# Conformed to Federal Register Version > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/agency%3Asec%3A5fbf1a0fd298b332 ## Record - **Collection:** Agency decision - **Document type:** Agency decision ## Text Conformed to Federal Register Version SECURITIES AND EXCHANGE COMMISSION 17 CFR Parts 229, 230, 232, 239, 249, 270 and 274 [Release Nos. 33-10514; 34-83551; IC-33139; File No. S7-03-17] RIN 3235-AL59 Inline XBRL Filing of Tagged Data AGENCY: Securities and Exchange Commission. ACTION: Final rule. SUMMARY: We are adopting amendments to require the use of the Inline eXtensible Business Reporting Language (“XBRL”) format for the submission of operating company financial statement information and fund risk/return summary information. We also are adopting the elimination of the 15 business day XBRL filing period for fund risk/return summaries. The amendments are intended to improve the data’s usefulness, timeliness, and quality, benefiting investors, other market participants, and other data users and to decrease, over time, the cost of preparing the data for submission to the Commission. The amendments will also eliminate the requirement for operating companies and funds to post “Interactive Data Files” (i.e., machine-readable computer code that presents information in XBRL format) on their websites and terminate the Commission’s voluntary program for the submission of financial statement information interactive data that is currently available only to investment companies and certain other entities. DATES: Effective date: These amendments are effective on September 17, 2018. Compliance dates: See Section III.A.1.c. FOR FURTHER INFORMATION CONTACT: Mark W. Green, Senior Special Counsel, Division of Corporation Finance, at (202) 551-3430; John Foley, Senior Counsel, Division of Investment Management, at (202) 551-6792; Robert M. Willis, Assistant Director, Office of Disclosure Technology, Anzhela Knyazeva, Senior Financial Economist, or Hermine Wong, Special Counsel, Division of Economic and Risk Analysis, at (202) 551-6600. SUPPLEMENTARY INFORMATION: We are adopting amendments to: Commission Reference Regulation S-K 1 Regulation S-T 2 Securities Act of 1933 (Securities Act) 3 Securities Exchange Act of 1934 (Exchange Act) 4 1 17 CFR 229.10 through 229.1208. 2 17 CFR 232.10 through 232.903. 3 15 U.S.C. 77a et seq. 4 15 U.S.C. 78a et seq. CFR Citation (17 CFR) Item 601 Rule 11 Rule 201 Rule 202 Rule 305 Rule 401 Rule 402 Rule 405 Rule 144 § 229.601 § 232.11 § 232.201 § 232.202 § 232.305 § 232.401 § 232.402 § 232.405 § 230.144 Rule 485 Rule 497 Form S-3 Form S-8 Form F-3 Form F-10 Rule 13a-14 § 230.485 § 230.497 § 239.13 § 239.16b § 239.33 § 239.40 § 240.13a-14 Rule 15d-14 Form 10-Q § 240.15d-14 § 249.308a 2 Investment Company Act of 1940 (Investment Company Act) 5 Securities Act and Investment Company Act Form 10-K Form 20-F Form 40-F Form 6-K Rule 8b-1 § 249.310 § 249.220f § 249.240f § 249.306 § 270.8b-1 Rule 8b-2 Rule 8b-33 Rule 30a-2 Form N-1A § 270.8b-2 § 270.8b-33 § 270.30a-2 § 239.15A and 274.11A I. INTRODUCTION ..................................................................................................................... 4 II. BACKGROUND AND ECONOMIC BASELINE ................................................................ 7 A. Overview of Existing XBRL Requirements for Operating Companies and Funds ..................... 7 B. Current XBRL Practices and Affected Parties ...........................................................................11 1. XBRL Preparation ........................................................................................................11 2. Voluntary Use of Inline XBRL by Operating Companies under the Exemptive Order 13 3. XBRL Data Use ............................................................................................................17 III. FINAL AMENDMENTS AND ANTICIPATED ECONOMIC EFFECTS .................... 20 A. Discussion of the Final Amendments .........................................................................................20 1. Inline XBRL Requirements ..........................................................................................20 2. Elimination of the Website Posting Requirements .......................................................51 3. Termination of the 2005 XBRL Voluntary Program ....................................................53 4. Technical Amendments ................................................................................................54 B. Potential Economic Effects of the Amendments ........................................................................55 1. Inline XBRL Requirements ..........................................................................................57 2. Elimination of the Website Posting Requirements for Financial Statement Information and Risk/Return Summaries ......................................................................................79 3. Termination of the 2005 XBRL Voluntary Program ....................................................80 4. Alternatives ...................................................................................................................80 IV. OTHER MATTERS ............................................................................................................. 86 V. PAPERWORK REDUCTION ACT ..................................................................................... 86 A. Background ................................................................................................................................86 B. Summary of Comment Letters and Revisions to Proposals........................................................87 C. Reporting and Cost Burden Estimates ........................................................................................88 1. Registration Statement and Periodic Reporting ............................................................88 2. Regulation S-K and Regulation S-T .............................................................................96 VI. FINAL REGULATORY FLEXIBILITY ACT ANALYSIS ............................................. 97 A. Need for, and Objectives of, the Final Amendments..................................................................97 B. Significant Issues Raised by Public Comments ..........................................................................97 C. Small Entities Subject to the Amendments.................................................................................99 D. Projected Reporting, Recordkeeping and Other Compliance Requirements ............................100 E. Agency Action to Minimize Effect on Small Entities ..............................................................102 VII. STATUTORY BASIS........................................................................................................ 104 TEXT OF THE FINAL RULE AND FORM AMENDMENTS............................................ 104 5 15 U.S.C. 80a et seq. 3 I. INTRODUCTION In 2009 the Commission adopted rules requiring operating companies 6 to provide the information from the financial statements accompanying their registration statements and periodic and current reports in machine-readable format using XBRL by submitting it to the Commission in exhibits to such registration statements and reports and posting it on their websites, if any. 7 That same year, the Commission similarly required open-end management investment companies (including exchange-traded funds (“ETFs”) organized as open-end management investment companies) (“funds”) to provide risk/return summary information from their prospectuses in XBRL format by submitting it to the Commission in exhibits and posting it on their websites, if any. 8 XBRL requirements currently apply to operating companies that prepare their financial statements in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) or in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). 9 XBRL 6 For purposes of both the existing XBRL requirements for financial statement information and these amendments, operating companies are filers subject to the financial statement information XBRL requirements of Item 601(b)(101) of Regulation S-K and Forms F-10, 20-F, 40-F and 6K. Operating companies do not include any investment company that is registered under the Investment Company Act, any business development company (“BDC”), as defined in Section 2(a)(48) of that Act [15 U.S.C. 80a-2(a)(48)], or any 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 through 210.6-10], as well as asset-backed issuers. See Release No. 33-9002 (Jan. 30, 2009) [74 FR 6776] (“2009 Financial Statement Information Adopting Release”) as corrected by Release No. 33-9002A (Apr. 1, 2009) [74 FR 15666], at 6780-1, nn. 69 and 78 and accompanying text. 7 17 CFR 232.405. See also 2009 Financial Statement Information Adopting Release. 8 See Release No. 33-9006 (Feb. 11, 2009) [74 FR 7747] (“2009 Risk/Return Summary Adopting Release”) as corrected by Release No. 33-9006A (May 1, 2009) [74 FR 21255]. The risk/return summary is set forth in Items 2, 3, and 4 of Form N-1A under the Securities Act and the Investment Company Act. 9 As used in this release, the phrase “IFRS as issued by the IASB” refers to the authoritative text of IFRS. 4 requirements also apply to funds pursuant to Form N-1A and related rules under Regulation S-T. 10 Operating companies and funds subject to these XBRL requirements must submit an Interactive Data File, 11 including information tagged in XBRL, as an exhibit to the Related Official Filing, which is filed in the traditional HyperText Markup Language (“HTML”) or, less commonly, American Standard Code for Information Interchange (“ASCII”) format. 12 The 2009 requirements were intended to make financial information and fund risk/return summaries easier for investors to analyze and to assist in automating regulatory filings and business information processing. 13 Since that time, however, some observers have expressed concerns regarding the quality of, extent of use of, and cost to create XBRL data. 14 In addition, the Commission staff has identified common data quality issues associated with financial statement information XBRL data filed by operating companies. 15 10 See General Instruction C.3.(g) to Form N-1A; Rule 405 of Regulation S-T. 11 17 CFR 232.11; 17 CFR 232.405. The term “Interactive Data File” means the machine-readable computer code that presents information in XBRL electronic format pursuant to Rule 405 of Regulation S-T. The Interactive Data File currently consists of an instance document and other documents as described in the Electronic Data Gathering, Analysis, and Retrieval system (EDGAR) Filer Manual. The instance document contains the XBRL tags for the information contained in the corresponding data in the Related Official Filing to satisfy the content and format requirements in Rule 405. The other documents in the Interactive Data File contain contextual information about the XBRL tags. 12 17 CFR 232.11. 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 Form N1A, the ASCII or HTML format part of the official filing that contains the information to which an Interactive Data File corresponds. 13 See 2009 Financial Statement Information Adopting Release, at 6776; 2009 Risk/Return Summary Adopting Release, at 7748. 14 See Release No. 33-10323 (Mar. 1, 2017) [82 FR 21487] (“Inline XBRL Proposing Release”), at 14283, nn. 29-30, at 14286, n. 70, at 14287, n. 78, and accompanying text. 15 See, e.g., Staff Observations of Custom Axis Tags (Mar. 29, 2016), https://www.sec.gov/structureddata/reportspubs/osd_assessment_custom-axis-tags.html (retrieved Jun. 20, 2018); Staff Observations of Custom Tag Rates (July 7, 2014), 5 At the same time, since the adoption of the original XBRL requirements in 2009, other observers have disagreed with the claim that the XBRL requirements impose high costs and emphasized the decrease in costs over time as filers and filing agents have gained experience and widely adopted the XBRL technology. 16 Other observers have discussed the improvement in XBRL data quality over time and examined the benefits of XBRL data. 17 The same observers have associated XBRL data with better availability of information about smaller operating companies from an access to capital standpoint. 18 We have reviewed and considered all of the comments that we received on the Inline XBRL Proposing Release. 19 The final amendments reflect changes made in response to those comments. We are adopting the Inline XBRL requirements for https://www.sec.gov/dera/reportspubs/assessment-custom-tag-rates-xbrl.html (retrieved Jun. 20, 2018); Staff Observations from the Review of Interactive Data Financial Statements (Dec. 13, 2011), https://www.sec.gov/spotlight/xbrl/staff-review-observations-121311.shtml (retrieved Jun. 20, 2018). 16 See Inline XBRL Proposing Release, at 14286. 17 See Inline XBRL Proposing Release, at 14286 and at 14287, n. 81. 18 Id. 19 See letters from Advanced Computer Innovations, Inc. (Mar. 1, 2017) (“ACI”); Association of International Certified Professional Accountants (May 16, 2017) (“AICPA”); Biotechnology Innovation Organization (May 16, 2017) (“BIO”); CFA Institute (Jun. 12, 2017) (“CFA Institute”); Cigna Corporation (May 16, 2017) (“Cigna”); Data Coalition (May 16, 2017) (“Data Coalition”); Deloitte & Touche LLP (May 5, 2017) (“Deloitte”) ; Ernst & Young LLP (May 16, 2017) (“EY”); Federated Investors (May 16, 2017) (“Federated I”); Federated Investors (Jun. 1, 2018) (“Federated II”); Financial Executives International (May 16, 2017) (“FEI”); Jack Frei (Mar. 13, 2017) (“Frei”); Gartner, Inc. (May 10, 2017) (“Gartner”); Grant Thornton LLP (May 16, 2017) (“Grant Thornton”); Hindssight 2020, llc (May 15, 2017) (“Hindssight”); Charles S. Hoffman (May 14, 2017) (“Hoffman”); Investment Company Institute (May 16, 2017) (“ICI I”); Investment Company Institute (Jun. 1, 2018) (“ICI II”); IRIS Business Services Limited (Mar. 27, 2017) (“IRIS”); Hemant Khatod (Mar. 27, 2017) (“Khatod 1”); Hemant Khatod (Mar. 27, 2017) (“Khatod 2”); Suresh Kumar (Mar. 21, 2017) (“Kumar”); Paul Lewis (Mar. 10, 2017) (“Lewis”); Reps. Randy Hultgren, Carolyn Maloney, and Darrell Issa, Members of Congress (Apr. 27, 2017) (“Members of Congress”); Merrill Corporation (May 16, 2017) (“Merrill”); Morningstar, Inc. (May 16, 2017) (“Morningstar”); Octachoron Limited (May 15, 2017) (“Octachoron”); Bill Palmer (May 12, 2017) (“Palmer”); Laurie A. Pergamit (May 2, 2017) (“Pergamit”); Somnath Ray (May 17, 2017) (“Ray”); Daniel C. Sweeney (Mar. 27, 2017) (“Sweeney”); TagniFi (Apr. 19, 2017) (“TagniFi”); U.S. Bancorp Fund Services, LLC (May 16, 2017) (“USBFS”); Workiva Inc. (May 23, 2017) (“Workiva I”); Workiva Inc. (Mar. 6, 2018) (“Workiva II”); XBRL International (May 16, 2017) (“XBRL International”); XBRL US (May 16, 2017) (“XBRL US”). 