nonmaterial and other changes.
52 The list of tags is available on XBRL
International’s Web site at: https://www.xbrl.org/
Taxonomy/ici/ici-rr-summarydocument-20070516acknowledged.htm.
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
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Commission anticipates entering into a
contract to update the architecture of
the list of tags and conform the list of
tags to any changes in the risk/return
summary that we adopt pursuant to a
pending rule proposal.53
Interactive data risk/return summary
information using the list of tags for
risk/return summary information has
been submitted voluntarily to us by
approximately 20 mutual funds. In
recent years, there has been a growing
development of software products for
users of interactive data, as well as of
applications to assist companies,
including mutual funds, to tag their
disclosures using interactive data.54 The
growing number of software
applications available to preparers and
consumers is helping make interactive
data increasingly useful to both retail
and institutional investors, as well as to
other participants in the U.S. and global
capital markets. On this basis, we
believe interactive data, and in
particular the XBRL standard, have
become widespread and that the list of
tags for risk/return summary
information is now sufficiently
advanced to require that mutual funds
provide their risk/return summary
information in interactive data format.
As discussed in more detail below,
our proposed rules would require all
mutual funds to submit interactive data
with any registration statement or posteffective amendment on Form N–1A
that includes or amends risk/return
summary information.55 We anticipate
that the first required submissions
would be for initial registration
statements and post-effective
amendments that are annual updates to
effective registration statements and that
become effective after December 31,
2009.
We are proposing that mutual funds
be required to provide the same risk/
return summary information in
interactive data format that mutual
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/.
53 See Summary Prospectus Proposing Release,
supra note 15.
54 See SEC’s Office of Interactive Disclosure Urges
Public Comment as Interactive Data Moves Closer
to Reality for Investors, Securities and Exchange
Commission Press Release, Dec. 5, 2007, available
at: https://www.sec.gov/news/press/2007/2007253.htm. A list of interactive data products and
service providers is available at: https://xbrl.us/
Vendors/Pages/default-expand.aspx.
55 See proposed General Instruction C.3.(g) to
Form N–1A.
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funds have been providing in the
voluntary program.56 In addition, funds
would be required to provide document
and entity identifier tags, such as the
form type and the fund’s name. As was
the case in the voluntary program, the
proposed requirement for interactive
data reporting is intended to be
disclosure neutral. We do not intend the
rules to result in mutual funds
providing more, less, or different
disclosure for a given disclosure item
depending upon the format, whether
ASCII, HTML, or XBRL.
We propose to continue requiring the
existing electronic formats now used in
filings because we believe it is necessary
to monitor the usefulness of interactive
data reporting to investors and the cost
and ease of providing interactive data
before attempting further integration of
the interactive data format. However,
the proposed rules would treat viewable
interactive data as displayed through
software available on the Commission’s
Web site, and interactive data
generally,57 as part of the official filing,
instead of a supplement as is the case
in the voluntary program. Further
evaluation will be useful with respect to
the availability of inexpensive,
sophisticated interactive data viewers.
Currently there are many software
providers and financial printers that are
developing interactive data viewers. We
anticipate that these will become widely
available and increasingly useful to
investors.
We expect that the open standard
feature of XBRL format will facilitate the
development of applications and
software, and that some of these
applications may be made available to
the public for free or at a relatively low
cost. The expected continued
improvement in this software would
give the public increasingly useful ways
to view and analyze mutual fund risk/
return summary information. After
evaluating the use of the new interactive
data technologies, software, and list of
tags, we may consider proposing rules
to eliminate the filing of risk/return
summary information in ASCII or
HTML format. Or we may consider
proposing rules to require a filing format
that integrates ASCII or HTML with
XBRL.
We believe XBRL is the appropriate
interactive data format with which to
supplement ASCII and HTML. Our
experience with the voluntary program
and feedback from company, audit, and
56 See proposed General Instruction C.3.(g) to
Form N–1A.
57 As further discussed below in Part II.F,
interactive data generally would be deemed not
filed for purposes of specified liability provisions.
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software communities point to XBRL as
the appropriate open standard for the
purposes of this rule. As a derivative of
the XML standard, XBRL data would be
compatible with a wide range of open
source and proprietary XBRL software
applications. As discussed above, many
XBRL-related products exist for
analysts, investors, filers, and others to
more easily create and compare
disclosures; still others are in
development, and that process would
likely be hastened by mutual fund
disclosure using interactive data.
Comments on our 2004 concept release
and proposed rules in 2004 and 2007
generally supported interactive data and
XBRL in particular.58 Several other
factors support our views regarding
XBRL’s broad and growing acceptance,
internationally as well as in the U.S. For
example, as noted above, in addition to
the use of XBRL by other U.S.
agencies,59 several foreign securities
regulators have adopted voluntary or
required XBRL financial reporting.60 We
understand that several U.S. public and
private companies use XBRL in
connection with financial reporting or
analysis.
Request for Comment:
• Should we adopt rules that require
each mutual fund’s risk/return summary
information to be provided in
interactive data format? What are the
principal factors that should be
considered in making this decision? Is
it useful to users of risk/return summary
information to continue to have, in
addition to interactive data, duplicate,
58 Securities Act Release No. 8497 (Sept. 27, 2004)
[69 FR 59111 (Oct. 1, 2004)] (‘‘Concept Release’’);
Securities Act Release No. 8496 (Oct. 1, 2004) [69
FR 59094 (Oct. 1, 2004)]; Securities Act Release No.
8781 (Feb. 6, 2007) [72 FR 6676 (Feb. 12, 2007)].
See, e.g., letter from Deloitte & Touche LLP (Nov.
11, 2004) regarding the Voluntary Program
Adopting Release, supra note 16; and letter from PR
Newswire Association LLC (Nov. 11, 2004)
regarding the Concept Release; and letters from
Charles S. Hoffman (Feb. 10, 2007); ICI (Mar. 14,
2007); NewRiver, Inc. (Mar. 14, 2007);
PricewaterhouseCoopers LLP (Mar. 14, 2007); and
Ayal Rosenthal (Mar. 6, 2007) regarding extending
the voluntary program to allow funds to submit
tagged risk/return summaries.
We also note that financial statement participants
in the voluntary program provided positive
feedback with respect to possible mandatory XBRL.
For example, the vast majority of voluntary program
participants that submitted responses and views to
a questionnaire answered in the affirmative to the
question ‘‘Based on your experience to date, do you
think it would be advisable for the Commission to
continue to explore the feasibility and desirability
of the use of interactive data on a more widespread
and, possibly, mandated basis?’’ See question V.f in
the Interactive Data Voluntary Program
Questionnaire available at https://www.sec.gov/cgibin/XBRL_Questionnaire.
59 See note 36 above. Also we note CIFiR’s
support of XBRL as referenced above in Part I.C.
60 For example, such countries include Canada,
China, Israel, Japan, Korea, and Thailand.
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human-readable risk/return summary
information in ASCII or HTML format?
• What opportunities exist to improve
the display of risk/return summary
information prepared using interactive
data? How should these affect any
continued requirement to file ASCII- or
HTML-formatted risk/return summary
information? For example, if the
technology is sufficiently developed,
should we propose rules to encourage or
require a format that embeds interactive
data tags in HTML so that risk/return
summary information can be viewed in
a browser? How should these affect any
continued requirement to file ASCII- or
HTML-formatted risk/return summary
information? What obstacles exist to
making such improvements in the
display of XBRL information?
• Is it appropriate to require mutual
funds to provide interactive data using
XBRL? Alternatively, in place of such a
requirement, should the Commission
instead wait to see whether interactive
data disclosure by mutual funds is
voluntarily adopted? Without a
requirement, would the development of
products for producing and using
interactive data from mutual funds meet
the needs of investors, third party
information providers, and others who
seek interactive data? Would a large
percentage of mutual funds provide
interactive data voluntarily, and
following the same standard, if not
required to do so?
• If we do not adopt the proposed
rules and instead wait to see whether
mutual funds on their own expand their
use of interactive data, would such data
be less comparable among mutual
funds? Is there a ‘‘network effect,’’ such
that interactive data would not be useful
unless many or all mutual funds
provide their risk/return summary
information using interactive data?
Would the development of software for
retail investors to obtain and make use
of such data be slowed without a
requirement that mutual funds provide
interactive data?
• What advantages are there to
investors having the mutual fund
responsible for preparing risk/return
summary information in interactive data
format, as opposed to a model in which
third parties independently prepare the
information in interactive format and
charge a fee for it?
• Do commenters agree that
compared to filings using ASCII and
HTML, interactive data would require
less manually-transferred data? If so, do
commenters believe that the proposed
rules would result in less human error
and therefore contribute to reduced
costs?
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• If we require interactive data
disclosure and the proposed rules result
in more effective and efficient
disclosure with reduced human error
and cost, would fees charged by
financial printers or other service
providers be likely reduced to reflect
such lower costs?
• If we adopt rules requiring
interactive data disclosure of risk/return
summary information, is the XBRL
standard the one that we should use?
Are any other standards becoming more
widely used or otherwise superior to
XBRL? What would the advantages of
any such other standards be over XBRL?
• Is the XBRL format for interactive
data sufficiently developed to require its
use at this time? If not, what indicators
should we use to determine when it has
become sufficiently developed to
require its use?
• Are vendors likely to develop and
make commercially available software
applications or Internet products that
will be able to deliver the functionality
of interactive data to retail investors?
• How important is it that many
different types of viewers with varying
levels of sophistication and
functionality be available to investors?
In addition to the free viewer provided
on the SEC Web site, are there likely to
be other such products available at low
or no cost?
• If we require risk/return summary
information in interactive data format,
what are the principal challenges facing
the eventual integration of such
reporting with the current filing formats,
ASCII and HTML, so that filing in all
three formats would no longer be
necessary?
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B. Compliance Date
The proposed rules would require all
mutual funds to submit interactive data
with any registration statement or posteffective amendment on Form N–1A
that includes or amends risk/return
summary information.61 If the rules are
adopted by this fall, we anticipate that
the first required submissions would be
for initial registration statements and
post-effective amendments that are
annual updates to effective registration
statements 62 and that become effective
61 See proposed General Instruction C.3.(g) to
Form N–1A.
62 Section 10(a)(3) of the Securities Act [15 U.S.C.
77j(a)(3)] generally requires that when a prospectus
is used more than nine months after the effective
date of the registration statement, the information
in the prospectus must be as of a date not more than
sixteen months prior to such use. The effect of this
provision is to require mutual funds to update their
prospectuses annually to reflect current cost,
performance, and other financial information. A
mutual fund updates its registration statement by
filing a post-effective amendment to the registration
statement.
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after December 31, 2009. We are
sensitive to concerns that undue
expense and burden should not
accompany the adoption of required
interactive data reporting. We therefore
propose limitations on liability
applicable to the interactive data file, as
well as a 15-business-day period for
making interactive data submissions
after effectiveness of the related filing.63
Mutual funds under the proposed
rules would be required to convert their
risk/return summary information into
an interactive data file using the list of
tags for risk/return summary
information, as approved for use by the
Commission.64 The submission also
would be required to include any
supporting files as prescribed by the
EDGAR Filer Manual. Interactive data
would be required for the entirety of the
risk/return summary information,
including information for all series and
all classes.65
As noted above, we anticipate
deferring the requirement for
submission of risk/return summary
information in interactive data format
for all mutual funds until after
December 31, 2009. We also anticipate
that the voluntary program, with its
limitations on liability, will remain
available to mutual funds until
December 31, 2009, for purposes of
submitting risk/return summary
information in interactive data format.
We believe that this period of almost
two years from now will give mutual
funds, including those that have not
previously participated in the voluntary
program, adequate opportunity to test
interactive data submissions so that they
may be fully prepared to file risk/return
summary information in interactive data
format after December 31, 2009.
Our multiyear experience with
interactive data has helped us
understand the extent to which a
mutual fund would incur additional
costs to create and submit its existing
disclosures in interactive data format.
Based on that experience, we believe
that the process of converting a mutual
fund’s existing ASCII or HTML risk/
return summary information into
interactive data would not impose a
significant burden or cost. Mutual funds
could choose to tag their risk/return
summary information using available
63 We discuss more fully at Part II.F liability
related to required submissions of interactive data
in general and the continuation of some of the
limitations on liability used in the voluntary
program in particular.
64 See Interactive Data Proposing Release, supra
note 8 (proposing amendments to Rule 11 of
Regulation S–T and proposing new Rule 405(a)) and
proposed amendments to proposed Rule 405(a).
65 Proposed General Instruction C.3.(g) of Form
N–1A.
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software without using outside services
or consultants; alternatively, they could
rely on financial printers, consultants,
and software companies for assistance,
although they would retain ultimate
responsibility for both their risk/return
summary information and their tagged
data. As discussed in more detail in the
cost-benefit analysis below,66 we
believe that the modest first-year costs
for a mutual fund would decrease in
subsequent periods. We also believe that
these costs would be justified by
interactive data’s benefits.
We expect that most mutual funds
that are part of smaller fund families,
which generally are disproportionately
affected by regulatory costs, also would
be able to provide their risk/return
summary information in interactive data
format without undue effort or expense.
While interactive data reporting
involves changes in reporting
procedures mostly in the initial
reporting periods, we expect that these
changes would provide efficiencies in
future periods. As a result, there may be
potential net savings to the mutual fund,
particularly if interactive data become
integrated into the mutual fund’s
disclosure process. While we recognize
that requiring interactive data risk/
return summary information would
likely result in start-up expenses for
smaller mutual fund families, we expect
that both software and third-party
services will be available to help meet
the needs of smaller mutual fund
families. We also intend that the
delayed compliance date for all mutual
funds would permit mutual funds that
are part of smaller fund families to learn
from the experience of funds that have
participated in the voluntary program
and to participate in the voluntary
program themselves during the almost
two-year period prior to December 31,
2009. The delayed compliance date
would also give mutual funds that are
part of smaller fund families a
significant period of time across which
to spread first-year data tagging costs.
We believe that adopting a delayed
compliance date of December 31, 2009,
would establish an appropriate and
measured timeline, which we would be
able to monitor and, if necessary,
reconsider during the continuation of
the voluntary program.
Request for Comment:
• Is the proposed schedule for
implementation of interactive data
tagging appropriate?
• Should we advance the first
required interactive data submission to
be for filings that become effective after
June 30, 2009, or some other date, rather
66 See
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than December 31, 2009? Should we
delay the first required interactive data
submissions until, for example, 2011,
2012, or later? What benefits would
there be to advancing or delaying
implementation of the proposed rules?
How much lead time do mutual funds
need to familiarize themselves with
interactive data and the process of
mapping risk/return summary
information using the list of tags for
risk/return summary information?
• Should there be a phase-in to
provide mutual funds with more time to
become familiar with the list of tags for
risk/return summary information and to
encourage potential vendors of
interactive data products and services to
invest in the development and
marketing of such products? If so, what
should the phase-in dates be and what
funds should be included in each
phase? Should we differentiate funds
based on net assets of the fund, the fund
family, or on some other basis? Should
we, for example, provide a more
delayed compliance date for mutual
funds that are small entities for
purposes of the Regulatory Flexibility
Act, i.e., funds that, together with other
investment companies in the same
group of related investment companies,
have net assets of $50 million or less as
of the end of their most recent fiscal
year? If we provide a more delayed
compliance date for smaller fund
families, how should we define such a
category?
• Is the proposed timing sufficient for
mutual funds to familiarize themselves
with interactive data and the process of
mapping risk/return summary
information using the list of tags for
risk/return summary information? Is it
sufficient for funds that are part of
smaller fund families, e.g., funds that
are small entities for purposes of the
Regulatory Flexibility Act?
• Should there be a longer lag than
proposed for mutual funds that are part
of smaller fund families, e.g., funds that
are small entities for purposes of the
Regulatory Flexibility Act, to allow
them to allocate the necessary resources
and meet the proposed requirements?
• Should mutual funds that are part
of smaller fund families, e.g., funds that
are small entities for purposes of the
Regulatory Flexibility Act, be subject to
the proposed rules at all? Should
compliance with the proposed rules be
solely voluntary for those funds?
• Will the rule proposal and the
anticipated December 31, 2009
compliance date sufficiently encourage
potential vendors of interactive data
products and services to invest in the
development and marketing of such
products? If not, what changes should
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we make to encourage developments in
the markets for filer and investor
products related to mutual fund
interactive data?
C. Documents and Information Covered
by the Proposed Rules
The proposed rules would require
interactive data tagging of a mutual
fund’s risk/return summary information,
which is currently provided in response
to Items 2 and 3 of Form N–1A.67 In
November 2007, the Commission
proposed to amend Form N–1A.68 The
amendments, if adopted as proposed,
would result in the risk/return summary
information being contained in Items 2,
3, and 4 of Form N–1A. If the
Commission adopts that proposal, we
intend to apply any tagging rules we
adopt to the items of amended Form N–
1A that contain the information that is
currently contained in Items 2 and 3.
As with the voluntary program, the
proposed rules would require mutual
funds to provide the interactive data in
an exhibit.69 Interactive data would be
required for all information in the risk/
return summary, including information
for each series and class included in a
mutual fund’s prospectus.70 The
proposed rules would not, however,
require interactive data submissions for
parts of Form N–1A other than the risk/
return summary information.
As with the voluntary program, the
proposed rules would require that the
information contained in the risk/return
summary section in the traditional
format filing on Form N–1A be the same
as in the interactive data format.71
Further, the interactive data would have
to be submitted in a manner that would
permit the information for each series
and any class-specific information, such
as expenses and performance, to be
separately identified by series and
class.72 However, information that is not
class-specific, such as investment
67 See proposed Rule 405(b)(2); General
Instruction C.3.(g) to Form N–1A. We are also
proposing technical amendments to proposed Rule
405 that reflect this proposed requirement.
As previously noted, proposed Rule 405 of
Regulation S–T would directly set forth the basic
tagging requirements and indirectly set forth the
rest of the tagging requirements through the
requirement to comply with the EDGAR Filer
Manual. Consistent with proposed Rule 405, the
EDGAR Filer Manual would contain the detailed
tagging requirements.
68 See Summary Prospectus Proposing Release,
supra note 15, 72 FR at 67817.
69 See proposed General Instruction C.3.(g) to
Form N–1A; proposed Rule 405(a). The Interactive
Data File must be named ‘‘EX–101’’ as specified in
the EDGAR Filer Manual.
70 See proposed General Instruction C.3.(g) to
Form N–1A.
71 Proposed Rule 405(b)(2).
72 Proposed General Instruction C.3.(g) to Form
N–1A.
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objectives, would not be required to be
separately identified by class.
To clarify the intent of the rules, we
propose to include an instruction to
proposed Rule 405 of Regulation S–T
stating that the rules require a
disclosure format, but do not change
substantive disclosure requirements.73
The rules also would state clearly that
the information in interactive data
format should not be more or less than
the information in the ASCII or HTML
part of the Form N–1A filing.74
The proposed rules would not
eliminate or alter existing filing
requirements that risk/return summary
information be filed in traditional
format. We believe investors and other
users may wish to use these electronic
formats to obtain an electronic or
printed copy of the entire registration
statement, either in addition to or
instead of disclosure formatted using
interactive data. In addition, we propose
to no longer require or permit the
cautionary disclosure that is used in the
voluntary program for required
interactive data, which states that
investors should not rely on the
interactive data information in making
investment decisions. We believe that
such language would be inconsistent
with the proposal that interactive data
be part of the related registration
statement.
We are proposing to require a mutual
fund to submit interactive data for the
risk/return summary information that is
contained in any filing on Form N–1A
that includes or amends information
provided in response to Items 2 and/or
3.75 This would include initial
registration statements and any posteffective amendment that makes
changes to the risk/return summary
information.76
Request for Comment:
• Has the interactive information
available through the voluntary program
been useful? Should we require that
more or less information be tagged? For
example, should the entire risk/return
summary section of Form N–1A,
including the investment objective and
73 See Interactive Data Proposing Release, supra
note 8 (proposing Preliminary Note 2 to proposed
Rule 405).
74 Proposed Rule 405(b)(2).
75 Proposed General Instruction C.3.(g) to Form
N–1A.
76 Revised interactive data would be required
with respect to post-effective amendments that
make changes to the risk/return summary
information so that the risk/return summary
information would be the same in both the
traditional format filing and the interactive data file.
If the risk/return summary information is not
revised in connection with a post-effective
amendment, the exhibit index would indicate that
the interactive data file was already provided.
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strategies, risks, costs, and performance
information, be required to be tagged in
interactive data format? Should we
apply tagging requirements to both
narrative information, such as
investment objectives, and numerical
information, such as costs?
• Would investors and other users of
risk/return summary information find
tagged risk/return information useful for
analytical purposes? Is tagged risk/
return summary information that is
narrative, rather than numerical, useful
as an analytical tool?
• Would the availability of interactive
data-formatted risk/return summary
information possibly cause competitive
pressures on mutual funds to choose to
make more disclosures than are required
by Commission regulations?
Alternatively, might the availability of
tagged data possibly cause mutual funds
to choose to curtail such disclosures?
What types of disclosures would those
be?
• Once interactive data are provided
with a Form N–1A filing, should we
limit the requirement to provide
interactive data for amendments to only
the amendments that reflect substantive
changes from or additions to the risk/
return summary information? What
would the benefits and burdens be of
revising interactive data that previously
was provided in connection with a
registration statement on Form N–1A to
reflect changes?
• Do the standards we propose for
tagging provide clear enough guidance
for preparers so that we can expect to
achieve consistency among filers?
• Should we require that mutual
funds tag their document and entity 77
information? Would this information be
useful in interactive data format?
• Should we provide an opportunity
for mutual funds to submit voluntarily
in interactive data format information
other than that which they would be
required to submit as interactive data? If
so, should we permit such interactive
data format information to be subject to
provisions governing the proposed
required filing of interactive data?
Should we instead permit such
interactive data format information to be
submitted under the voluntary program?
• If we adopt the recently proposed
amendments to Form N–1A,78 should
we require interactive data format
information for the risk/return
summary? Should we require interactive
data format information for any
additional information contained in the
proposed summary section of the
77 See
supra note 48.
78 See Summary Prospectus Proposing Release,
supra note 15.
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prospectus? Should the information in
the proposed summary prospectus be
tagged? If so, should all of the
information required in the summary
prospectus be tagged? If not, what
information in the summary prospectus
should be tagged? Should only the risk/
return information in the summary
prospectus be tagged?
