Securities Regulation Daily SEC adopts hyperlinks for exhibits rules; proposes XBRL and muni offering amendments
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Wednesday, March 1, 2017

SEC adopts hyperlinks for exhibits rules; proposes XBRL and muni offering amendments

Acting Chair Michael Piwowar and Commissioner Kara Stein approved the adoption of rule and form amendments to require issuers to include hyperlinks in exhibits to their registration statements and other reports to make the exhibits easier to access. They also approved proposals to amend Industry Guide 3 to update disclosures by bank holding companies, to require the use of inline XBRL by operating companies and mutual funds, and to amend Exchange Act Rule 15c2-12 to add event notices to better inform investors and market participants about the financial condition of municipal securities issuers and obligated persons.

Hyperlinks to exhibits. Exhibits to registration statements and other reports are currently incorporated by reference to a filing in which the exhibit was included. A person seeking to retrieve an exhibit must review the exhibit index to determine the filing in which it was included and then search for the relevant filing. The amendments require hyperlinks for each exhibit listed in an exhibit index and the filing of registration statements and reports on EDGAR in html format. The amendments apply to all registration statements and reports that are subject to the exhibit filing requirements under Item 601 of Regulation S-X and Forms F-10 and F-20.

About two percent of registrants file using ASCII, which cannot support functional hyperlinks. While registration statements and certain reports will be required to be filed using html after the effective date, registrants may continue to use ASCII for schedules or forms that are not subject to the exhibit filing requirements under Item 601, such as proxy statements or other documents that are included with a filing, such as an exhibit.

The rules will take effect on September 1, 2017 for larger filing companies, but non-accelerated filers and small reporting companies that submit filings in ASCII will have until September 1, 2018 to comply. The compliance date is also delayed for filings on Form 10-D that will require a hyperlink to exhibits filed with Form ABS-EE for asset-backed securities issuers in order to make programming changes to EDGAR. The SEC will publish a notice in the Federal Register and on its website announcing the compliance date for Form 10-D filings.

Industry Guide 3. Industry Guide 3 – Statistical Disclosure by Bank Holding Companies was first published in 1976 and has not been updated to reflect significant changes in the financial services industry. The SEC is seeking comments on whether there are new disclosures about the activities of bank holding companies that should be provided to investors, whether there are duplicative or overlapping disclosures that should be eliminated, and whether to disclose the impact of regulations on bank holding companies’ operations, capital structures, dividend policies and bankruptcy proceedings. The comment period will be open for 60 days.

Inline XBRL. Another approved proposal would require the use of inline XBRL for financial information submitted by operating companies and risk/return summaries submitted by mutual funds. If adopted, the current requirement for filers to post XBRL data on their websites will be eliminated. Inline XBRL will allow filers to embed data directly into their filings rather than include it as an attachment. For mutual funds, inline XBRL will make the filing process more efficient by allowing the concurrent submission of XBRL data files with certain post-effective amendment filings. If adopted, the SEC will eliminate the current allowance of 15 business days for filings that contain risk/return summaries, so the information will be timelier.

The inline XBRL proposal, if adopted, will be phased in over a three year period for operating companies and a two-year period for mutual fund risk/return summaries. The comment period is open for 60 days.

Muni offerings disclosure. Under the proposed amendments to Rule 15c2-12 to improve disclosure about municipal securities offerings, two new reportable events would be added for brokers, dealers, and municipal securities dealers that are acting as underwriters in primary offerings. Dealers would be required to report the incurrence of a financial obligation of the issuer or obligated person, if material, or any material agreements to covenants, events of default, remedies, priority rights, or other terms of a financial obligation if it affects security holders.

Dealers would also have to report a default, event of acceleration, termination event, modification of terms, or other similar events under the terms of the financial obligation of the issuer or obligated person if they reflect financial difficulties.

Piwowar explained that investors currently may not have timely access to information about municipal issuers’ bank loans and other financial obligations. There may be an information asymmetry between the counterparty to the financial obligation and investors in the securities. The proposal will reduce the information asymmetry among market participants and increase the transparency of the municipal securities market. The comment period will be open for 60 days.

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