SEC Proposal: Filing Fee Disclosure

SEC Proposal: Filing Fee Disclosure

On October 24, 2019, the SEC released a proposal to require filing fee disclosures to be tagged using Inline XBRL (iXBRL). These changes would affect filings for registered securities offerings, tender offers, mergers and acquisition transactions, and registration fees for open-end funds, unit investment trusts (UITs), business development companies (BDCs), and small business investment companies (SBICs). The proposed changes would help to reduce errors made by incorrectly rekeying information and help to improve the validation process.

Under the proposal, filers would be required to include the fee disclosures on the cover page in a structured format rather than in a text-only format. They would also be required to include all of the information necessary to calculate the fees in this section. Current filings include this data in several places and formats, which can often lead to errors from rekeying information. By including all of the fee calculation information in one place, the summations become more straightforward and there will lIkely be fewer inquiries from SEC staff who are reviewing the filings.

Currently, the SEC does a manual review of fee information for each filing. Using machine-readable iXBRL would allow the review process to be automated and allow the SEC to validate fees on submission. The EDGAR system would flag any potentially incorrect filings for SEC staff to follow up on, but would not prevent filing.

In order to ease the effect of the transition, the SEC has proposed this change be phased in based on the size of the filer. They suggest large accelerated filers begin 18 months after the requirements’ effectiveness date, accelerated filers begin 30 months after, and all other filers would begin after 42 months. This would give smaller filers, who have fewer resources to devote to compliance, more time to adjust to the change.

The proposal also includes a provision to modernize payment methods. Currently, filers can submit payments via bank wire, paper checks, or money orders. If approved, only Automated Clearing House (ACH) transactions and bank wires would be accepted. This transition to electronic payment systems would reduce the number of filings that are suspended due to incorrect or incomplete payment information.

The proposal also gives a few stats on who would be affected by the change. The SEC believes 7,785 unique filers would have to adjust for the change, but only 266 of those filers would be subject to iXBRL solely because of this change. Despite the potential burden, this modernization would allow the SEC to improve their filing and validation processes and for those filings to become more transparent and useful for investors.

The SEC is asking for comments on the proposal by February 25, 2020. They are allowing submissions via internet form, email, or paper mail. All of the comments are posted on the SEC’s website for the public to view.