SEC enters digital age

The Securities and Exchange Commission is not an organisation associated with
making radical changes to the way it operates, but recently the US watchdog
broke from tradition with the news that it would be splashing out $54m (£30m) on
overhauling its company disclosure system.

Describing the investment as a transformation of the agency’s ‘1980s-vintage
public company disclosure system’, the SEC said the move showed the regulator’s
commitment to phasing out its EDGAR database, a form-based system, in favour of
a‘real-time search tool with interactive capabilities’.

Electronic filing of company accounts has been a pet topic of SEC chairman
Christopher Cox, who believes that the use of technology can greatly help
investors. ‘The new system will make it easier both to file information with the
commission, and to use it,’ Cox says.

The move to an interactive database may affect a number of UK companies with
US listings. The changes are significant because of the computer language that
will be used to operate it. The SEC’s new system will make use of XBRL, a
language used by the Federal Reserve and the Comptroller of currency, which
requires banks to use it too. XBRL is a ‘tag’ for financial information,
allowing it to be more easily understood by users.

But as popular as XBRL may be across the Atlantic, UK IT experts have been
far less convinced about the merits of the language.

Some industry experts believe XBRL is too complicated and costly for
companies to use in its current format. But Companies House and HM Revenue
& Customs are persuading customers to use the technology, while the
Financial Services Authority remains cautious, stating that it was ‘pointless
rushing into’ XBRL filing systems.

But where the US goes, the UK usually follows. Industry players will continue
to watch the ongoing events across the pond with great interest, some of them
with trepidation.

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