Posted on Tuesday, November 17, 2020

SEC Commissioner Allison Herren Lee gave a keynote presentation “The Promise of Structured Data: True Modernization of Disclosure Effectiveness” at the XBRL US Investor Forum: Ready for Anything – Using Data in Perilous Times.  Her speech focused on the importance of data quality (and notes the contribution to quality improvements made by the XBRL US Data Quality Rules), and the potential for structured data for other corporate disclosures. Here are a few highlights from her speech:

On data quality and use of structured data: 

… [an] area worthy of focus is how to enhance the accuracy and quality of structured data. This is, of course, ultimately the responsibility of the reporting entity…We have reason to believe there has been some progress in both regards, with studies showing a decrease in overall tagging error rates after 2012, and a potential decrease in the use of custom tags over time as well. I’m sure that is attributable in part to the thoughtful work of FASB and Commission staff in the continued enhancement of the taxonomies available. I also commend the work of XBRL’s Data Quality Committee in the development of tools to help enhance accuracy and quality.

But, as we know, investors and others—including the Commission staff—rely heavily on structured data in order to analyze information in SEC filings. In fact, some recent rulemakings cite to the availability of structured data in financial statements as a basis for the proposed elimination of other disclosure requirements…

Because of this level of reliance on structured data, it is crucial that we continue to work to improve its quality. While some progress has been made, I’m interested to hear from all market participants about ways we could potentially verify XBRL tagging in a more comprehensive and systematic way. The quality of structured data is only as good as the quality of the process for producing it. And if it’s worth doing, it’s worth doing right.

On tagging proxy data:

As we continue to modernize, we should consider obvious places where structuring could be relatively simple and would provide significant transparency benefits. For example, proxy voting data… What kind of data are we talking about here? The most basic information that an investor might want: how their money is being voted in corporate elections, and whether their shares are being voted in their best interest or in accordance with their instructions. We could bring much greater clarity and transparency to investors regarding how their voting rights are being exercised with the simple expedient of finalizing this rule and adding a requirement, as discussed in the proposal, to tag the Form N-PX voting data.

On tagging ESG data:

Another area that could benefit from structured data to support usability and comparability is in the area of climate change and other ESG risks and impacts… developing standardized climate and ESG disclosure requirements should be a top priority for the Commission. As we consider this, we should also consider how to make the data disclosed under such requirements as usable as possible, including through tagging requirements.

 On tagging other non-financial data:

… disclosures under MD&A may benefit from some simple block tagging that could greatly enhance comparability of certain relatively consistent types of information disclosed in MD&A. And earnings releases, particularly given their often market-moving nature, appear to be another well-suited candidate for tagging.

On identifiers:

The potential to more easily link LEIs within regulatory reports facilitates both research and meeting regulatory requirements such as know your customer and anti-money laundering. Overall, this promises another means of enhancing the usability of data in the Commission’s filings…. I want to highlight another alternative that the Commission has considered, which is whether freely available, open data identifiers for financial products such as the Financial Instrument Global Identifier or (FIGI) should be allowed in reporting. FIGI is an alternative to proprietary identifiers such as the CUSIP or ISIN. Given that there are non-commercial, open, and freely available alternatives to proprietary identifiers, it makes sense to consider how to allow their usage when it comes to regulatory reporting requirements.