• When we proposed the summary
prospectus, we proposed that mutual
funds choosing to use a summary
prospectus be required to provide the
summary prospectus, the statutory
prospectus, and the statement of
additional information on the Internet
with links that would allow persons to
move back and forth among the
documents.79 If we were to require
information in the prospectus and/or
the summary prospectus to be submitted
in interactive data format, should we
adopt as proposed or modify the
proposed linking requirements? 80
• Should the proposed rules
eliminate the requirement that the risk/
return summary information be
submitted in traditional format, in
addition to interactive data format?
Should cautionary language from the
voluntary program be eliminated or
modified and, if not, why not?
• Should the proposed rules apply to
a prospectus filed under Securities Act
Rule 497? 81 If we require interactive
data with filings that do not currently
include exhibits, such as prospectus
supplements, should we require that the
interactive data be provided as
schedules or exhibits?
D. Filing Period
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 proposed rules would
not permit the submission of an
interactive data exhibit that is related to
a registration statement or a posteffective amendment that is not yet
effective. More specifically, the
proposed rules would provide that an
interactive data exhibit to a Form N–1A
filing, whether the filing is an initial
registration statement or a post-effective
amendment thereto, must be submitted
as a post-effective amendment to the
79 See Summary Prospectus Proposing Release,
supra note 15, 72 FR at 67802–03.
80 See Summary Prospectus Proposing Release,
supra note 15, 72 FR at 67803 and 67816 (Proposed
Rule 498(f)(2)(ii) and (iii) under the Securities Act
would require persons accessing documents on the
Internet to be able to move back and forth between
certain specified sections of the documents.).
81 17 CFR 230.497. Currently, Rule 497
prospectuses do not have a provision for exhibits,
so additional EDGAR programming would be
needed.
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registration statement to which the
interactive data relates. Under the
proposal, the amendment, including the
interactive data, must be submitted after
the related filing becomes effective, but
not later than 15 business days after the
effective date of the related filing.82 Our
proposal that the interactive data exhibit
be filed within 15 business days is
intended both to provide funds with
adequate time to prepare the exhibit and
to make the interactive data available
promptly. An exhibit containing
interactive data format risk/return
summary information could be
submitted under Rule 485(b) of the
Securities Act, which provides for
immediate effectiveness of amendments
that make non-material changes, and
would 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.
Request for Comment:
• Should we require interactive data
information to be submitted before
effectiveness of the related filing, e.g. ,
at the same time that the related filing
is made? Or should we, as proposed,
require interactive data information to
be provided only after the related filing
becomes effective? If so, is 15 business
days after the effective date of the
related filing an appropriate time period
for filing the interactive data? Should
the time period be shorter or longer, e.g.,
1 day, 5 days, 10 days, 20 days, 30 days?
Would it be feasible and desirable to
require interactive data to be submitted
on the effective date of the related filing,
either for filings that become effective
automatically and/or for filings that are
declared effective by the Commission
staff? How would different requirements
regarding the time of filing affect the
usefulness of the interactive data, the
ability of funds to file accurate
interactive data, and the burdens of
filing the data?
E. Web Site Posting of Interactive Data
We believe interactive data, consistent
with our proposed rules, should be
easily accessible for all investors and
other market participants. As such
disclosure becomes more widely
available, advances in interactive data
software, online viewers, search
engines, and other Web tools may in
turn facilitate access and usability of the
data. Encouraging widespread
accessibility to mutual funds’ risk/
return summary information furthers
82 Proposed General Instruction C.3.(g) of Form
N–1A. This proposal differs from the voluntary
program which does not impose a time limit for the
filing of interactive data.
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our mission to promote fair, orderly,
and efficient markets, and facilitates
capital formation. We believe Web site
availability of the interactive data would
encourage its widespread
dissemination, thereby contributing to
lower access costs for users. We
therefore propose that each mutual fund
be required to provide the same
interactive data on its Web site, if it has
one, that would be required to be
provided to the Commission.83 The
interactive data on a fund’s Web site
would be required by the end of the
business day on the earlier of the date
that the interactive data is submitted to
the Commission or is required to be
submitted to the Commission.84
We believe access to the interactive
data on fund Web sites would enable
search engines and other data
aggregators to more quickly and cheaply
aggregate the data and make them
available to investors because the data
would be available directly from the
mutual fund, instead of through thirdparty sources that may charge a fee. To
help further our goals of decreasing user
cost and increasing availability, we do
not propose to allow mutual funds to
comply with the Web posting
requirement by including a hyperlink to
the documents available electronically
on the Commission’s Web site.
We believe this requirement would be
consistent with the increasing role that
mutual fund Web sites perform in
supplementing the information filed
electronically with the Commission by
delivering risk/return summary
information and other disclosure
directly to investors. For example, we
recently proposed amendments that
would permit a person to satisfy its
mutual fund prospectus delivery
obligations under the Securities Act by
sending or giving the key information
directly to investors in the form of a
summary prospectus and providing the
statutory prospectus on an Internet Web
site.85 We also note that mutual funds
may satisfy certain disclosure
83 See proposed General Instruction C.3.(g) to
Form N–1A.
84 See Interactive Data Proposing Release, supra
note 8 (proposing Rule 405(f)); proposed Rule
405(a). Proposed Rule 405(a) requires posting to a
‘‘corporate’’ Web site. For mutual funds, this would
require posting to the fund’s Web site.
The day the interactive data is submitted
electronically to the Commission may not be the
business day on which it was deemed officially
filed. For example, a filing submitted after 5:30 p.m.
generally is not deemed officially filed until the
following business day. Under the proposed rules,
the Web posting would be required to be posted at
any time on the same day that the interactive data
exhibit to a Form N–1A filing is deemed officially
filed or required to be filed, whichever is earlier.
85 See Summary Prospectus Proposing Release,
supra note 15, 72 FR at 67798–99.
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obligations by posting required
disclosures on their Web sites.86 In
addition, many mutual funds provide
on their Web sites access to their
prospectuses, statements of additional
information, and other Commission
filings.87 This proposal would expand
such Web site posting by requiring
mutual funds with Web sites to post
their interactive data as well.
Request for Comment:
• Should we adopt rules that require
each mutual fund to post interactive
data from its risk/return summary on its
Web site, if it has one?
• What advantages, if any, would
dual Internet and EDGAR availability
have for individual investors, other
users, search engines, software
developers, and others involved in the
extraction and processing of risk/return
summary data? Would it be helpful if
our Web site provided the option to
download the interactive data
submission from our Web site or the
mutual fund’s Web site? Would it add
a significant burden if a mutual fund
were required to submit with its
interactive data the URL that would link
specifically to that interactive data as
posted on the mutual fund’s Web site or,
alternatively, link to a part of the mutual
fund’s Web site from which there would
be easy access to the interactive data as
posted there? What would facilitate the
realization of any advantages of Web
site posting, for example, the use of a
standardized URL for interactive data?
Would a standardized URL add
significant cost to posting?
• Instead of requiring Web site
posting, should we require that mutual
funds disclose in their prospectuses,
registration statements, shareholder
reports, or elsewhere whether or not
they provide free access to their
interactive data on their Web sites and,
if not, why not?
• What impact would be realized by
mutual funds that do not currently
86 See, e.g., Securities Act Release No. 8458 (Aug.
23, 2004) [69 FR 52788 (Aug. 27, 2004)] (disclosure
regarding portfolio managers); Securities Act
Release No. 8408 (April 16, 2004) [69 FR 22300
(April 23, 2004)] (disclosure regarding market
timing and selective disclosure of portfolio
holdings); Securities Act Release No. 8393 (Feb. 27,
2004) [69 FR 11244 (Mar. 9, 2004)] (shareholder
reports and quarterly portfolio disclosure);
Securities Act Release No. 8188 (Jan. 31, 2003) [68
FR 6564 (Feb. 7, 2003)] (disclosure of proxy voting
policies and records); Exchange Act Release No.
47262 (Jan. 27, 2003) [68 FR 5348 (Feb. 3, 2003)]
(disclosure of code of ethics).
87 Mutual funds filing registration statements are
required to disclose whether or not they make
available free of charge on or through their Web
site, if they have one, their statement of additional
information and shareholder reports. Funds that do
not make their reports available in that manner also
must disclose the reasons that they do not. See Item
1(b)(1) of Form N–1A.
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35451
provide Web sites? Would the proposed
rules affect whether mutual funds create
or maintain Web sites?
• Would Web site posting decrease
the time and cost required for
aggregators of mutual fund disclosure,
individual investors, and other users to
access disclosure formatted using
interactive data?
• If we require Web site posting of
interactive data, as proposed, should we
also require that the Web site include
language stating that the entire
registration statement also is available
for free at the Commission’s Web site?
F. Accuracy and Reliability of
Interactive Data
1.Voluntary Program
To help ensure the accuracy of
interactive data in the voluntary
program, the data has undergone
validation upon receipt by our
electronic filing system separate from
the normal validation of the traditional
format filing.88 Potential liability also
helps ensure the accuracy and reliability
of the data. Although the voluntary
program has provided limited
protections from liability under the
federal securities laws,89 interactive
data in the voluntary program are
subject to the anti-fraud provisions of
the federal securities laws. The
voluntary program also encourages
participants’ efforts to create accurate
and reliable interactive data that is the
same as the corresponding disclosure in
the traditional electronic format filing
by providing that a participant is not
liable for information in its interactive
data that reflects the same information
that appears in the corresponding
portion of the traditional format filing,
to the extent that the information in the
corresponding portion of the traditional
format filing was not materially false or
misleading. To further encourage
reasonable efforts to provide accurate
interactive data, the voluntary program
treats interactive data that do not reflect
the same information as the official
version as reflecting the official version
if the volunteer meets several
conditions. The volunteer must have
made a good faith and reasonable
attempt to reflect the same information
as appears in the traditional format
filing and, as soon as reasonably
practicable after becoming aware of any
difference, the volunteer must amend
88 If the traditional format filing meets its
validation criteria, but any interactive data fail their
own validation criteria, all interactive data are
removed and the traditional format filing is
accepted and disseminated without the interactive
data file.
89 Rule 402 of Regulation S–T provides these
liability protections.
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the interactive data to cause them to
reflect the same information.90
2. Use of Technology to Detect Errors
Complete, accurate, and reliable
prospectus and other disclosures are
essential to investors and the proper
functioning of the securities markets.
Our proposed requirement to submit
interactive data with mutual fund
registration statements is designed to
provide investors with new tools to
obtain, review, and analyze information
from mutual funds more efficiently and
effectively. To satisfy these goals,
interactive data must meet investor
expectations of reliability and accuracy.
Many factors, including mutual fund
policies and procedures buttressed by
incentives provided by the application
of technology by the Commission,
market forces, and the liability
provisions of the federal securities laws,
help further those goals.
Building on the validation criteria
referenced above for interactive data in
the voluntary program, we plan to use
validation software to check interactive
data for compliance with many of the
applicable technical requirements and
to help the Commission identify data
that may be problematic. For example,
we expect the validation software to:
• Check if required conventions (such
as the use of angle brackets to separate
data) are applied properly for standard
and, in particular, non-standard special
labels and tags;
• Identify, count, and provide the
staff with easy access to non-standard
special labels and tags; 91
• Identify the use of practices,
including some the XBRL U.S. Preparers
Guide contains, that enhance
usability; 92
• Facilitate comparison of interactive
data with disclosure in the
corresponding traditional format data in
the official filing;
• Check for mathematical errors; and
• Analyze the way that mutual funds
explain how particular facts relate to
one another.93
The availability of interactive data to
the staff may also enhance its review of
mutual fund filings. After the FDIC
required submission of interactive data,
it reported that its analysts were able to
increase the number of banks they
90 17
CFR 232.402(b).
example, if a mutual fund uses the words
‘‘redemption fees’’ as the caption for a value data
tagged as ‘‘exchange fees,’’ the software could flag
the filing and bring it to the staff’s attention.
92 The XBRL U.S. Preparers Guide, available from
the XBRL U.S. Web site, would provide guidance
to facilitate preparing information in the interactive
data format that we propose to require.
93 The technology used to show these
relationships is known as a ‘‘linkbase.’’
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91 For
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reviewed by 10% to 33%, and that the
number of bank reports that failed to
fully meet filing requirements fell from
30% to 0%. These bank reports require
information that is more structured and
less varied than the information we
would require. As a result, the FDIC’s
efficiency gains from the use of
interactive data likely would be greater
than ours.
We believe analysts, individual
investors, and others outside the
Commission that use the interactive
data submitted to us also will make use
of software and other tools to evaluate
the interactive data and, as a result,
market forces will encourage mutual
funds to provide interactive data that
accurately reflects the corresponding
traditional format data in the traditional
format filing. For example, the use of
non-standard labels or tags (extensions)
could introduce errors, but we expect
the open source and public nature of
interactive data and the list of tags for
risk/return summary information would
enable software easily to detect and
identify any modifications or additions
to the approved list of tags. We believe
such software and other technology will
be widely available for free or at
reasonable cost. Investors, analysts, and
other users therefore would be able to
identify the existence and evaluate the
validity of any such modifications or
additions. We also anticipate that
mutual funds preparing their interactive
data and investors, analysts, and other
users would use such devices to search
for and detect any changes made to the
standard list of tags. Because analysts
and other users would rapidly discover
mistakes or alterations not consistent
with the desired use of interactive data,
mutual funds would have a powerful
incentive to prepare such data with care
and promptly to correct any errors.
With this proposal, we seek the rapid
adoption and use of interactive data
without imposing unnecessary cost and
expense on mutual funds. We therefore
propose that the interactive data itself
provided to us generally would be
subject to a liability regime under the
federal securities laws similar to that
governing the voluntary program. We
also propose that viewable interactive
data 94 as displayed through software
available on the Commission’s Web site,
as described above and further
discussed below, would be subject to
the same liability under the federal
94 Proposed Rule 11 of Regulation S–T would
define viewable interactive data as ‘‘Interactive Data
in Viewable Form.’’ See Interactive Data Proposing
Release, supra note 8 (proposing Rule 11 of
Regulation S–T). We are proposing technical
amendments to include references to risk/return
summary information in the definition.
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securities laws as the corresponding
portions of the traditional format
filing.95
Interactive data would be subject to
the following liability-related
provisions:
• Deemed not filed or part of a
registration statement or prospectus for
purposes of sections 11 and 12 of the
Securities Act;
• Deemed not filed for purposes of
section 18 of the Exchange Act and
section 34(b) of the Investment
Company Act;
• Not otherwise subject to the
liabilities of these sections;
• Subject to other liability under
these Acts for the substantive content of
the risk/return summary disclosures (as
distinct from compliance with proposed
Rule 405) in the same way and to the
same extent as the corresponding
information in the related traditional
format official filing.96 The content of
the risk/return summary disclosures
refers, for example, to the investment
objectives and strategies, costs, risks,
and past performance. The Rule 405
requirements generally refer to the
process of tagging and formatting the
content of the risk/return summary for
the interactive data file;
• Deemed filed for purposes of (and,
as a result, benefit from) Rule 103 of
Regulation S–T; 97 and
• Protected from liability under these
Acts for failure to comply with the
requirements of proposed Rule 405 if
the interactive data either:
Æ Met the requirements of proposed
Rule 405 of Regulation S–T; or
Æ Failed to meet those requirements
but the failure occurred despite the
95 Proposed Rule 406 of Regulation S–T would set
forth the liability applicable to interactive data and
viewable interactive data that is displayed through
software available on the Commission’s Web site.
Proposed Rule 406 also would clarify that
disclosures in the traditional format part of an
official filing on Form N–1A that contains the
information corresponding to the interactive data
remain subject to the federal securities laws as in
the past and that nothing in proposed Rule 405 of
Regulation S–T (setting forth content, format, and
other requirements related to interactive data) or
proposed Rule 406 would affect the liability
otherwise applicable to the traditional format data.
We are not proposing to modify proposed Rule 406
as set forth in our recently issued release. See
Interactive Data Proposing Release, supra note 8
(proposing Rule 406 of Regulation S–T).
96 Proposed Rule 11 of Regulation S–T would
define ‘‘Related Official Filing.’’ See Interactive
Data Proposing Release, supra note 8 (proposing
amendments to Rule 11 of Regulation S–T). We are
proposing technical amendments to the definition.
97 The viewed data would be deemed filed for
purposes of Rule 103 of Regulation S–T [17 CFR
232.103] and, as a result, in general, the mutual
fund would not be subject to liability for electronic
transmission errors beyond its control if the mutual
fund corrects the problem through an amendment
as soon as reasonably practicable after the fund
becomes aware of the problem.
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mutual fund’s good faith and reasonable
effort and the mutual fund corrected the
failure as soon as reasonably practicable
after becoming aware of it.
None of the proposed liability-related
provisions for interactive data submitted
to the Commission, however, would
affect the application of the anti-fraud
provisions under the federal securities
laws, whether the interactive data is
submitted to the Commission or posted
on a fund’s Web site.
Rule 405 is being proposed, in part,
under the Commission’s authority to
specify information required to be
submitted to the Commission in
registration statements. To encourage
accurate filing of interactive data
without fear of making good faith errors,
the Commission is proposing Rule
406.98 Although not expressly
addressed in proposed Rule 406, the
Commission would have the authority
to enforce compliance with proposed
Rule 405 because it has the authority to
enforce compliance with any of its
rules.
We believe these liability-related
provisions strike an appropriate balance
between avoiding unnecessary cost and
expense and encouraging accuracy in
light of the nature of the interactive data
to which they apply and the additional
accuracy incentives that may be
provided by our validation software and
market forces.
Other aspects of the proposal would
supplement the Commission’s objective
of supplying reliable and accurate
information to investors. First, the risk/
return summary information and other
disclosures in the traditional format
related official filing to which the
interactive data relate would continue to
be subject to the usual liability
provisions of the federal securities laws.
For example, the traditional format
related official filing would continue to
be subject to section 10(b) and Rule
10b–5 99 of the Exchange Act and, in the
appropriate circumstance, to section 11
of the Securities Act.
Second, we propose that the usual
liability provisions of the federal
securities laws also would apply to
human-readable interactive data that is
identical in all material respects to the
corresponding data in the traditional
format filing 100 as displayed by a
viewer that the Commission provides.
Under these circumstances, for example,
98 See Interactive Data Proposing Release, supra
note 8 (proposing Rule 406).
99 17 CFR 240.10b–5.
100 The human-readable interactive data would be
identical to the corresponding data in the
traditional format filing if the mutual fund
complied with the interactive data tagging
requirements of proposed Rule 405.
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a Form N–1A’s viewable interactive data
would be deemed filed and subject to
section 11 of the Securities Act and
section 34(b) of the Investment
Company Act, consistent with the
liability applicable to the corresponding
part of the traditional format Form N–
1A. In that regard, such viewable
interactive data disclosure therefore
would have exactly the same potential
liability as the corresponding portions
of the traditional format filing. We
believe applying liability for such
viewable interactive data displayed
through software on the Commission’s
Web site would further investors’
interests in filers providing accurate
interactive data under our proposal.
We expect that each mutual fund
would be in the best position to
determine the appropriate manner in
which to assure the accuracy of the
interactive data it would be required to
submit and the viewable interactive data
that would result. We also expect that
software providers and other private
sector third parties would help develop
procedures and tools to help in that
regard. As an adjunct to those private
sector efforts, we plan to make available
to mutual funds, on an optional basis,
the opportunity to help assure accuracy
by making a test submission with the
Commission or using software we
provide to create viewable interactive
data.
A mutual fund would have the
opportunity to submit an interactive
data exhibit as part of a test submission
just as a filer can make test submissions
today.101 The validation system would
process the test submission with an
interactive data exhibit similar to the
way it processes test submissions today.
If it found an error, it would advise the
filer of the nature of the error and as to
whether the error was major or minor.
As occurs in the voluntary program, a
major error in an interactive data exhibit
that was part of a live filing would cause
the exhibit to be held in suspense in the
electronic filing system while the rest of
the filing would be accepted and
disseminated if there were no major
errors outside of the interactive data
exhibit. If that were to happen, the filer
would need to revise the interactive
data exhibit to eliminate the major error
and submit the exhibit as an
amendment to the filing to which it is
intended to appear as an exhibit. A
minor error in an interactive data
exhibit that was part of a live filing
would not prevent the interactive data
exhibit from being accepted and
disseminated together with the rest of
101 The EDGAR Filer Manual addresses test
submissions primarily at section 6.6.5 of Volume II.
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the filing if there were no major errors
in the rest of the filing. We believe it
would be appropriate to accept and
disseminate a filing without the
interactive data exhibit submitted with
it if only the exhibit has a major error,
in order to disseminate at least as much
information at least as timely as would
have been disseminated were there no
interactive data requirement.
We are not proposing that mutual
funds be required to involve third
parties such as auditors or consultants
in the creation of the interactive data
provided as an exhibit to a mutual
fund’s Form N–1A filing, including
assurance. We are taking this approach
after considering various factors,
including:
• The availability of a comprehensive
list of tags for risk/return summary
information from which appropriate
tags can be selected, thus reducing a
mutual fund’s need to develop new
elements;
• The availability of user-friendly
software with which to create the
interactive data file;
• The delayed compliance date, prior
to which mutual funds may become
familiar with the tagging of risk/return
summary information;
• The availability of interactive data
technology specifications, and of other
XBRL U.S. and XBRL International
resources for preparers of tagged data;
• The advances in rendering/
presentation software and validation
tools for use by preparers of tagged data
that can identify the existence of certain
tagging errors;
• The expectation that preparers of
tagged data will take the initiative to
develop sufficient internal review
procedures to promote accurate and
consistent tagging; and
• The mutual fund’s and preparer’s
liability for the accuracy of the
traditional format version of the risk/
return summary information that will
also be provided using the interactive
data format.
Request for Comment:
• Do the proposed rules strike an
appropriate balance to promote the
availability of reliable interactive data
without imposing undue additional
costs and burdens? If not, what balance
of liability will best encourage mutual
funds to prepare reliable interactive data
without subjecting them to undue fear
of mis-tagging? How does the
‘‘extensibility’’ of interactive data, i.e. ,
a mutual fund’s ability to customize the
standard list of tags to correspond more
closely to the fund’s particular risk/
return summary information, affect your
answer?
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• What are the risks to investors
under the proposed liability rules? Will
investors still find the interactive data
sufficiently reliable to use it?
• Should interactive data be subject
to liability if a mutual fund does not tag
its risk/return summary information in
a manner consistent with the standards
approved by the Commission,
irrespective of the mutual fund’s good
faith effort? If the answer is yes, what
should the mutual fund’s liability be for
such errors, and should liability attach
even if the mistake is inadvertent? What
if the error is the result of negligent
tagging practices, but there was no
affirmative intent to mislead?