6 operating companies and funds substantially as proposed, with modifications to address input from commenters. We are also eliminating the XBRL website posting requirements for operating companies and funds and eliminating the Commission’s interactive data voluntary program (“2005 XBRL Voluntary Program”), 20 as proposed. The discussion below begins with a background description of the existing XBRL requirements and current XBRL practices. The discussion of the amendments is found in Section III.A. We believe that the use of Inline XBRL may reduce the time and effort associated with preparing XBRL filings, simplify the review process for filers, and improve the quality and usability of XBRL data for investors, market participants, and other data users. The Commission will continue to monitor industry practices and market developments in disclosure technologies. Should future developments suggest that a more efficient or less costly reporting standard would provide at least substantively similar benefits as Inline XBRL, we would evaluate whether changes to our reporting format are appropriate, including, without limitation, designating another reporting standard as an alternative to Inline XBRL for some or all aspects of the rule. II. BACKGROUND AND ECONOMIC BASELINE A. Overview of Existing XBRL Requirements for Operating Companies and Funds 20 See Rule 401 of Regulation S-T. In 2005, the Commission began to allow registrants to voluntarily submit financial information in XBRL form as exhibits to periodic reports and Investment Company Act filings. See Release No. 33-8529 (Feb. 3, 2005) [70 FR 6556]. In 2007, the voluntary program was expanded to permit risk/return summary submissions. See Release No. 33-8823 (Jul. 11, 2007) [72 FR 39289]. As a result of rule amendments adopted by the Commission in 2009, the 2005 XBRL Voluntary Program is now only open for participation by investment companies and other entities that prepare their financial statements in accordance with Article 6 of Regulation S-X. See 2009 Financial Statement Information Adopting Release and 2009 Risk/Return Summary Adopting Release. 7 The XBRL requirements for the required information are located in the Interactive Data File provisions of Regulation S-K; 21 Forms F-10, 22 20-F, 23 40-F, 24 6K, 25 and N-1A; 26 Rule 405 of Regulation S-T; and the EDGAR Filer Manual. 27 Operating companies are required to submit financial statements and any applicable financial statement schedules in XBRL as exhibits to certain Exchange Act reports and Securities Act registration statements. 28 In general, operating companies that prepare their financial statements in accordance with U.S. GAAP or in accordance with IFRS as issued by the IASB must submit their financial statements to the Commission in XBRL. Filers that are required to provide information in XBRL must use the taxonomies specified on the Commission’s website. 29 21 See Item 601(b)(101) of Regulation S-K [17 CFR 229.601(b)(101)]. 22 See Paragraph (101) of Part II—Information Not Required to be Delivered to Offerees or Purchasers of Form F-10. 23 See Paragraph 101 of the Instructions as to Exhibits of Form 20-F. 24 See Paragraph B.(15) of the General Instructions to Form 40-F. 25 See Paragraph C.(6) of the General Instructions to Form 6-K. 26 See General Instruction C.3.(g) to Form N-1A. 27 The EDGAR Filer Manual sets forth the technical formatting requirements for the presentation and submission of electronic filings through the EDGAR system. EDGAR performs automated collection, validation, indexing, acceptance, and forwarding of submissions by companies and others who are required to file forms with the Commission. See https://www.sec.gov/edgar/aboutedgar.htm (retrieved Jun. 20, 2018). 28 Financial statements in XBRL are required as exhibits to Exchange Act reports on Forms 10-Q, 10-K, 20-F, 40-F, and, in some cases, 8-K and 6-K. Financial statements in XBRL also are required as exhibits to Securities Act registration statements that contain financial statements, such as Form S-1 (except registration statements filed in connection with an initial public offering). Securities Act registration statements that do not contain financial statements, such as a Form S-3 or other form filed by an issuer that incorporates by reference all required financial statement information from its periodic reports, and Exchange Act registration statements are not required to include Interactive Data Files. See 2009 Financial Statement Information Adopting Release. 29 See Rule 405(c)(1) of Regulation S-T. 8 Funds are required to submit risk/return summary information in XBRL as exhibits to registration statements and to prospectuses with risk/return summary information that varies from the registration statement. 30 An operating company generally must submit the Interactive Data File as an exhibit to the relevant Related Official Filing. 31 Funds are required to submit the Interactive Data File within 15 business days of (1) the effective date of the registration statement or post-effective amendment that contains the related information, 32 or (2) the filing of a form of prospectus made pursuant to paragraph (c) or (e) of Rule 497. 33 Operating companies and funds may delay submission and posting to the extent provided under a hardship exemption. 34 When filers submit XBRL exhibits during EDGAR filing, the XBRL exhibits are validated for compliance with certain EDGAR Filer Manual technical requirements before the attachments are accepted. During EDGAR filing, EDGAR validates XBRL documents that make up an Interactive Data File, producing error and warning messages when issues with the XBRL data are identified. EDGAR also “renders”—creates a human-readable version of—XBRL data that can be viewed on the EDGAR website. EDGAR users can view a rendered version of the tagged information submitted in the 30 See General Instruction C.3.(g) to Form N-1A. 31 See Rule 405(a) of Regulation S-T. 32 See General Instruction C.3.(g)(i), (iv) to Form N-1A. 33 See General Instruction C.3.(g)(ii), (iv) to Form N-1A. 34 An operating company may delay the submission and posting of the Interactive Data File to the extent provided under a temporary or a continuing hardship exemption. See Rules 201 and 202 of Regulation S-T. A fund filer may delay the submission and posting of the Interactive Data File to the extent provided under a continuing hardship exemption. See Rule 202 of Regulation S-T. 9 XBRL exhibit by clicking on the “Interactive Data” button next to the relevant filing on EDGAR. For both operating companies and funds, the Interactive Data File submitted to the Commission also must be posted on the filer’s website, if any, on the earlier of the calendar day that the filer submitted or was required to submit it. 35 Operating companies must keep the Interactive Data File posted for at least 12 months. 36 Funds must keep the Interactive Data File posted until the registration statement or post-effective amendment to which the Interactive Data File relates is no longer current. 37 Currently, the requirement for operating companies to submit and post financial statement information in XBRL applies through the exhibit requirements of Item 601(b)(101) of Regulation S-K 38 and Forms F-10, 39 20-F, 40 40-F, 41 and 6-K. 42 Similar requirements for funds to submit and post risk/return summary information in XBRL apply through the exhibit requirements of Form N-1A 43 and Rule 497. 44 These exhibit 35 See Rule 405(g). 36 Id. 37 See Rule 405(g) and General Instruction C.3.(g)(iii) to Form N-1A. If a fund does not submit or post interactive data as required, its ability to file post-effective amendments to its registration statement under Rule 485(b) under the Securities Act is automatically suspended until it submits and posts the interactive data as required. See Rule 485(c) under the Securities Act. The Interactive Data File also must 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. See General Instruction C.3.(g)(iv) to Form N-1A. 38 The exhibit requirements of Item 601(b)(101) relate to Forms S-1, S-3, S-4, S-11, F-1, F-3, F-4, 8K, 10-Q, and 10-K. 39 See Paragraph (101) of Part II (Information Not Required to be Delivered to Offerees or Purchasers) of Form F-10. 40 See Paragraph 101 of the Instructions as to Exhibits of Form 20-F. 41 See Paragraph B.(15) of the General Instructions to Form 40-F. 42 See Paragraph C.(6) of the General Instructions to Form 6-K. 43 See General Instruction C.3.(g) to Form N-1A. 10 requirements specify when information in the Related Official Filing triggers the requirement to submit and post an Interactive Data File in the manner provided by Rule 405 of Regulation S-T. 45 Rule 405 sets forth the basic content, format, submission, and posting requirements for the Interactive Data File, such as the requirement to submit the Interactive Data File as an exhibit to the Related Official Filing. 46 Rule 405 also requires that an Interactive Data File be submitted in accordance with the EDGAR Filer Manual. 47 The EDGAR Filer Manual contains additional formatting and submission requirements for the Interactive Data File. On June 13, 2016, the Commission issued an exemptive order under the Exchange Act to permit operating companies that comply with certain conditions listed in the order to file structured financial statement data required in their periodic and current reports using Inline XBRL through March 2020, in lieu of filing all their XBRL data in a separate exhibit. 48 B. Current XBRL Practices and Affected Parties 1. XBRL Preparation 44 See Rule 497(c), (e). 45 The exhibit provisions that specify when an Interactive Data File is required for financial information also specify when it is optional and when it is prohibited. 46 See Rule 405(a)(2) for the exhibit requirement. 47 See Rule 405(a)(3). 48 See Order Granting Limited and Conditional Exemption under Section 36(a) of the Securities Exchange Act of 1934 from Compliance with Interactive Data File Exhibit Requirement in Forms 6-K, 8-K, 10-Q, 10-K, 20-F, and 40-F to Facilitate Inline Filing of Tagged Financial Data, Release No. 34-78041 (Jun. 13, 2016) [81 FR 39741] (“Exemptive Order”). 11 There were approximately 8,315 filers of annual and quarterly reports (Forms 10K, 10-Q, 20-F, and 40-F), including amendments, during calendar year 2017. 49 As of December 2017, there were approximately 11,181 funds registered on Form N-1A. 50 Filers may prepare their Interactive Data to comply with existing XBRL requirements inhouse or use an outside service provider. 51 Tagging required disclosures in XBRL may involve either a standalone or integrated approach. 52 In 2009 the Commission estimated the expected direct cost of compliance with XBRL requirements by operating companies. 53 After the adoption of the 2009 rules, several pre-proposal commenters and studies provided estimates of the cost of 49 The figures are based on staff analysis of EDGAR filings. Filers were identified based on Central Index Key (“CIK”) codes. Some filers, including investment companies, asset-backed issuers, and filers who have received a hardship exemption, are not subject to financial statement information interactive data requirements. Interactive data requirements for operating companies also pertain to certain Securities Act registration statements, as well as certain filings on Forms 8-K and 6-K containing specified financial statements. 50 The figures are based on data obtained from ICI as of December 31, 2017, available at http://www.ici.org/research/stats, and staff analysis of EDGAR filings. This count includes 9,360 mutual funds and 1,821 ETFs registered as open-end investment companies. The estimate of ETFs is reduced to exclude approximately eight ETFs registered as unit investment trusts (“UITs”). UITs and closed-end funds are not subject to the proposed amendments and are therefore excluded from this estimate. 51 See Inline XBRL Proposing Release, at 14285. See also William Sinnett, SEC reporting and the impact of XBRL: 2013 survey, Financial Executives Research Foundation (Nov. 15, 2013) (“FERF Study”), at 15. 52 See Inline XBRL Proposing Release, at 14285. With a standalone approach, filers or filing agents create an XBRL exhibit by copying the information from the filing document and tagging it in XBRL, which requires them to expend incremental resources to create and tag a copy of the data and verify the consistency of tagged data across documents. With an integrated approach, XBRL tagging of required disclosures is a part of a broader disclosure management process, and integrated disclosure management software is used to generate both the HTML filing and the XBRL exhibit. 53 See 2009 Financial Statement Information Adopting Release, at 6804 (estimating direct costs of preparing and submitting interactive data-formatted financial statements, excluding the cost of website posting, at $39,510–$81,220 ($12,450–$20,340) for the first submission (each subsequent submission) with block-text footnotes and schedules and $29,700–$59,150 ($20,075–$36,940) for the first submission (each subsequent submission) with detailed tagging of footnotes and schedules, and the cost of website posting at $1,000 per year). 12 compliance with financial statement information XBRL requirements. 54 According to a 2013 survey, the median operating company filer required 25 hours for the preparation and 15 hours for the review of XBRL and between $8,000 and $10,000 for the services of outside professionals for its most recent annual filing. 55 According to another survey, the median small filer paid $10,000 or less on an annual basis for fully outsourced creation and filing of its XBRL exhibits. 56 Preliminary statistics from a pricing survey being conducted by the AICPA and XBRL US indicate that the cost of XBRL formatting has declined 41% since 2014 and that the average cost of XBRL preparation for small reporting companies in 2017 averaged $5,850 per year. 57 The 2009 Risk/Return Summary Adopting Release estimated the expected direct cost of compliance with the fund risk/return summary XBRL requirements. 58 2. Voluntary Use of Inline XBRL by Operating Companies under the Exemptive Order 54 See Inline XBRL Proposing Release, at 14285-6, n. 69. 55 See FERF Study, at 18–19. 56 See Research shows XBRL filing costs are lower than expected, AICPA, https://www.aicpa.org/InterestAreas/FRC/AccountingFinancialReporting/XBRL/DownloadableD ocuments/XBRL%20Costs%20for%20Small%20Companies.pdf (retrieved Jun. 20, 2018) (“AICPA Study”); Mohini Singh (2017) The Cost of Structured Data: Myth vs. Reality, CFA Institute, https://www.cfapubs.org/doi/pdf/10.2469/ccb.v2017.n5.1 (retrieved Jun. 20, 2018). 