Before closing the book in 2022, both houses of Congress passed the Financial Data Transparency Act (FDTA), which President Biden signed into law soon after. Covered in detail in the DFIN Knowledge Hub, The FDTA is designed to modernize the collection and dissemination of financial data by federal financial regulators, making that information more accessible, uniform, and ultimately more useful to investors and consumers.
The Treasury Department and seven key regulators will jointly develop new standards, leveraging other data modernization efforts to streamline compliance and align data collections with government-wide policies for “open data assets.” Standards being considered include iXBRL/XBRL. The FDTA requires, among other things, that the SEC establish a program to improve the quality of the corporate financial data filed or furnished by issuers. Section 5825 calls for the Securities and Exchange Commission (SEC) to report on its progress in helping to improve the quality of data twice a year for six years.
This marks a dramatic shift for the SEC, which previously communicated very little about the quality of XBRL. In its inaugural report, the SEC announced that the Division of Corporation Finance may now issue letters to certain companies depending on the facts and circumstances of their filing, specifically the XBRL or machine-readable data. The big takeaway here is that companies should elevate XBRL data quality and now be on high alert.
DFIN is a long-standing XBRL U.S. partner, and over this time, our customers have been counting on us to provide data quality checks and submit filings on their behalf. This work, which pre-dates the FDTA, has given us an unmatched understanding and expertise in the industry as DFIN and ActiveDisclosure are currently data-quality certified (DQC) by XBRL U.S. In fact, ActiveDisclosure is one of just a few applications with a certification rating of 21, representing the latest effective version of the DQC rules and guidance validations for Center for Data Quality Members.
Our work helps ensure client filings adhere to SEC EDGAR specifications and requirements. The Commission recently shared a sample letter that SEC registrants may receive if specific errors are found in their submissions, along with a call for corrections. Some error examples include the following:
- Item 405 of Regulation S-T: An entity’s filing does not include the required Inline XBRL presentation in accordance with Item 405 of Regulation S-T. Please file an amendment to the filing to include the required Inline XBRL presentation.
- Cover Page: The common shares outstanding reported on the cover page and on your balance sheet are tagged with materially different values. It appears that you present the same data using different scales (presenting the whole amount in one instance and the same amount in thousands in the second). Please confirm that you will present the information consistently in future filings.
DFIN is a long-time supporter of the FDTA, which is helping to ensure that all efforts to improve data quality succeed. Thanks to the solutions we provide and our longstanding partnership and certification with XBRL U.S., we will continue to help businesses adhere to all key specifications and, in doing so, help ensure government, investors, and all stakeholders have access to high-quality machine-readable data and are not on the receiving end of any future SEC communications.