On May 3, the Securities and Exchange Commission’s Scott Baugess spoke at the Financial Information Management Conference 2018. Highlights from his speech:
“The key innovation of our developing disclosure technology is making machine accessibility invisible to the rendering of a document for human readability. This is illustrated well by a recently proposed rule that would require SEC reporting companies to file their periodic reports in Inline XBRL … this standardized data can be combined with other relevant financial information and market participant actions to establish patterns that may warrant further inquiry. And that can ultimately lead to predictions about potential future registrant behavior. These are precisely the types of algorithms that staff in DERA are currently developing… the agency’s commitment to investor protection involves the use of sophisticated data analytics to ensure that we have insight into the market, particularly as we seek potential market misconduct.“
Myths about machine-readable data (bold) and commentary in the speech:
- Electronic access is equivalent to machine readability… For advanced machine learning algorithms to generate unique insights, there must be structure to the information being read.
- The Commission alone develops the reporting standards incorporated in its rules. .. The standard originated from an AICPA (American Institute of Certified Public Accountants) initiative and was ultimately given its own organizational standing—XBRL International—that now has more than 600 members. And XBRL is now in use in more than 60 countries.
- Retail investors don’t need machine-readable data…structured disclosures enable third-party vendors to make this information available to retail investors at low or even no cost. Machine-readable disclosures fuel many online financial tools popular with investors…The Google Cloud Platform recently included the SEC’s Public Dataset in its cloud platform.
- Machine-readable reporting standards ensure high-quality data…there is no substitute for reporting accurate data in the first instance. To this end, Commission staff report observations about the quality of information being reported to help facilitate compliance with both the letter and spirit of the rules.
- We don’t need the public’s views anymore…We hear a lot from market participants on the value of the information being disclosed. We hear far less frequently on the manner in which it should or could be disclosed. As experts in the data management field, I urge all of you to take the time to let your thoughts be known.
Read the transcript.
