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Statement on Final Rule of Inline XBRL Filing of Tagged Data

Commissioner Hester M. Peirce

June 28, 2018

Thank you, Mr. Chairman.  I want to extend my thanks to the staff for their work on this rule.  The rule is the result of close collaboration among DERA, CorpFin, and IM. I appreciate the hard work that each of these divisions, as well as the Office of General Counsel, has contributed to the final product.

As a believer in the benefits of open, structured data to our investors and markets, I very much would have liked to support the rule, but I cannot do so.  This rule requires operating companies and funds to use inline eXtensible Business Reporting Language, or inline XBRL, to submit, in the case of operating companies, financial statement information, and for funds, risk/return summary information.  It also eliminates the 15 day filing period funds currently have between submitting this information in HTML and submitting the tagged XBRL version. 

I am not convinced that now is the time to require all of these filers to use this particular technology on this particular timeline.  While I support the rule's elimination of the web posting requirement for XBRL data and the transition to the inline XBRL format for large operating companies, I cannot at this time support a mandate that smaller operating companies and funds shift to inline XBRL.  I would instead prefer to maintain the voluntary program and open it to funds to allow them to shift to the inline XBRL format in response to investor demand.

As regulators, we have broad authority—authority we do not hesitate to use—to reach into the day-to-day operations of the companies we oversee.  Our rules can radically change the way companies conduct their business, organize their workflow, and allocate resources.  Today's rule will require the adoption of very specific technology to be used in a very specific way on an ambitious timeline.  When we issue such a mandate, it has wide-ranging effects on the industry, including knock-on effects on vendors, investors, and others who interact with the relevant filers.  By mandating the use of inline XBRL, we are privileging one form of technology over present and potential future competitors.  When we take this step, therefore, we must be very certain that we are choosing the right technology at the right time for the right purpose in the right set of companies.  I appreciate the Chairman's acknowledgment that we need to be alert to changes in technology.

While we have conducted a pilot program for operating companies, allowing them to voluntarily submit using inline XBRL, the uptake on this program has been minimal.  Only 1.8 percent of eligible filers have participated, and many of these have been accelerated or large accelerated filers.  We have not adequately addressed the question of whether smaller operating companies should be exempt from the requirement, given their lower participation rate in the voluntary program and the disproportionately high costs they face in adopting the technology.  If Interest is low it makes little sense to then mandate that everyone use the unpopular technology.  In the early days of home video, it would not have been reasonable for the government to say "people aren't using Betamax.  Let's mandate the use of Betamax!"  Moreover, it is not clear how useful XBRL is to small filers' investors.  According to comments we received, small company investors in certain sectors do not currently use XBRL.[1]  Before requiring small filers to invest considerable resources in implementing inline XBRL, we should be sure that the data is actually useful to their investors.

Absent a mandate, I suspect that if we retained the voluntary program, over time—as the technology becomes cheaper, easier to use, and more popular with investors—the number of small participants would rise without a Commission mandate.

In the case of operating companies, however, we at least had a pilot program.  We had no such program for fund risk/return summaries.  The comments we received reflecting the viewpoint of funds uniformly stated that requiring inline XBRL and eliminating the 15 day filing period would require considerable changes to fund work flow, may require switching vendors, and would impose meaningful costs on funds and their shareholders.[2]  The experience of operating companies is not necessarily relevant to funds, which are subject to a different set of filing obligations and challenges.  Moreover, experience suggests that fund investors are not as interested in using the mandated tagged data as are operating company investors. XBRL risk/return submissions are not widely used. 

The potential benefits we cite in support of extending the requirement to funds are not compelling.  Would fund investors really find it worthwhile to foot the bill for a shift to inline XBRL that seems designed primarily for the benefit of data aggregators eager to sell the information to investors?  There are also assertions that inline XBRL improves data quality, but there is not evidence that data quality is a problem for funds.[3] 

It also is not clear that this is the right time to require funds to make such a change.  Funds are busy with, among other things, new Forms N-PORT and N-CEN, as well as changes to the classification of funds' securities holdings.  These projects demand considerable fund resources.  Adding a new requirement now, even on the adopting release's extended timeline, does not seem appropriate.

I am sorry that I cannot support this recommendation, but I appreciate the hard work of the staff. I hope that time and positive experience with the rule will lay to rest my concerns about the changes we are making today.


[1] Letter from Biotechnology Innovation Organization (May 16, 2017).

[2] Letters from Federated Investors (May 16, 2017 and June 1, 2018), Investment Company Institute (May 16, 2017 and June 1, 2018), and U.S. Bancorp Fund Services, LLC (May 16, 2017), and Jack Frei (March 13, 2017).

[3] See, e.g., letters from Investment Company Institute (May 16, 2017), and U.S. Bancorp Fund Services, LLC (May 16, 2017).

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