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Report of the 21st Century Disclosure Initiative
The 21st Century Disclosure Initiative has delivered a report to the Commission setting out a blueprint for a modernized disclosure system. The discussion, analysis, and recommendations in the report are exclusively those of the 21st Century Disclosure Initiative staff, and do not represent the views of the Commission or any of its divisions or offices.
The report recommends that the Commission design and implement a new disclosure system in which interactive data would replace plain-text disclosure documents. Instead of drafting and transmitting ASCII- or HTML-formatted documents based on complex forms, filers would submit interactive data corresponding to the components of required disclosure.
As disclosure documents have continued to grow longer, reflecting more complex business arrangements, the plain-text format used in EDGAR has become less effective. Disclosure information in an interactive data format could be automatically processed by software and seamlessly fed into investors' analyses and comparisons. Rather than being buried within a lengthy, static plain-text document, each piece of information would be individually searchable. Disclosure information would become more accessible and easier to use, enhancing the transparency of the disclosure system.
The report recommends that the Commission retain the substantive content and filing schedule of the current system. Filers would continue to submit the registration and proxy materials, periodic and current reports, stock ownership reports, and mutual fund materials that are required under the securities laws. Each filing and report required by the securities laws and regulations would be a compilation of interactive data, rather than a plain-text document. Plain-text renderings could be automatically generated for enforcement and litigation.
In addition to enhancing transparency for investors by improving accessibility and ease of use, the new disclosure system would benefit filers and the Commission's mission. The system could allow filers to submit core company data that would become part of every statutory report, minimizing redundant filing requirements. The use of a common interactive data format could make reporting processes more efficient. And the Commission could develop new tools and data applications to pursue its mission, including sophisticated monitoring software to raise automatic red flags based on suspicious patterns. The new disclosure system's data warehouse could serve as a broad-based platform for a new, enterprise-wide approach to data management.
The report is available here.
On January 15, 2009, William D. Lutz, Director of the 21st Century Disclosure Initiative, discussed the report in a speech to the New York chapter of the National Investor Relations Institute. A transcript of the speech is available here.