On July 11, 2007, the SEC issued a Release adopting rule amendments to extend the current interactive data voluntary reporting program to allow mutual funds voluntarily to submit supplemental tagged information contained in the risk/return summary section of their prospectuses. Any fund may participate, without pre-approval, merely by submitting the risk/return summary information in the required manner. If, in the future, the SEC considers requiring filers to tag the risk/return summary information, that would be the subject of a separate rulemaking proposal. These amendments become effective Aug. 20, 2007. Release Nos. 33-8823; IC-27884; available at http://www.sec.gov/rules/final/2007/33-8823.pdf. Highlights of the Release are briefly summarized below.
The Release reviews the SEC's efforts over the past several years in evaluating the use of "interactive data tagging" as a tool to improve the timeliness and accessibility of the information contained in SEC filings. Data tagging uses standard definitions (or data tags) to translate text-based information into data that is "interactive"; that is, data that can be retrieved, searched, and analyzed through automated means.
Tags are defined in "taxonomies," which are essentially data dictionaries that describe individual items of information and mathematical and definitional relationships among the items; and substantial progress has been made in developing data tagging taxonomies related to a language for the electronic communication of business and financial data known as eXtensible Business Reporting Language (XBRL). XBRL was developed and is supported by XBRL International, a "collaborative consortium of approximately 450 organizations representing many perspectives in the financial reporting community." XBRL International and its related entities have been developing standard taxonomies that are designed to classify and define financial information in accordance with U.S. Generally Accepted Accounting Principles and SEC regulations. The taxonomy for tagging the risk/return summary information, however, was developed by the Investment Company Institute (ICI). Mutual funds will be permitted to file documents containing risk/ return summary information that is tagged using the ICI's taxonomy, commencing Aug. 20, 2007. ICI has submitted its taxonomy to XBRL International, and the taxonomy received "acknowledgement" in June 2007. ICI also intends to seek "approval" of the taxonomy in accordance with the procedures of XBRL International; nevertheless, the SEC has concluded that ICI’s taxonomy is now sufficiently developed to permit its use in the voluntary program.
Note: 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.
The Voluntary Program
The XBRL data furnished under the voluntary program must consist of at least one item from a list of enumerated content items (Mandatory Content), which currently includes financial statements, earnings information, and, for mutual funds, financial highlights or condensed financial information. The effect of the current SEC amendments is to add the complete set of risk/return summary information set forth in Items 2 and 3 of Form N-1A as a new item of Mandatory Content. Thus, a fund submitting tagged risk/return summary information may, but is not required to, also submit tagged financial highlights or condensed financial information. Similarly, a fund that submits tagged financial highlights or condensed financial information may, but is not required to, also submit tagged risk/return summary information. In order to address questions of potential harm to investors and liability to the funds, relevant SEC rules require these voluntary filings to include certain cautionary disclosures, and provide certain liability protections.
Submissions of tagged exhibits containing risk/return summary information will be supplemental and will not replace the required HTML or ASCII version of the information called for in Form N-1A. Mutual funds submitting tagged risk/return summary information must include this information as an exhibit to an amendment to a previous filing on Form N-1A. More specifically, the rules provide that a tagged exhibit to a Form N-1A filing, whether the filing is an initial registration statement or an amendment thereto, must be submitted as a separate amendment to the filing to which the tagged exhibit relates, and only after the effective date of such filing. An exhibit containing tagged risk/return summary information may be submitted under rule 485(b) of the Securities Act (which, generally, provides for immediate effectiveness of amendments) and will only need to contain the new exhibit, a facing page, a signature page, a cover letter explaining the nature of the amendment, and a revised exhibit index.
Under the adopted amendments, in the case of a Form N-1A filing that includes more than one series, a filer may tag a complete set of risk/return summary information for any one or more series; however, filers who choose to tag the information for a particular series would be required to tag all the information for that series, including the information for each class of the series. Volunteer filers will be free to submit tagged risk/return summary information regularly or from time to time, and may stop and start as they choose. Participation in the voluntary program will not create a continuing obligation for a volunteer to submit tagged risk/return summary information as an exhibit to a subsequent post-effective amendment. A volunteer will, however, be required to amend any previously filed tagged risk/return summary exhibits that do not comply with applicable content and format requirements (e.g., because they do not reflect the same information as the corresponding official filing).
The SEC's Web site currently provides access to a "prototype XBRL Web application" that converts tagged financial information submitted in the voluntary program into a "rendered" (or "human readable") format. However, the SEC's site currently does not provide access to any rendering or analytical tools for use with tagged risk/return summary information. Thus, while users will be able to download the tagged risk/return summary information from the SEC's Web site, they will only be able to perform their own interactive analysis if they have otherwise obtained and installed appropriate software.