Proposal seeks to establish HTML linking requirement for exhibits to regulatory filings

The SEC on August 31, 2016, proposed rule changes that would require public companies to include HTML links to the exhibits that are part of their regulatory filings.

The proposal in Release No. 33-10201, Exhibit Hyperlinks and HTML Format, says public companies should include a hyperlink to each exhibit in a filing’s exhibit index. The proposal also asks that public companies submit their filings in an HTML format.

The proposal will be out for a 45-day comment period that starts after the release is published in the Federal Register. Releases typically appear in the register a few weeks after they are posted to the SEC website.

“The proposed changes should make it significantly easier to locate documents attached to company filings,” SEC Chair Mary Jo White said in a statement. “This enhanced capability will benefit both investors and companies.”

The SEC said the proposed changes are part of its broader effort to review its disclosure rules as explained in Release No. 33-10064, Business and Financial Disclosure Required by Regulation S-K. The preliminary rulemaking document, called a concept release, was published by the SEC in April 2016 to solicit the public’s views about the use of Regulation S-K, the set of rules that cover information outside the financial statements that companies must provide in their annual and quarterly reports. The release’s comment deadline was July 21.

Release No. 33-10201 proposes amending the rule that governs exhibits to regulatory filings, Item 601 of Reg S-K and Rule 102 and Rule 105 of Regulation S-T.

Reg S-T is the SEC’s set of rules for submitting electronic filings. Rule 102 deals with exhibits, and Rule 105 explains the limits on the use of HTML linking in a filing submitted to the SEC’s Electronic Data Gathering, Analysis, and Retrieval (EDGAR).

The proposal also calls for changes to the requirements for filing registration statements, annual and quarterly reports, and other documents in EDGAR that will have public companies submit the filings in HTML and not the American Standard Code for Information Interchange (ASCII) text format that has been in use for years. ASCII cannot support hyperlinks.

The proposal also does not include exhibits that are filed in the eXtensible Business Reporting Language (XBRL) because of the limits in the software used to generate XBRL documents. Also, the exhibits are not incorporated into other filings by a reference.

Still, the SEC asked in the proposal if it should have an HTML linking requirement to the XBRL exhibits. The proposal also asks if smaller companies should be left exempt from the rules because of the costs they would face complying with them. It also asks if older documents that may only exist on paper, such as a company’s articles of incorporation, should not be subject to the linking rule.

Release No. 33-10201 was published in the midst of a far-reaching review by the SEC to reassess its disclosure rules. At the same, officials like Commissioner Kara Stein are pushing for a reconsideration of the agency’s reporting and disclosure regime given the changes made possible by new technology.

“As the SEC modernizes its disclosure system, it is important that each disclosure document be presented in a manner that can be effectively and efficiently used in today’s modern capital markets, with an independent accountant providing assurances to investors and market participants about its accuracy and fair presentation,” Stein said during a September 2015 speech in London to the Institute of Chartered Accountants in England and Wales and BritishAmerican Business

Stein also speculated about how technology could be used to get data to investors more quickly in a May 2016 speech.

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