• If interactive data are subject to
liability as proposed, is it necessary or
appropriate for viewable interactive data
to be subject to liability as and to the
extent proposed or otherwise? Should
the answer depend on the degree of
liability to which the interactive data
are subject? Should viewable interactive
data be subject to liability in a manner
or to an extent different than as
proposed?
• Should any or all interactive data be
deemed filed for purposes of Section
34(b) of the Investment Company Act
and, if so, should it be regardless of
compliance with proposed Rule 405 or
a filer’s good faith and reasonable efforts
to comply?
• Should the liability for interactive
data be exactly the same as it is for
XBRL-Related Documents under the
voluntary program?
• Would software be commercially
available and reasonably accessible to
all required interactive data filers,
investors, and analysts that would make
detection of tagging errors, such as the
use of inappropriate tags or improper
extensions, easy and cost-effective? If
so, would such monitoring by investors
and analysts likely discourage the
improper use of extensions or negligent
conduct in the tagging process?
• Would the use of software to search
for and detect any differences between
a mutual fund’s interactive data and the
Commission-approved interactive data
tags and other attributes depend on the
degree of investor interest or analysis by
third party information providers?
• Should a rule expressly state that
the Commission retains the authority to
enforce compliance with proposed Rule
405?
• Should we require the involvement
of auditors, consultants, or other third
parties in the tagging of data? If
assurance should be required, what
should be its scope, and should any
such requirement be phased in?
• Should we phase in increasing
levels of liability over time? Are the
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proposed limitations on liability
necessary and appropriate at the outset,
for example, the first year that a mutual
fund is subject to the interactive data
requirement, but inappropriate at a later
time? Should we require that interactive
data be subject to more liability later?
• Should the validation software, as
contemplated, cause an interactive data
exhibit with a major error to be held in
suspense in the electronic filing system
while the rest of the filing would be
accepted and disseminated if there were
no major errors outside of the
interactive data exhibit? In that case,
should the validation software hold the
entire filing in suspense or reject or
accept the entire filing or interactive
data exhibit?
G. Required Items
1. Data Tags
To comply with the proposed rules,
mutual funds would be required to tag
their risk/return summary information
using the most recent list of tags for
mutual fund risk/return summaries, as
released by XBRL U.S. and required by
the EDGAR Filer Manual. The ICI’s risk/
return summary list of tags received
acknowledgement from XBRL
International in June 2007. The
Commission anticipates entering into a
contract to update the architecture of
the list of tags and conform the list of
tags to any changes in the risk/return
summary that we adopt pursuant to a
pending rule proposal.102
Updates to the list of tags for risk/
return summary reporting may be
posted and available for downloading
from time to time to reflect changes in
the risk/return summary requirements,
refinements to the list of tags, or for
other reasons. To provide mutual funds
sufficient time to become familiar with
any such updates, we anticipate giving
advance notice before requiring use of
an updated list of tags. Based on
experience to date with the list of tags
for risk/return summaries, we believe
that, with the enhancements to the list
of tags that XBRL U.S. will be
developing, the list of tags will be
sufficiently developed to support the
interactive data disclosure requirements
in the proposed rules.
One of the principal benefits of
interactive data is its extensibility—that
is, the ability to add to the standard list
of tags in order to accommodate unique
circumstances in a mutual fund’s
particular disclosures. The use of
customized tags, however, may also
serve to reduce the ability of users to
compare similar information across
102 See Summary Prospectus Proposing Release,
supra note 15.
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mutual funds. In order to promote
comparability across funds, our
proposed rules would limit the use of
extensions to circumstances where the
appropriate element does not exist in
the standard list of tags.103 We also are
proposing that wherever possible,
preparers change the label for an
element that exists in the standard list
of tags, instead of creating a new
customized tag.104
Under Item 401(c) of Regulation S–T,
voluntary filers’ interactive data
elements must reflect the same
information as the corresponding
traditional format elements. Further, no
data element can be ‘‘changed, deleted
or summarized’’ in the interactive data
file.105 We do not propose to change this
equivalency standard for risk/return
summary information provided in
interactive data format as required by
the proposed rules.106
Request for Comment:
• Is our focus on comparability
appropriate? Instead of stressing ease of
risk/return summary comparability,
should our rules permit greater use of
customized data tags?
• Should we codify any other
principles to encourage comparability
without unduly reducing the
extensibility of interactive data?
2. Regulation S–T and the EDGAR Filer
Manual
We propose to require that mutual
funds provide interactive data in the
form of exhibits to the related
registration statement on Form N–1A.107
Interactive data would be required to
comply with our Regulation S–T 108 and
the EDGAR Filer Manual. The EDGAR
Filer Manual is available on our Web
site. It includes technical information
for making electronic filings to the
Commission. Volume II of this manual
includes guidance on the preparation,
submission, and validation of
interactive data submitted under the
voluntary program. Before adoption of
our proposed rules, we plan to update
103 Proposed Rule 405(c)(1)(iii)(B) as proposed in
Interactive Data Proposing Release, supra note 8.
104 Proposed Rule 405(c)(1)(iii)(A) as proposed in
Interactive Data Proposing Release, supra note 8.
105 Proposed Rule 405(c)(2) as proposed in
Interactive Data Proposing Release, supra note 8
106 Id.
107 The requirement to submit interactive data as
an exhibit would appear in proposed General
Instruction C.3.(g) of Form N–1A.
108 Proposed Rule 405 of Regulation S–T would
directly set forth the basic tagging and posting
requirements for the XBRL data and require
compliance with the EDGAR Filer Manual.
Consistent with proposed Rule 405, the EDGAR
Filer Manual would contain the detailed tagging
requirements.
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our manual with additional instructions
for filers of interactive data.
In addition to both Regulation S–T,
which would include the rules we are
proposing, and the instructions in our
EDGAR Filer Manual, filers may access
other sources for guidance in tagging
their financial information. These
include the XBRL U.S. Preparers Guide;
user guidance accompanying tagging
software; and financial printers and
other service providers. New software
and other forms of third-party support
for tagging risk/return summary
information using interactive data are
also becoming available.
Request for Comment:
• What specific guidance should be
provided in Regulation S–T for
interactive data filers?
• Does the XBRL U.S. Preparers
Guide provide useful guidance to
promote consistent tagging among
various mutual funds?
• Is the user guidance accompanying
tagging software, and the guidance
available from financial printers and
other service providers, helpful for filers
to tag their risk/return summary
information? What other sources of
guidance might prove useful?
H. Consequences of Non-Compliance
and Hardship Exemption
We propose that if a filer does not
provide the required interactive data
submission, or post the interactive data
on its Web site, by the required due
date, the filer’s ability to file posteffective amendments under Rule
485(b), which provides for immediate
effectiveness of amendments that make
non-material and other changes, would
be automatically suspended.109 The
suspension would become effective at
the time that the filer fails to meet the
requirement to submit or post
interactive data and would terminate as
soon as the filer has submitted and
posted that data. The suspension would
apply to post-effective amendments
filed after the suspension becomes
effective, but would not apply to posteffective amendments that were filed
before the suspension became effective.
The suspension would not apply to
post-effective amendments filed solely
for purposes of submitting interactive
data, which would enable a filer to cure
its failure to submit interactive data by
filing an amendment under Rule 485(b).
We believe that precluding the use of
immediate effectiveness of post-effective
amendments during any period of
failure to comply would appropriately
direct attention to the proposed
interactive data requirement without
109 Proposed
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permanently suspending a mutual
fund’s ability to file post-effective
amendments under Rule 485(b) once the
fund has remedied the failure.
If the proposed rules are adopted, we
anticipate that we would not interpret
Rule 303,110 which restricts the ability
of registered investment companies to
incorporate by reference into an
electronic filing documents that have
not been filed in electronic format, to
apply to the failure to file Interactive
Data Files. Thus, as long as the
traditional format electronic filing has
been made as required, the failure to file
a required Interactive Data File would
not affect a mutual fund’s ability to
incorporate by reference the mutual
fund’s prospectus. For example, if we
were to adopt as proposed our proposed
rules regarding a summary prospectus
for mutual funds, we anticipate that a
mutual fund could incorporate by
reference its statutory prospectus into
its summary prospectus as permitted by
those proposed rules, notwithstanding
the fund’s failure to file required
interactive data.111
Consistent with the treatment of other
applicable reporting obligations, we
propose to provide a continuing
hardship exemption for the inability to
timely electronically submit interactive
data. Rule 202 of Regulation S–T
provides for continuing hardship
exemptions.112
Rule 202 permits a filer to apply in
writing for a continuing hardship
exemption if information otherwise
required to be submitted in electronic
format cannot be so filed without undue
burden or expense. If the staff, through
authority delegated from the
Commission, grants the request, the filer
must file the information in paper by
the applicable due date and file a
confirming electronic copy if and when
specified in the grant of the request.
We propose to revise Rule 202 to
provide that a grant of a continuing
hardship exemption for interactive data
would not require a paper
submission.113 If the filer did not
electronically submit the interactive
data by the end of the period for which
the exemption was granted, the filer’s
ability to file post-effective amendments
under Rule 485(b) would be suspended
110 Rule
303 of Regulation S–T.
Summary Prospectus Proposing Release,
supra note 15.
112 Rule 201 of Regulation S–T provides for
temporary hardship exemptions. We are not
proposing a temporary hardship exemption because
our proposal would provide a mutual fund with a
15-business day period for submitting the
interactive data file for a related Form N–1A filing.
113 See Proposed Rule 202 as proposed in
Interactive Data Proposing Release, supra note 8.
111 See
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until it did electronically submit the
interactive data.114 Similarly, we
propose to revise Rule 202 to provide an
essentially mirror-image exemption
from the proposed requirement for a
mutual fund that has a Web site to post
the interactive data on its Web site.115
Request for Comment:
• Are the consequences for failure to
comply with the interactive data
submission requirements appropriate?
• Should we suspend the ability of a
mutual fund to file post-effective
amendments under Rule 485(b) if it
does not comply with the proposed
rules? Should the proposed rules
provide similar treatment whether the
failure to comply relates to interactive
data submission or to Web site posting?
Should the suspension apply to the
particular fund that failed to comply, all
series of a registrant that failed to
comply, or all funds of a complex that
failed to comply?
• Should the proposed rules treat a
mutual fund’s compliance with
interactive data requirements as an
express condition to the mutual fund’s
related registration statement or posteffective amendment becoming
effective?
• Should the failure to file or post
interactive data as required restrict a
mutual fund’s ability to incorporate by
reference the fund’s statutory
prospectus, including under our
proposed rules relating to a mutual fund
summary prospectus?
• Does our proposed rule strike the
correct balance of positive and negative
consequences when a mutual fund
meets its requirements to provide
traditional format documents but fails to
provide interactive data?
• Do commenters believe that the
proposed revisions to the continuing
hardship exemption would be sufficient
to cover unanticipated technical
difficulties associated with interactive
data? If insufficient, why would they be
insufficient and how should the
hardship exemption be tailored to
address technical difficulties associated
with interactive data?
• Should we provide a temporary
hardship exemption? If so, would six
business days be an appropriate period
for the temporary hardship exemption
to apply? 116 If not, would a shorter or
longer period be appropriate, and why?
114 Proposed amendment to Note 4 to Rule 202 as
proposed in Interactive Data Proposing Release,
supra note 8; Proposed Rule 485(c)(3).
115 Id.
116 See Proposed Rule 201 as proposed in
Interactive Data Proposing Release, supra note 8
(proposing a six-business-day temporary hardship
exemption for financial statement filers).
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I. Changes to the Voluntary Program
If we adopt rules requiring mutual
funds to submit risk/return information
in interactive data format, we intend
that mutual funds would no longer be
able to submit risk/return summary
information in interactive data format
through the voluntary program after the
compliance date for the mandatory
rules. We are proposing to amend Rule
8b–33 to remove risk/return summary
information as a category of information
permitted to be submitted under the
voluntary program. In addition, we are
proposing technical amendments to
other rules to reflect this.117
Further, in order to encourage
participation in the voluntary program
for tagging investment company
financial information, we are proposing
amendments to enable investment
companies that are registered under the
Investment Company Act, business
development companies, and other
entities that report under the Exchange
Act and prepare their financial
statements in accordance with Article 6
of Regulation S–X to submit exhibits
containing a tagged schedule of
portfolio holdings without having to
submit other financial information in
interactive data format.118 As with the
current voluntary program, volunteers
could participate, without pre-approval,
merely by submitting a tagged Schedule
I—Investments in Securities of
Unaffiliated Issuers (‘‘Schedule I’’).119
To facilitate this, the Commission
anticipates entering into a contract to
develop a list of tags that could be used
to tag portfolio holdings.
Currently, the interactive 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,
117 See proposed Rule 401(a); proposed Rule
401(d)(1)(i); proposed Rule 401(d)(2)(i). We are also
proposing to delete current Rule 401(b)(1)(iv),
which provides the option to file risk/return
summary information under the voluntary program,
and to replace it with the option to file the portfolio
holdings schedule on a stand-alone basis described
below.
118 Proposed Rule 401(b)(1)(iv) (designating
Schedule I—Investments in securities of
unaffiliated issuers as mandatory content under the
voluntary program). If rules requiring interactive
data financial information are adopted, we
anticipate that the voluntary program would be
modified to permit participation only by registered
investment companies, business development
companies, and other entities that report under the
Exchange Act and prepare their financial statements
in accordance with Article 6 of Regulation S–X. See
Interactive Data Proposing Release, supra note 8
(proposed Rule 401(a)).
119 Rule 12–12 of Regulation S–X [17 CFR 210.12–
12].
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financial highlights or condensed
financial information and risk/return
summary information set forth in Items
2 and 3 of Form N–1A.120 We are adding
Schedule I information as a separate
item of Mandatory Content that
participants can submit in order to give
volunteers greater flexibility in tagging
fund data.
Investors, financial intermediaries,
and third party information providers,
among others, use the portfolio holdings
data contained in Schedule I to make
decisions concerning the purchase and
continued holding of funds and for
other purposes. Portfolio holdings data
promises to be even more useful to these
various stakeholders if this data is
interactive. In addition, allowing
volunteers to submit tagged portfolio
holdings information without having to
submit other financial information in
interactive data format would increase
the range of options for participation in
the voluntary program and encourage
increased participation.
Under the current voluntary program,
any official filing with which tagged
exhibits are submitted must disclose
that the financial information is
‘‘unaudited’’ or ‘‘unreviewed,’’ as
applicable and that the purpose of
submitting the tagged exhibits is to test
the related format and technology and,
as a result, investors should not rely on
the exhibits in making investment
decisions.121 We believe that this
cautionary disclosure should also be
tagged and included within each
interactive data exhibit, in order to help
alert investors and other users that the
exhibits should not be relied on in
making investment decisions.
Accordingly, we are proposing that this
disclosure be required in the exhibits
submitted pursuant to the voluntary
program as a tagged data element,122
consistent with how the cautionary
disclosure is presented in risk/return
summary exhibits under the current
voluntary program.
Request for Comment:
• Is allowing the tagging of fund data
contained in Schedule I separately from
other investment company financial
information an appropriate next step in
the voluntary program for investment
companies? Is there other investment
company information that should be
included in the voluntary program?
• What effect would tagged data have
on investors’, analysts’, and other users’
ability to analyze investment company
120 Rule 401(b)(1) of Regulation S–T [17 CFR
232.401(b)(1)].
121 Rule 401(d)(1)(ii) of Regulation S–T [17 CFR
232.401(d)(1)(ii)].
122 See proposed Rule 401(d)(2).
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portfolio holdings? Are there any
potential problems related to providing
investment company portfolio holdings
in interactive data format? For example,
could this facilitate the front-running of
investment company portfolio
transactions or other behavior that could
harm investors?
• Is the tagging of fund data
contained in Schedule I useful on a
stand-alone basis? Should we instead
require a fund that submits tagged data
for Schedule I to also provide tagged
data for Schedules II through V,123 as
Schedules I through V are often
presented together in fund financial
statements? Should we allow funds to
tag any or all of Schedules I through V
in the voluntary program without
tagging other financial information? Are
there particular Schedules, or particular
combinations of Schedules, that should
be permitted to be tagged in the
voluntary program without tagging other
financial information?
• How would allowing volunteers to
submit an interactive data exhibit
consisting of Schedule I information on
a stand-alone basis affect participation
in the voluntary program? Does the
tagging of Schedule I information
separately from other investment
company financial information present
any technical concerns that would affect
participation in the voluntary program?
• Should we require cautionary
disclosure in the tagged schedule of
portfolio holdings as a tagged data
element?
• Is additional or different language
necessary for cautionary disclosure?
• Has development of a list of tags for
portfolio holdings advanced sufficiently
to permit tagging of Schedule I on a
stand-alone basis? If not, what further
steps are needed?
III. General Request for Comments
We request comment on the specific
issues we discuss in this release, and on
any other approaches or issues that we
should consider in connection with the
proposed amendments. We seek
comment from any interested persons,
including those required to file
information with us on the EDGAR
system, as well as investors,
disseminators of EDGAR data, industry
analysts, EDGAR filing agents, and any
other members of the public.
123 Schedule II—Investments—other than
securities, Rule 12–13 of Regulation S–X [17 CFR
210.12–13]; Schedule III—Investments in and
advances to affiliates, Rule 12–14 of Regulation S–
X [17 CFR 210.12–14]; Schedule IV—Investments—
securities sold short, Rule 12–12A of Regulation S–
X [17 CFR 210.12–12A]; and Schedule V—Open
option contracts written, Rule 12–12B of Regulation
S–X [17 CFR 210.12–12B].
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IV. Paperwork Reduction Act
The proposed amendments contain
‘‘collection of information’’
requirements within the meaning of the
Paperwork Reduction Act of 1995, or
PRA.124 The purpose of the proposed
amendments is to make risk/return
summary information easier for
investors to analyze and to assist in
automating regulatory filings and
business information processing. We are
submitting the proposed amendments to
the Office of Management and Budget
(OMB) for review in accordance with
the PRA.125 An agency may not conduct
or sponsor, and a person is not required
to respond to, an information collection
unless it displays a currently valid OMB
control number.
The title for the new collection of
information for submitting risk/return
summary information in interactive data
format that the proposed amendments
would establish is ‘‘Mutual Fund
Interactive Data’’ (OMB Control No.
3235–XXXX). This collection of
information relates to already existing
regulations and forms adopted under
the Securities Act, the Exchange Act,
and the Investment Company Act that
set forth disclosure requirements for
mutual funds and other issuers. The
proposed amendments, if adopted,
would require mutual funds to submit
their risk/return summary information
in interactive data format and post it on
their Web sites, if any, in interactive
data form. The specified risk/return
summary information already is and
would continue to be required to be
submitted to the Commission in
traditional format under existing
disclosure requirements. Compliance
with the proposed amendments would
be mandatory beginning with initial
registration statements, and posteffective amendments that are annual
updates to effective registration
statements, that become effective after
December 31, 2009.126 The information
required to be submitted would not be
kept confidential by the Commission.
The title for the collection of
information for submitting portfolio
holdings in interactive data format is
‘‘Voluntary XBRL-Related Documents’’
(OMB Control No. 3235–0611). The
proposed amendments would permit
investment companies that are
registered under the Investment
Company Act, business development
companies, and other entities that report
under the Exchange Act and prepare
their financial statements in accordance
with Article 6 of Regulation S–X to
124 44
U.S.C. 3501 et seq.
U.S.C. 3507(d) and 5 CFR 1320.11.
126 See Part II.B.
125 44
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submit exhibits containing a tagged
schedule of portfolio holdings without
having to submit other financial
information in interactive data format.
Compliance with the proposed
amendments would be voluntary. The
information required to be submitted
would not be kept confidential by the
Commission.
A. Reporting and Burden Estimate
1. Submission of Risk/Return Summary
Information Using Interactive Data
Form N–1A (OMB Control No. 3235–
0307) under the Securities Act and the
Investment Company Act 127 is used by
mutual funds to register under the
Investment Company Act and to offer
their securities under the Securities Act.
The information required by the new
collection of information we propose,
would correspond to the risk/return
summary information now required by
Form N–1A and would be required to
appear in exhibits to Form N–1A and on
mutual funds’ Web sites.
Based on estimates from voluntary
program participant responses to a
questionnaire and our experiences with
the voluntary program, we estimate that
interactive data filers would require an
average of approximately 13 burden
hours to tag risk/return summary
information in the first year, and the
same task in subsequent years would
require an average of approximately 11
hours.128 The average annual burden
over a three-year period is estimated at
approximately 12 hours.129 Based on
estimates of 8,810 mutual funds
submitting interactive data
documents,130 each incurring 12 hours
per year on average, we estimate that, in
the aggregate, interactive data adoption
would result in an additional 105,720
burden hours, on average, for all mutual
funds for each of the first three years.131
Converted into dollars, this amounts to
approximately $22,500,000.132
127 17
CFR 239.15A; 17 CFR 274.11A.
average burden hours for the first and
subsequent submissions were calculated using data
collected from 6 responses to a voluntary program
participant questionnaire from mutual funds that
participated in the voluntary program. See Part V,
infra.
129 (13.33 hours for the first submission + 11.275
hours for the second submission + 11.275 hours for
the third submission) ÷ 3 years = approximately 12
hours.
130 This estimate is based on analysis by the
Division of Investment Management staff of
publicly available data.
131 8,810 mutual funds × 12 incremental burden
hours per mutual fund = 105,720 burden hours.
132 This cost increase is estimated using an
estimated hourly wage rate of $213.00 ((105,720
burden hours) × $213.00 hourly wage rate =
$22,518,360 total incremental internal cost). The
estimated wage figure is based on published rates
for compliance attorneys and programmer analysts,
128 The
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We further estimate that mutual funds
would require an average of
approximately 1 burden hour to post
interactive data to their Web sites. Based
on estimates of 8,810 mutual funds
posting interactive data, each incurring
1 burden hour per year on average, we
estimate that, in the aggregate, adoption
of Web site posting requirements would
result in an additional 8,810 burden
hours for all mutual funds.133 Converted
into dollars, this amounts to
approximately $2,200,000.134
We also estimate that software and
consulting services would be used by
mutual funds for an increase of
approximately $803 per mutual fund.135
Based on the estimate of 8,810 mutual
funds using software and consulting
services at an annual cost of $803 we
estimate that, in the aggregate, the total
external costs to the industry would be
approximately $7,100,000.136
Regulation C and Regulation S–T
Regulation C (OMB Control No. 3235–
0074) describes the procedures to be
followed in preparing and filing
registration statements with the
Commission. Regulation S–T (OMB
Control No. 3235–0424) specifies the
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 $270 and $194,
respectively. See Securities Industry Association,
Report on Management & Professional Earnings in
the Securities Industry 2007 (Sept. 2007) (‘‘SIA
Report’’). The estimated wage rate was further based
on the estimate that compliance attorneys would
account for one quarter of the hours worked and
senior system analysts would account for the
remaining three quarters, resulting in a weighted
wage rate of $213.00 (($270 × .25) + ($194 ×.75)).
