U.S. securities issuers will be required to include a hyperlink to each exhibit in a corporate filing’s exhibit index under new rule and form amendments approved Wednesday by the SEC.
The rules are designed to make it easier for investors to find exhibits that are referred to in company filings. Currently, someone seeking to access such an exhibit must search through the company’s filings to locate the relevant filing that contains the exhibit.
“As the SEC looks for new ways to modernize financial disclosures, one of the easiest things we can do is add hyperlinks that automatically direct users to additional information on our EDGAR system,” SEC Acting Chairman Michael Piwowar said in a news release. “We are so accustomed to clicking hyperlinks on basically every website we visit, this commonsense solution will make life simpler for a lot of people.”
The rules will take effect Sept. 1. Nonaccelerated filers and smaller reporting companies that submit filings in ASCII will have until Sept. 1, 2018, to comply with the rules.
The requirement will apply to exhibits that are required under Item 601 of Regulation S-K and Forms F-10 and 20-F. But the rules will exclude exhibits that are filed with Form ABS-EE and exhibits filed in extensible business reporting language (XBRL).
In addition, the SEC proposed:
- That public companies and mutual funds that use XBRL be required to use the Inline XBRL format, which allows filers to embed XBRL data directly into their filings instead of as attachments, reducing the likelihood of inconsistencies.
- Rule amendments designed to improve investor protection and enhance transparency in the municipal securities market by providing more information about the financial obligations incurred by municipal issuers.
The XBRL proposal would eliminate the requirement for filers to post XBRL data on their websites and would give the preparer full control over the presentation of XBRL disclosures within the HTML filing.
The SEC first adopted rules requiring provision of financial statement information in XBRL in 2009. The original rules required submitting XBRL reports to the SEC in an interactive data file as an exhibit to company filings, as well as posting reports in XBRL on corporate websites.
“While XBRL technology has made disclosures easier to access for investors, there are legitimate concerns about the burdens smaller companies face when preparing their filings,” Piwowar said in a news release. “Today, the SEC is asking comment on a way to streamline this process to ensure usability for the public while keeping compliance costs down.”
The SEC will seek public comment on the Inline XBRL proposal for 60 days.
The municipal securities amendments proposed by the SEC added two new event notices that brokers, dealers, and municipal securities dealers acting as underwriters in municipal securities offerings would be required to determine that the issuer has agreed to provide to the Municipal Securities Rulemaking Board. The new event notices would reference:
- Financial obligations, covenants, or other terms of financial obligation of the issuer that affect security holders.
- Default, acceleration, termination event, modification of terms, or other similar events that reflect financial difficulties of the issuer.
The comment period on the municipal securities proposal will remain open for 60 days following publication in the Federal Register.
—Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is a JofA editorial director.