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SEC Gets on the Soapbox About XBRL and Corporate Actions, Again

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Since its decision to mandate the XBRL tagging of financial reports for US firms, the Securities and Exchange Commission (SEC) has been doing its level best to keep the industry apprised of any possible compliance challenges. To this end, this month, the regulator announced yet another event, in the form of a public seminar on 23 March, to allow firms to pose pertinent questions around these details. The SEC has also this month taken the initiative with regards to educating investors about corporate actions events and has amended proxy rules to allow electronic access to some of this data.

According to the regulator, the XBRL seminar will help answer frequently asked questions about the rules and technology requirements related to these data tags. SEC staff will therefore present information to help corporate filers understand how to comply with the rules and provide an overview of the XBRL taxonomy — the list of tags associated with Generally Accepted Accounting Principles (GAAP). Staff also will discuss the recently announced role of the Financial Accounting Foundation in maintaining that taxonomy in conjunction with its GAAP standard setting activities.

The seminar will be held on 23 March, beginning at 1pm (ET) in the auditorium at the SEC’s headquarters in Washington DC and will also be webcast on the SEC website.

The proxy voting measures, on the other hand, are aimed at supporting greater investor participation in corporate elections. Accordingly, the regulator has amended its e-proxy rules, issued an Investor Alert and created new internet resources that explain the proxy voting process in plain language. SEC chairman Mary Schapiro explains: “Investor participation in elections at companies they own is critical to effective corporate governance. The recent changes to the voting rules for the election of directors have increased the importance of voter participation.”

Last year, the SEC approved a change to the New York Stock Exchange rule that previously allowed brokers the discretion to vote shares held in customer accounts in an uncontested election of directors without receiving voting instructions from those customers. Now, brokers can only vote those shares in elections at companies if they are instructed by their customers. The change does not apply to mutual funds or certain closed end funds, however.

The regulator has duly amended its proxy rules to clarify and provide additional flexibility when companies and other persons are relying on the “e-proxy rules.” Those rules allow a notice to be sent to shareholders indicating that the proxy materials are online and available upon request, rather than requiring a full package of materials containing a proxy card, annual report and proxy statement be sent. According to the SEC, the new rule amendments will, among other things, allow shareholders to be provided with additional materials explaining the e-proxy rules.

It has also recently published a new Investor Alert entitled New Shareholder Rules for the 2010 Proxy Season, which provides investors with information related to the recent changes to the broker voting rules and the impact of those new rules on proxy voting. Furthermore, it has launched a new spotlight page that provides investors with information on the mechanics of proxy voting, the e-proxy rules, corporate elections and proxy matters generally.

Lori Schock, director of the SEC’s Office of Investor Education and Advocacy, explains: “We designed these new resources to help investors better understand the materials they will receive in connection with annual meetings of shareholders and how to vote by proxy in corporate elections.”

The move to more electronic communication methods in the corporate actions space should have a knock on impact on timeliness of that data and also the volumes of that data that financial institutions will be forced to cope with. The volatility of the markets and the economic environment have led to an increase in the number of these events and by facilitating electronic data transmission, the SEC is set to make firms’ data volumes rise further still. The benefit, however, may be in an improvement of the quality of this data, especially if XBRL tagging is correctly implemented in the long term.

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