133 8,810 mutual funds × 1 burden hour per
mutual fund = 8,810 burden hours.
134 ($250 × 1 hour × 8,810 mutual funds). This
cost estimate is based on informal discussions with
a limited number of persons believed to be
generally knowledgeable about preparing,
submitting, and posting interactive data. See Part V,
infra.
135 For purposes of this estimate, we assumed that
the largest 50 fund complexes would develop
software in-house incurring costs of $125,000 in the
first year. Assuming that the largest 50 fund
complexes would develop software for use in all of
their funds, and that their funds encompass 80% of
the number of funds (7,048), then the average first
year cost for those funds would be ($125,000 × 50)/
7,048 = $887. Therefore, for those funds using
software developed internally, the average 3 year
cost would be approximately $829 ($887 in the first
year + $800 in the second year + $800 in the third
year) ÷ 3 years = approximately $829. The average
3 year cost for those funds that use commercial
software would be $700 ($500 in the first year +
$800 in the second year + $800 in the third year)
÷ 3 years = $700. Assuming 80% of funds incurred
costs of $829 and 20% of funds incurred costs of
$700, the average software and consulting cost per
mutual fund would be approximately $803. These
estimates were derived from responses to a
voluntary program questionnaire. See Part V, infra.
136 8,810 mutual funds × $803 = approximately
$7,100,000.
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requirements that govern the electronic
submission of documents. The proposed
changes to these items would add and
revise rules under Regulations C and S–
T. The filing requirements themselves,
however, are included in Form N–1A
and we have reflected the burden for
these new requirements in the burden
estimate for Mutual Fund Interactive
Data. The rules in Regulations C and S–
T do not impose any separate burden.
jlentini on PROD1PC65 with PROPOSALS2
2. Changes To the Voluntary Program
We are proposing to decrease the
burden associated with the existing
collection of information for Voluntary
XBRL-Related Documents to reflect the
proposed amendments. If we adopt
rules requiring mutual funds to submit
risk/return information in interactive
data format, we intend that mutual
funds would no longer be able to submit
risk/return summary information in
interactive data format through the
voluntary program after the compliance
date for the mandatory rules.
When we adopted the amendments to
expand the voluntary program to enable
mutual funds voluntarily to submit risk/
return summary information in
interactive data format, we estimated an
increase to the existing collection of
information for Voluntary XBRL-Related
Documents.137 We estimated that 10%
of the approximately 545 fund
complexes that have mutual funds, or
55 fund complexes, would each submit
documents containing tagged risk/return
summary information for one mutual
fund.138 We further estimated that the
initial creation of tagged documents
containing risk/return summary
information would require, on average,
approximately 110 burden hours per
mutual fund, and the creation of such
tagged documents in subsequent years
would require an average 10 burden
hours per mutual fund. Because the
PRA estimates represent the average
burden over a three-year period, we
estimated the average hour burden for
the submission of tagged documents
containing risk/return summary
information for one mutual fund to be
approximately 43 hours.139
Based on the estimates of 55
participants submitting tagged
documents containing risk/return
summary information for one mutual
fund once per year and incurring 43
hours per submission, we estimated
137 See Voluntary Program Adopting Release,
supra note 16.
138 In the case of a mutual fund with multiple
series, our estimate treated each series as a separate
mutual fund.
139 (110 hours in the first year + 10 hours in the
second year + 10 hours in the third year) ÷ 3 years
= 43 hours.
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that, in the aggregate, the industry
would incur an additional 2,365 burden
hours associated with the
amendments.140 We further estimated
that 75% of this burden increase, or
approximately 1,774 hours, would be
borne internally by the mutual fund
complexes. We estimated that this
internal burden increase converted to
dollars would amount to a total annual
increase of internal costs of
approximately $393,828.141
We also estimated that 25% of the
burden, or approximately 591 hours,
would be outsourced to external
professionals and consultants retained
by the mutual fund complex at an
average cost of $256.00 per hour for a
total annual increase of approximately
$151,296.142 In addition, we estimated
that the cost of licensing software would
be $333 per participant per year, for a
total annual increase of $18,315.143
Altogether, we estimated the total
annual increase in external costs related
to the amendments would be
$169,611.144
Given that mutual funds would no
longer be able to submit risk/return
summary information in interactive data
format through the voluntary program if
the proposed amendments are adopted,
we would reduce the internal hour
burden associated with the voluntary
program by 1,774 hours and the internal
cost burden by $393,828. We would also
reduce the external cost burden by
$169,611.
We also are proposing amendments to
the voluntary program to enable
investment companies that are
registered under the Investment
Company Act, business development
companies, and other entities that report
under the Exchange Act and prepare
their financial statements in accordance
with Article 6 of Regulation S–X to
submit exhibits containing a tagged
schedule of portfolio holdings without
having to submit other financial
information in interactive data format.
As with the current voluntary program,
volunteers could participate, without
pre-approval, merely by submitting
Schedule I in interactive data format.145
Investors, financial intermediaries,
and third party information providers,
documents per year × 43 hours per
submission = 2,365 hours.
141 See note 82 of the Voluntary Program
Adopting Release, supra note 16.
142 See note 83 of the Voluntary Program
Adopting Release, supra note 16.
143 $333 per participant × 55 participants =
$18,315.
144 This annual total consisted of $151,296 in
outside professional costs plus $18,315 in software
costs.
145 Rule 12–12 of Regulation S–X [17 CFR 210.12–
12].
140 55
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among others, use the portfolio holdings
data contained in Schedule I to make
decisions concerning the purchase and
continued holding of funds and for
other purposes. Portfolio holdings data
promises to be even more useful to these
various stakeholders if this data is
interactive. In addition, allowing
volunteers to submit tagged portfolio
holdings information without having to
submit other financial information in
interactive data format would increase
the range of options for participation in
the voluntary program and encourage
increased participation.
We estimate that 20 registrants would
choose to submit a schedule of portfolio
holdings in interactive data format. We
believe that investment companies that
are registered under the Investment
Company Act, business development
companies, and other entities that report
under the Exchange Act and prepare
their financial statements in accordance
with Article 6 of Regulation S–X would
participate, given the flexibility
provided by a new option to submit
exhibits containing just portfolio
holdings information in interactive data
format.
Submission of portfolio holdings
information in interactive data format
would not affect the burden of preparing
the registrants’ traditional format filings.
In order to provide portfolio holdings
information in interactive data format, a
participating registrant would have to
tag Schedule I and submit the resulting
interactive data file as an exhibit to its
filing on Form N–CSR or Form N–Q.146
The Commission anticipates entering
into a contract to develop a list of tags
that could be used to tag portfolio
holdings. Based on our experience with
mutual funds that have submitted risk/
return summary information in the
current voluntary program, we estimate
that the initial creation of portfolio
holdings information in interactive data
format would require, on average,
approximately 12 burden hours per
registrant,147 and the creation of such
information in interactive data format in
subsequent years would require an
average 10 burden hours per
146 Form N–CSR [17 CFR 249.331; 17 CFR
274.128]; Form N–Q [17 CFR 249.332; 17 CFR
274.130].
147 Mutual funds submitting risk/return summary
information in our voluntary program indicated that
an initial submission in the voluntary program took
approximately 13 hours of labor. Given that the
submission of portfolio holdings in interactive data
format is less complex than the submission of risk/
return summary information in interactive data
format but potentially requires the tagging of many
more individual items, we estimate that the initial
creation of interactive data files containing portfolio
holdings information would require, on average,
approximately 12 burden hours per volunteer.
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jlentini on PROD1PC65 with PROPOSALS2
registrant.148 Because the PRA estimates
represent the average burden over a
three-year period, we estimate the
average hour burden for the submission
of portfolio holdings information in
interactive data format for one registrant
to be approximately 11 hours.149
Based on the estimate of 20 registrants
submitting interactive data files
containing portfolio holdings
information once each year and
incurring 11 hours per submission we
estimate that, in the aggregate, the
industry would incur an additional 220
burden hours associated with the
proposed amendments.150 We estimate
that this internal burden increase
converted to dollars would amount to
approximately $47,000.151
We also estimate that external
professionals and consultants would be
retained by the registrant for an increase
of approximately $600.00.152 It is our
understanding that annual software
licensing costs generally would be
included in the cost of hiring external
professionals and consultants.153 Based
148 Mutual funds submitting risk/return summary
information in the current voluntary program
indicated that each set of submissions, after the
initial set, would take approximately 11 burden
hours, or 2 hours less than the initial submission.
We estimate that the reduction in burden hours for
subsequent submissions of portfolio holdings
information in interactive data format would be a
similar 2 hour reduction, or approximately 10
burden hours per volunteer.
149 (12 hours in the first year + 10 hours in the
second year + 10 hours in the third year) ÷ 3 years
= approximately 11 hours. While the PRA requires
an estimate based on a hypothetical three years of
participation, a registrant, as noted earlier, could
participate in the voluntary program by submitting
portfolio holdings information in interactive data
format over a shorter period or even just once as
the registrant chooses.
150 20 documents per year × 11 hours per
submission = 220 hours. We note that mutual funds
submit portfolio holdings information to the
Commission four times per year. However, for
purposes of our analysis, we estimate that mutual
funds choosing to participate in the voluntary
program would submit portfolio holdings
information in interactive data format once each
year.
151 This cost increase is estimated by multiplying
the increase in annual internal hour burden (220)
by the estimated hourly wage rate of $213.00. See
supra note 132.
152 ($100.00 in the first year + $800.00 in the
second year + $800.00 in the third year) ÷ 3 years
= approximately $600.00. Mutual funds
participating in our voluntary program for the
submission of risk/return summary information in
interactive data format indicated an initial external
cost of $100.00 for the hiring of external
professionals and consultants and projected an
annual cost of $800.00 for external service
providers going forward. The increase going
forward was due to the fact that a couple of
participants indicated that their external service
provider had waived its fee for the initial
submission.
153 We note that one respondent spent over
$100,000 internally to develop software to submit
risk/return summary information in interactive data
format. We did not include this number in our
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on the estimate of 20 registrants
retaining external professionals and
consultants at an annual cost of $600.00
we estimate that, in the aggregate, the
total external cost to the industry would
be $12,000.154
As a result of the changes to the
voluntary program, we therefore
estimate a total decrease in internal
burden hours of approximately 1,600 155
and a total decrease in internal costs of
approximately $347,000.156 We further
estimate a total decrease in external
costs of approximately $158,000.157
B. Request for Comments
We solicit comment on the expected
Paperwork Reduction Act effects of the
proposed amendments, including the
following:
• The accuracy of our estimates of the
additional burden hours that would
result from adoption of the proposed
amendments;
• Whether the proposed new
collection of information is necessary
for the proper performance of the
functions of the Commission, including
whether the information will have
practical utility;
• Ways to enhance the quality, utility,
and clarity of the information to be
collected;
• Ways to minimize the burden of the
collection of information on those who
respond, including through the use of
automated collection techniques or
other forms of information technology;
and
• Any effects of the proposed
amendments on any other collections of
information not previously identified.
Any member of the public may direct
to us any comments concerning these
burden estimates and suggestions for
reducing the burdens. Persons
submitting comments on the collection
of information requirements should
direct their comments to the OMB,
Attention: Desk Officer for the
calculations as this software was developed solely
for purposes of submitting risk/return summary
information and not for submitting financial
information in interactive data format. See infra
note 170.
154 20 registrants submitting interactive data files
under the voluntary program × $600.00 = $12,000.
155 (1,774 hours for the removal of risk/return
summary information from the voluntary program
¥ 220 hours for the submission of schedule of
portfolio holdings in interactive data format =
approximately 1,600 hours.)
156 ($393,828 for the removal of risk/return
summary information from the voluntary program
¥ $47,000 for the submission of schedule of
portfolio holdings in interactive data format =
approximately $347,000.)
157 ($169,611 for the removal of risk/return
summary information from the voluntary program
¥ $12,000 for the submission of schedule of
portfolio holdings in interactive data format =
approximately $158,000.)
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Securities and Exchange Commission,
Office of Information and Regulatory
Affairs, Washington, DC 20503, and
send a copy of the comments to Office
of the Secretary, Securities and
Exchange Commission, 100 F Street,
NE., Washington, DC 20549–9303, with
reference to File No. S7–12–08.
Requests for materials submitted to
OMB by the Commission with regard to
these collections of information should
be in writing, refer to File No. S7–12–
08, and be submitted to the Securities
and Exchange Commission, 100 F
Street, NE., Washington, DC 20549.
OMB is required to make a decision
concerning the collection of information
between 30 and 60 days after
publication of this release.
Consequently, a comment to OMB is
best assured of having its full effect if
OMB receives it within 30 days of
publication.
V. Cost/Benefit Analysis
A. Submission of Risk/Return Summary
Information Using Interactive Data
The proposed rules would require
submission of interactive data-formatted
risk/return summary information and
the posting of such information on a
mutual fund’s Web site, if any. We
believe that the proposed rules likely
would result in the benefits and costs
described below. We base our belief on
an economic analysis of data obtained
from several sources, including
voluntary program participant responses
to a staff-prepared questionnaire and
our experiences with the voluntary
program.158
Interactive data are intended to
remove a barrier in the flow of
information between mutual funds and
users of information that is conveyed
through mutual fund disclosures. This
should enable less costly dissemination
of information and thereby improve the
allocation of capital. The cost of
implementation will depend primarily
on the costs of transition by mutual
funds to the new mode of reporting. The
magnitudes of these benefits and costs
from any individual mutual fund’s
adoption of interactive data reporting
will depend on the number of other
mutual funds that also adopt and on the
availability of supporting software and
other infrastructures that enable
analysis of the information. To the
extent that submitted information
allows investors to make investment
decisions based on market-wide
comparison and analysis, the value to
the investors of the reported information
158 The proposed required program, similar to the
voluntary program, would require use of interactive
data in XBRL format.
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tends to increase with the total number
of mutual funds adopting the regime.
Likewise, mutual funds’ incentives to
report their information using
interactive data depends on the interest
level of the investors in this mode of
reporting. By mandating
implementation, the rule will expand
the network of adopters and thereby
create positive network externalities of
reported information for the investors.
jlentini on PROD1PC65 with PROPOSALS2
1. Benefits of Interactive Data
Submissions and Web Site Posting
The proposed rules have the potential
to benefit investors both directly and by
facilitating the exchange of information
between mutual funds and the third
party information providers and other
intermediaries who receive and process
mutual fund disclosures.
Information Access
Benefits of the proposed rulemaking
accrue from the acceleration of marketwide adoption of interactive data format
reporting. The magnitudes of the
benefits thus depend on the value to
investors of the new reporting regime
relative to the old reporting regime and
on the extent to which the mandated
adoption speeds up the market-wide
implementation.
Requiring mutual funds to file their
risk/return summary information using
the interactive data format would enable
investors, third party information
providers, and the Commission staff to
capture and analyze that information
more quickly and at a lower cost than
is possible using the same information
provided in a static format.159 Even
though the new regime does not require
any new information to be disclosed or
reported, certain benefits accrue when
mutual funds use an interactive data
format to report their risk/return
summary information. These include
the following. Through interactive data,
what is currently static, text-based
information could be dynamically
searched and analyzed, facilitating the
comparison of mutual fund cost,
performance, and other information
across multiple classes of the same fund
and across the more than 8,000 funds
currently available. Any investor with a
computer would have the ability to
acquire and download data that have
generally been available only to
intermediaries and third-party analysts.
For example, users of risk/return
summary information could download
it directly into spreadsheets, analyze it
using commercial off-the-shelf software,
or use it within investment models in
other software formats. Also, to the
159 See
Part I.
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extent investors currently are required
to pay for access to mutual fund risk/
return summary information that has
been extracted and reformatted into an
interactive data format by third-party
sources, the availability of interactive
data in Commission filings could allow
investors to avoid additional costs
associated with third-party sources.
The magnitude of this informational
benefit varies, however, with the
availability of sophisticated tools that
will allow investors to analyze the
information. The growing development
of software products for users of
interactive data is helping to make
interactive data increasingly useful to
both institutional and retail investors.160
For example, currently there are many
software providers and financial
printers that are developing interactive
data viewers. We anticipate that these
will become widely available and
increasingly accessible to investors. We
expect that the open standard feature of
the interactive data format will facilitate
the development of applications, and
software, and that some of these
applications may be made available to
the public for free or at a relatively low
cost. The continued improvement in
this software would allow increasingly
useful ways to view and analyze mutual
fund risk/return summary information
to help investors make more wellinformed investment decisions.
Interactive data also could provide a
significant opportunity for mutual funds
to automate their regulatory filings and
business information processing, with
the potential to increase the speed,
accuracy, and usability of mutual fund
disclosure. This reporting regime may in
turn reduce filing and processing costs.
By enabling mutual funds to further
automate their disclosure processes,
interactive data may eventually help
funds improve the speed at which they
generate information. For example, with
standardized interactive data tags,
registration statements may require less
time for information gathering and
review.
A mutual fund that uses a
standardized interactive data format at
earlier stages of its reporting cycle may
also increase the accuracy of its
disclosure by reducing the need for
repetitive data entry that could
introduce errors and enhancing the
ability of a mutual fund’s in-house
professionals to identify and correct
errors in the fund’s registration
160 See SEC’s Office of Interactive Disclosure
Urges Public Comment as Interactive Data Moves
Closer to Reality for Investors, Securities and
Exchange Commission Press Release, Dec. 5, 2007,
available at https://www.sec.gov/news/press/2007/
2007-253.htm.
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statements filed in traditional electronic
format. There has been a growing
development of software products to
assist mutual funds to tag their risk/
return summary information using
interactive data helping make
interactive data increasingly useful.161
Mutual funds that automate their
regulatory filings and business
information processing in a manner that
facilitates their generation and analysis
of disclosures could, as a result, realize
a reduction in costs.
Market Efficiency
The proposed requirements could
benefit investors by making financial
markets more efficient in regard to the
following: 162
• Capital formation as a result of
mutual funds’ being in a better position
to attract shareholders because of greater
(less costly) awareness on the part of
investors of mutual fund risk/return
summary information; and
• Capital allocation as a result of
investors’ being better able to allocate
capital among those mutual funds
seeking it because of interactive data
reporting’s facilitating innovations in
efficient communication of mutual fund
risk/return summary information.
More Efficient Capital Formation
An increase in the efficiency of
capital formation is a benefit that may
accrue to the extent that interactive data
reduces some of the information barriers
that make it costly for mutual funds to
find appropriate sources of new
investors. In particular, smaller mutual
fund complexes are expected to benefit
from enhanced exposure to investors. If
interactive data risk/return summary
reporting increases the availability, or
reduces the cost of collecting and
analyzing, mutual fund risk/return
summary data, then there could be
improved coverage of mutual funds in
smaller fund complexes by third party
information providers and commercial
data vendors.
At present, some mutual funds in
smaller fund complexes do not provide
their data to third party information
providers.163 This may reduce the
161 Id.
162 We believe the benefits will stem primarily
from the requirement to submit interactive data to
the Commission and the Commission’s
disseminating that data. We also believe, however,
that the requirement that mutual funds with Web
sites post the interactive data required to be
submitted would encourage its widespread
dissemination thereby contributing to lower access
costs for users and the related benefits described.
We solicit comment in Part II.E regarding what
advantages dual Commission and Web site
availability would have.
163 Analysis by Division of Investment
Management staff based on publicly available data.
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likelihood that their data is readily
available to investors who use
commercially available products to
assess mutual fund performance. Hence,
if interactive data reporting increases
coverage of mutual funds in smaller
fund complexes by third party
information providers, and this
increases their exposure to investors,
then lower search costs for shareholders
could result.
jlentini on PROD1PC65 with PROPOSALS2
More Efficient Capital Allocation
An increase in the efficiency of
capital allocation may accrue to the
extent that interactive data increase the
quality of information by reducing the
cost to access, collect, and analyze
mutual fund risk/return summary
information or improve the content of
mutual fund-reported information.164
An increase in quality and improvement
in content could enable investors to
better allocate their capital among
mutual funds.
Information quality in mutual fund
markets would likely be higher if
interactive data reporting were required
than if not, leading to more efficient
capital allocation. As a result of the
improved utility of information,
investors may be able to evaluate
various mutual funds, thereby
facilitating capital flow into their
favored investment prospects.
We believe that requiring mutual
funds to provide interactive data would
improve the quality of risk/return
summary information available to end
users, and help spur interactive datarelated innovation in the supply of
mutual fund comparative products,
resulting from a potential increased
competition among suppliers of such
products due to lower entry barriers as
a result of lower data collection costs.
However, we have considered
competing views of the informational
consequences of interactive data. For
example, a requirement to submit
interactive data information could
decrease the marginal benefit of
collecting information and thus reduce
the information quality to the extent it
reduces third-party incentives to
facilitate access to, collect, or analyze
information. Assuming that markets
efficiently price the value of
information, the amount of information
accessed, collected (or enhanced), and
analyzed will be determined by the
marginal benefit of doing so.165
164 In the context of the discussion below, quality
refers to the ease with which end-users of risk/
return summary information can access, collect,
and analyze the data. This issue is separate from the
content of mutual fund-reported information.
165 Also, we expect that because the proposed
rules would require the use of the XBRL interactive
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Lowering information collection costs
(through a requirement to submit
interactive data information) should
increase this benefit. If this is so, then
there should be no degradation in the
level of information quality as a result
of changes in third-party provider
behavior under an interactive data
reporting regime. However, if one
competitor in the industry can subsidize
its operations through an alternative
revenue stream, both quality and
competition may suffer.166
Another potential information
consequence of the proposed
requirements may be changes to the
precision and comparability of the
information disseminated by data
service providers since the interactive
data requirements would shift the
source of data formatting that allows
aggregation and facilitates comparison
and analysis from end-users to mutual
funds submitting interactive data. At
present, data service providers manually
key risk/return summary information
into a format that allows aggregation. As
a result, the data service provider makes
interpretive decisions on how to
aggregate reported items so that they can
be compared across all mutual funds.
Consequently, when a subscriber of the
commercial product offered by a data
service provider uses this aggregated
data, it can expect consistent
interpretation of the reported items. In
contrast, a requirement for mutual funds
to submit interactive data information
would require the mutual funds to
independently decide within the
confines of applicable requirements
which ‘‘tag’’ best describes each item
within the risk/return summary—
perhaps with the help from a filing
agent or consultant—lessening the
amount of interpretation required by
data aggregators or end-users of the data.