57 See https://xbrl.us/wp-content/uploads/2018/06/XBRL-US-Letter-to-HFSC-RE-HR-5054-6-62018.pdf (retrieved Jun. 20, 2018). 58 See 2009 Risk/Return Summary Adopting Release, at 7769 (estimating direct costs of preparing and submitting interactive data-formatted risk/return summary information, excluding the cost of website posting, at $23,200 for the first submission ($3,100 for each subsequent submission) and the cost of website posting at $250). One commenter stated that it uses a third-party vendor for XBRL preparation and estimated the average time the commenter expends to review the approximately 336 risk/return summary XBRL filings per year produced for its funds at approximately 12 hours per month, with a peak of 32 hours per month. See letter from Federated II. This amounts to an average review time of approximately 0.43 hours per filing (12 hours per month x 12 months / 336 filings per year). The cost of outside services for XBRL preparation, which are incurred in addition to the review time, is not stated in this letter. 13 A small but growing number of operating company filers have relied on the Exemptive Order to voluntarily file in Inline XBRL. 59 Large accelerated, accelerated, and nonaccelerated filers and smaller reporting companies were well represented, with large accelerated filers representing a larger proportion of voluntary operating company filers than their proportionate share of all operating company filers. 60 Filers that have filed in Inline XBRL under the Exemptive Order used XBRL preparation software or filing agents that already can accommodate Inline XBRL. Based on filing software information, where available in the filing, voluntary Inline XBRL filers used seven different vendors. 61 In conjunction with the Exemptive Order, the Commission also made the open source Inline Viewer available to the public so that filers could test and view their submissions before EDGAR filing and the public could easily view the Inline XBRL document within the context of a web browser. One commenter—whose vendor members are estimated by the commenter to “provide XBRL creation services for an estimated 80% of U.S. public companies that file in XBRL to the SEC each quarter”—stated that “[m]any vendors today already have Inline XBRL capabilities or have development underway” to incorporate this capability into their tools. 62 59 Based on staff analysis of Inline XBRL filings, as of May 21, 2018, approximately 152 unique operating company filers filed approximately 526 Inline XBRL filings. The number of filers that have voluntarily filed in Inline XBRL so far is modest relative to the overall number of filers (approximately 1.8%). 60 As of May 21, 2018, staff analysis of voluntary Inline XBRL filings showed that large accelerated filers accounted for approximately 38% and accelerated filers approximately 18% of such filings. By comparison, based on staff analysis of Forms 10-K, 10-Q, 20-F, and 40-F filings and amendments to them filed during calendar year 2017, large accelerated filers accounted for approximately 26% and accelerated filers for approximately 19% of such filings. 61 This estimate is based on filings information as of May 21, 2018. 62 See letter from XBRL US. See also letters from Workiva I, IRIS, and ACI. 14 Based on our understanding of the experience of voluntary Inline XBRL filers and the input from commenters whose XBRL solutions were used in voluntary Inline XBRL filings, filers have not incurred increases in the cost of XBRL software. 63 We recognize, however, that filers that voluntarily elected to file in Inline XBRL under the Exemptive Order may not be representative of all filers affected by the amendments. For example, most voluntary filers already used integrated XBRL preparation software. Thus, their transition to Inline XBRL likely entailed minimal changes to XBRL preparation workflow, with the resulting minor impact on both the cost of XBRL preparation and XBRL data quality. With regard to data quality of voluntary Inline XBRL filings by operating companies under the Exemptive Order, Commission staff reviewed a random sample of 25 Form 10-Q and Form 10-K Inline XBRL filings submitted pursuant to the Exemptive Order as of November 1, 2017 64 to determine whether Inline XBRL had any effect on a particular issue of data quality: negative values. 65 For each of the 25 filings, Commission staff reviewed the Inline XBRL filing and the latest filing prior to the Inline XBRL filing to determine if amounts were inappropriately entered as negative values in either of the Vendors identified as having been used in voluntary Inline XBRL filings and other software vendors and filing agents that reference Inline XBRL capabilities on their websites, and in other public sources, accounted for approximately 87% of financial statement XBRL filings filed during 2017 for which preparation software could be identified. Preparation software could not be identified for approximately 3% of financial statement XBRL filings. 63 See, e.g., letters from Workiva I and ACI. Both of these commenters were vendors whose XBRL preparation solutions were used by voluntary Inline XBRL filers. 64 The examined subset of filings was randomly drawn from 252 Inline XBRL filings submitted as of November 1, 2017. 65 Most XBRL numeric elements are designed to be entered as positive values. Even if the XBRL element is related to a credit balance, the element should still be submitted as a positive number because debit and credit balances represent presentation attributes for the HTML document, not the underlying meaning of the XBRL element. 15 filings. Commission staff observed one Inline XBRL filing with an inappropriate negative value for a footnote disclosure; the same disclosure in the latest filing prior to the Inline XBRL filing did not have an inappropriate negative value. After the initial Inline XBRL filing, that filer submitted a subsequent Inline XBRL filing and corrected the error. One commenter stated that XBRL data quality has not improved significantly, based on errors in XBRL data identified during the commenter’s review of early voluntary Inline XBRL filings pursuant to the Exemptive Order. 66 However, the example provided by the commenter of an Inline XBRL tagging error was not an error in the Inline XBRL document, but rather a presentation discrepancy when the Inline XBRL document was run through the EDGAR Renderer, which is designed for XBRL format documents and not Inline XBRL format documents. In part of the example provided, the Inline XBRL document had a dimensional axis that does not present in the EDGAR rendered view. Nevertheless, these observations suggest that some XBRL data quality issues may remain for a minority of filers. The relatively small number of voluntary Inline XBRL filings to date makes it difficult to draw definitive conclusions about the extent to which Inline XBRL may improve data quality going forward. Moreover, we are not able to observe whether the reviewed voluntary filings were prepared with the use of the Inline XBRL Viewer tool, which can facilitate detection of certain types of errors, such as negative values and scaling errors. In addition, the experience of a small number of voluntary filers may not be representative of all filers subject to the amendments. 66 See letter from TagniFi. 16 Since the implementation of the voluntary Inline XBRL program, we have observed that, not only is the public using the Inline XBRL data, but some data users have also made enhancements to the Commission’s open source Inline XBRL Viewer. These enhancements, such as creating instantly human-readable time series charting, may help to make the XBRL data even more useful. For example, using these enhancements, a user can hover over the revenues element of a filing and instantly view the latest two years of reported revenues for that filer, or hover over a narrative element and instantly view the latest two years of text reported for that element by that filer. 3. XBRL Data Use There is a wide range of XBRL data users, including investors, financial analysts, economic research firms, data aggregators, academic researchers, filers seeking information on their peers for benchmarking purposes, and Commission staff. During the second quarter of 2017, individual financial statement information XBRL exhibits were accessed on the EDGAR website approximately 53.1 million times (including approximately 13.7 million unique filing views by approximately 149,000 unique IP addresses) and individual risk/return summary XBRL exhibits were accessed approximately 6.8 million times (including approximately 839,000 unique filing views by approximately 8,000 unique IP addresses). 67 This is the approximate equivalent of 287 67 The figures are based on staff analysis of EDGAR log file data for the second quarter of 2017. The analysis examined access during the second quarter of 2017 to all financial statement information XBRL exhibits filed with annual and current reports and amendments to them and all risk/return summary XBRL exhibits filed with amendments to registration statements and forms of prospectuses since inception of the XBRL requirements. The analysis did not exclude access by “bots” because machine-readable XBRL data is designed to enable automated aggregation and processing. Due to data availability, these statistics do not capture access to XBRL data through the Public Dissemination Service or the use of the data, tools, and products made available by third-party data aggregators, incorporating XBRL data to varying degrees, which likely account for the largest share of market participants’ access to such data. These statistics also do not capture access to DERA XBRL datasets, which is discussed separately. The data definitions used 17 exhibit views and 74 unique filing views for each filing with financial statement information XBRL data and 224 exhibit views and 28 unique filing views for each filing with risk/return summary XBRL data during the examined quarter. The Commission also combines, organizes and posts for bulk download financial statement information and risk/return summary XBRL data extracted from filings. 68 As of June 16, 2018, in the approximately eight months since the Commission began posting risk/return summary datasets, financial statement data sets had approximately 55,327 page views (including approximately 33,130 unique page views); financial statement and notes data sets had approximately 232,398 page views (including 194,623 unique page views), and risk/return summary data sets had approximately 2,089 page views (including approximately 1,791 unique page views). 69 A number of businesses have created products that provide XBRL data to to identify XBRL exhibits excluded access to XBRL data as part of a complete submission file or as part of an Inline XBRL document (for filings pursuant to the Exemptive Order). Applying the same methodology, individual XBRL files of nonaccelerated filers and smaller reporting companies were accessed on the EDGAR website approximately 23.3 million times (including approximately 6.2 million unique filing views by approximately 46,000 unique IP addresses). This is the approximate equivalent of 239 exhibit views (64 unique filing views) per filing. Filer status was obtained from the XBRL portion of the respective filing. Applying the same methodology, individual XBRL files of biotechnology companies were accessed on the EDGAR website approximately 4.9 million times (including approximately 1.3 million unique filing views by approximately 24,000 unique IP addresses). This is the approximate equivalent of 288 exhibit views (78 unique filing views) per filing. Companies were classified as being in the biotechnology sector based on primary Standard Industry Classification (“SIC”) codes (obtained from the XBRL portion of the respective filing) that correspond to industry groups for pharmaceutical products and medical equipment in the Fama and French 49 industry classification (http://mba.tuck.dartmouth.edu/pages/faculty/ken.french/Data_Library/det_49_ind_port.html, retrieved Jun. 20, 2018). 68 See https://www.sec.gov/dera/data/financial-statement-data-sets.html, https://www.sec.gov/dera/data/financial-statement-and-notes-data-set.html, and https://www.sec.gov/dera/data/mutual-fund-prospectus-risk-return-summary-data-sets (retrieved Jun. 20, 2018). 69 These statistics do not account for the use of third-party products or websites incorporating these datasets. See, e.g., https://console.cloud.google.com/launcher/details/sec-public-data-bq/secpublic-dataset (retrieved Jun. 20, 2018). 18 investors. Data aggregators (i.e., entities that, in general, collect, package, and resell data) have incorporated XBRL data into their products to varying degrees. Various thirdparty data providers extract or preview information contained in XBRL exhibits, offering XBRL analytics tools or using XBRL data to supplement other reported data based on filer disclosures. 70 The Commission staff uses XBRL data to efficiently analyze large quantities of information in support of risk assessment, rulemaking, and enforcement activities, including as part of its internally developed Corporate Issuer Risk Assessment and Financial Statement Query Viewer applications. Commenters and studies have noted the benefits of XBRL data in providing a wide range of financial reporting data that is not always available elsewhere. 71 Other commenters and studies have indicated that XBRL data use has been limited, in part due to concerns regarding data quality and lack of awareness of XBRL. 72 Several 70 See, e.g., a discussion of XBRL analytics tools, https://xbrl.us/use/howto/ (retrieved Jun. 20, 2018); https://xbrl.us/home/category/productsservices/service/data-aggregation/ (retrieved Jun. 20, 2018); Mitchell R. Wenger, Rick Elam, and Kelly L. Williams (2013) A tour of five XBRL tools, Journal of Accountancy (Apr. 1, 2013), https://www.journalofaccountancy.com/issues/2013/apr/20126677.html (retrieved Jun. 20, 2018); Inline XBRL Proposing Release, at 14286, n. 77; letters from Octachoron and TagniFi. 71 See, e.g., letters from CFA Institute, Data Coalition, Grant Thornton, Members of Congress, Octachoron, TagniFi, XBRL US, and XBRL International. Various academic studies have examined the benefits of XBRL for the information environment of firms. See Inline XBRL Proposing Release, at 14295, n. 169. See also Yu Cong, Hui Du, and Miklos A. Vasarhelyi (2017) Are XBRL files being accessed? Evidence from the SEC EDGAR log file data set, Journal of Information Systems (forthcoming) (examining rates of access to XBRL files and providing some evidence that investors in smaller operating companies access XBRL files and that investors may prefer XBRL files to non-XBRL files when both types of files are included with the filing). 