TheCorporateCounsel.net

As Liz has highlighted before, the form check tool isn’t the only useful information found in the SEC’s “Semi-Annual Report to Congress on Machine Readable Data for Corporate Disclosures.” It also addresses enforcement actions resulting from use of machine-readable data and how the Staff otherwise uses that data.

On the enforcement side, in addition to the charges against six public companies and several related individuals for engaging in “earnings management” practices described in the prior report, the latest report says “Enforcement used and analyzed machine-readable data during the underlying investigation of one other action brought in 2023. In the course of performing background due diligence, Enforcement staff reviewed financial statements and notes and was able to view period-over-period changes more efficiently due to the machine readability of the data.”

Liz previously flagged other uses by the SEC Staff, including identifying issuers that are subject to the Holding Foreign Companies Accountable Act, identifying counting, sorting, comparing, and analyzing registrants and their disclosures and making preliminary assessments of compliance with PVP disclosure requirements. In addition to those uses, the report flags the following:

Corporation Finance staff and Division of Economic and Risk Analysis (DERA) staff review machine-readable financial statement information contained in filings under Commission rules. In connection with these reviews, the staff has issued comment letters to some individual issuers regarding the Inline XBRL tagging requirements.

The staff has also used its findings to publish observations on data quality and analyses of custom tags. On September 7, 2023, Corporation Finance published a sample letter to companies regarding their XBRL disclosures. The letter included sample comments that, depending on the particular facts and circumstances, and type of filing under review, Corporation Finance staff may issue to certain companies.

The tagging requirements of filing fee-related information, adopted in 2021, will enable EDGAR to determine automatically in many cases whether a registrant’s filing fee calculations have been performed correctly. Filings that use the SEC’s optional fee-tagging tool and test filings that do not pass specific validation tests will be flagged before the related live filing is filed.

This will allow filers to correct any filing fee calculation errors without needing to wait for Commission staff to verify the calculations manually, and without having to subsequently revise an already-filed document and adjust any fees owed due to an erroneous calculation.

– Meredith Ervine