Once a tag is chosen, comparison to
other funds is straightforward. However,
data standard, XBRL’s being an open standard
would facilitate the development of related
software, some of which may, as a result, be made
available to the public for free or at a relatively low
cost and provide the public alternative ways to
view and analyze interactive data information
provided under our proposed rules.
166 For illustration purposes only, assume that an
Internet service company develops an interactive
data-based tool that easily provides mutual fund
risk/return summary information for free to all
subscribers, and it uses this product as a loss leader
to increase viewership and advertising revenue. If
the data provided is of the same quality as data
provided through subscription to other available
commercial products, then there should be no
informational efficiency loss. However, if a data
aggregator’s providing information that improves
investor interpretation and goes beyond risk/return
summary information is possible, but no longer
profitable to produce for competitors without the
subsidy, then valuable information production may
be lost.
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since mutual funds have some
discretion in how to select tags, and can
choose extensions (new tags) when they
can not find an appropriate existing tag,
unique interpretations by each fund
could result in reporting differences
from what current data service
providers and other end-users would
have chosen. This view suggests that the
information disseminated by data
aggregators may be, on the one hand,
less comparable because they have not
normalized it across mutual funds but,
on the other hand, more accurate
because the risk of human error in the
manual keying and interpretation of
filed information would be eliminated
and more precise because it will reflect
decisions by the mutual funds
themselves. Replication of prior
methods of interpretation still would be
possible, however, because mutual
funds would continue to be required to
file risk/return summary information in
traditional format. As a result, nothing
would prohibit data aggregators from
continuing to provide normalized data.
Nonetheless, interactive data benefits
could diminish if other reporting
formats are required for clarification in
data aggregation.
The content of mutual fund-reported
information may improve because, as
previously discussed, a mutual fund
that uses a standardized interactive data
format at earlier stages of its disclosure
cycle may increase the accuracy of its
disclosure. In contrast, the content of
mutual fund-reported information may
improve or decline to the extent that the
interactive data process influences what
mutual funds disclose. While the
proposed requirements to submit and
post interactive data information are
intended to be disclosure neutral, it is
possible they would affect what is
disclosed.167
2. Costs of Interactive Data Submissions
and Web Site Posting
The primary cost of the rulemaking is
the cost of mutual funds’
implementation of the rule, which
includes the costs of submitting and
posting interactive data. We discuss this
cost element extensively below. In
addition, because the proposed rules
would allow an increase in the flow of
risk/return summary information being
reported directly to third party
information providers and investors,
there will be a cost of learning on the
part of the investors in using and
analyzing risk/return summary
information at the interactive data level.
167 We solicit comment on whether the proposed
requirements would affect mutual fund disclosure
in Part II.C.
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As for the cost of implementation of
the rule, based on currently available
data, we estimate the average direct
costs of submitting and posting
interactive data-formatted risk/return
summary information for all mutual
funds under the proposed rules would,
based on certain assumptions, be as
follows:
TABLE.—ESTIMATED DIRECT COSTS OF SUBMITTING INTERACTIVE DATA-FORMATTED RISK/RETURN SUMMARY
INFORMATION
First submission
Subsequent
submissions
Preparation 168 .............................................................................................................................................
Software and consulting services 169 ...........................................................................................................
Web site posting 171 .....................................................................................................................................
170 20,600
250
$2,300
800
250
Total cost ..............................................................................................................................................
23,450
3,350
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The above estimates are generated
from a limited number of voluntary
program participant questionnaire
responses. In particular, these responses
provided detail on the actual and
projected costs of preparing risk/return
168 Estimates based on risk/return summary
voluntary program questionnaire responses. The
voluntary program questionnaire responses
indicated that different filers use different
personnel to prepare interactive data submissions.
We calculated costs for each participant based upon
the personnel each individual respondent to the
voluntary program questionnaire indicated it used
and the length of time it indicated the personnel
spent on the preparation. The numbers in the table
represent the average of all of these calculations.
The following wage rates were assumed for
preparation cost estimates: operations specialist—
$129; paralegal—$168; senior compliance
examiner—$180; intermediate business analyst—
$183; senior accountant—$185; programmer
analyst—$194; financial reporting manager—$268;
and attorney—$295. These estimated wage figures
are based on published rates for the personnel
above, modified to account for bonuses, firm size,
employee benefits, and overhead, yielding the
effectively hourly rates above. See SIA Report,
supra note 132.
169 Software licensing and the use of a consultant
can be substitutionary—mutual funds can choose to
do one or the other, or do both—and are thus
aggregated.
170 We note that one volunteer expended over
$100,000 in information technology to develop
internal software that applies interactive data tags
to risk/return summary information. This one
expenditure by one fund resulted in a higher
average software and consulting services cost per
fund of $20,600 for the first submission. Excluding
this data, the average software and consulting
services costs per fund would have been
approximately $500.
While our averages imply that the costs of
internally developing software are allocated to one
fund in the sample, in reality the complex that
developed the software will likely use that software
for all of its funds. Thus the development cost
could be allocated across all funds within that
complex rather than to one fund.
171 Voluntary program participants were not
required to post on their Web sites, if any, the
interactive data information they submitted.
Consequently, the costs of the requirement to post
interactive data information are not derived from
the voluntary program participant questionnaire
responses or discussed in our analysis of those
responses. Those costs are, instead, derived from
informal discussions with a limited number of
persons believed to be generally knowledgeable
about preparing, submitting, and posting interactive
data.
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summary information in interactive data
format and for purchasing software or
related filing agent services. A detailed
analysis of the costs associated with
voluntary program participation
suggests that the estimated direct cost of
submitting risk/return summary
information in interactive data format
falls within the range of $735.50 to
$127,500 per fund for the first
submission.172 This cost reflects
expenditures on interactive data-related
software, consulting or filing agent
services used, and the market rate for all
internal labor hours spent (including
training) to prepare, review, and submit
the first interactive data format risk/
return summary information. The future
experiences of individual mutual funds
regarding risk/return summary
information filed in an interactive data
format still may vary according to the
mutual funds’ size, complexity, and
other factors not apparent from the
voluntary program participant
responses. The discussion below
summarizes the direct cost estimates of
compliance regarding risk/return
summary submissions based on
voluntary program participant
questionnaire responses and the
specified assumptions.173
• Average cost of first submission,
excluding the costs of Web site posting,
from voluntary program questionnaire
data is $23,200.
• Projected average cost of
subsequent submissions, excluding the
costs of Web site posting, from
voluntary program questionnaire data is
$3,100.
This analysis attempts to quantify
some of the direct costs that mutual
funds will incur if we require
submission and posting of interactive
172 See supra note 170 with respect to the high
end of the range.
173 The details of this analysis regarding risk/
return summary information, including the
underlying assumptions and other considerations
related to both the costs and benefits of requiring
submission of interactive data, are provided
following the summary.
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$2,600
data. Whether mutual funds choose to
purchase and learn how to use software
packages designed for interactive data
submissions or outsource this task to a
third party, internal (labor) resources
would be required to complete the task.
The cost estimates provided here using
voluntary program participant
questionnaire responses shed light on
the potential dollar magnitude of the
costs of requiring interactive data
submissions.
At present, there are 22 mutual funds
that have participated in the voluntary
program. Of these, 9 were provided
questionnaires on the details of their
cost experience, and 6 responses were
collected by the time of this analysis
representing the cost data for 10
funds.174 The table below summarizes
the aggregate costs per mutual fund,
including software and filing agent
service costs and an estimated cost for
the internal labor hours required to
prepare and submit the interactive data
format information. The low and high
estimates of the cost for internal labor
hours were calculated using a variety of
billing rates corresponding to the job
descriptions of internal personnel
involved in preparing the tagged risk/
return summaries.175 The reported costs
are calculated using responses from the
six voluntary program participants that
provided responses. Although there are
only 6 voluntary program respondents
to the questionnaire, those 6
respondents represent mutual fund
complexes whose assets comprise
approximately 26.35% of all the assets
of the mutual funds that ultimately
174 The questionnaires requested data for one
fund; however, several questionnaire respondents
voluntarily submitted cost information for more
than one fund.
175 See supra note 168. These estimates are from
the Securities Industry and Financial Markets
Association’s Management & Professional Earnings
in the Securities Industry 2007, modified to account
for an 1800-hour work year and multiplied by 5.35
to account for bonuses, firm size, employee
benefits, and overhead. Questionnaire respondents
apportioned time spent tagging risk/return
summaries among various job types.
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35463
would be required to submit interactive
data.176
TABLE.—SUMMARY OF ILLUSTRATIVE SURVEY DATA ON THE DIRECT COST ESTIMATES FOR VOLUNTARY PROGRAM
PARTICIPANTS
All voluntary program participants
respondents
Low
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First submission: Estimated costs ...............................................................................................................
Subsequent submissions: Estimated costs .................................................................................................
Average reduction in cost from first to second submission ........................................................................
Scalability of Interactive Data-Related
Support Services and Technology
The final cost consideration in this
section is the scalability of interactive
data-related support services and
technology. In particular, it is unclear
how the market for interactive data
support services and technology may
change if the Commission required over
8,000 mutual funds to submit and post
interactive data.
The roles of each potential kind of
service provider within the interactive
data market are likely to develop further
and are not yet clear, and there are
many potential participants to consider,
including the software vendors, print/
filing agents, and consultants, as well as
the Commission.179 Until the market of
mutual funds that submit interactive
data information grows substantially
larger (either by requirement or by
expansion of the number of volunteers),
it is difficult to predict how standard
solutions will evolve. For example, we
do not know whether mutual funds will
adopt solutions that create interactive
data submissions using third party
software, a so-called ‘‘bolt-on’’
approach, or will seek integrated
solutions that enable funds to prepare
interactive data submissions from their
existing software. Moreover, filing
agents may maintain their role as an
intermediary by offering interactive data
technology or other service providers
may cause that role to change. Others
with technical expertise may participate
in the technology with unpredictable
results.
Combining the uncertainty over the
source of future interactive data services
with increased demand for these
services could result in a new
equilibrium market price that is
different from what is currently reported
by voluntary program participants. This
price could be higher if the demand for
interactive data services increases (from
15 mutual fund complexes currently
participating in the voluntary program
to 683 mutual fund complexes 180
participating) at a faster rate than the
supply for these same services. More
broadly, if an interactive data
requirement resulted in clients
subscribing for interactive data services
faster than the rate at which these
services can be supplied, then a price
increase is the natural discriminator in
how to allocate limited resources.
The submission costs discussed in
this section suggest that if interactive
data is implemented too quickly it could
result in higher than necessary
submission costs if the supply of
interactive data-related resources is
constrained, but the effect would likely
diminish as a market place for
interactive data services develops.
Hence, this concern is mitigated by
delaying the requirement that mutual
funds submit interactive data until
December 31, 2009. This delay would
allow interactive data service suppliers
to keep pace with demand.
176 Based on total mutual fund assets of $11.8
trillion. Lipper-Directors’ Analytical Data, Reuters
2008.
177 We note that these costs are higher due to one
questionnaire respondent who spent significantly
more than all other respondents to create its own
interactive data software in-house. See supra note
170.
178 Id.
179 In addition, mutual fund complexes with a
large number of funds may consider developing
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B. Changes to Voluntary Program
In order to facilitate further evaluation
of data tagging, the proposed
amendments would enable investment
companies that are registered under the
Investment Company Act, business
development companies, and other
entities that report under the Exchange
Act and prepare their financial
statements in accordance with Article 6
of Regulation S–X to submit exhibits
containing a tagged schedule of
portfolio holdings without having to
submit other financial information in
interactive data format.
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$735.50
$555.00
24.54%
High
177 $127,500
$5,640
178 95.58%
1. Benefits
We believe that portfolio holdings
information in interactive data format
may allow more efficient and effective
retrieval, research, and analysis of
registrants’ portfolio holdings through
automated means. The proposed
amendments to the voluntary program
will assist us in assessing whether using
interactive data tags enhances users’
ability to analyze and compare portfolio
holdings information included in filings
with the Commission.
Currently, a number of companies use
computers and data entry staff to mine
portfolio holdings information provided
by mutual funds and others in order to
populate databases that are used to
package information for sale to analysts,
funds, investors, and others. Permitting
funds and other entities to tag portfolio
holdings 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
accuracy of that data. Additionally, the
changes to the voluntary program may
benefit funds and the public by
permitting experimentation with data
tagging using the new portfolio holdings
list of tags when it is created.
In the future, the availability of
potentially more accurate information
about mutual funds and other entities
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 information
submitted in interactive data format 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 and
software in-house since that cost could be allocated
across all of their funds.
180 Investment Company Institute, 2008
Investment Company Fact Book, at 14 (2008),
available at: https://www.icifactbook.org/pdf/
2008_factbook.pdf (683 fund sponsors).
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other investment options, 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 other entities 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.
Other potential benefits resulting from
the inclusion of portfolio holdings
information as a stand-alone item in the
voluntary program could include an
increase in the accuracy of information
and the potential for increased
timeliness of data that investors use to
make informed investment decisions.
Another potential benefit is that
portfolio holdings information
submitted in interactive data format
would allow automated, instantaneous
extraction of every investment disclosed
in the schedule of portfolio holdings.
Finally, the investment analysis process
could become more efficient and
effective through the increased use of
automation and reduced human
intervention that would result from the
use of interactive data.
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2. Costs
The proposed amendments to the
voluntary program would lead to some
costs for filers choosing to submit
portfolio holdings information in
interactive data format.181 For purposes
of the PRA, we estimated that the
increase in annual internal burden
hours to the industry would be
approximately 220 hours, which would
amount to an increase in costs of
approximately $47,000 and that the
increase in annual external costs per
filer would amount to approximately
$600 per year for a total estimated
increase to the industry of
approximately $12,000 on an annual
basis.182
We based these cost estimates upon,
among other things, experience with
mutual funds who have submitted risk/
return summary information in
interactive data format in the current
voluntary program.183 Due to the
ongoing nature of the project to develop
181 For purposes of the PRA, we also estimated a
reduction in burden hours for the voluntary
program collection of information, due to removal
of risk/return summary information from the
voluntary program. See supra Part IV.A.2.
182 See supra Part IV.A.2.
183 See supra note 168.
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the list of tags for portfolio holdings,
however, we have limited data to
quantify the cost of implementing the
use of interactive data tags applied to
portfolio holdings information, and we
seek comment and supporting data on
our estimates with regard to the
proposed amendments. In the future,
there may be additional costs to current
users of EDGAR data. For example,
companies that currently provide
tagging and dissemination of 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 filers to
submit tagged portfolio holdings
information, even voluntarily, may have
an impact on entities providing EDGARbased services and products. Because
the Commission does not regulate all
these entities, it is currently not feasible
to accurately estimate the number or
size of these potentially affected
entities. The limited, voluntary nature
of the program will help the
Commission assess the effect, if any, on
these entities. Additionally, the
availability of interactive data on
EDGAR may provide these companies
with alternative business opportunities.
C. Comment Solicited
We solicit comment on all aspects of
this cost-benefit analysis, including the
identification of any additional costs or
benefits of, or suggested alternatives to,
the proposed rules. Commenters are
requested to provide empirical data and
other factual support for their views to
the extent possible.
We request comment regarding the
costs and benefits to investors, mutual
funds, third-party information
providers, software providers, filing
agents, and others who may be affected
by the proposed rules. We are
particularly interested in information on
the costs and benefits to smaller mutual
fund complexes.
In particular, we request comment
regarding:
• The differences between start-up
costs and the costs of providing
interactive data on a continuing basis
after the initial preparation; and
• The cost of Web site posting.
VI. Consideration of Burden on
Competition and Promotion of
Efficiency, Competition, and Capital
Formation
Section 23(a)(2) of the Exchange
Act 184 requires us, when adopting rules
under the Exchange Act, to consider the
184 15
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impact that any new rule would have on
competition. In addition, section
23(a)(2) prohibits us from adopting any
rule that would impose a burden on
competition not necessary or
appropriate in furtherance of the
purposes of the Exchange Act.
Furthermore, section 2(b) 185 of the
Securities Act, section 3(f) 186 of the
Exchange Act, and section 2(c) 187 of the
Investment Company Act require us,
when engaging in rulemaking where we
are required 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.
A. Submission of Risk/Return Summary
Information Using Interactive Data
The proposals to require mutual funds
to submit interactive data to the
Commission and post it on their Web
sites are intended to make risk/return
summary information easier for
investors to analyze while assisting in
automating regulatory filings and
business information processing. In
particular, we believe that the proposed
rules would enable investors and others
to search and analyze the risk/return
summary information dynamically;
facilitate comparison of mutual fund
cost, performance, and other
information; and, possibly, provide a
significant opportunity to automate
regulatory filings and business
information processing with the
potential to increase the speed,
accuracy, and usability of risk/return
summary disclosure. Further, as
discussed in detail above, we believe
that the proposals may lead to more
efficient capital formation and
allocation.188
We understand that private sector
businesses such as those that access
mutual fund information and aggregate,
analyze, compare, or convert it into
interactive format have business models
and, as a result, competitive strategies
that the proposed interactive data
requirements might affect. Since
interactive data technology is designed
to remove an informational barrier,
business models within the mutual fund
services industry that are currently
adapted to traditional format document
reporting may change, with possible
consequences for the revenue stream of
current product offerings due to the
competitive effects of such a change.
185 15
U.S.C. 77b(b).
U.S.C. 78c(f).
187 15 U.S.C. 80a–2(c).
188 See Part V.A.
186 15
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The competitive effects may relate to
changes in the accessibility of risk/
return summary information to
investors, the nature of the information
that investors receive, and the potential
from new entry or innovation in the
markets through which mutual fund
disclosures are transmitted from mutual
funds to investors. For example, lower
entry barriers that result from lower data
collection costs may increase
competition among third-party
information providers and help spur
interactive data-related innovation. It is
also possible, however, that a
requirement to submit interactive data
information could decrease the marginal
benefit of collecting information and
thus cause third-party information
providers to produce information that is
less robust to the extent the decreased
marginal benefit reduces third party
incentives to facilitate access to, collect,
or analyze information. If markets
efficiently price the value of
information, the amount of information
accessed, collected (or enhanced), and
analyzed will be determined by the
marginal benefit of doing so.189
Lowering information collection costs
(through a requirement to submit
interactive data information) should
increase this benefit. If this is so, then
there should be no degradation in the
level of information quality as a result
of changes in third-party provider
behavior under an interactive data
reporting regime. However, if one
competitor in the industry can subsidize
its operations through an alternative
revenue stream, both quality and
competition may suffer.
For the reasons described more fully
above, we believe the liability
protections for interactive data would be
necessary or appropriate in the public
interest and consistent with the
protection of investors. Moreover, the
protections would also be consistent
with the purposes fairly intended by the
policy and provisions of the Investment
Company Act.
B. Changes to the Voluntary Program
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The proposed amendments would no
longer allow mutual funds to submit
risk/return summary information in
interactive data format through the
voluntary program after the compliance
date for the mandatory rules and would
189 Also, we expect that because the proposed
rules would require the use of the XBRL interactive
data standard, XBRL’s being an open standard
would facilitate the development of related
software, some of which may, as a result, be made
available to the public for free or at a relatively low
cost and provide the public alternative ways to
view and analyze interactive data information
provided under our proposed rules.
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enable investment companies that are
registered under the Investment
Company Act, business development
companies, and other entities that report
under the Exchange Act and prepare
their financial statements in accordance
with Article 6 of Regulation S–X to
submit exhibits containing a tagged
schedule of portfolio holdings without
having to submit other financial
information in interactive data format.
The changes to the voluntary program
are intended to help further evaluate the
usefulness to investors, third-party
information providers, investment
companies, the Commission, and the
marketplace of interactive data and, in
particular, of submitting portfolio
holdings information in interactive data
format. Because compliance with the
proposed amendments will be
voluntary, the Commission estimates
that the impact of the proposal will be
limited. However, because the
submission of portfolio holdings
information in interactive data format
has the potential to facilitate analysis of
that information, we believe that the
proposed amendments could promote
efficiency by allowing us and others to
gain experience with portfolio holdings
information in interactive data format.
Further, submitting portfolio holdings
information in interactive data format
has the potential to help streamline the
delivery of portfolio holdings
information, and provide investors and
others with improved tools to compare
funds and other entities. As with the
filing of risk/return summary
information in interactive data format,
we believe that the potential to
streamline the delivery of portfolio
holdings information and to provide
investors and others with improved
comparison tools could promote
efficiency and competition through
more efficient allocation of investments
by investors and more efficient
allocation of assets among competing
funds and other investment products.
In the future, companies that
currently provide tagging and
dissemination of EDGAR data may
experience decreased demand for their
services. The availability of interactive
data on the Commission’s electronic
filing system however, may provide
these companies with alternative
business opportunities. We do not
anticipate that the proposed
amendments would have a significant
impact on capital formation. Finally,
because the proposals are designed to
permit mutual funds and other entities
to provide information in a format that
we believe would be more useful to
investors, we believe that the proposed
amendments are appropriate in the
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35465
public interest and for the protection of
investors.
C. Request for Comment
We request comment on whether the
proposals, if adopted, would promote
efficiency, competition, and capital
formation or have an impact or burden
on competition. Commenters are
requested to provide empirical data and
other factual support for their views, if
possible.
VII. Initial Regulatory Flexibility
Analysis
This Initial Regulatory Flexibility
Analysis has been prepared in
accordance with 5 U.S.C. 603. It relates
to proposed amendments that would
require mutual funds to provide risk/
return summary information to the
Commission and on their Web sites in
interactive data format and that would
enable investment companies and other
entities to submit exhibits through the
voluntary program containing a tagged
schedule of portfolio holdings without
having to submit other financial
information in interactive data format.
A. Reasons for, and Objectives of, the
Proposed Action
Submission of Risk/Return Summary
Information Using Interactive Data
The main purpose of the proposed
amendments is to make risk/return
summary information easier for
investors to analyze while assisting in
automating regulatory filings and
business information processing.
Currently, mutual funds are required to
file their registration statements in a
traditional format that provides static
text-based information. We believe that
providing the risk/return summary
information these filings contain in
interactive data format would:
• Enable investors and others to
search and analyze the information
dynamically;
• Facilitate comparison of mutual
fund performance; and
• Possibly provide a significant
opportunity to automate regulatory
filings and business information
processing with the potential to increase
the speed, accuracy, and usability of
risk/return summary disclosure.