72 See Inline XBRL Proposing Release, at 14287, n. 78. See also letter from BIO (stating that “XBRL data is little used by biotech investors”). But see note 67 above (discussing XBRL data use for smaller and biotech companies that is generally consistent with the XBRL data use for all operating companies). 19 commenters stated that risk/return summary XBRL data is little used by investors. 73 Some commenters stated that the use of risk/return summary XBRL data is limited due to the delay in its availability as compared to the HTML version of the same information. 74 One of these commenters, a large data aggregator that processes fund information for investors, indicated that it must manually extract information from fund HTML filings because the structured XBRL filing comes too late for investors’ preferences. 75 The 2005 XBRL Voluntary Program for financial statement information has not been used for several years, with no submissions during calendar years 2011–2017. 76 III. FINAL AMENDMENTS AND ANTICIPATED ECONOMIC EFFECTS A. Discussion of the Final Amendments 1. Inline XBRL Requirements a. Use of Inline XBRL Format On March 1, 2017, the Commission proposed rule and form amendments to facilitate improvements in the quality and usefulness of XBRL data and, over time, A December 2016 global survey of members by the CFA Institute, corroborating the results of the prior surveys, found that less than half of the respondents (approximately 45%) were aware of XBRL and, among those aware of XBRL, a minority of respondents (approximately 23%) use financial XBRL data from periodic reports. See CFA Institute Member Survey: XBRL, https://blogs.cfainstitute.org/marketintegrity/2016/12/05/do-you-know-what-xbrl-is-a-majority-ofsurvey-respondents-do-not-know/ and https://www.cfainstitute.org//media/documents/survey/xbrl-member-survey-report-2016.ashx (retrieved Jun. 20, 2018). 73 See letters from Federated I and II, Frei, ICI I and II, and USBFS. One of these letters cited limited use of XBRL data posted on the filer’s website in connection with the discussion of limited XBRL data use. See letter from Federated II. 74 See, e.g., letters from Morningstar (“we use the HTML filings rather than the XBRL filings because we can process them and share the information with end investors more quickly than if we were to wait for the XBRL filing”) and XBRL US (“[r]isk/return data from mutual funds today is not as timely as investors would prefer”). 75 See letter from Morningstar. 76 A few filers submitted Voluntary Program XBRL exhibits (EX100), but those filings seem to have been made in error. 20 decrease filing costs by decreasing XBRL preparation costs. 77 The proposed amendments would require operating company financial statement information and fund risk/return summary information to be submitted in the Inline XBRL format. 78 Inline XBRL allows filers to embed XBRL data directly into an HTML document, eliminating the need to tag a copy of the information in a separate XBRL exhibit. Inline XBRL is both human-readable and machine-readable for purposes of validation, aggregation, and analysis. The proposed amendments also would eliminate the requirements for filers to post Interactive Data Files on their websites and terminate the 2005 XBRL Voluntary Program with respect to financial statement information. 79 The majority of commenters generally supported the proposed Inline XBRL requirements. 80 Many of these commenters specifically supported the proposal to replace the XBRL format with the Inline XBRL format for operating company filers, 81 while several commenters supported applying the proposed Inline XBRL requirements to both operating companies and funds. 82 Several commenters opposed the proposed Inline XBRL requirements for some or all filers. 83 77 See Inline XBRL Proposing Release. 78 Inline XBRL™ and iXBRL™ are trademarks of XBRL International. XBRL® is a registered trademark of XBRL International. The Inline XBRL technology is freely licensed by XBRL International. See https://specifications.xbrl.org/spec-group-index-inline-xbrl.html (retrieved Jun. 20, 2018) and https://specifications.xbrl.org/presentation.html (retrieved Jun. 20, 2018). 79 See note 20 above. 80 See, e.g., letters from ACI, AICPA, CFA Institute, Data Coalition, Deloitte, Grant Thornton, Hoffman, IRIS, Lewis, Kumar, Members of Congress, Merrill, Morningstar, Octachoron, Palmer, TagniFi, Workiva I, XBRL International, and XBRL US. 81 See, e.g., letters from ACI, AICPA, CFA Institute, Data Coalition, Deloitte, Grant Thornton, Hoffman, IRIS, Members of Congress, Merrill, Morningstar, Octachoron, TagniFi, XBRL International, XBRL US, and Workiva I. 82 See, e.g., letters from ACI, AICPA, CFA Institute, Data Coalition, Members of Congress, Morningstar, XBRL International, and XBRL US. 21 After considering these comments, we are adopting, substantially as proposed, amendments to Rule 405 to require the submission of financial statement information and risk/return summary information Interactive Data Files in Inline XBRL. 84 Operating companies and funds, on a phased in basis, will be required to embed a part of the Interactive Data File within an HTML document using Inline XBRL and to include the rest in an exhibit to that document. The portion filed as an exhibit to the form will contain contextual information about the XBRL tags embedded in the filing. The information as tagged will continue to be required to satisfy all other requirements of Rule 405, including the technical requirements in the EDGAR Filer Manual. The Inline XBRL requirement, similar to the current XBRL requirement, will apply to financial statement information in HTML regardless of whether it appears in the non-exhibit part of a filing and/or in one or more exhibits. Accordingly, under Inline XBRL, tags must be embedded wherever that HTML information appears. The Commission received a number of comments that addressed data usability, quality, and cost issues. Various commenters stated that Inline XBRL would, over time, (i) increase the efficiency of review and yield savings of XBRL preparation time and cost; 85 (ii) potentially improve the quality of XBRL data (by reducing discrepancies Two of these commenters elaborated on their specific support to replace the XBRL format with the Inline XBRL format for risk/return summaries. See letters from Morningstar and XBRL US. 83 See, e.g., letters from Cigna and FEI (opposing the Inline XBRL requirement for financial statement information); letters from Hindssight and Pergamit (expressing general opposition to Inline XBRL); and letters from Federated I and II, Frei, ICI I and II, and USBFS (opposing the Inline XBRL requirement for risk/return summaries). 84 See new Rule 405(a)(3). 85 See, e.g., letters from ACI, AICPA, CFA Institute, Cigna, Data Coalition, FEI, IRIS, Kumar, Lewis, Members of Congress, Merrill, Workiva I, XBRL International, and XBRL US. But see letter from ICI I (stating that funds will not realize a significant increase in the effectiveness and 22 between HTML and XBRL data); 86 and (iii) increase the data’s usability (through greater accessibility and transparency of the data and enhanced capabilities for data users, who would no longer have to view the XBRL data separately from the text of the documents). 87 One commenter stated that while “Inline XBRL will not directly contribute to increased quality . . . indirectly, Inline XBRL will contribute to better decisions related to the meaning conveyed by the machine-readable XBRL format.” 88 Another commenter emphasized the benefit of Inline XBRL “in allowing filers greater control over the presentation of financial exhibits.” 89 Several commenters that supported requiring Inline XBRL for financial statement information expressed concern that switching to Inline XBRL would not be sufficient to significantly improve the quality of financial statement information XBRL data without additional measures. Some of these commenters recommended that the Commission implement additional validation rules, including the incorporation of XBRL Data Quality Committee validation rules. 90 Some of these commenters recommended expanding the efficiency of XBRL preparation) and letter from Pergamit (stating that Inline XBRL would not yield benefits for filers). 86 See, e.g., letters from ACI, AICPA, CFA Institute, IRIS, Kumar, Lewis, Members of Congress, Merrill, Morningstar, Octachoron, Palmer, Ray, XBRL International, and XBRL US. But see, e.g., note 107 below (stating that there would not be gains in data quality for risk/return summaries) and letters from EY, TagniFi, and Workiva I (stating that there would not be gains in data quality for financial statement information). 87 See, e.g., letters from ACI, AICPA, CFA Institute, Deloitte, IRIS, Morningstar, Octachoron, Ray, TagniFi, and XBRL US. But see letters from Federated I and II (regarding risk/return summaries) and Pergamit. 88 See letter from Hoffman. 89 See letter from Octachoron. 90 See, e.g., letters from AICPA, CFA Institute, Deloitte, TagniFi, Workiva I, XBRL International, and XBRL US. 23 scope of auditor assurance to include review of XBRL tags. 91 Some commenters encouraged additional engagement or alignment with other entities such as the Financial Accounting Standards Board (“FASB”), the IASB, and international regulators who are also using the Inline XBRL format. 92 We continue to analyze the data quality of submissions made in XBRL and Inline XBRL, as well as monitor developments related to the XRBL standard and the Inline XBRL specification. If additional technical rules within the EDGAR environment are deemed necessary, they may be reflected in updates to the EDGAR Filer Manual, but we are not imposing additional XBRL validation requirements at this time. We note that filers, vendors, and filing agents are currently able to voluntarily incorporate validation rules into their software and that the Commission makes available various tools to assist XBRL filers. Moreover, filers remain subject to Rule 405(c) of Regulation S-T, which imposes certain fundamental data quality requirements on Interactive Data File submissions. 93 Regarding our engagement with other entities such as the FASB, we note that the staff actively engages with the FASB over the development of the U.S. GAAP Taxonomy throughout the year. For example, the staff reviews and consults on the taxonomy development process, taxonomy changes, and comments received from the public. We 91 See, e.g., letters from AICPA, CFA Institute, Deloitte, EY, Grant Thornton, Hoffman, XBRL International, and XBRL US. 92 See, e.g., letters from AICPA, EY, and XBRL International. 93 17 CFR 232.405(c)(1). In particular, each data element in the Interactive Data File must reflect the same information in the corresponding data in the Related Official Filing; data elements contained in the corresponding data in the Related Official Filing may not be changed, deleted, or summarized in the Interactive Data File; and each data element contained in the Interactive Data File must be matched with an appropriate tag from the most recent version of the standard list of tags specified by the EDGAR Filer Manual, with a new special element required to be created and used only if an appropriate tag does not exist in the standard list. 24 continue to encourage all members of the public to submit any comments they may have to improve the U.S. GAAP Taxonomy to the FASB. As we have noted throughout this release, we are aware of various developments that could impact the Commission’s XBRL requirements and will continue to monitor those developments as filers transition to Inline XBRL. With respect to expanded auditor assurance, one commenter stated that a recent survey of its members found that “77 per cent of respondents wish to have assurance of the tagged data.” 94 Another commenter stated that “audit committees are likely to request that auditors perform a separate attestation engagement to provide an opinion on the accuracy and consistency of the XBRL formatted information, and issue a report” in order “to provide investors additional confidence in the iXBRL formatted information.” 95 However, a different commenter stated that XBRL data cannot be audited because tag selection is subjective and no accounting standards are applicable. 96 As the Commission stated in the Inline XBRL Proposing Release, the proposed amendments were intended to modernize existing financial statement information XBRL requirements to incorporate developments in the XBRL technology since the 2009 adoption of these requirements. The proposal did not contemplate any changes to the application of officer certifications or auditor assurance requirements to XBRL data. 97 In particular, the Commission noted that, because the proposed amendments related only to the manner of submitting the Interactive Data File and not the data that comprises the 94 See letter from CFA Institute. 95 See letter from AICPA. 96 See letter from Workiva I. 97 See Inline XBRL Proposing Release, at 14297, n. 181 and accompanying text. 25 Interactive Data File, it was not proposing to change the existing positions pertaining to the exclusion of the Interactive Data File from the officer certification and assurance requirements. 98 Consistent with the proposal, we are not making any such changes at this time. Several commenters recommended clarifying that financial statement information XBRL data under the new Inline XBRL requirement would not be subject to auditor assurance in order to address a potential “expectations gap” that might arise if XBRL data is embedded in a document containing HTML financial statements subject to auditor assurance. Commenters had different suggestions on how to communicate the auditor’s responsibility related to financial statement information XBRL data, such as by including some form of reporting mechanism or disclosure within the filing, or by having the Commission re-affirm its position from the Inline XBRL Proposing Release that there is no change in auditor responsibility. 