WASHINGTON (Reuters) - Public companies will be required to make it easier for investors to locate exhibits attached to their financial filings by including hyperlinks, under a new rule adopted on Wednesday by the U.S. Securities and Exchange Commission.
The change is widely viewed as a common sense measure that is long overdue, and did not spark opposition from the SEC’s two commissioners, Mike Piwowar, the acting Republican chairman, and Kara Stein, a Democrat.
Under current rules, companies are required to provide a list of exhibits, such as their bylaws and underwriting agreements, and where they can be located. But they can be hard for investors to quickly and easily locate without hyperlinks.
“In many cases, exhibits are incorporated by reference, meaning that they are not attached to a current filing,” Stein said. “In order to find an exhibit, an individual would need to embark on a time-consuming search.”
The final hyperlink rule, which is slated to take effect in September for most companies, is among a raft of other proposals unveiled Wednesday, with all of them geared toward modernizing how public companies disclose information to investors.
Collectively, the measures unveiled by the SEC on Wednesday aim to “focus the light of disclosure in ways that empower investors” while also promoting “efficient regulation,” Piwowar said.
One such initiative, for instance, calls for public comments on how the SEC should update stale, 30-year-old guidance to the banking sector about certain statistical disclosures provided to investors.
“Industry Guide 3,” as the SEC calls it, does not reflect changes the sector has experienced over the last few decades. The SEC asks for comments about things such as how regulation impacts banks’ operations, capital structures, dividend policies and treatment in bankruptcy, among other things, and how the disclosure regime can be improved.
A second proposal, meanwhile, would require companies to use inline XBRL, an open source software designed to make it easier to view, navigate and search financial data.
Companies already provide data using XBRL, a software that labels financial statements with computer-readable tags that can be read like barcodes. By requiring inline XBRL, companies will then embed that structured data into the financial statements.
In addition to the various public company disclosure proposals, the SEC also proposed a measure that would require brokers who underwrite municipal bonds to ask municipalities for additional disclosures related to bank loans, swaps and other financial obligations.
Reporting by Sarah N. Lynch; Editing by Chizu Nomiyama and Paul Simao