The US Securities and Exchange Commission is to formalise a new rule that aims to improve and simplify the way investors receive financial information on stocks, bonds and mutual funds.
Christopher Cox, SEC chairman, said on Thursday the rule would require all companies to report financial information in XBRL, or “extensible business reporting language”.
The new format will make all data interactive, making it possible for investors to go online and easily compare information filed – including financial reports, company prospectuses and facts and figures on a mutual fund’s risk, expenses and strategy.
Framing the issue as part of the “SEC’s war on complexity”, Mr Cox said the new reporting format would “enable investors to find what they need quickly and reliably, without having to pore through pages and pages of documents”. “I’ve been fighting against legalese and gobbledygook for years,” he said.
While much of this information is already available on the internet, finding it is a time-consuming task. Investors in search of financial information must often sift through lengthy corporate reports or mutual fund prospectuses, which, even online, tend to have narrow search capability. Interactive data pin down all this information, allowing investors immediately to dig out precisely the data they need.
Mr Cox said that the move to the new format would also benefit financial analysts and financial publishers, as evaluating companies could reduce inputting and re-keying costs and free resources to concentrate on building better analytical tools.
In a speech at the Investment Company Institute’s annual conference in Washington, DC, Mr Cox said the new format was widely used in Europe, and adopting it in the US was part of “sharpening our market’s competitive edge in the increasingly global world of finance”. At present about two dozen companies, including Ford, Xerox and Pfizer, submit reports via interactive data.
●Barney Frank, House financial services committee chairman, said his panel would hold a hearing next month to scrutinise the SEC, in response to criticism that its policies are increasingly favouring companies over investors.
Mr Frank, a Massachusetts Democrat, said he would call all five SEC commissioners, including Christopher Cox, to testify before the committee, which oversees the agency.