99 98 Id. Currently, the financial statement information Interactive Data File is excluded from the officer certification requirements under Rules 13a-14(f) and 15d-14(f) of the Exchange Act [17 CFR 240.13a-14 and 240.15d-14]. Furthermore, auditors are not required to apply AS 2710 (Other Information in Documents Containing Audited Financial Statements), AS 4101 (Responsibilities Regarding Filings Under Federal Securities Statutes), or AS 4105 (Reviews of Interim Financial Information) (prior to December 31, 2016, AU Sections 550, 711, and 722, respectively) to the Interactive Data File submitted with a company’s reports or registration statements. In addition, filers are not required to obtain assurance on their Interactive Data File or involve third parties, such as auditors or consultants, in the creation of their Interactive Data File. See 2009 Financial Statement Information Adopting Release, at 6796–6797. However, the Commission has previously stated that XBRL is part of an issuer’s disclosure controls and procedures. See 2009 Financial Statement Information Adopting Release, at 6797. Risk/return summary information Interactive Data File requirements do not require funds to involve third parties, such as auditors or consultants, in the creation of the interactive data provided as an exhibit to a fund’s Form N-1A filing, including assurance. With respect to registration statements, SAS 37 (currently AS 4101) was issued in April 1981 to address the auditor’s responsibilities in connection with filings under the federal securities statutes. With respect to existing risk/return summary information Interactive Data File requirements, an auditor is not required to apply AS 4101 to the Interactive Data File. See 2009 Risk/Return Summary Adopting Release, at 7760–7761 and footnote 183. 99 See, e.g., letters from AICPA, Deloitte, EY, and Grant Thornton. 26 Consistent with the suggestions of these commenters, we are reiterating that the change from the XBRL format to the Inline XBRL format does not change the Commission’s positions with respect to officer certifications and auditor assurance. Accordingly, we are not requiring additional transparency regarding auditors’ responsibilities related to financial statement information XBRL data at this time. However, consistent with the existing XBRL requirements, issuers would not be prohibited from indicating in the financial statements (such as in a footnote) the degree (or lack thereof) of auditor involvement related to the financial statement information XBRL data. 100 A few commenters cited concerns about the burden of transition to Inline XBRL. 101 The amendments address transition issues through the use of a staggered phase-in period, discussed in greater detail in Section III.A.1.c below. Further, in response to commenter concerns, we are making certain modifications from the proposed compliance dates to help filers address any transition issues. In particular, in response to commenters’ suggestions, the amendments include an additional transition accommodation for operating companies whereby Inline XBRL will be required for the first Form 10-Q for a fiscal period ending on or after the applicable compliance date, which is intended to further facilitate the transition to Inline XBRL. The amendments also modify the phase-in period for funds to provide funds and vendors with additional time to transition to Inline XBRL for risk/return summaries and to modify their processes 100 See 2009 Financial Statement Information Adopting Release, at 6796. 101 See, e.g., letters from Cigna and FEI (regarding the burden of transition for operating companies); Hindssight (expressing concern about costs but not specifying whether it pertained to operating companies or funds); Federated I and II, Frei, ICI I and II, and USBFS (regarding the burden of transition for funds). 27 for preparing and reviewing these filings to accommodate the elimination of the 15 business day filing period. We believe that these aspects of the amendments will help to mitigate the burden of transition to Inline XBRL. As proposed, the amendments will also require risk/return summary information to be submitted in Inline XBRL. 102 Among commenters that addressed the Inline XBRL requirement for funds, several commenters expressed support for Inline XBRL for risk/return summaries. 103 Some of these commenters cited the potential benefits of increased timeliness and usability of XBRL data to investors and other data users. 104 They also described economies of scale that funds may realize from their vendors providing an XBRL preparation process that is consistent with operating companies under a single standard specification. 105 Several commenters opposed the Inline XBRL requirement for risk/return summaries. 106 These commenters stated that there are few, if any, data quality issues with risk/return summary XBRL data today and concluded that Inline XBRL would not improve the quality of risk/return summary XBRL data. 107 One 102 See new Rule 405(a)(3)(ii) of Regulation S-T. 103 See, e.g., letters from ACI, AICPA, CFA Institute, Data Coalition, Members of Congress, Morningstar, XBRL International, and XBRL US. 104 See letters from Morningstar and XBRL US. 105 Id. 106 See, e.g., letters from Federated I and II; Frei; ICI I and II; and USBFS. In addition, two commenters generally opposed Inline XBRL without stating whether their opposition was specific to funds or operating companies. See letters from Pergamit and Hindssight. 107 See letters from ICI (reiterating the observation in the Inline XBRL Proposing Release that, compared to financial statements of operating companies, mutual fund risk/return summaries have fewer instances in which numeric data is embedded into text and the data is generally more standardized as a reason why, in the commenter’s view, data quality is not an issue for mutual fund risk/return summaries) and USBFS (stating that it was not aware of any XBRL filing data quality issues affecting the funds serviced by the commenter or any other funds in the industry). 28 commenter stated that the proposed Inline XBRL requirements for funds do not have tangible benefits for investors and impose costs that would outweigh any benefits. 108 Commenters also expressed differing views regarding the extent to which investors, Commission staff, and academics use the fund information submitted in XBRL. Some commenters stated that XBRL data filed by funds is little used by investors 109 or data aggregators. 110 Others stated that it was used by data aggregators and, if more timely provided, its use by data aggregators and, indirectly, by investors, would increase. 111 Two commenters observed that the current 15 business day filing delay decreases the usefulness of this data as a means of providing timely information to investors and stated that they or others would make greater use of this data if we eliminated the delay. 112 After considering the input of commenters, we continue to believe that it is important for risk/return summary information to be provided in an XBRL format and that this format be as usable for investors and other data users as possible. We 108 See letter from Federated II. 109 See letters from Federated I (stating that it does “not believe that either XBRL, or the proposed iXBRL filing and posting requirements are (or would be) useful to investors.”); Federated II; Frei (“There has been no evidence that the SEC staff, academics, or every day investors uses [sic] this data.”); ICI I (stating that investors generally do not use XBRL tagged risk/return summary information and instead obtain this risk/return information in human-readable form from fund prospectuses, on fund websites, or on third party information provider websites.”); ICI II; USBFS (stating that the XBRL data is generally not used by investors, investment advisers, or brokerdealers in making investment decisions or recommendations). 110 See letter from ICI (stating that its members provide data directly to many information providers and further noting that these information providers separately extract data from HTML filings). 111 See letters from Frei and USBFS (referencing XBRL data use by data aggregators) and XBRL US (noting Morningstar’s support of eliminating the 15 day filing period as it would allow them to use the XBRL data to more rapidly disseminate fund data to investors). 112 See letters from Morningstar (noting that it currently uses the HTML filings rather than the XBRL filings because it can process and share the information with investors more quickly than if it were to wait for the XBRL filing) and XBRL US (stating that the elimination of the 15 business day period would make XBRL data much more valuable to data providers and investors). 29 understand, based on commenter input, that many investors obtain risk/return summary information through data aggregators but that they may seek it out more quickly than it is currently available in XBRL through fund submissions. To meet this demand for more timely data, one data aggregator manually extracts the risk/return summary information from fund HTML or ASCII filings over a period of days rather than wait up to 15 business days for the XBRL filings. We further understand, based on commenter input, that transitioning to Inline XBRL will allow risk/return summary information to reach investors via aggregators in hours, rather than days, after a Related Official Filing. As a result, we expect that more timely XBRL data will lead to increased use of that data by third-party data aggregators already in the market. We also anticipate that data aggregators with fewer resources or any new entrants to the data aggregation market would be better positioned to compete to provide information products to investors based on fund risk/return summaries if timely delivery does not require the resources necessary to tag the information manually. Investors will also be able to take further advantage of the XBRL data in ways that were not possible before. Because the Inline XBRL format embeds XBRL within the HTML document, investors can use their own web browser to view the embedded XBRL data and metadata within the context of the Related Official Filing, without having to download the information into any separate applications for review and analysis. Contrary to some commenters’ statements that this data is little used, risk/return summary XBRL data is accessed on EDGAR on a regular basis. 113 We also disagree with commenters who suggested that investors do not benefit when data aggregators use 113 See Section II.B.3 above. 30 XBRL data. 114 These aggregators typically use this data to provide information to investors, and funds are primarily held by retail investors, who often look to third party information sites when evaluating various funds for investment. Preparing Inline XBRL filings involves embedding XBRL tags into the HTML document. This single-document approach should create long-term benefits by removing a separate workflow of checking the numbers and text in the original HTML filing for consistency with the numbers and text in the separate XBRL filing and the related time demands that entails—time demands that currently contribute towards much later filings by funds and less timely information for fund investors. Several commenters indicated that funds would not realize cost savings from Inline XBRL and that funds would incur significant costs of transition to Inline XBRL, which would be compounded by the elimination of the 15 business day filing period and would outweigh any benefits. 115 One commenter stated that its members do not anticipate a significant increase in the efficiency and effectiveness of their filing processes from the shift to Inline XBRL. 116 Two commenters stated that a number of funds currently use a standalone approach to XBRL preparation and thus may require significant changes in XBRL preparation workflow to transition to Inline XBRL. 117 One of these commenters further indicated that the Commission may have overestimated the 114 See, e.g., letters from Federated II, Frei, ICI II, and USBFS. 115 See letters from Federated I and II, Frei, ICI I and II, and USBFS. 116 See letter from ICI I. 117 See letters from USBFS and XBRL US. Another commenter referenced the comment letter by USBFS (stating that “at least one large filing vendor believes that the SEC’s proposal may have significantly underestimated the cost of implementing iXBRL tagging in the mutual fund context, particularly for smaller registrants”). See letter from ICI II. 31 proportion of funds that use an integrated approach to XBRL preparation. 118 According to this commenter, while funds that use “the largest financial printers” are likely well positioned to comply with the Inline XBRL requirement, funds that instead rely on other service providers for preparing and submitting XBRL filings (e.g., law firms, administrators, in-house advisory firm personnel, and smaller financial printers) will be forced to incur significant costs and potentially change vendors. 119 Thus, the commenter asserted, the Inline XBRL Proposing Release significantly underestimated the costs of transitioning to Inline XBRL for funds, particularly for smaller filers. We recognize that many funds today prepare and file an HTML or ASCII version of risk/return information in the Related Official Filing and then, up to 15 business days later, prepare and file a separate XBRL exhibit with this same risk/return information. As a result, many funds may incur one-time costs to change their workflow processes as they transition to filing this information in an Inline XBRL format without this extended filing period. We acknowledge that this may cause some funds to change vendors or software products used to create these filings, and that these transition costs will likely be greater than estimated in the Proposing Release. 120 However, we believe that the improved data usability that Inline XBRL offers, particularly when combined with the more efficient Inline XBRL process that reduces the need for the extended filing period, provides benefits to investors that justify these initial costs to funds. Accordingly, we are adopting Inline XBRL and the related elimination of the 15 business day filing period for fund risk/return summaries. However, in light of the 118 See letter from USBFS. 119 Id. We note, however, to the extent funds rely on other service providers to prepare and submit XBRL filings, those service providers in turn may be relying on financial printers. 120 See letters from Federated I and II, ICI I and II, and USBFS. 32 comments and to help funds address transition issues, we are extending the proposed phase-in for risk/return summary Inline XBRL requirements, as discussed in greater detail in Section III.A.1.c below. After careful consideration, we continue to believe that the amendments to risk/return summary XBRL requirements to reflect the evolution of XBRL technology will offer benefits to data users and further believe that the modified compliance dates provide sufficient time for filers, software vendors, and filing agents to transition to Inline XBRL. b. Timing of Submission of Interactive Data File The Commission did not propose any changes to the timing of the required submission of the financial statement information XBRL data, nor are we adopting any, and operating companies will generally continue to be required to submit the Interactive Data File with the filing. With respect to risk/return summary information, currently an Interactive Data File for a Form N-1A filing, whether the filing is an initial registration statement or a post-effective amendment to it, must be submitted as an amendment to the registration statement to which the Interactive Data File relates. 