TheCorporateCounsel.net

As I noted last month, the SEC’s creeping Inline XBRL requirements present a trap for the unwary, because failing to tag disclosure using Inline XBRL has the draconian penalty of rendering a company not “current” for form eligibility and Rule 144 purposes. As we now enter the heart of the annual reporting season, companies should double down on their efforts to check the Inline XBRL tagging of their reports prior to filing them on EDGAR.

Bob Dow of Maynard Nexsen has observed that some filers this season have failed to tag their new insider trading policy disclosure required by Item 408(b) of Regulation S-K and their cybersecurity disclosures required Item 106 of Regulation S-K (which just became subject to Inline XBRL tagging requirements after a one-year phase in). This harkens back to the situation that we observed when the quarterly disclosure of the adoption or termination of Rule 10b5-1 plans went into effect, as some companies began making filings after the effective date that failed to include the required Inline XBRL tagging.

As I noted last month, if a company does not file interactive data exhibits on a timely basis, the company will be deemed to not be current with its Exchange Act reports for purposes of eligibility for Form S-3, Form S-8 and other forms, and will be deemed not to have available current public information for purposes of Rule 144. A filing delinquency can be remedied by filing an amendment that includes the required interactive data files, at which time the company will be deemed to be current again.

For those companies that use an external filing service or that utilize internal filing software that has an XBRL tagging service attached to it, the problem can often be avoided because those services have systems in place to check on whether the required Inline XBRL tagging has been completed prior to filing. Those companies that are in “DIY” mode when it comes to their EDGAR filing need to put controls in place to double-check Inline XBRL compliance prior to making any periodic or current report filing.

– Dave Lynn