Changes to the Voluntary Program
The main purpose of the proposed
amendments to the voluntary program is
to help us evaluate the usefulness to
investors, third party information
providers, funds, the Commission, and
the marketplace of interactive data and,
in particular, of submitting portfolio
holdings information in interactive data
format. We believe the proposed
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changes to the voluntary program would
enable us to further study the extent to
which interactive data enhance the
comparability of portfolio holdings
information, the usefulness of
interactive data for dissemination, and
our staff’s ability to review and assess
the accuracy and adequacy of that data.
The proposed changes to the voluntary
program also would help us assess the
effect of interactive data on the quality
and transparency of portfolio holdings
information, as well as the compatibility
of interactive data with the
Commission’s disclosure requirements.
More specifically, we believe that the
proposed changes to the voluntary
program would better enable us to study
the extent to which interactive data
would:
• Enable investors and others to
search and analyze the information
dynamically;
• Facilitate comparison of portfolio
holdings among funds and other
entities; and
• Possibly provide a significant
opportunity to reduce the resources
needed for data analysis.
In addition, we believe the proposed
changes to the voluntary program would
enhance our ability to evaluate the:
• Impact on the staff’s ability to
review filings on a more timely and
efficient basis,
• Use of interactive data for risk
assessment and surveillance procedures,
and
• Compatibility of interactive data
with reporting quality, transparency,
and other Commission reporting
requirements.
jlentini on PROD1PC65 with PROPOSALS2
B. Legal Basis
We are proposing the amendments
under sections 5, 6, 7, 10, 19(a), and 28
of the Securities Act,190 sections 3, 12,
13, 14, 15(d), 23(a), 35A, and 36 of the
Exchange Act,191 sections 314 and 319
of the Trust Indenture Act 192 and
sections 6(c), 8, 24, 30, and 38 of the
Investment Company Act.193
C. Small Entities Subject to the
Proposed Rules
The proposed amendments would
affect mutual funds that are small
entities. For purposes of the Regulatory
Flexibility 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.194 Approximately 127 mutual
funds registered on Form N–1A meet
this definition.195 All of these mutual
funds would become subject to the
proposed rules to require submission of
risk/return summary information using
interactive data. Regarding the proposed
changes to the voluntary program, a
smaller subset of small entity mutual
funds may voluntarily submit tagged
portfolio holdings information, but,
because submitting portfolio holdings
information would be voluntary, we
anticipate that only mutual fund
complexes with sufficient resources
would elect to participate. To date, no
small entity mutual funds have elected
to participate in the current voluntary
program.
the associated burden on the
Commission’s electronic filing system,
and the possible effect of the proposed
changes to the voluntary program on
those entities that use the data from the
Commission’s electronic filing system
would be minimal.
No registrant would be required to
submit documents in interactive data
format under the proposed changes to
the voluntary program. The submission
of portfolio holdings information in
interactive data format would require a
participant to tag the portfolio holdings
information already provided in
required disclosures and to submit
exhibits to its filing. Volunteers may
also need to purchase software or retain
a consultant to assist in creating
interactive data exhibits.197
D. Reporting, Recordkeeping and Other
Compliance Requirements
E. Duplicative, Overlapping, or
Conflicting Federal Rules
We believe that the proposed
amendments would not duplicate, or
overlap, or conflict with, other federal
rules.
Submission of Risk/Return Summary
Information Using Interactive Data
All mutual funds subject to the
proposed rules would be required to
submit risk/return summary information
to the Commission in interactive data
format and, if they have a Web site, post
the interactive data on their Web site.
We believe that, in order to submit risk/
return summary information in
interactive data format, mutual funds in
general and small entities in particular
likely would need to prepare and then
submit the interactive data by
expending internal labor hours in
connection with either or both of
• Purchasing, learning, and using
software packages designed to prepare
risk/return summary information in
interactive format; and
• Hiring and working with a
consultant or filing agent.
We believe that mutual funds would
incur relatively little cost in connection
with the requirement to post the
interactive data on their Web site
because the requirement applies only to
mutual funds that already have a Web
site.196
Changes to the Voluntary Program
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 submitting portfolio holdings
information in interactive data format,
194 17
190 15
U.S.C. 77e, 77f, 77g, 77s(a), and 77z–3.
191 15 U.S.C. 78c, 78l, 78m, 78n, 78o(d), 78w(a),
78ll, and 78mm.
192 15 U.S.C. 77nnn and 77sss.
193 15 U.S.C. 80a–6(c), 80a–8, 80a–24, 80a–29,
and 80a–37.
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CFR 270.0–10.
estimate is based on analysis by the
Division of Investment Management staff of
publicly available data as of December 2007.
196 The internal labor and external costs required
to comply with the proposed rules are discussed
more fully in Parts IV and V above.
195 This
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F. Agency Action to Minimize the Effect
on Small Entities
The Regulatory Flexibility Act directs
us to consider significant alternatives
that would accomplish the stated
objective, while minimizing any
significant adverse impact on small
entities. In connection with the
proposed amendments, we considered
several alternatives, including the
following:
• Establishing different compliance or
reporting requirements or timetables
that take into account the resources
available to small entities;
• Further clarifying, consolidating, or
simplifying the proposed requirements;
• Using performance rather than
design standards; and
• Providing an exemption from the
proposed requirements, or any part of
them, for small entities.
Submission of Risk/Return Summary
Information Using Interactive Data
We believe that, as to small entities,
differing compliance, reporting or
timetable requirements, a partial or
complete exemption from the proposed
requirements, or the use of performance
rather than design standards would be
inappropriate because these approaches
would detract from the long-term
completeness and uniformity of the
interactive data format risk/return
summary information database. Less
long-term completeness and uniformity
would reduce the extent to which the
proposed requirements would enable
197 Id.
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35467
to require the filing of portfolio holdings
information in interactive data format in
the future, we will look to the results of
the voluntary program, including those
of the proposed changes to the
voluntary program, to find alternatives
to minimize any burden on small
entities. We solicit comment on how the
proposals could be modified to
minimize the effect on small entities.
78n, 78o(d), 78w(a), 78ll, and 78mm];
sections 314 and 319 of the Trust
Indenture Act [15 U.S.C. 77nnn and
77sss]; and sections 6(c), 8, 24, 30, and
38 of the Investment Company Act [15
U.S.C. 80a–6(c), 80a–8, 80a–24, 80a–29,
and 80a–37].
G. Solicitation of Comment
Reporting and recordkeeping
requirements, Securities.
Changes to the Voluntary Program
The purpose of the proposed
amendments is to help us evaluate the
usefulness to investors, third party
information providers, mutual funds
and other entities, the Commission, and
the marketplace of interactive data and,
in particular, of submitting portfolio
holdings information in interactive data
format. Submitting documents
containing portfolio holdings
information in interactive data format
would be entirely voluntary.
We have considered different or
simpler procedures for small entities,
but for interactive data to provide
benefits such as ready comparability
there cannot be alternative procedures
in place for different entities. Similarly,
in order to achieve the benefits of
interactive data, use of a single
technology is necessary. If we determine
jlentini on PROD1PC65 with PROPOSALS2
investors and others to search and
analyze the information dynamically;
facilitate comparison of mutual fund
performance; and, possibly, provide a
significant opportunity to automate
regulatory filings and business
information processing with the
potential to increase the speed,
accuracy, and usability of risk/return
summary information disclosure. We
note, however, that all mutual funds,
including small entities, would not be
subject to the proposed requirements
until after December 31, 2009.198 We
solicit comment, however, on whether
differing compliance, reporting, or
timetable requirements, a partial or
complete exemption, or the use of
performance rather than design
standards would be consistent with our
described main goal of making risk/
return summary information easier for
investors to analyze while assisting in
automating regulatory filings and
business information processing.
We are considering whether further
clarifying, consolidating, or simplifying
the proposed interactive data
submission and posting requirements
would be appropriate. Based in part on
our experience with the voluntary
program, we believe that the proposed
requirements are sufficiently clear and
straightforward (although, we seek
comment on this).
VIII. Small Business Regulatory
Enforcement Fairness Act
198 In this regard, in Part II.B. of this release we
note that the additional time is intended to permit
mutual funds to plan for and implement the
interactive data reporting process after having the
opportunity to experiment with the voluntary
program. We also there solicit comment on the
appropriate timetable for smaller mutual fund
complexes (which would include small entities)
and note that the additional time also is intended
to enable us to monitor the voluntary program and,
if necessary, make appropriate adjustments to the
timetable.
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We encourage comments with respect
to any aspect of this Initial Regulatory
Flexibility Analysis. In particular, we
request comments regarding:
• The number of small entities that
may be affected by the proposed
amendments;
• The existence or nature of the
potential impact of the proposed
amendments on small entities as
discussed in this analysis; and
• How to quantify the impact of the
proposed amendments.
We ask those submitting comments to
describe the nature of any impact and
provide empirical data supporting the
extent of the impact. These comments
will be considered in the preparation of
the Final Regulatory Flexibility
Analysis, if the proposed amendments
are adopted, and will be placed in the
same public file as comments on the
proposed amendments themselves.
For purposes of the Small Business
Regulatory Enforcement Fairness Act of
1996, a rule is ‘‘major’’ if it has resulted,
or is likely to result in:
• An annual effect on the economy of
$100 million or more;
• A major increase in costs or prices
for consumers or individual industries;
or
• Significant adverse effects on
competition, investment, or innovation.
We request comment on whether our
proposals would be a ‘‘major rule’’ for
purposes of SBREFA. We solicit
comment and empirical data on:
• The potential effect on the U.S.
economy on an annual basis;
• Any potential increase in costs or
prices for consumers or individual
industries; and
• Any potential effect on competition,
investment, or innovation.
IX. Statutory Authority
The Commission is proposing the
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]; sections 3, 12,
13, 14, 15(d), 23(a), 35A, and 36 of the
Exchange Act [15 U.S.C. 78c, 78l, 78m,
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List of Subjects
17 CFR Parts 232 and 239
17 CFR Parts 230, 270 and 274
Investment companies, Reporting and
recordkeeping requirements, Securities.
Text of Proposed Rule and Form
Amendments
For the reasons set forth above, the
Commission proposes to amend Title
17, Chapter II of the Code of Federal
Regulations as follows:
PART 230—GENERAL RULES AND
REGULATIONS, SECURITIES ACT OF
1933
1. The authority citation for Part 230
continues to read in part as follows:
Authority: 15 U.S.C. 77b, 77c, 77d, 77f,
77g, 77h, 77j, 77r, 77s, 77z–3, 77sss, 78c, 78d,
78j, 78l, 78m, 78n, 78o, 78t, 78w, 78ll(d),
78mm, 80a–8, 80a–24, 80a–28, 80a–29, 80a–
30, and 80a–37, unless otherwise noted.
*
*
*
*
*
2. Amend § 230.485 by adding
paragraph (c)(3) to read as follows:
§ 230.485 Effective date of post-effective
amendments filed by certain registered
investment companies.
*
*
*
*
*
(c) * * *
(3) A registrant’s ability to file a posteffective amendment, other than an
amendment filed solely for purposes of
submitting an Interactive Data File,
under paragraph (b) of this section is
automatically suspended if a registrant
fails to submit and post on its Web site
any Interactive Data File exhibit as
required by General Instruction C.3.(g)
of Form N–1A. A suspension under this
paragraph (c)(3) shall become effective
at such time as the registrant fails to
submit or post an Interactive Data File
as required by General Instruction
C.3.(g) of Form N–1A. Any such
suspension, so long as it is in effect,
shall apply to any post-effective
amendment that is filed after the
suspension becomes effective, but shall
not apply to any post-effective
amendment that was filed before the
suspension became effective. Any
suspension shall apply only to the
ability to file a post-effective
amendment pursuant to paragraph (b) of
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this section and shall not otherwise
affect any post-effective amendment.
Any suspension under this paragraph
(c)(3) shall terminate as soon as a
registrant has submitted and posted to
its Web site the Interactive Data File as
required by General Instruction C.3.(g)
of Form N–1A.
*
*
*
*
*
PART 232—REGULATION S–T—
GENERAL RULES AND REGULATIONS
FOR ELECTRONIC FILINGS
3. The authority citation for Part 232
continues to read in part as follows:
Authority: 15 U.S.C. 77f, 77g, 77h, 77j,
77s(a), 77z–3, 77sss(a), 78c(b), 78l, 78m, 78n,
78o(d), 78w(a), 78ll, 80a–6(c), 80a–8, 80a–29,
80a–30, 80a–37, and 7201 et seq.; and 18
U.S.C. 1350.
*
*
*
*
*
4. Further amend § 232.11 as
published at 73 FR 32827, June 10, 2008
by revising the definitions of
‘‘Interactive Data in Viewable Form’’
and ‘‘Related Official Filing’’ to read as
follows:
§ 232.11
232.
Definition of terms used in part
jlentini on PROD1PC65 with PROPOSALS2
*
*
*
*
*
Interactive Data in Viewable Form.
The term Interactive Data in Viewable
Form means the financial statements,
financial statement schedules, financial
statement footnotes, and, in the case of
an open-end management investment
company registered under the
Investment Company Act of 1940, risk/
return summary information that
(1) Are displayed when an Interactive
Data File is converted from machinereadable computer code into humanreadable text through software the
Commission provides; and
(2) Are displayed through such
conversion identically in all material
respects to the corresponding financial
statements, financial statement
schedules, financial statement footnotes,
and, in the case of an open-end
management investment company
registered under the Investment
Company Act of 1940, risk/return
summary information in the Related
Official Filing.
*
*
*
*
*
Related Official Filing. The term
Related Official Filing means the ASCII
or HTML format part of the official
filing with which an Interactive Data
File appears as an exhibit or, in the case
of a filing on Form N–1A, the ASCII or
HTML format part of an official filing
that contains the information to which
an Interactive Data File corresponds.
*
*
*
*
*
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5. Further amend § 232.202 as
published at 73 FR 32828, June 10,
2008, by revising Note 4 to read as
follows:
7. Amend § 232.401 by revising
paragraphs (b)(1)(iv), (d)(1)(i), (d)(2)
introductory text, and (d)(2)(i) to read as
follows:
§ 232.202
Continuing hardship exemption.
*
*
§ 232.401 XBRL-Related Document
submissions.
*
*
*
Note 4 to § 232.202: Failure to submit or
post, as applicable, the Interactive Data File
as required by Rule 405 by the end of the
continuing hardship exemption if granted for
a limited period of time, will result in
ineligibility to use Forms S–3, S–8, and F–
3 (§§ 239.13, 239.16b and 239.33 of this
chapter), constitute a failure to have filed all
required reports for purposes of the current
public information requirements of Rule
144(c)(1) (§ 230.144(c)(1) of this chapter),
and, pursuant to Rule 485(c)(3), suspend the
ability to file post-effective amendments
under Rule 485(b) (§ 230.485 of this chapter).
6. Further amend § 232.401 as
published at 73 FR 32828, June 10,
2008, by revising paragraph (a) to read
as follows:
§ 232.401 XBRL-Related Document
submissions.
(a) Only an electronic filer that is an
investment company registered under
the Investment Company Act of 1940
(15 U.S.C. 80a–1 et seq.), a ‘‘business
development company’’ as defined in
section 2(a)(48) of that Act, or an entity
that reports under the Exchange Act and
prepares its financial statements in
accordance with Article 6 of Regulation
S–X (17 CFR 210.6–01 et seq.) is
permitted to participate in the voluntary
XBRL (eXtensible Business Reporting
Language) program. An electronic filer
that participates in the voluntary XBRL
program may submit XBRL-Related
Documents (§ 232.11) in electronic
format as an exhibit to: the filing to
which the XBRL-Related Documents
relate; an amendment to such filing, 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. The XBRL-Related
Documents must comply with the
content and format requirements of this
section, be submitted as an exhibit to a
form that contains the disclosure
required by this section and be
submitted in accordance with the
EDGAR Filer Manual and, as applicable,
one of Item 601(b)(100) of Regulation S–
K (§ 229.601(b)(100) of this chapter),
Item 601(b)(100) of Regulation S–B
(§ 228.601(b)(100) of this chapter), Form
20–F (§ 249.220f of this chapter), Form
6–K or § 270.8b–33 of this chapter.
*
*
*
*
*
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*
*
*
*
*
(b) * * *
(1) * * *
(iv) If the electronic filer is an
investment company registered under
the Investment Company Act of 1940
(15 U.S.C. 80a–1 et seq.), a ‘‘business
development company’’ as defined in
Section 2(a)(48) of that Act, or an entity
that reports under the Exchange Act and
prepares its financial statements in
accordance with Article 6 of Regulation
S–X (17 CFR 210.6–01 et seq.), Schedule
I—Investments in Securities of
Unaffiliated Issuers (§ 210.12–12 of this
chapter).
*
*
*
*
*
(d) * * *
(1) * * *
(i) That the financial information
contained in the XBRL-Related
Documents is ‘‘unaudited’’ or
‘‘unreviewed,’’ as applicable;
*
*
*
*
*
(2) The disclosures required by
paragraph (d)(1) of this section must
appear within the XBRL-Related
Documents as a tagged data element
and, as applicable, in:
(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
(§ 249.210b of this chapter), 10–KSB
(§ 249.310b of this chapter), 10–QSB
(§ 249.308b of this chapter) or 20–F;
*
*
*
*
*
8. Further amend § 232.405 as
published beginning at 73 FR 32828,
June 10, 2008 by:
a. Revising Preliminary Note 1;
b. Revising paragraph (a);
c. Redesignating paragraph (b) as
paragraph (b)(1) and adding the phrase
‘‘If the electronic filer is not an openend management investment company
registered under the Investment
Company Act of 1940,’’ to the beginning
of the paragraph;
d. Redesignating paragraphs (b)(1) and
(b)(2) as paragraphs (b)(1)(i) and
(b)(1)(ii);
e. Redesignating Note to paragraph (b)
as Note to paragraph (b)(1);
f. Adding paragraph (b)(2); and
g. Adding a sentence at the end of the
Note to § 232.405.
The revisions and additions read as
follows:
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§ 232.405 Interactive Data File
submissions and postings.
Preliminary Notes
1. Sections 405 and 406 of Regulation
S–T (§§ 232.405 and 232.406) apply to
electronic filers that submit or post
Interactive Data Files. Item 601(b)(101)
of Regulation S–K (§ 229.601(b)(101) of
this chapter), Item 101 of the
Instructions as to Exhibits of Form 20–
F (§ 249.220f of this chapter), and
General Instruction C.3.(g) of Form N–
1A (§§ 239.15A and 274.11A of this
chapter) specify when electronic filers
are required or permitted to submit or
post an Interactive Data File (§ 232.11),
as further described below in the Note
to Section 405.
*
*
*
*
*
(a) Content, Format, Submission and
Posting Requirements—General. An
Interactive Data File (§ 232.11) must:
(1) Comply with the content, format,
submission and Web site posting
requirements of this section;
(2) Be submitted only by an electronic
filer either required or permitted to
submit an Interactive Data File as
specified by Item 601(b)(101) of
Regulation S–K (§ 229.601(b)(101) of
this chapter), Item 101 of the
Instructions as to Exhibits of Form 20–
F (§ 249.220f of this chapter), or General
Instruction C.3.(g) of Form N–1A
(§§ 239.15A and 274.11A of this
chapter), as applicable, as an exhibit to
a form that contains the disclosure
required by this section;
(3) Be submitted in accordance with
the EDGAR Filer Manual and, as
applicable, Item 601(b)(101) of
Regulation S–K, Item 101 of the
Instructions as to Exhibits of Form 20–
F, or General Instruction C.3.(g) of Form
N–1A; and
(4) Be posted on the electronic filer’s
corporate Web site, if any, in accordance
with, as applicable, Item 601(b)(101) of
Regulation S–K, Item 101 of the
Instructions as to Exhibits of Form 20–
F, or General Instruction C.3.(g) of Form
N–1A.
(b)(1) Content—Categories of
Information Presented. If the electronic
filer is not an open-end management
investment company registered under
the Investment Company Act of 1940,
* * *
(i) * * *
(ii) * * *
(2) If the electronic filer is an openend management investment company
registered under the Investment
Company Act of 1940, an Interactive
Data File must consist of only a
complete set of information for all
periods required to be presented in the
corresponding data in the Related
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Jkt 214001
Official Filing, no more and no less,
from the risk/return summary
information set forth in Items 2 and 3 of
Form N–1A.
*
*
*
*
*
Note to § 232.405: * * * For an issuer that
is an open-end management investment
company registered under the Investment
Company Act of 1940, General Instruction
C.3.(g) of Form N–1A specifies the
circumstances under which an Interactive
Data File must be submitted as an exhibit and
be posted to the company’s Web site, if any.
*
*
*
*
*
PART 274—FORMS PRESCRIBED
UNDER THE INVESTMENT COMPANY
ACT OF 1940
12. The authority citation for Part 274
continues to read in part as follows:
Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s,
78c(b), 78l, 78m, 78n, 78o(d), 80a–8, 80a–24,
80a–26, and 80a–29, unless otherwise noted.
*
*
*
*
*
13. Amend Form N–1A (referenced in
§§ 239.15A and 274.11A) by adding a
paragraph (g) to General Instruction C.3.
The addition is to read as follows:
PART 239—FORMS PRESCRIBED
UNDER THE SECURITIES ACT OF 1933
Note: The text of Form N–1A does not, and
these amendments will not, appear in the
Code of Federal Regulations.
9. The authority citation for Part 239
continues to read in part as follows:
FORM N–1A
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.
*
*
*
*
*
10. The authority citation for Part 270
continues to read in part as follows:
Authority: 15 U.S.C. 80a–1 et seq., 80a–
34(d), 80a–37, and 80a–39, unless otherwise
noted.
*
*
*
*
*
11. Revise § 270.8b–33 to read as
follows:
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–CSR
(§§ 249.331 and 274.128 of this chapter)
or Form N–Q (§§ 249.332 and 274.130 of
this chapter) to which they relate,
XBRL-Related Documents (§ 232.11 of
this chapter). A registrant that submits
XBRL-Related Documents as an exhibit
to a form must name each XBRL-Related
Document ‘‘EX 100’’ as specified in the
EDGAR Filer Manual and submit the
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 filing to which it
relates.