121 That amendment with the Interactive Data File also must be submitted after the registration statement or posteffective amendment that contains the related information becomes effective but not later than 15 business days after the effective date of that registration statement or posteffective amendment. 122 121 General Instruction C.3.(g)(i) to Form N-1A. 122 Id. 33 Funds also are required to submit an Interactive Data File for any form of prospectus filed that includes risk/return summary information that varies from the registration statement. 123 In the case of those filings, however, funds are permitted to file the Interactive Data File concurrently with the filing or up to 15 business days subsequent to the filing. 124 As the Commission noted in the 2009 Risk/Return Summary Adopting Release, the period of 15 business days was intended both to provide funds with adequate time to prepare the exhibit and to make the interactive data available promptly. 125 i. Concurrent Submissions with Certain Post-Effective Amendment Filings To help facilitate efficiencies in the fund post-effective amendment filing process, the Commission proposed to permit funds to submit Interactive Data Files concurrently with certain post-effective amendments to fund registration statements. 126 The Commission proposed this change in recognition of the fact that, in its experience, posteffective amendments filed pursuant to these paragraphs of Rule 485 generally are not subject to further revision. 127 123 See General Instruction C.3.(g)(ii) to Form N-1A. 124 Id. 125 See 2009 Risk/Return Summary Adopting Release, at 7754, n. 97 and accompanying and following text. 126 See proposed General Instruction C.3.(g)(i)(B) to Form N-1A. 127 With the exception of post-effective amendments filed pursuant to Rule 485(b)(1)(iii), a posteffective amendment filed under Rule 485(b)(1) may become effective immediately upon filing. Paragraph (b)(1)(i) of Rule 485 permits a post-effective amendment filing for the purpose of bringing the financial statements up to date under Section 10(a)(3) of the Securities Act or Rule 312 or 3-18 of Regulation S-X. 17 CFR 210.3-12 and 210.3-18. Paragraph (b)(1)(ii) of Rule 485 permits a post-effective amendment filing for the purpose of complying with an undertaking to file an amendment containing financial statements, which may be unaudited, within four to six months after the effective date of the registrant’s registration statement under the Securities Act. Paragraph (b)(1)(v) of Rule 485 permits a post-effective amendment filing for the purpose of making any non-material changes which the registrant deems appropriate. 34 We received one comment letter on this aspect of the proposal. The commenter expressed support for the proposed amendment, believing that administrative costs would be reduced relative to making a separate filing for submitting the XBRL data. 128 After considering commenter input, and to provide funds with flexibility to achieve cost and administrative efficiencies, we are adopting the amendments as proposed. 129 ii. 15 Business Day Filing Period To improve the timeliness of the availability of risk/return summary XBRL information, the Commission proposed to eliminate the 15 business day filing period for the submission of the Interactive Data File accorded to all fund filings containing risk/return summaries (initial registration statements; post-effective amendments; and forms of prospectuses that include risk/return summary information that varies from the registration statement). At the same time, the Commission sought comment on whether a different length filing period might be more appropriate. In proposing to mandate the use of Inline XBRL, the Commission noted that Inline XBRL involves embedding XBRL data directly into the filing. Inline XBRL thereby reduces the need for this filing delay, which is typically used to prepare and review a separate XBRL-only filing. Paragraph (b)(1)(vii) of Rule 485 permits a post-effective amendment filing for any other purpose which the Commission shall approve. 128 See letter from Federated I (stating that it is “generally in support of allowing mutual funds to submit the interactive data files concurrently with certain post-effective amendments as we believe this would reduce administrative costs associated with filing interactive data separately”). 129 See new General Instruction C.3.(g) to Form N-1A; see also new Rule 405(a)(3)(ii) of Regulation S-T. The amendments to these two provisions have the result of permitting fund filers to submit XBRL data concurrently with the Related Official Filing. 35 Two commenters supported the Commission’s proposal to eliminate the 15 business day filing period. 130 These commenters noted that the elimination of the 15 business day filing period would allow data aggregators to process and share the information more quickly with investors, who are the end-users. This is because aggregators would no longer have to either wait 15 business days or manually extract information from the HTML or ASCII version of the risk/return summary in order to provide the information to investors in a more timely manner, which itself takes time. 131 One commenter, while supporting elimination of the current filing period, noted that funds are “accustomed to taking advantage of the 15-day grace period” and so would need to enact major workflow changes if this period is eliminated, likely requiring increased staffing levels and resulting in higher costs for both funds and their vendors. 132 This commenter also acknowledged that funds may encounter greater challenges than operating companies under the proposed amendments, given that many fund complexes must make multiple, simultaneous filings for the funds they sponsor or manage. 133 This commenter asked the Commission to consider giving funds more time to make the transition to Inline XBRL due to these challenges, but nevertheless urged the Commission to adopt the proposal, believing that moving the marketplace to a single standard—Inline XBRL—would be “beneficial to all stakeholders over the long-term.” 134 130 See letters from Morningstar and XBRL US. 131 Id. 132 See letter from XBRL US. 133 Id. See also letters from Federated II (stating that it submitted 1,291 filings, in addition to 336 XBRL filings, in the past calendar year for its funds) and ICI II (referencing the letter from Federated II). 134 See letter from XBRL US. 36 Three commenters expressed concerns about the costs, changes in workflow, and loss of flexibility associated with the elimination of the 15 business day filing period. 135 Two commenters proposed that the Commission preserve the 15 business day filing period to allow funds time to work through any technical difficulties that may occur with the tagging process and review and approve the tagged filings. 136 These commenters also stated that, for those funds that mail the prospectus and shareholder report together, the shorter timeframe for Inline XBRL review would increase the likelihood of having to mail the prospectus and shareholder report separately, which if it occurred, would increase the mailing costs for fund shareholders. 137 One commenter did not support eliminating the current XBRL filing period, but stated that funds would not be burdened by shortening this period from 15 business days to 10 business days. 138 Another commenter suggested, as an alternative, shortening the 15 day timeframe to 7 days. 139 After evaluating comments received on this issue, and in light of our decision to require the use of Inline XBRL for fund filers as proposed, we are eliminating the current 15 business day filing period for risk/return summary XBRL data. As a result: • For post-effective amendments filed pursuant to paragraph (b)(1)(i), (ii), (v), or (vii) of Rule 485, Interactive Data Files must be filed either concurrently with the filing or in a subsequent amendment that is filed on or before the date 135 See letters from Federated I and II, ICI I and II, and USBFS. 136 See letters from ICI I and II and Federated I and II. 137 Id. One of these commenters estimated the additional mailing costs of sending the prospectuses separately at approximately $1.5 million per year. See letter from Federated II. 138 See letter from USBFS. 139 See letter from ICI II. 37 that the post-effective amendment that contains the related information becomes effective; 140 • For initial registration statements and post-effective amendments filed other than pursuant to paragraph (b)(1)(i), (ii), (v), or (vii) of Rule 485, Interactive Data Files must be filed in a subsequent amendment on or before the date the registration statement or post-effective amendment that contains the related information becomes effective; 141 and • For any form of prospectus filed pursuant to Rule 497(c) or (e), funds must submit the Interactive Data File concurrently with the filing. 142 We recognize that many funds will experience changes in workflow and associated costs once the filing period is eliminated. However, we believe that eliminating the 15 business day filing period will significantly improve the timely availability of risk/return summary XBRL information for investors, other market participants, and other data users, yielding substantial benefits. Two commenters indicated that the benefits of XBRL data are currently not being realized for many potential data users, including data aggregators and (indirectly) investors, due to the filing period. 143 For data aggregators responding to demand for the data earlier than 15 business days after the effective date of the related filing, eliminating this period will remove the need for time-consuming manual extraction of this information from HTML or ASCII filings and allow data aggregators to obtain this data earlier, thereby expediting 140 See new General Instruction C.3.(g)(i)(B) to Form N-1A. 141 See new General Instruction C.3.(g)(i)(A) to Form N-1A. 142 See new General Instruction C.3.(g)(ii) to Form N-1A. 143 See letters from Morningstar and XBRL US. 38 the availability of the data and related analysis to investors. 144 Further, the transition of funds to Inline XBRL will entail embedding XBRL tags into the HTML filing, reducing the need for a separate XBRL filing period. In addition, eliminating the current 15 day filing period could have other, indirect beneficial effects. We understand some funds currently provide more timely return information to some data aggregators. However, funds do not provide other information contained in the risk/return summary information on a more timely basis, such as fee and risk information, which data aggregators also use to provide information products to investors. Providing more timely XBRL data may enable data aggregators to better compete in providing timely information to investors. Today, only those aggregators with sufficient resources to manually extract this information from the text filings can respond to demands to provide investors with more timely data. Further, in the staff’s experience, risk/return summary information is relatively standardized and the list of XBRL data elements that are tagged in the risk/return summary should not vary substantially from period to period, minimizing the impact of workflow changes in this area. Therefore, we do not see a compelling reason to retain even a shortened filing period, such as 10 or 7 days, and note that any delayed filing period would undermine the timeliness and usability benefits. We also note that, while funds may currently use the 15 business day filing period to review the XBRL data, operating companies prepare, review, and file XBRL data without an additional filing period. Compared to fund filings with risk/return summaries, operating company XBRL filings entail a more complex taxonomy, with more data 144 Id. 39 elements, as well as more instances of numeric data being embedded into text. Studies have shown that concurrent submission of the HTML and XBRL data for operating companies began with a standalone approach and over time transitioned to an integrated approach as technology developed to achieve efficiencies. 145 For example, one recent study found that the median small filer paid $10,000 or less for fully outsourced XBRL preparation. 146 Similarly, preliminary statistics from a pricing survey being conducted by the AICPA and XBRL US indicate that the cost of XBRL formatting has declined 41% since 2014 and that the average cost of XBRL preparation for small reporting companies in 2017 averaged $5,850 per year. 147 The experience of operating companies leads us to believe that, while many funds may not currently use an integrated approach to XBRL preparation and filing, with the concurrent HTML and XBRL filing, funds will likely transition to an integrated approach to achieve efficiencies. We would expect, after the initial transition, the costs to funds of preparing and reviewing XBRL submissions using an integrated approach similarly to go down over time, as they have for operating companies. 145 See Trevor S. Harris and Suzanne Morsfield, “An Evaluation of the Current State and Future of XBRL and Interactive Data for Investors and Analysts”—“White Paper Number Three,” Columbia Business School Center for Excellence in Accounting and Security Analysis (December 2012), https://www8.gsb.columbia.edu/rtfiles/ceasa/An%20Evaluation%20of%20the%20Current%20Stat e%20and%20Future%20of%20XBRL%20and%20Interactive%20Data%20for%20Investors%20a nd%20Analysts.pdf (retrieved Jun. 20, 2018), at 38 (stating that filers have transitioned over time to integrated disclosure management solutions). Consistent with this observation, approximately 71% of operating company filers relied on integrated solutions in the 2013 FERF survey, compared to approximately 54% of operating company filers in the 2012 FERF survey. See FERF Study, at 6; William Sinnett, SEC reporting and the impact of XBRL: 2012 survey, Financial Executives Research Foundation (Nov. 15, 2013), at 25-26. 146 See AICPA Study. 147 See note 57 above. 40 We anticipate that the technology and related workflow changes that accompany the transition to Inline XBRL will partly mitigate the concern about certain fund groups having to mail prospectuses separately if the 15 business day filing period is eliminated, because XBRL tags will be embedded in the HTML filing. In addition, based on staff analysis of fund filing data on EDGAR, most fund groups currently mail prospectuses and shareholder reports separately. Finally, recently adopted 17 CFR 270.30e-3 (“Rule 30e-3” under the Investment Company Act) will provide certain registered investment companies with an optional method to satisfy their obligations to transmit shareholder reports by making such reports and other materials accessible at a website address and mailing investors a short paper notice indicating how to access the reports. 