IR Web Report posted a story titled “SEC seeks to ‘blow up’ forms-based system”, the 75-year old system in which pubco’s, brokers, funds, etc. file disclosures via specific forms. That’s right, you may soon be saying good-bye to 8K’s, 10K’s, 15 2C-11’s and other such forms. According to an SEC press release on the matter, a team has been put together to re-think reporting from scratch, free of any attachment to current forms. To this end, SEC Chairman Chris Cox stated as follows:
“To encourage a fundamental rethinking, the project won’t proceed from the premises of the current reporting system. It will start from scratch, from the ground up, freed from any conventionsâ€
TIME LINE
As far as a time line goes, the press release stated the following:
“The first phase of the study will be completed by the end of 2008, when a follow-on advisory committee will be appointed to consider the questions in more detailed fashion through a public and consultative process.”
That is fast. In my opinion, that is too fast for anybody to tear up an existing system of any kind and develop a new one based on out of the box thinking. Nonetheless, if they can pull it off, all the power to them…though implementation is an entirely different matter.
NEW DISCLOSURE SYSTEM WILL BE BASED ON NEW TECHNOLOGIES
What I really like about the 21st Century Disclosure Initiative is the fact that it will be incorporating new technologies for the purpose of providing investors with both an easier and simpler system:
“On the 75th anniversary of the SEC, with so much new technology available to improve the quality of information for investors as well as the way investors acquire it, we’re initiating a broad, introspective look at our business model,” said Chairman Cox. … “We’ll be examining how to improve the way disclosure works, including tapping the full potential of today’s technology…That could mean fewer confusing forms, and more useful information at investors’ fingertips in a form they can really use.”
According to IR Web Report, the eventual new system will probably be based on “eXtensible Business Reporting Language (XBRL), which breaks down traditional document-based disclosures into individually tagged data elements that can be read and recompiled by software according to an investor’s preferred way of viewing the information.”
If you don’t get that, don’t worry. We’re going to provide XBRL info in a separate post. In the meantime, here is a powerful but layman’s description from Edgar-Online:
XBRL automates financial analysis, which is an historic accomplishment. Computers can intelligently “read” an XBRL report to select specific data, pull it into documents and spreadsheets, analyze it, exchange it with other computers, and present it in a variety of formats. This can all take place in real time, allowing users to instantly compare hundreds of companies, industry sectors, topics, and issues, with automatic updates.
Exciting stuff for good emerging companies – and scary for small-cap / micro-cap companies that are nothing more than empty pump-n-dump schemes that hide behind convoluted filings.
We’ll be sure to keep you up to date on this initiative.
Regards,
George