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Effective Disclosure for the 21st Century Investor

Rick A. Fleming, Investor Advocate

Washington, DC

Feb. 20, 2015

Thank you, Keith [Higgins], for that kind introduction.  I would also like to thank Laura Shields and PLI for this chance to spend a few minutes with all of you this morning.  It’s a real privilege for me to share this podium today.

For some of you, this is probably the first time you’ve heard of the Office of the Investor Advocate at the SEC.  And that’s understandable, because the Office did not exist when this conference was held last year.  I began my position on February 24, 2014, on the Monday following SEC Speaks. 

Simply put, my job is to provide a voice for investors as policies are being considered at the SEC and self-regulatory organizations (“SROs”).  My Office’s goal is to help ensure that policymakers appropriately consider the needs of investors.  I also report to Congress twice per year, and I am authorized to recommend legislation that may be beneficial for investors.[1]

To do my job, I must monitor a wide variety of issues.  This means that the learning curve has been very steep, but I have been blessed with a talented and experienced staff.  One of them is here today –

This staff includes Senior Special Counsel Marc Sharma and the SEC’s first Ombudsman, Tracey McNeil, who serves as a liaison to help resolve problems that retail investors may have with the Commission or SROs. 

As I mark one year as Investor Advocate, I want to publicly thank Chair White for giving me the resources and freedom to do the job as it was envisioned.  I am also grateful to each Commissioner for giving me the access I need to make the case for investors.  In addition, I am deeply indebted to my fellow directors at the SEC for their support.  Directors of divisions and offices, large and small, have been gracious in the face of my endless requests for briefings and other assistance, and they have been a constant encouragement to me as I deal with the administrative challenges of establishing a new office.   

Two weeks ago, I had an opportunity at another event to share some thoughts about the growing need to protect elderly investors from financial exploitation.[2]  This morning, I want to shift my focus to the Millennials and future generations of American investors.  In particular, I want to share my views about the steps the SEC should continue taking to ensure that investors receive meaningful disclosures.  Of course, the views I express are my own and do not necessarily reflect those of the Commission, the Commissioners, or Commission staff. 

As the father of six children, including two daughters in college, I consider myself something of an expert on the next generation.  And there is one thing I have noticed as I watch my kids grow into adulthood–they don’t think the same way I do.

I mean that quite literally.  Their generation has grown up in the digital age, and their world is largely on-line, including their homework.  They expect instant access to information, and they would either laugh or look bewildered if you suggest they look up something in an encyclopedia.  They are bombarded with information on social media, and they expect content to be eye-catching, clear, and, if it can’t be entertaining, it must be useful.  As a result, content providers spend vast sums of money to convey information in ways that appeal to Millennial consumers. 

Contrast that type of modern data-sharing with the way information is provided to investors.  To illustrate, I brought with me a copy of a recent 10-K filing.  It is over 200 pages of a type size that is far too small for my bad eyes.  I selected this particular issuer because it is a Kansas-based company that might appeal to my daughters, but I am confident they wouldn’t choose to wade through this much paper.  And, as many of you know, some 10-Ks are much longer. 

If we’re honest with ourselves, this was never an especially effective method of disclosure, because it is so overwhelming to the average investor.  Granted, it may have been the best we could do in the 20th Century to provide comprehensive disclosure of all material facts, but it is now 2015.  Today, new technologies give us new opportunities to provide disclosure that is both comprehensive and comprehensible.  Times have changed, and so should the delivery of information to investors. 

In my view, if the SEC wants issuers to provide effective disclosure to the 21st Century investor, the data needs to be both layered and structured.  To understand what is meant by the term “layered data,” simply picture a company website.  The company does not put all the information into one long web page that requires users to scroll down endlessly.  Rather, the information is split into manageable pieces that utilize appealing graphics, with tabs and hyperlinks to help users quickly find the information that is most important to them.  By similarly layering the data in an S-1 or 10-K, the SEC could greatly assist the individual investor who takes it upon herself to research an investment opportunity.

In contrast, structured data could assist the analyst or intermediary who wants to search data dynamically and compare multiple companies by slicing and dicing the data.  Millions of investors in pension plans and other pooled investment vehicles could greatly benefit from these enhanced analytical tools, and smaller reporting companies may find greater trading volume in their shares as analysts are able to use data more effectively and cover more companies.   

The SEC has taken some steps forward in recent years. In 2009, the Commission began to require companies to provide their financial statements using eXtensible Business Reporting Language (XBRL), which is a global standard for structured financial reporting.[3]  XBRL appears today in more than 20 SEC forms, and as the Commission engages in new rulemaking, it continues to expand the required use of structured data.[4]  The Commission recently began compiling structured data sets and posting them for use by investors and academics,[5] and the Commission is working to develop “Inline XBRL” to integrate XBRL tagging directly into HTML formatted documents.[6]    

Despite these improvements, much of the information on EDGAR is still difficult to find and use efficiently.  To be candid, I believe the SEC has been painfully slow to adapt to changing technologies that will benefit investors.  However, today I am even more troubled by Congressional action that may thwart the recent progress the Commission has been making. 

On January 14, 2015, the U.S. House of Representatives passed H.R. 37, the “Promoting Job Creation and Reducing Small Business Burdens Act.”  Title VII of that Act would create an exemption from the XBRL filing requirements for Emerging Growth Companies and other small companies, which some have estimated would exclude more than 60 percent of all public companies.[7]  If passed by the Senate and signed into law, I believe this bill would seriously impede the ability of the SEC to bring disclosure into the 21st Century. 

If Congressional action is needed, it should be used to press the SEC to move forward in its efforts to make disclosure more accessible and useful for investors.  Cost to issuers is a legitimate concern, but I think we can safely predict that smart people will quickly develop ways to bring those costs down significantly, particularly if the SEC moves forward with Inline XBRL.[8]

What we can’t afford to do is go backward.  We should not expect the next generation of American investors to scroll through hundreds pages of disclosure to find the information they need to make investment decisions.  Private companies would not display critical information to their customers in this manner, and American investors have a right to expect their government to do better. 

Thank you.


[1] Section 4(g)(4)(E) of the Securities Exchange Act of 1934 authorizes the Investor Advocate, among other things, to propose to Congress any legislative, administrative, or personnel changes that may be appropriate to mitigate certain problems and to promote the interests of investors. 15 U.S.C. § 78d(g)(4)(E).

[2] Rick A. Fleming, Investor Advocate, Sec. Exch. Comm’n, Protecting Elderly Investors from Financial Exploitation: Questions to Consider, Address Before The American Retirement Initiative Winter Summit (Feb. 5, 2015), available at (last visited Feb. 18, 2015).

[3] Mark J. Flannery, Chief Economist and Director, SEC, The Commission’s Production and Use of Structured Data, Speech at Data Transparency Coalition’s Fall Policy Conference, Washington, D.C., (Sept. 30, 2014), available at (last visited Feb. 18, 2015).

[4] Id.

[5] SEC, Press Release, SEC Announces Program to Facilitate Analysis of Corporate Financial Data, (Dec. 30, 2014), available at (last visited Feb. 18, 2015).

[6] Flannery, supra note 3.

[7] Daniel Castro and Josh New, Congress Should Not Undo Progress on Financial Data Reform, The Hill Blog, (Feb. 11. 2015, 10:00 AM),

[8] According to one study, 69% of small public companies paid $10,000 or less on an annual basis for fully outsourced creation and filing solutions of their XBRL filings. See AICPA, XBLR Costs Study: Research Shows XBLR Filing Costs Lower than Expected (2015), available at (last visited Feb. 18, 2015).

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