148 This change may reduce the mailing costs associated with shareholder reports, thereby potentially mitigating some of these concerns. The amendments eliminating the 15 business day filing period do not change the liability provisions related to the Interactive Data File. One commenter recommended a temporary modification to the liability provisions pertaining to the Interactive Data File for risk/return summary filings following the elimination of the 15 business day filing period, similar to the temporary modified liability provision that was put in place when the XBRL requirements were adopted in 2009. 149 Given that we have delayed compliance with the Inline XBRL requirement and the elimination of the 15 business day period until two years after the effective date for funds that, together with other 148 See Release No. IC-33115 (June 5, 2018) 83 FR 29158. 149 See letter from Federated II. 41 investment companies in the same “group of related investment companies,” 150 have net assets of $1 billion or more as of the end of their most recent fiscal year (“large fund groups”) and three years after the effective date for small fund groups, as discussed in greater detail in Section III.A.1.c below, we do not believe that such a temporary liability modification is necessary. c. Phase-In of the Inline XBRL Requirements We are adopting phased compliance dates substantially as proposed, with modifications to further mitigate the potential burden of the initial transition on filers and preparers: Operating Companies Compliance Date 151 Large accelerated filers that prepare their financial statements in accordance with U.S. GAAP Accelerated filers that prepare their financial statements in accordance with U.S. GAAP All other filers Fiscal periods ending on or after June 15, 2019 Funds Compliance Date Fiscal periods ending on or after June 15, 2020 Fiscal periods ending on or after June 15, 2021 Any initial registration statement (or post150 For these purposes, the definition of a “group of related investment companies” is the same as the term defined in Rule 0-10 under the Investment Company Act [17 CFR 270.0-10]. Rule 010(a)(1) defines the term as applied to management investment companies as two or more management companies (including series thereof) that (i) hold themselves out to investors as related companies for purposes of investment and investor services; and (ii) either (A) have a common investment adviser or have investment advisers that are affiliated persons of each other, or (B) have a common administrator. We believe that this broad definition would encompass most types of fund complexes and therefore is an appropriate definition for compliance date purposes. 151 Form 10-Q filers will not become subject to the Inline XBRL requirements with respect to Form 10-K or any other form, however, until after they have been required to comply with the Inline XBRL requirements for their first Form 10-Q for a fiscal period ending on or after the applicable compliance date for the respective category of filers. 42 effective amendment that is an annual update to an effective registration statement) that becomes effective on or after: Large fund groups September 17, 2020 (two years after the effective date of the amendments) Small fund groups September 17, 2021 (three years after the effective date of the amendments) Except as noted below, based on the information on vendor readiness provided by commenters and the staff’s observations of developments in the XBRL preparation industry and experience with voluntary Inline XBRL filings pursuant to the Exemptive Order, we are adopting a three-year phase-in for operating companies, as proposed: (i) large accelerated filers that prepare their financial statements in accordance with U.S. GAAP will be required to comply with Inline XBRL for financial statements for fiscal periods ending on or after June 15, 2019; (ii) accelerated filers that prepare their financial statements in accordance with U.S. GAAP will be required to comply with Inline XBRL for financial statements for fiscal periods ending on or after June 15, 2020; and (iii) all other operating company filers that are subject to financial statement information XBRL requirements, including foreign private issuers (“FPIs”) 152 that prepare their financial statements in accordance with IFRS, will be required to comply with Inline XBRL for financial statements for fiscal periods ending on or after June 15, 2021. 153 In a modification from the proposal, in response to comments, 154 domestic form filers 155 will be required to comply beginning with their first Form 10-Q for a fiscal 152 See Rule 405 under the Securities Act [17 CFR 230.405] and Rule 3b-4(c) under the Exchange Act [17 CFR 240.3b-4(c)]. 153 See new Rule 405(f)(1)(i). 154 See note 161 below. 155 Form 20-F and 40-F filers do not have quarterly report filing obligations and are therefore not affected by this provision. 43 period ending on or after the applicable compliance date, as opposed to the first filing for a fiscal period ending on or after that date, to enable filers to gain experience with Inline XBRL through less complex filings. 156 This approach is similar to the approach in the 2009 Financial Statement Information Adopting Release, which was intended to facilitate the transition of filers to financial statement information XBRL requirements. Most commenters that addressed the proposed phase-in for operating companies supported it. 157 Some commenters supported the general phase-in approach but recommended postponing the compliance dates until after the third quarter of 2018 or creating a fourth early phase-in category for the largest 500 filers. 158 One of these commenters supported the phase-in for smaller filers because of potential cost increases during the transition period and specifically suggested that emerging growth companies (“EGCs”) 159 be added to the third phase-in category. 160 Several commenters proposed adjusting the compliance dates for the Inline XBRL requirement so that they initially apply to quarterly reports on Form 10-Q rather than Form 10-K, due to the lower complexity of Form 10-Q. 161 156 As an example, a Form 10-Q filer in the first phase-in group with a calendar fiscal year end will be required to begin compliance with the Inline XBRL requirement with its Form 10-Q for the period ending June 30, 2019. As a further example, a Form 10-Q filer in the first phase-in group with a June 30 fiscal year end will be required to begin compliance with the requirement with its Form 10-Q for the period ending September 30, 2019. 157 See, e.g., letters from AICPA, Kumar, Merrill, and XBRL US (also citing a survey of filers among which 71% supported a phase-in and 13% did not, while 52% thought that one year was the right amount of time before the first phase of filers is required to comply). 158 See, e.g., letters from EY and FEI. 159 See Rule 405 under the Securities Act and Rule 12b-2 of the Exchange Act [17 CFR 240.12b-2]. 160 See letter from BIO. 161 See, e.g., letters from AICPA, EY, and Kumar. 44 Some commenters expressed a concern about the initial transition of operating companies to Inline XBRL because not all software vendors and filing agents are currently Inline-capable. 162 One of those commenters stated that the relative burden of initial transition for filers would depend on vendor readiness and that compliance dates should reflect this. 163 However, two commenters opposed a phase-in, stating that the costs of Inline XBRL transition would be minimal and that the phase-in would lower the benefits to data users. 164 One of those commenters suggested that compliance should begin with quarterly filings ending on or after June 15, 2019. 165 In addition, a number of commenters stated that the Inline XBRL transition would involve either no burden or only a small burden for filers and preparers because many vendors already include the Inline XBRL capability as part of their software package or could easily incorporate it as they have for their foreign customers that are required to use Inline XBRL for other reporting purposes. 166 Several commenters also stated that the Inline XBRL transition would have little impact on data users’ existing processes for analyzing XBRL data and that many of them already use Inline XBRL data from foreign jurisdictions. 167 162 See, e.g., letters from Cigna and FEI. 163 See letter from FEI. 164 See letters from Workiva I and CFA Institute. 165 See letter from Workiva I. 166 See, e.g., letters from ACI; IRIS; Workiva I; Merrill; XBRL US (“At the latest, all XBRL US vendor members will be ready to file using inline XBRL by the second quarter of 2019.”). 167 See, e.g., letters from Morningstar; Octachoron; TagniFi; XBRL US (“We held informal discussions with several of these organizations ranging from startup companies . . . to large established organizations . . . These organizations, which today use XBRL-formatted US corporate data, indicated that extracting data from Inline XBRL is the same as extracting data from conventional XBRL files. Several indicated that they have already begun to use Inline XBRL given its availability in other non-US markets. Of these, the cost to do so was minimal, requiring zero to little change to their current process.”). 45 After considering commenter input, we are not introducing additional phase-in categories, postponing the compliance date for EGCs, or making further modifications to the phase-in for operating companies. We do not believe that the potential incremental benefits to some filers from such changes would offset the increased complexity and delays of the benefits of Inline XBRL for market participants and other data users. EGCs will be required to comply beginning with fiscal periods ending on or after June 15, 2020, or June 15, 2021, depending on filer status and basis of accounting. Because the relative burden for filers of the fixed costs of initial transition to Inline XBRL, if any, is likely to depend on filer size, we believe that this approach provides smaller EGC filers, and other smaller filers, with sufficient time to transition to Inline XBRL. With respect to funds, the Commission proposed a two-year phase-in based on net asset size. Specifically, for large fund groups, it proposed a compliance date of one year after the effective date to comply with the new requirements. For small fund groups, the Commission proposed a compliance date of two years after the effective date, to provide these filers with an additional year to comply with the new requirements. Several commenters expressed concerns about the workflow and vendor changes that may be required for funds to transition to Inline XBRL and adjust to the elimination of the 15 business day filing period. 168 In particular, one commenter stated that “to the extent the Commission determines to proceed in adopting the Proposed Rule, we encourage the Commission to provide mutual funds and their filing agents a minimum of two years to plan for and implement the changes needed to comply with the Proposed 168 See notes 115-119 above and accompanying text. 46 Rule.” 169 Another commenter stated that one year would not be “a realistic timeframe for implementation of the proposed amendments” and suggested 18 months “as a more achievable compliance date.” 170 Another commenter supported the Inline XBRL requirement for funds and the elimination of their 15 business day filing period but suggested that “the Commission may want to consider giving mutual funds more time to make the transition than operating companies” given the likely workflow changes in instituting these amendments. 171 After considering commenters’ concerns, and consistent with their suggestions, to provide funds and vendors with additional time to implement any necessary workflow changes, we are extending the phase-in with respect to the Inline XBRL and timing requirements for risk/return summary XBRL data and modifying the compliance dates to two years after the effective date of the amendments for large fund groups and three years after the effective date of the amendments for small fund groups. 172 We believe that these compliance dates will provide sufficient time for filers, filing agents, and software vendors to transition to Inline XBRL and adjust to the elimination of the extended filing period. Given that any fixed cost of initial transition may have a relatively greater impact on smaller filers, this approach will give such filers time to develop related expertise, as well as the opportunity to benefit from the 169 See letter from USBFS. 170 See letters from Federated I and II. 171 See letter from XBRL US. 172 When we adopted the risk/return summary information XBRL requirements on February 11, 2009, all filers had approximately two years to comply (until January 1, 2011). After considering commenter feedback, we are providing a similar period for larger filers to comply with the proposed Inline XBRL requirements. Further, after considering commenter feedback, we believe that smaller fund filers may benefit from even more time to comply with these new requirements. 47 experience of larger filers with Inline XBRL. The phase-in is also expected to provide filing agents and software vendors with additional time to transition to Inline XBRL and develop related expertise. Similar to the proposal and consistent with a commenter’s suggestion, 173 the amendments will permit all filers to file using Inline XBRL prior to the compliance date for each category of filers. Filers will be able to file in Inline XBRL under the amendments once the EDGAR system has been modified to accept submissions in Inline XBRL for all forms subject to the amendments, which is anticipated to be March 2019. 174 Notice of EDGAR system readiness to accept filings in Inline XBRL will be provided in a manner similar to notices of taxonomy updates and EDGAR Filer Manual updates. We believe that offering filers the option to file using Inline XBRL before the compliance date will enable filers that are ready to transition to Inline XBRL to begin realizing the benefits of Inline XBRL sooner. It will also enable vendors and filing agents used by early Inline XBRL adopters to gain valuable expertise that may help facilitate the transition to Inline XBRL for filers that transition to Inline XBRL at a later time. Otherwise, prior to the applicable compliance date, filers that do not file using Inline XBRL will continue to be required to submit the entire Interactive Data File as an exhibit, as they do currently. 