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*
*
*
*
GENERAL INSTRUCTIONS
*
*
*
*
*
C. Preparation of the Registration
Statement
*
PART 270—RULES AND
REGULATIONS, INVESTMENT
COMPANY ACT OF 1940
§ 270.8b–33
*
*
*
*
*
3. Additional Matters:
*
*
*
*
*
(g) Interactive Data File. An
Interactive Data File (§ 232.11 of this
chapter) is required to be submitted to
the Commission and posted on the
Fund’s Web site, if any, in the manner
provided by Rule 405 of Regulation S–
T (§ 232.405 of this chapter) for any
registration statement or post-effective
amendment thereto on Form N–1A that
includes or amends information
provided in response to Items 2 and/or
3. The Interactive Data File must be
submitted as an exhibit to Form N–1A
and must be named ‘‘EX–101’’ as
specified in the EDGAR Filer Manual
and be submitted 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 the Fund to be separately
identified. The Interactive Data File
must be submitted as an amendment to
the registration statement to which the
Interactive Data File relates. The
amendment must be submitted after the
registration statement or post-effective
amendment that contains the related
information becomes effective but not
later than 15 business days after the
effective date of that registration
statement or post-effective amendment.
Dated: June 10, 2008.
By the Commission.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–13356 Filed 6–20–08; 8:45 am]
BILLING CODE 8010–01–P
E:\FR\FM\23JNP2.SGM
23JNP2
]]>Agencies
[Federal Register Volume 73, Number 121 (Monday, June 23, 2008)]
[Proposed Rules]
[Pages 35442-35469]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-13356]
[[Page 35441]]
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Part II
Securities and Exchange Commission
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17 CFR Parts 230, 232, 239, et al.
Interactive Data for Mutual Fund Risk/Return Summary; Proposed Rule
Federal Register / Vol. 73, No. 121 / Monday, June 23, 2008 /
Proposed Rules
[[Page 35442]]
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SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 230, 232, 239, 270, and 274
[Release Nos. 33-8929, 34-57942, 39-2457, IC-28298; File Number S7-12-
08]
RIN 3235-AK13
Interactive Data for Mutual Fund Risk/Return Summary
AGENCY: Securities and Exchange Commission.
ACTION: Proposed rule.
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SUMMARY: We are proposing rules requiring mutual funds to provide risk/
return summary information in a form that would improve its usefulness
to investors. Under the proposed rules, risk/return summary information
could be downloaded directly into spreadsheets, analyzed in a variety
of ways using commercial off-the-shelf software, and used within
investment models in other software formats. Mutual funds would provide
the risk/return summary section of their prospectuses to the Commission
and on their Web sites in interactive data format using the eXtensible
Business Reporting Language (``XBRL''). The interactive data would be
provided as an exhibit to registration statements. The proposed rules
are intended not only to make risk/return summary information easier
for investors to analyze, but also to assist in automating regulatory
filings and business information processing. Interactive data has the
potential to increase the speed, accuracy, and usability of mutual fund
disclosure, and eventually reduce costs. We are also proposing to
permit investment companies to submit portfolio holdings information in
our interactive data voluntary program without being required to submit
other financial information.
DATES: Comments should be submitted on or before August 1, 2008.
ADDRESSES: Comments may be submitted by any of the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://
www.sec.gov/rules/proposed.shtml);
Send an e-mail to rule-comments@sec.gov. Please include
File Number S7-12-08 on the subject line; or
Use the Federal eRulemaking Portal (https://
www.regulations.gov). Follow the instructions for submitting comments.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number S7-12-08. This file number
should be included on the subject line if e-mail is used. To help us
process and review your comments more efficiently, please use only one
method. The Commission will post all comments on the Commission's
Internet Web site (https://www.sec.gov/rules/proposed.shtml). Comments
are also available for public inspection and copying in the
Commission's Public Reference Room, 100 F Street, NE., Washington, DC
20549, on official business days between the hours of 10 a.m. and 3
p.m. All comments received will be posted without change; we do not
edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly.
FOR FURTHER INFORMATION CONTACT: Alberto H. Zapata, Senior Counsel, or
Tara R. Buckley, Branch Chief, Office of Disclosure Regulation,
Division of Investment Management, at (202) 551-6784, U.S. Securities
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-5720.
SUPPLEMENTARY INFORMATION: The Securities and Exchange Commission
(``Commission'') is proposing amendments to Rule 485 \1\ under the
Securities Act of 1933 (``Securities Act''), Rules 11,\2\ 202,\3\ and
401 \4\ of Regulation S-T, \5\ Rule 8b-33 \6\ under the Investment
Company Act of 1940 (``Investment Company Act''), and Form N-1A \7\
under the Securities Act and the Investment Company Act. We are also
proposing amendments to proposed Rule 405 of Regulation S-T.\8\
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\1\ 17 CFR 230.485.
\2\ 17 CFR 232.11.
\3\ 17 CFR 232.202.
\4\ 17 CFR 232.401.
\5\ 17 CFR 232.10 et seq.
\6\ 17 CFR 270.8b-33.
\7\ 17 CFR 239.15A and 274.11A.
\8\ See Securities Act Release No. 8924 (May 30, 2008) [73 FR
32794 (June 10, 2008)] (``Interactive Data Proposing Release'').
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Table of Contents
I. Introduction and Background
A. Introduction
B. Current Filing Technology and Interactive Data
C. The Commission's Multiyear Evaluation of Interactive Data and
Overview of Proposed Rules
II. Discussion of the Proposed Amendments
A. Submission of Risk/Return Summary Information Using
Interactive Data
B. Compliance Date
C. Documents and Information Covered by the Proposed Rules
D. Filing Period
E. Web Site Posting of Interactive Data
F. Accuracy and Reliability of Interactive Data
G. Required Items
H. Consequences of Non-Compliance and Hardship Exemption
I. Changes to the Voluntary Program
III. General Request for Comments
IV. Paperwork Reduction Act
V. Cost/Benefit Analysis
VI. Consideration of Burden on Competition and Promotion of
Efficiency, Competition, and Capital Formation
VII. Initial Regulatory Flexibility Analysis
VIII. Small Business Regulatory Enforcement Fairness Act
IX. Statutory Authority
X. Text of Proposed Rule and Form Amendments
I. Introduction and Background
A. Introduction
Over the last several decades, developments in technology and
electronic data communication have significantly decreased the time and
cost of filing disclosure documents with us. Technological developments
also have facilitated greater transparency in the form of easier access
to, and analysis of, financial reporting and disclosures. Most notably,
in 1993 we began to require electronic filing on our Electronic Data
Gathering, Analysis and Retrieval System (``EDGAR'').\9\ Since then,
widespread use of the Internet has vastly decreased the time and
expense of accessing disclosure filed with us.
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\9\ In 1993, we began to require domestic issuers to file most
documents electronically. Securities Act Release No. 6977 (Feb. 23,
1993) [58 FR 14628 (Mar. 18, 1993)]. Electronic filing began with a
pilot program in 1984. Securities Act Release No. 6539 (June 27,
1984) [49 FR 28044 (July 10, 1984)].
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We continue to update our filing standards and systems as
technologies improve. These developments assist us in our goal to
promote efficient and transparent capital markets. For example, since
2003 we have required electronic filing of certain ownership reports
filed on Forms 3,\10\ 4,\11\ and 5 \12\ in a format that provides
interactive data, and recently we adopted similar rules governing the
filing of Form D.\13\ In addition, recently we have encouraged, and in
some cases required, open-end management investment companies (``mutual
funds'') \14\ and
[[Page 35443]]
public reporting companies to provide disclosures and communicate with
investors using the Internet.\15\ Now, as part of our continuing
efforts to assist filers as well as investors who use Commission
disclosures, we propose to require that mutual fund risk/return summary
information be provided in a format that makes the information
interactive.
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\10\ 17 CFR 249.103 and 274.202.
\11\ 17 CFR 249.104 and 274.203.
\12\ 17 CFR 249.105.
\13\ 17 CFR 239.500.
\14\ An open-end management investment company is an investment
company, other than a unit investment trust or face-amount
certificate company, that offers for sale or has outstanding any
redeemable security of which it is the issuer. See Sections 4 and
5(a)(1) of the Investment Company Act [15 U.S.C. 80a-4 and 80a-
5(a)(1)].
\15\ See, e.g. , Exchange Act Release No. 57172 (Jan. 18, 2008)
[73 FR 4450 (Jan. 25, 2008)]; Securities Act Release No. 8861 (Nov.
21, 2007) [72 FR 67790 (Nov. 30, 2007)] (``Summary Prospectus
Proposing Release''); Exchange Act Release No. 56135 (July 26, 2007)
[72 FR 42222 (Aug. 1, 2007)]; Exchange Act Release No. 55146 (Jan.
22, 2007) [72 FR 4148 (Jan. 29, 2007)]; Securities Act Release No.
8591 (July 19, 2005) [70 FR 44722 (Aug. 3, 2005)].
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Our proposal builds on our voluntary filer program, started in
2005,\16\ that allowed us to evaluate the merits of interactive data.
The voluntary program allows companies to submit financial statements
on a supplemental basis in interactive format as exhibits to specified
filings under the Securities Exchange Act of 1934 (``Exchange Act'')
and the Investment Company Act.\17\ Over 75 companies have participated
in the voluntary program. These companies span a wide range of
industries and company characteristics, and have a total market
capitalization of over $2 trillion. Companies that participate in the
program still are required to file their financial statements in
American Standard Code for Information Interchange (``ASCII'') or
HyperText Markup Language (``HTML'').\18\
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\16\ Securities Act Release No. 8529 (Feb. 3, 2005) [70 FR 6556
(Feb. 8, 2005)] (``Voluntary Program Adopting Release'').
\17\ 15 U.S.C. 80a-1 et seq.
\18\ HTML is a standardized language commonly used to present
text and other information on Web sites.
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In 2007, we extended the program to enable mutual funds voluntarily
to submit in interactive data format supplemental information contained
in the risk/return summary section of their prospectuses.\19\ The risk/
return summary contains key information about a fund's investment
objectives and strategies, costs, risks, and past performance.\20\
Approximately 20 mutual funds from a wide variety of fund families have
submitted risk/return summary information in interactive format.
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\19\ Securities Act Release No. 8823 (July 11, 2007) [72 FR
39290 (July 17, 2007)] (``Risk/Return Voluntary Program Adopting
Release'').
\20\ Items 2 and 3 of Form N-1A.
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In a recently issued release, we proposed to require companies,
other than investment companies that are registered under the
Investment Company Act, business development companies,\21\ and other
entities that report under the Exchange Act and prepare their financial
statements in accordance with Article 6 of Regulation S-X, to submit
financial information to the Commission in interactive data format.\22\
In this release, we propose to extend similar requirements to mutual
fund risk/return summary information.
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\21\ Business development companies are a category of closed-end
investment companies that are not required to register under the
Investment Company Act. 15 U.S.C. 80a-2(a)(48).
\22\ See Interactive Data Proposing Release, supra note 8.
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The submission of mutual fund risk/return summary information based
on interactive data would create new ways for investors, analysts, and
others to retrieve and use the information. For example, users of risk/
return summary information could download cost and performance
information directly into spreadsheets, analyze it using commercial
off-the-shelf software, or use it within investment models in other
software formats. Through interactive data, what is currently static,
text-based information can be dynamically searched and analyzed,
facilitating the comparison of mutual fund cost, performance, and other
information across multiple classes of the same fund and across the
more than 8,000 funds currently available.\23\
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\23\ Investment Company Institute, 2008 Investment Company Fact
Book, at 15 (2008), available at: https://www.icifactbook.org/pdf/
2007_factbook.pdf (as of year-end 2007, there were 8,752 mutual
funds).
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Interactive data also could provide a significant opportunity to
automate regulatory filings and business information processing, with
the potential to increase the speed, accuracy, and usability of mutual
fund disclosure. Such automation could eventually reduce costs. A
mutual fund that uses a standardized interactive data format at earlier
stages of its reporting cycle could reduce the need for repetitive data
entry and, therefore, the likelihood of human error. In this way,
interactive data may improve the quality of information while reducing
its cost.
Also, to the extent investors currently are required to pay for
access to mutual fund risk/return summary information that has been
extracted and reformatted into an interactive data format by third-
party sources, the availability of interactive data in Commission
filings could allow investors to avoid additional costs associated with
third-party sources.
We believe that requiring mutual funds to file the risk/return
summary section of their prospectuses using interactive data format
would enable investors, analysts, and the Commission staff to capture
and analyze that information more quickly and at less cost than is
possible using the same information provided in a static format. Any
investor with a computer would have the ability to acquire and download
interactive data that have generally been available only to
intermediaries and third-party analysts. The proposed interactive data
requirements would not change what is currently disclosed, but would
add a requirement to include risk/return summary information in a new
format as an exhibit. Thus the proposal to require that filers provide
risk/return summary information using interactive data will not alter
the disclosure or formatting standards of mutual fund prospectuses,
which would continue to be available as they are today for those who
prefer to view the traditional text-based document.
Throughout this release, we solicit comment on many issues
concerning the use of interactive data, including specifically whether
mutual fund risk/return summary information in interactive data format
should be required as exhibits to Securities Act registration
statements filed with us. We are seeking comment from investors, mutual
funds, financial intermediaries, analysts, accountants, and any other
parties or individuals who may be affected by the use of interactive
disclosure in Commission filings, and any other members of the public.
B. Current Filing Technology and Interactive Data
Companies filing electronically are required to file their
registration statements and periodic reports in ASCII or HTML
format.\24\ Also, to a limited degree, our electronic filing system
uses other formats for internal processing and document-type
identification. For example, our system uses eXtensible Markup Language
(``XML'') to process reports of beneficial ownership of equity
securities on Forms 3, 4, and 5 under section 16(a) of the Exchange
Act.\25\
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\24\ Rule 301 of Regulation S-T [17 CFR 232.301] requires
electronic filings to comply with the EDGAR Filer Manual, and
Section 5.2 of the EDGAR Filer Manual requires that electronic
filings be in ASCII or HTML format. Rule 104 of Regulation S-T [17
CFR 232.104] permits filers to submit voluntarily as an adjunct to
their official filings in ASCII or HTML unofficial PDF copies of
filed documents. Unless otherwise stated, we refer to filings in
ASCII or HTML as traditional format filings.
\25\ 15 U.S.C. 78p(a).
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[[Page 35444]]
Electronic formats such as HTML, XML, and XBRL are open standards
\26\ that define or ``tag'' data using standard definitions. The tags
establish a consistent structure of identity and context. This
consistent structure can be recognized and processed by a variety of
different software applications. In the case of HTML, the standardized
tags enable Web browsers to present Web sites' embedded text and
information in predictable format. In the case of XBRL, software
applications, such as databases, financial reporting systems, and
spreadsheets, recognize and process tagged information.
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\26\ The term ``open standard'' is generally applied to
technological specifications that are widely available to the
public, royalty-free, at minimal or no cost.
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XBRL was derived from the XML standard. It was developed and
continues to be supported by XBRL International, a collaborative
consortium of approximately 550 organizations representing many
elements of the financial reporting community worldwide in more than 20
jurisdictions, national and regional. XBRL U.S., the international
organization's U.S. jurisdiction representative, is a non-profit
organization that includes companies, public accounting firms, software
developers, filing agents, data aggregators, stock exchanges,
regulators, financial services companies, and industry
associations.\27\
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\27\ XBRL U.S. supports efforts to promote interactive financial
and business data specific to the U.S.
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Risk/return summary information in interactive format requires a
standard list of tags. These tags are similar to definitions in an
ordinary dictionary, and they cover a variety of concepts that can be
read and understood by software applications. For the risk/return
summary, a mutual fund would use the list of tags for risk/return
summary information developed by the Investment Company Institute
(``ICI'').\28\ This list of tags contains descriptive labels,
authoritative references to Commission regulations where applicable,
and other elements, all of which provide the contextual information
necessary for interactive data \29\ to be recognized and processed by
software.\30\
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\28\ Unless stated otherwise, when we refer to the ``list of
tags for risk/return summary information'' we mean the interactive
data taxonomy developed by the ICI, including any modifications. We
anticipate entering into a contract to update the architecture of
the taxonomy developed by the ICI and conform the taxonomy to any
changes in the risk/return summary that we adopt pursuant to a
pending rule proposal. See Summary Prospectus Proposing Release,
supra note 15.
The ICI is a national association of the U.S. investment company
industry. The taxonomy developed by the ICI received acknowledgement
from XBRL International in June 2007 and is used by mutual funds
participating in the Commission's voluntary program. The taxonomy is
available on XBRL International's Web site at: https://www.xbrl.org/
Taxonomy/ici/ici-rr-summarydocument-20070516-acknowledged.htm.
\29\ The proposed rules would define the interactive data
necessary to create human-readable disclosure as the ``interactive
data file,'' which would be required with every interactive data
submission. See Interactive Data Proposing Release, supra note 8
(proposing new definitions under 17 CFR 232.11). The EDGAR Filer
Manual would identify any necessary supporting files.
\30\ For example, contextual information would identify the
entity to which it relates, usually by using the filer's CIK number.
A hypothetical filer converting its traditional electronic
disclosure of total annual fund operating expenses of 0.73% would
have to create interactive data that identify what the 0.73%
represents, total annual fund operating expenses, and that the
number is a percentage. The contextual information would include
other information as necessary; for example, the date of the
prospectus to which it relates and the series and class to which it
applies.
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.
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].
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To apply data tags to risk/return summary information, a preparer
uses commercially available software that guides the preparer in
mapping information in the risk/return summary, such as line item costs
in a mutual fund's fee table, to the appropriate tags in the standard
list. This involves locating an element in the list of tags that
represents the particular disclosure that is to be tagged.
Occasionally, because mutual funds have some flexibility in preparing
the risk/return summary, particularly the narrative portions, it is
possible that a mutual fund may wish to use a non-standard disclosure
that is not included in the standard list of tags. In this situation, a
fund would create a company-specific element, called an extension.
A mutual fund may choose to tag its own risk/return summary using
commercially available software, or it may choose instead to outsource
the tagging process. In the event a mutual fund relies upon a service
provider to tag the fund's risk/return summary, the mutual fund would
want to carefully review the tagging done by the service provider in
order to make sure that the tagged risk/return summary information is
accurate and consistent with the information the mutual fund presents
in its traditional format filing.
Because mutual fund risk/return summary information in interactive
data format, referred to as the interactive data file, is intended to
be processed by software applications, the unprocessed interactive data
is not readable. Thus, viewers are necessary to convert the interactive
data file to human readable format. Some viewers are similar to Web
browsers used to read HTML files.
The Commission's Web site currently provides links to four viewers
that allow the public to easily read mutual fund and other company
disclosures submitted using interactive data.\31\ One of these viewers
allows users to view and compare mutual fund risk/return summary
information, including investment objectives and strategies, risks,
costs, and performance, that is submitted in interactive data
format.\32\ These viewers demonstrate the capability of downloading
interactive data into software such as Microsoft Excel as well as into
other applications that are widely available on the Internet. In
addition, we are aware of other applications under development that may
provide additional and advanced functionality.
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\31\ See viewers available at https://www.sec.gov/xbrl.
\32\ A mutual fund information viewer for the voluntary program
is available at: https://a.viewerprototype1.com/viewer.
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C. The Commission's Multiyear Evaluation of Interactive Data and
Overview of Proposed Rules
In 2004, we began assessing the benefits of interactive data and
its potential for improving the timeliness and accuracy of financial
disclosure and analysis of Commission filings.\33\ As part of this
evaluation, we adopted rules in 2005 permitting filers, on a voluntary
basis, to provide financial disclosure in interactive data format as an
exhibit to certain filings on our electronic filing system. After more
than two years of increasing participation, over 75 companies have
chosen to provide interactive data financial reporting.\34\
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\33\ See 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.
\34\ A viewer for this interactive data is available at: https://
www.sec.gov/spotlight/xbrl/xbrlwebapp.shtml. This viewer, one of
several funded by the Commission to demonstrate interactive data,
maintains a running total of companies and filers submitting data as
part of the voluntary program. As of April 17, 2008, 78 companies
had submitted 350 interactive data reports.
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In 2007, we extended the program to enable mutual funds voluntarily
to submit risk/return summary information in interactive data format.
To date,
[[Page 35445]]
approximately 20 mutual funds have chosen to provide interactive data
risk/return summaries.\35\
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\35\ The mutual fund information viewer contains all mutual fund
submissions under the voluntary program. As of May 1, 2008, 21
mutual funds had submitted 33 interactive data reports.
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During this time, we have kept informed of technology advances and
other interactive data developments. We note that several U.S. and
foreign regulators have begun to incorporate interactive data into
their financial reporting systems. The Federal Deposit Insurance
Corporation (``FDIC''), the Federal Reserve, and the Office of the
Comptroller of the Currency (``OCC'') require the use of XBRL.\36\ As
of 2006, approximately 8,200 U.S. financial institutions were using
XBRL to submit quarterly reports to banking regulators.\37\ Countries
that have required or instituted voluntary or pilot programs for XBRL
financial reporting include Australia, Belgium, Canada, China, Denmark,
France, Germany, Ireland, Israel, Japan, Korea, Luxembourg, the
Netherlands, New Zealand, Norway, Singapore, Spain, Sweden, Thailand,
and the United Kingdom.\38\
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\36\ Since 2005, the FDIC, Federal Reserve, and the OCC have
required the insured institutions that they oversee to file their
quarterly Consolidated Reports of Condition and Income (called
``Call Reports'') in interactive data format using XBRL. Call
Reports, which include data about an institution's balance sheet and
income statement, are used by these federal agencies to assess the
financial health and risk profile of the financial institution.
\37\ See Improved Business Process Through XBRL: A Use Case for
Business Reporting, available at https://www.xbrl.org/us/us/
FFIEC%20White%20Paper%2002Feb2006.pdf.
\38\ See XBRL International Progress Report (November 2007),
available at https://www.xbrl.org/ProgressReports/2007_11_XBRL_
Progress_Report.pdf.
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We also have kept informed of relevant advances and developments by
hosting roundtables on the topic of interactive data reporting,\39\
creating the Commission's Office of Interactive Disclosure,\40\ and
meeting with international securities regulators to discuss, among
other items, timetables for implementation of interactive data
initiatives for financial reporting.\41\ Also, staff of the Commission
have attended meetings of the Advisory Committee on Improvements to
Financial Reporting (``CIFiR'') in which the committee discussed
proposals for financial reporting using interactive data.\42\ We also
have reviewed written statements and public comments received by CIFiR
on its XBRL developed proposal.\43\
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\39\ See materials available at https://www.sec.gov/spotlight/
xbrl/xbrl-meetings.shtml.
\40\ See SEC Announces New Unit to Lead Global Move to
Interactive Data, Securities and Exchange Commission Press Release,
October 9, 2007, available at: https://www.sec.gov/news/press/2007/
2007-213.htm.
\41\ See Chairman Cox, Overseas Counterparts Meet to Discuss
Interactive Data Timetable, Securities and Exchange Commission Press
Release, November 9, 2007, available at: https://www.sec.gov/news/
press/2007/2007-227.htm.
