Over the past few years, the SEC has issued a wave of regulations that have increased the demands for structured data. The updated disclosure regulations requiring iXBRL tagging for all business development companies (BDCs) and registered closed-end investment companies (registered CEFs), including interval funds, follow that trend.
XBRL was adopted by the SEC for EDGAR filings in 2009 starting with public company financial statements using the U.S. GAAP taxonomy. Shortly after, the SEC adopted XBRL for mutual fund risk/return summary information using the U.S. Mutual Fund Risk/Return taxonomy.
Inline XBRL, or iXBRL, allows filers to embed XBRL data directly into an HTML document, merging machine-readable business reporting data into a human-readable HTML page.
It is worth noting here that previous mandates by the SEC phased in XBRL by allowing filers to furnish tagging in a separate filing before being mandated to file iXBRL. CEF and BDC products will have no such phase-in period and certain filings will need to file iXBRL beginning August 1, 2022.
BDC and CEF timeline – Effective Date of Rule: August 1, 2020
iXBRL Compliance Dates:
August 1, 2022: (Financial Statement, Cover Page (facing sheet) and Prospectus Information). Affected funds that are eligible to file a short-form registration statement will be required to comply with those provisions 24 months after the effective date, or August 1, 2022.
February 1, 2023: (Financial Statement, Cover Page (facing sheet) and Prospectus Information). All other affected funds subject to these requirements must comply 30 months after the effective date, or February 1, 2023.
The following outlines the information required to be tagged in the prospectus, per the SEC:
- Fee Table (Item 3.1)
- Senior Securities Table (Item 4.3)
- Investment Objectives and Policies (Items 8.2b, 8.2d)
- Risk Factors (Items 8.3a, 8.3b)
- Share Price Data (Items 8.5b, 8.5c, 8.5e)
- Capital Stock, Long-Term Debt and Other Securities (Items 10.1.a-d, 10.2.a-c, 10.2e, 10.3, 10.5)
A seasoned fund filing a short-form registration statement on Form N-2 also will be required to tag information appearing in Exchange Act reports—such as those on Forms N-CSR, 10-K, 10-Q, or 8-K—if that information is required to be tagged in the fund’s prospectus.
Form submission types that are impacted by the iXBRL requirements:
N-2, N-2/A, N-2ASR, N-2 POSASR, N-2MEF, POS462B, POS462C, POS 8C, POS EX, POS AMI, 486APOS, 486BPOS, 486BXT, 424A, 424B1, 424B2, 424B3, 424B4, 424B5, 424B7, 424B8, 10-K, 10-K/A, 10-KT, 10-KT/A, 10-Q, 10-Q/A, 10-QT, 10-QT/A, 8-K, 8-K/A, 8-K12B, 8-K12B/A, 8-K12G3, 8-K12G3/A, 8-K15D5, 8-K15D5/A, DEF 14A, DEF 14C, DEFA14A, DEFA14C, DEFC14A, DEFM14A, DEFM14C, DEFN14A, DEFR14A, DEFR14C, SC 13E3, SC 13E3/A, N-CSR, N-CSR/A, N-CSRS and N-CSRS/A.
In addition to the above prospectus items, Item 601 of Regulation S-K will subject BDCs to the Inline XBRL financial statement tagging requirements that apply to operating companies by removing the exclusion for BDCs from the Inline XBRL financial statement tagging requirements.
BDCs would use the U.S. GAAP taxonomy. The Commission believes that the relevant XBRL taxonomies are sufficiently developed for use by BDCs, even if the BDCs use nonstandard elements more than the average operating company.
However, if a BDC files a registration statement, post-effective amendment or form of prospectus pursuant to Rule 424 before their 10-Q compliance date, they will need to file iXBRL. The iXBRL requirements for Form N-2 are separate from those of financial statements. For example, a BDC that files a short-form registration would need to tag any 424B filings made on or after August 1, 2022, if it contains taggable items.
There are several benefits to iXBRL versus XBRL. Reviewers will be able to view the HTML and XBRL simultaneously and easily navigate between human-readable HTML and machine-readable XBRL. iXBRL reinforces standardization, improving the readability and navigability of disclosure documents while discouraging repetition and disclosure of immaterial information.
There are also key considerations to keep in mind when implementing iXBRL tagging.
iXBRL adds an extra layer to review. In addition to reviewing content, you will need to allow time for reviewing tags.
iXBRL requires the primary document to be in XHTML format, not HTML. XHTML allows for tagging to be embedded, therefore enabling iXBRL. Secondary documents such as exhibits would remain in HTML format.
iXBRL filings do not allow for <R> tags. The SEC created a new redlining style specifically for iXBRL. Text can be redlined but traditional <R> tags are not allowed.
As the market leader in iXBRL filings, DFIN is ready to support your iXBRL filing requirements. We’ll bring the lessons gleaned from the capital markets rollout and mutual fund risk/return rollout to our BDC and CEF clients.