175 d. Scope of the Inline XBRL Requirements 173 See letter from Workiva II. 174 Operating companies may continue to voluntarily file certain Exchange Act reports in Inline XBRL prior to that time pursuant to the Exemptive Order, which will cease to be operative once voluntary reporting under the amendments is permitted. See note 48 above and accompanying text. 175 See new Rule 405(f)(2) and (3). 48 The Inline XBRL requirements for financial statement information will apply to all operating company filers, including smaller reporting companies (“SRCs”), 176 EGCs, and FPIs that are currently required to submit financial statement information in XBRL. Several commenters supported our proposal not to exempt individual categories of operating company filers subject to XBRL requirements from the Inline XBRL requirement, citing data quality and efficiency reasons. 177 One commenter did not specifically address an exemption from the Inline XBRL format requirement but recommended exempting EGCs, SRCs, and nonaccelerated filers from XBRL requirements generally, citing concerns about cost and lack of use of XBRL data. 178 We do not expect Inline XBRL to significantly affect the overall costs of compliance with XBRL requirements. While filers may incur a small initial transition cost, they also may realize reductions in ongoing costs of compliance with XBRL requirements. 179 Furthermore, filers may realize reductions in ongoing costs due to the elimination of the website posting requirement. We have sought to alleviate the initial transition burden for filers through phased compliance dates. Given the benefits expected from the Inline XBRL requirement, the overall readiness of the Inline XBRL technology, and the input from commenters regarding vendor readiness, we are not exempting any filers that are subject to existing XBRL requirements. Exempting some categories of filers subject to XBRL requirements from Inline XBRL could reduce the aggregate data 176 See Rule 405 under the Securities Act, Rule 12b-2 under the Exchange Act and Item 10(f) of Regulation S-K [17 CFR 229.10(f)]. 177 See, e.g., letters from CFA Institute, Merrill, Morningstar, and XBRL US. 178 See letter from BIO. But see AICPA Study (discussing XBRL preparation costs for smaller filers) and note 67 above (discussing XBRL data use for smaller filers and biotechnology companies). 179 See Sections III.B.1.a and V.C below. 49 quality and usability benefits for investors, analysts, and other users and create a need for investors and other data users to maintain indefinitely the support for both sets of technologies, potentially resulting in ongoing inefficiencies. Some commenters addressed the scope of information subject to XBRL requirements more generally, although no such changes were contemplated as part of the Inline XBRL Proposing Release. 180 Several commenters expressed overall support for XBRL requirements in general 181 or suggested expanding the scope of operating company information that is required to be tagged, 182 or is permitted to be tagged, 183 in XBRL, while other commenters recommended exemptions from XBRL requirements for certain operating companies 184 or funds, 185 citing concerns about cost. Two commenters recommended that, to the extent that the Commission wishes to modernize structured disclosure requirements for fund filers, it should rescind the existing XBRL requirements for risk/return summary information and replace them with requirements to tag certain risk/return summary information in the XML format on Form N-CEN. 186 Another commenter recommended that risk/return summary XBRL 180 See Inline XBRL Proposing Release, at 14291. 181 See, e.g., letters from CFA Institute, Grant Thornton, Members of Congress, Morningstar, TagniFi, XBRL International, and XBRL US. 182 See, e.g., letters from CFA Institute, Data Coalition, Merrill, XBRL International, and XBRL US. 183 See letter from Gartner. 184 See note 178 above. 185 See letters from Federated I and II (recommending that we exempt funds from XBRL or replace XBRL with XML on Form N-CEN); ICI I and II (recommending that we exempt funds from XBRL); USBFS (recommending that we require funds to submit XBRL data only for forms of their prospectus that have been used to sell shares of the fund). 186 See letters from Federated (stating that filing tagged data on Form N-CEN would create consistency in data tagging language and allow the Commission and third-party information providers to access important data about a fund in one location) and ICI. See also Release No. IC32314 (Oct. 13, 2016) [81 FR 81870]. We note that, while funds are currently required to update 50 requirements apply only to forms of prospectuses that have been used to sell shares of the fund. 187 As the Commission stated in the Inline XBRL Proposing Release, these amendments are aimed at modernizing existing XBRL requirements to incorporate developments in the XBRL technology since the 2009 adoption of these requirements. 188 Therefore, at this time, we are not changing the categories of operating company or fund filers, or the scope of operating company or fund disclosures, that are subject to these XBRL requirements. 2. Elimination of the Website Posting Requirements We are adopting, as proposed, the elimination of the XBRL website posting requirements for financial statement information and risk/return summaries. 189 In the 2009 Financial Statement Information Adopting Release and the 2009 Risk/Return Summary Adopting Release, the Commission stated that it thought that the website availability of the interactive data would encourage its widespread dissemination, make it easier and faster for investors to collect information on a particular filer, enable search engines and other data aggregators to more quickly and cheaply aggregate the data and make them available to investors, and potentially increase the reliability of data their registration statements and file new XBRL data every time risk/return summary information changes, there is no requirement to update Form N-CEN (filed annually) for intra-year changes to its information. Therefore, filing risk/return summary tagged data on Form N-CEN could result in investors receiving risk/return summary information in a less timely manner. 187 See letter from USBFS. 188 See Inline XBRL Proposing Release, at 14291. 189 Website posting is currently required by Rule 405(g) and General Instruction C.3.(g) to Form N1A. 51 availability to the public. 190 However, the Commission also noted that this benefit could be limited since investors seeking to aggregate machine-readable XBRL data across companies, manually or through an automated process, may find XBRL exhibits posted on individual filers’ websites less useful. 191 We believe, based on our experience, that users of XBRL data generally do not seek the information directly from individual filers’ websites; rather, they obtain the data from a more central repository of the data, such as the Commission’s EDGAR system or third-party aggregators. We believe that access to XBRL data for purposes of aggregation and processing, whether by data aggregators or individual data users, is most efficiently achieved when such machine-readable data is consistently organized (e.g., with respect to directory structure) and made available at a single source. Based on our experience since the Commission adopted the website posting requirements in 2009, we believe that potential data users can obtain sufficiently reliable access to XBRL data through EDGAR and do not need the backup of a website posting on a filer’s website to access the XBRL data. Thus, data users should not incur significant costs from the elimination of the requirement to post the XBRL data on filers’ websites. Operating companies and funds are expected to recognize a modest benefit from the elimination of this requirement. 192 190 See 2009 Financial Statement Information Adopting Release, at 6791–6792. Similarly, in adopting the website posting requirement for risk/return summary XBRL information, the Commission stated that website availability of the interactive data will encourage its widespread dissemination, contributing to lower access costs for users. See 2009 Risk/Return Summary Adopting Release at 7755-7756. 191 See 2009 Financial Statement Information Adopting Release, at 6807. See also 2009 Risk/Return Summary Adopting Release, at 7767, n. 263 (“We believe the benefits will stem primarily from the requirement to submit interactive data to the Commission and the Commission’s disseminating that data.”). 192 See Sections III.B.2 and V.C below. 52 All of the commenters that addressed this aspect of the proposal supported eliminating the website posting requirements, citing the lack of utility to data users and/or the potential cost savings to filers. 193 One commenter that is a filer of risk/return summary information noted that an average of only three users per month access XBRL risk/return summary information through that filer’s website. 194 After considering the input from commenters, we agree that data users will not benefit from continued application of the website posting requirements, in light of the greater efficiency of retrieving XBRL data from EDGAR or other sources for purposes of aggregation and analysis. We continue to believe that most filers will realize a small benefit from the elimination of the website posting requirements, although the magnitude of the benefit for the average filer is likely to be small. 3. Termination of the 2005 XBRL Voluntary Program We are adopting, as proposed, the termination of the 2005 XBRL Voluntary Program for financial statement information interactive data. 195 Subsequent to the adoption of the interactive data requirements for financial statement information for operating companies in 2009, the only filers that remain eligible for the program are registered investment companies, BDCs, and other entities that report under the Exchange Act and prepare their financial statements in accordance with Article 6 of Regulation S-X. No commenters objected to the termination of the program and given its 193 See, e.g., letters from CFA Institute; Federated I and II; ICI I; Merrill; USBFS (supporting elimination but noting that it will not generate cost savings and may entail a small cost to modify the website to remove XBRL links and pages); and Workiva I. 194 See letter from Federated II. 195 We are amending Regulation S-T to remove Rule 401 that specifies voluntary program requirements and making related technical and conforming changes. 53 very infrequent use, we do not believe that its continued existence will provide significant benefits. 4. Technical Amendments We are adopting, as proposed, certain technical, conforming changes to the rules for hardship exemptions, current public information under Rule 144(c)(1) under the Securities Act, and form eligibility, consistent with the changes in format to the Interactive Data File and elimination of the website posting requirements. In addition, in Regulation S-T, we are deleting the definition of “promptly” from Rule 11 because it was used only in 17 CFR 232.406T (“Rule 406T”), which has expired, and deleting references to Forms S-2 and F-2 because those forms have been eliminated. Although not proposed, we are adopting additional technical, conforming changes consistent with the elimination of the 2005 XBRL Voluntary Program and additional technical clarifying changes. In connection with the elimination of the 2005 XBRL Voluntary Program, these changes affect Item 601(b)(100) of Regulation S-K; a heading within and Rules 11, 305(b), and 402 of Regulation S-T; Rules 13a-14(f) and 15d-14(f) under the Exchange Act; paragraph 100 of the Instructions as to Exhibits of Form 20-F; paragraph C.(5) of the General Instructions to Form 6-K; Rules 8b-1, 8b-2, 8b-33, and 30a-2(d) under the Investment Company Act; and General Instruction B.4.(b) of Form N1A under the Investment Company Act. We are substituting the term “filing” for “form” in the definition of Interactive Data File in Rule 11 of Regulation S-T and in some instances within Rule 405 of Regulation S-T because the term “filing” better describes the range of documents subject to XBRL requirements. Also, we are altering proposed Rules 201(c)(1) and 202(c)(2) 54 under Regulation S-T to specify that when a hardship exemption is received the document required to set forth a related legend must appear where the Interactive Data File exhibit otherwise would have appeared. Further, we are amending Rule 201 under Regulation S-T to adopt a temporary hardship exemption for the inability to timely file Interactive Data Files for risk/return summary information. 196 Since 2009, while operating companies could avail themselves of both the temporary hardship exemption under Rule 201 and continuing hardship exemption under Rule 202, funds were limited to continuing hardship exemptions. The 2009 Risk/Return Summary Adopting Release explained that while the Commission was adopting a continuing hardship exemption with respect to risk/return summary information data, the Commission was not adopting a temporary hardship exemption because the final rules included a 15 business day filing period for submitting the Interactive Data File. 197 Because we are eliminating the 15 business day filing period, we are amending Rule 201 to similarly allow funds to avail themselves of the temporary hardship exemption. Additionally, we are adopting technical changes to Rule 485 under the Securities Act to account for the elimination of the website posting requirements. We are also adopting technical changes to paragraphs (c) and (e) of Rule 497 under the Securities Act to indicate that a fund that files pursuant to Rule 497 must, if applicable pursuant to General Instruction C.3.(g) of Form N-1A, “submit” an Interactive Data File. 198 B. Potential Economic Effects of the Amendments 196 See Note to Paragraph (c) of Rule 201. 197 See 2009 Risk/Return Summary Adopting Release, at 7757, n. 129. 198 This change in terminology makes Rule 497 consistent with Rule 485 under the Securities Act. 55 We are mindful of the costs imposed by and the benefits obtained from our rules. Securities Act Section 2(b), 199 Exchange Act Section 3(f), 200 and Investment Company Act Section 2(c) 201 require us, when engaging in rulemaking that requires us 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. Additionally, Exchange Act Section 23(a)(2) requires us, when adopting rules under the Exchange Act, to consider the impact that any new rule will have on competition and not to adopt any rule that will impose a burden on competition th [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Asec%3A5fbf1a0fd298b332. Public record. Not legal advice.