\42\ The Commission established CIFiR to examine the U.S.
financial reporting system, with the goals of reducing unnecessary
complexity and making information more useful and understandable for
investors. See SEC Establishes Advisory Committee to Make U.S.
Financial Reporting System More User-Friendly for Investors,
Securities and Exchange Commission Press Release, June 27, 2007,
available at https://www.sec.gov/news/press/2007/2007-123.htm.
CIFiR conducted an open meeting on March 14, 2008, in which it
heard reactions from an invited panel of participants to CIFiR's
developed proposal regarding required filing of financial
information using interactive data. An archived Webcast of the
meeting is available at https://sec.gov/about/offices/oca/
cifir.shtml. The March 14, 2008 panelists presented their views and
engaged with CIFiR members regarding issues relating to requiring
interactive data tagged financial statements, including tag list and
technological developments, implications for large and small public
companies, needs of investors, necessity of assurance and
verification of such tagged financial statements, and legal
implications arising from such tagging. Also, CIFiR has provided to
the Commission an interim progress report that contains a developed
proposal that the Commission, over the long term, require the filing
of financial information using interactive data once specified
conditions are satisfied. See Progress Report of the Advisory
Committee on Improvements to the Financial Reporting to the United
States Securities and Exchange Commission (Feb. 14, 2008)
(``Progress Report''), available at https://www.sec.gov/about/
offices/oca/acifr/acifr-pr-021408-final.pdf.
\43\ The XBRL developed proposal appears in chapter 4 of the
Progress Report. Written statements of panelists at the March 14,
2008 meeting and public comments received on the Progress Report are
available at https://sec.gov/comments/265-24/265-24.shtml.
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Building on our experience monitoring the voluntary program and our
participation in the other initiatives described above, we are now
proposing rules to require mutual funds to provide risk/return summary
information using interactive data as an exhibit to their registration
statements filed on Form N-1A.\44\ Interactive data would be required
to be provided on a mutual fund's Web site \45\ and with the fund's
Securities Act registration statements and post-effective amendments
thereto.\46\ We believe this has the potential to provide advantages
for the investing public by making risk/return summary information more
accessible, timely, inexpensive, and easier to analyze.
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\44\ Form N-1A is the form used by mutual funds to register
under the Investment Company Act and to offer securities under the
Securities Act.
\45\ The proposed Web site posting requirement would apply only
to the extent a mutual fund already maintains a Web site.
\46\ Interactive data would be required as an exhibit to a
Securities Act registration statement or post-effective amendment
thereto that contains risk/return summary information. Interactive
data would not be required as an exhibit to a post-effective
amendment that does not contain risk/return summary information.
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By enabling mutual funds to further automate their disclosure
processes, interactive data may eventually help funds improve the speed
at which they generate information, while reducing the cost of filing
and potentially increasing the accuracy of the data. For example, with
standardized interactive data tags, registration statements may require
less time for information gathering and review. Also, standardized
interactive data tagging may enhance the ability of a fund's in-house
professionals to identify and correct errors in the fund's registration
statements filed in traditional electronic format. Mutual funds also
may gain benefits not directly related to risk/return summary
information disclosures. For example, mutual fund families that use
interactive data may be able to compile information more quickly and
potentially more reliably both for internal purposes and for
communications with financial intermediaries, third party information
providers, and the public. However, we recognize that at the outset,
mutual funds would most likely prepare their interactive data as an
additional step after their prospectuses have been prepared.
The principal elements of the proposal are as follows:
Mutual funds would provide to the Commission a new exhibit
with their risk/return summary information in interactive data format,
beginning with initial registration statements, and post-effective
amendments that are annual updates to effective registration
statements, that become effective after December 31, 2009.\47\
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\47\ The proposed schedule is premised on the rules being
adopted this fall in time for mutual funds to implement this
schedule, and could be adjusted depending on when the Commission
adopts any final rules.
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Mutual funds providing risk/return summary information in
interactive data format would be required to use the most recent list
of tags released by XBRL U.S. as required by the EDGAR Filer Manual.
Mutual funds also would be required to tag a limited number of document
and entity identifier elements, such as the form type and the fund's
name. As with interactive data for the risk/return summary, these
document and entity identifier elements would be formatted using the
appropriate list of tags as required by the EDGAR Filer Manual.\48\
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\48\ The appropriate list of tags for document and entity
identifier elements would be a list released by XBRL U.S. and would
be required to be used by all issuers required to submit interactive
data.
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[[Page 35446]]
A mutual fund required to provide risk/return summary
information in interactive data format to the Commission also would be
required to post that information in interactive data format on its Web
site on the earlier of the date that the interactive data is submitted
to the Commission or is required to be submitted to the Commission.
The proposed rules would not alter the requirements to
provide risk/return summary information with the traditional format
filings.\49\
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\49\ When we extended the voluntary program to the mutual fund
risk/return summary, we stated in the adopting release that the
interactive data submission would be supplemental to filings and not
replace the required traditional electronic format of the
information it contains. We also said that volunteers would be
required to continue to file their traditional electronic filings.
See Part II.A. of the Risk/Return Voluntary Program Adopting
Release, supra note 19, 72 FR at 39292.
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Risk/return summary information in interactive data format
would be provided as exhibits identified in General Instruction C.3.(g)
of Form N-1A.
Viewable interactive data as displayed through software
available on the Commission's Web site, and to the extent identical in
all material respects to the corresponding portion of the traditional
format filing, would be subject to all the same liability provisions of
the federal securities laws as the corresponding data in the
traditional format filing.
Data in the interactive data file submitted to us
generally would be subject to the federal securities laws in a manner
similar to that of the voluntary program and, as a result, would be
[cir] Deemed not filed for purposes of specified liability
provisions; and
[cir] Protected from liability for failure to comply with the
proposed tagging and related requirements if the interactive data file
either
[squf] Met the requirements; or
[squf] Failed to meet those requirements, but the failure occurred
despite the mutual fund's good faith and reasonable effort, and the
mutual fund corrected the failure as soon as reasonably practicable
after becoming aware of it.
The proposed rules would require the risk/return summary
information and document and entity identifier elements to be tagged
according to Regulation S-T and the EDGAR Filer Manual.\50\
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\50\ Proposed Rule 405 of Regulation S-T would directly set
forth the basic tagging requirements and indirectly set forth the
rest of the tagging requirements through the requirement to comply
with the EDGAR Filer Manual. Consistent with proposed Rule 405, the
Filer Manual would contain the technical tagging requirements. See
Interactive Data Proposing Release, supra note 8 (proposing Rule 405
of Regulation S-T).
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Each interactive data submission would be required to be
filed as a post-effective amendment under Rule 485(b) under the
Securities Act \51\ and would be required to be filed after
effectiveness of the related filing, but no later than 15 business days
after the effective date of the related filing.
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\51\ Rule 485(b) under the Securities Act provides for immediate
effectiveness of amendments to registration statements that make
certain non-material and other changes.
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If a mutual fund does not submit or post interactive data
as required, the fund's ability to file post-effective amendments to
its registration statement under Rule 485(b) under the Securities Act
would be automatically suspended until the fund submits and posts the
interactive data as required.
We anticipate that the voluntary program would be
modified, if the proposed rules are adopted, to exclude participation
by mutual funds with respect to risk/return summary information but
continue to permit investment companies to participate with respect to
financial statement information. As a result, the voluntary program
would continue for the financial statements of investment companies
that are registered under the Investment Company Act, business
development companies, and other entities that report under the
Exchange Act and prepare their financial statements in accordance with
Article 6 of Regulation S-X.
Registered investment companies, business development
companies, and other entities that report under the Exchange Act and
prepare their financial statements in accordance with Article 6 of
Regulation S-X would be permitted to submit exhibits under the
voluntary program containing a tagged schedule of portfolio holdings
without having to submit other financial information in interactive
data format.
II. Discussion of the Proposed Amendments
A. Submission of Risk/Return Summary Information Using Interactive Data
The ICI's risk/return summary list of tags received acknowledgement
from XBRL International in June 2007.\52\ The Commission anticipates
entering into a contract to update the architecture of the list of tags
and conform the list of tags to any changes in the risk/return summary
that we adopt pursuant to a pending rule proposal.\53\
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\52\ The list of tags is available on XBRL International's Web
site at: https://www.xbrl.org/Taxonomy/ici/ici-rr-summarydocument-
20070516-acknowledged.htm.
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/.
\53\ See Summary Prospectus Proposing Release, supra note 15.
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Interactive data risk/return summary information using the list of
tags for risk/return summary information has been submitted voluntarily
to us by approximately 20 mutual funds. In recent years, there has been
a growing development of software products for users of interactive
data, as well as of applications to assist companies, including mutual
funds, to tag their disclosures using interactive data.\54\ The growing
number of software applications available to preparers and consumers is
helping make interactive data increasingly useful to both retail and
institutional investors, as well as to other participants in the U.S.
and global capital markets. On this basis, we believe interactive data,
and in particular the XBRL standard, have become widespread and that
the list of tags for risk/return summary information is now
sufficiently advanced to require that mutual funds provide their risk/
return summary information in interactive data format.
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\54\ See SEC's Office of Interactive Disclosure Urges Public
Comment as Interactive Data Moves Closer to Reality for Investors,
Securities and Exchange Commission Press Release, Dec. 5, 2007,
available at: https://www.sec.gov/news/press/2007/2007-253.htm. A
list of interactive data products and service providers is available
at: https://xbrl.us/Vendors/Pages/default-expand.aspx.
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As discussed in more detail below, our proposed rules would require
all mutual funds to submit interactive data with any registration
statement or post-effective amendment on Form N-1A that includes or
amends risk/return summary information.\55\ We anticipate that the
first required submissions would be for initial registration statements
and post-effective amendments that are annual updates to effective
registration statements and that become effective after December 31,
2009.
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\55\ See proposed General Instruction C.3.(g) to Form N-1A.
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We are proposing that mutual funds be required to provide the same
risk/return summary information in interactive data format that mutual
[[Page 35447]]
funds have been providing in the voluntary program.\56\ In addition,
funds would be required to provide document and entity identifier tags,
such as the form type and the fund's name. As was the case in the
voluntary program, the proposed requirement for interactive data
reporting is intended to be disclosure neutral. We do not intend the
rules to result in mutual funds providing more, less, or different
disclosure for a given disclosure item depending upon the format,
whether ASCII, HTML, or XBRL.
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\56\ See proposed General Instruction C.3.(g) to Form N-1A.
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We propose to continue requiring the existing electronic formats
now used in filings because we believe it is necessary to monitor the
usefulness of interactive data reporting to investors and the cost and
ease of providing interactive data before attempting further
integration of the interactive data format. However, the proposed rules
would treat viewable interactive data as displayed through software
available on the Commission's Web site, and interactive data
generally,\57\ as part of the official filing, instead of a supplement
as is the case in the voluntary program. Further evaluation will be
useful with respect to the availability of inexpensive, sophisticated
interactive data viewers. Currently there are many software providers
and financial printers that are developing interactive data viewers. We
anticipate that these will become widely available and increasingly
useful to investors.
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\57\ As further discussed below in Part II.F, interactive data
generally would be deemed not filed for purposes of specified
liability provisions.
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We expect that the open standard feature of XBRL format will
facilitate the development of applications and software, and that some
of these applications may be made available to the public for free or
at a relatively low cost. The expected continued improvement in this
software would give the public increasingly useful ways to view and
analyze mutual fund risk/return summary information. After evaluating
the use of the new interactive data technologies, software, and list of
tags, we may consider proposing rules to eliminate the filing of risk/
return summary information in ASCII or HTML format. Or we may consider
proposing rules to require a filing format that integrates ASCII or
HTML with XBRL.
We believe XBRL is the appropriate interactive data format with
which to supplement ASCII and HTML. Our experience with the voluntary
program and feedback from company, audit, and software communities
point to XBRL as the appropriate open standard for the purposes of this
rule. As a derivative of the XML standard, XBRL data would be
compatible with a wide range of open source and proprietary XBRL
software applications. As discussed above, many XBRL-related products
exist for analysts, investors, filers, and others to more easily create
and compare disclosures; still others are in development, and that
process would likely be hastened by mutual fund disclosure using
interactive data. Comments on our 2004 concept release and proposed
rules in 2004 and 2007 generally supported interactive data and XBRL in
particular.\58\ Several other factors support our views regarding
XBRL's broad and growing acceptance, internationally as well as in the
U.S. For example, as noted above, in addition to the use of XBRL by
other U.S. agencies,\59\ several foreign securities regulators have
adopted voluntary or required XBRL financial reporting.\60\ We
understand that several U.S. public and private companies use XBRL in
connection with financial reporting or analysis.
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\58\ Securities Act Release No. 8497 (Sept. 27, 2004) [69 FR
59111 (Oct. 1, 2004)] (``Concept Release''); Securities Act Release
No. 8496 (Oct. 1, 2004) [69 FR 59094 (Oct. 1, 2004)]; Securities Act
Release No. 8781 (Feb. 6, 2007) [72 FR 6676 (Feb. 12, 2007)]. See,
e.g., letter from Deloitte & Touche LLP (Nov. 11, 2004) regarding
the Voluntary Program Adopting Release, supra note 16; and letter
from PR Newswire Association LLC (Nov. 11, 2004) regarding the
Concept Release; and letters from Charles S. Hoffman (Feb. 10,
2007); ICI (Mar. 14, 2007); NewRiver, Inc. (Mar. 14, 2007);
PricewaterhouseCoopers LLP (Mar. 14, 2007); and Ayal Rosenthal (Mar.
6, 2007) regarding extending the voluntary program to allow funds to
submit tagged risk/return summaries.
We also note that financial statement participants in the
voluntary program provided positive feedback with respect to
possible mandatory XBRL. For example, the vast majority of voluntary
program participants that submitted responses and views to a
questionnaire answered in the affirmative to the question ``Based on
your experience to date, do you think it would be advisable for the
Commission to continue to explore the feasibility and desirability
of the use of interactive data on a more widespread and, possibly,
mandated basis?'' See question V.f in the Interactive Data Voluntary
Program Questionnaire available at https://www.sec.gov/cgi-bin/XBRL_
Questionnaire.
\59\ See note 36 above. Also we note CIFiR's support of XBRL as
referenced above in Part I.C.
\60\ For example, such countries include Canada, China, Israel,
Japan, Korea, and Thailand.
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Request for Comment:
Should we adopt rules that require each mutual fund's
risk/return summary information to be provided in interactive data
format? What are the principal factors that should be considered in
making this decision? Is it useful to users of risk/return summary
information to continue to have, in addition to interactive data,
duplicate, human-readable risk/return summary information in ASCII or
HTML format?
What opportunities exist to improve the display of risk/
return summary information prepared using interactive data? How should
these affect any continued requirement to file ASCII- or HTML-formatted
risk/return summary information? For example, if the technology is
sufficiently developed, should we propose rules to encourage or require
a format that embeds interactive data tags in HTML so that risk/return
summary information can be viewed in a browser? How should these affect
any continued requirement to file ASCII- or HTML-formatted risk/return
summary information? What obstacles exist to making such improvements
in the display of XBRL information?
Is it appropriate to require mutual funds to provide
interactive data using XBRL? Alternatively, in place of such a
requirement, should the Commission instead wait to see whether
interactive data disclosure by mutual funds is voluntarily adopted?
Without a requirement, would the development of products for producing
and using interactive data from mutual funds meet the needs of
investors, third party information providers, and others who seek
interactive data? Would a large percentage of mutual funds provide
interactive data voluntarily, and following the same standard, if not
required to do so?
If we do not adopt the proposed rules and instead wait to
see whether mutual funds on their own expand their use of interactive
data, would such data be less comparable among mutual funds? Is there a
``network effect,'' such that interactive data would not be useful
unless many or all mutual funds provide their risk/return summary
information using interactive data? Would the development of software
for retail investors to obtain and make use of such data be slowed
without a requirement that mutual funds provide interactive data?
What advantages are there to investors having the mutual
fund responsible for preparing risk/return summary information in
interactive data format, as opposed to a model in which third parties
independently prepare the information in interactive format and charge
a fee for it?
Do commenters agree that compared to filings using ASCII
and HTML, interactive data would require less manually-transferred
data? If so, do commenters believe that the proposed rules would result
in less human error and therefore contribute to reduced costs?
[[Page 35448]]
If we require interactive data disclosure and the proposed
rules result in more effective and efficient disclosure with reduced
human error and cost, would fees charged by financial printers or other
service providers be likely reduced to reflect such lower costs?
If we adopt rules requiring interactive data disclosure of
risk/return summary information, is the XBRL standard the one that we
should use? Are any other standards becoming more widely used or
otherwise superior to XBRL? What would the advantages of any such other
standards be over XBRL?
Is the XBRL format for interactive data sufficiently
developed to require its use at this time? If not, what indicators
should we use to determine when it has become sufficiently developed to
require its use?
Are vendors likely to develop and make commercially
available software applications or Internet products that will be able
to deliver the functionality of interactive data to retail investors?
How important is it that many different types of viewers
with varying levels of sophistication and functionality be available to
investors? In addition to the free viewer provided on the SEC Web site,
are there likely to be other such products available at low or no cost?
If we require risk/return summary information in
interactive data format, what are the principal challenges facing the
eventual integration of such reporting with the current filing formats,
ASCII and HTML, so that filing in all three formats would no longer be
necessary?
B. Compliance Date
The proposed rules would require all mutual funds to submit
interactive data with any registration statement or post-effective
amendment on Form N-1A that includes or amends risk/return summary
information.\61\ If the rules are adopted by this fall, we anticipate
that the first required submissions would be for initial registration
statements and post-effective amendments that are annual updates to
effective registration statements \62\ and that become effective after
December 31, 2009. We are sensitive to concerns that undue expense and
burden should not accompany the adoption of required interactive data
reporting. We therefore propose limitations on liability applicable to
the interactive data file, as well as a 15-business-day period for
making interactive data submissions after effectiveness of the related
filing.\63\
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\61\ See proposed General Instruction C.3.(g) to Form N-1A.
\62\ Section 10(a)(3) of the Securities Act [15 U.S.C.
77j(a)(3)] generally requires that when a prospectus is used more
than nine months after the effective date of the registration
statement, the information in the prospectus must be as of a date
not more than sixteen months prior to such use. The effect of this
provision is to require mutual funds to update their prospectuses
annually to reflect current cost, performance, and other financial
information. A mutual fund updates its registration statement by
filing a post-effective amendment to the registration statement.
\63\ We discuss more fully at Part II.F liability related to
required submissions of interactive data in general and the
continuation of some of the limitations on liability used in the
voluntary program in particular.
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Mutual funds under the proposed rules would be required to convert
their risk/return summary information into an interactive data file
using the list of tags for risk/return summary information, as approved
for use by the Commission.\64\ The submission also would be required to
include any supporting files as prescribed by the EDGAR Filer Manual.
Interactive data would be required for the entirety of the risk/return
summary information, including information for all series and all
classes.\65\
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\64\ See Interactive Data Proposing Release, supra note 8
(proposing amendments to Rule 11 of Regulation S-T and proposing new
Rule 405(a)) and proposed amendments to proposed Rule 405(a).
\65\ Proposed General Instruction C.3.(g) of Form N-1A.
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As noted above, we anticipate deferring the requirement for
submission of risk/return summary information in interactive data
format for all mutual funds until after December 31, 2009. We also
anticipate that the voluntary program, with its limitations on
liability, will remain available to mutual funds until December 31,
2009, for purposes of submitting risk/return summary information in
interactive data format. We believe that this period of almost two
years from now will give mutual funds, including those that have not
previously participated in the voluntary program, adequate opportunity
to test interactive data submissions so that they may be fully prepared
to file risk/return summary information in interactive data format
after December 31, 2009.
Our multiyear experience with interactive data has helped us
understand the extent to which a mutual fund would incur additional
costs to create and submit its existing disclosures in interactive data
format. Based on that experience, we believe that the process of
converting a mutual fund's existing ASCII or HTML risk/return summary
information into interactive data would not impose a significant burden
or cost. Mutual funds could choose to tag their risk/return summary
information using available software without using outside services or
consultants; alternatively, they could rely on financial printers,
consultants, and software companies for assistance, although they would
retain ultimate responsibility for both their risk/return summary
information and their tagged data. As discussed in more detail in the
cost-benefit analysis below,\66\ we believe that the modest first-year
costs for a mutual fund would decrease in subsequent periods. We also
believe that these costs would be justified by interactive data's
benefits.
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\66\ See Part V.
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We expect that most mutual funds that are part of smaller fund
families, which generally are disproportionately affected by regulatory
costs, also would be able to provide their risk/return summary
information in interactive data format without undue effort or expense.
While interactive data reporting involves changes in reporting
procedures mostly in the initial reporting periods, we expect that
these changes would provide efficiencies in future periods. As a
result, there may be potential net savings to the mutual fund,
particularly if interactive data become integrated into the mutual
fund's disclosure process. While we recognize that requiring
interactive data risk/return summary information would likely result in
start-up expenses for smaller mutual fund families, we expect that both
software and third-party services will be available to help meet the
needs of smaller mutual fund families. We also intend that the delayed
compliance date for all mutual funds would permit mutual funds that are
part of smaller fund families to learn from the experience of funds
that have participated in the voluntary program and to participate in
the voluntary program themselves during the almost two-year period
prior to December 31, 2009. The delayed compliance date would also give
mutual funds that are part of smaller fund families a significant
period of time across which to spread first-year data tagging costs.
We believe that adopting a delayed compliance date of December 31,
2009, would establish an appropriate and measured timeline, which we
would be able to monitor and, if necessary, reconsider during the
continuation of the voluntary program.
Request for Comment:
Is the proposed schedule for implementation of interactive
data tagging appropriate?
Should we advance the first required interactive data
submission to be for filings that become effective after June 30, 2009,
or some other date, rather
[[Page 35449]]
than December 31, 2009? Should we delay the first required interactive
data submissions until, for example, 2011, 2012, or later? What
benefits would there be to advancing or delaying implementation of the
proposed rules? How much lead time do mutual funds need to familiarize
themselves with interactive data and the process of mapping risk/return
summary information using the list of tags for risk/return summary
information?
Should there be a phase-in to provide mutual funds with
more time to become familiar with the list of tags for risk/return
summary information and to encourage potential vendors of interactive
data products and services to invest in the development and marketing
of such products? If so, what should the phase-in dates be and what
funds should be included in each phase? Should we differentiate funds
based on net assets of the fund, the fund family, or on some other
basis? Should we, for example, provide a more delayed compliance date
for mutual funds that are small entities for purposes of the Regulatory
Flexibility Act, i.e., funds that, together with other investment
companies in the same group of related investment companies, have net
assets of $50 mil
