TechTalk Blog – US SEC EXPANDS USE OF STRUCTURED DATA TAGGING (XBRL) FOR INVESTOR PROTECTION

By David Colgren posted 11-09-2015 10:13 AM

  

Several days ago the US SEC released its Final Rule relating to the use of Crowdfunding to support the SME marketplace create millions of new jobs. 

In April, 2014 in Strategic Finance Magazine we discussed the relevance of using Crowdfunding and its importance to the SME marketplace and relevance to the management accountant. The IMA has been a big supporter of the use of data tagging of key public financial information to support better transparency and accountability. Using such open, freely available technologies like XBRL can enhance the data tagging of critical data disclosed to the public to help raise money in the capital markets and create new jobs. XBRL (an XML data tagging regime for financial/business reporting data tagging standard) and the new SEC crowdfunding rule requires the use of structured data like XBRL.

XBRL has mandated by the US SEC to data tag critical financial information disclosed by public companies to enhance accountability and transparency and to protect millions of investors around the world investing in US public companies. XBRL for public company financial statement disclosure has been in use of the US SEC for more than six years  (monitoring more than 14,000 public companies) and has been very success in helping the US SEC detect fraud or find anomalies in filings to the US SEC (ROBOCOP) using a machine-readable format instead of reviewing financial statements by hand.

 More than 2/3 of public companies around the world have been mandated to use XBRL for public company disclosure (US, UK, Japan, China, South Korea, Israel to name a few)…

We are please with the recent US SEC Crowdfunding Final Rule to utilize the same, open, freely available financial data standard like XBRL to also enhance disclosures.

 As referenced in the Final US SEC Crowdfunding rule

 “Consistent with the proposal, we are adopting a single Form C for all filings under Regulation Crowdfunding.519 We believe that the use of one form will be more efficient than requiring multiple forms, will not result in unduly lengthy forms, and will simplify the filing process for issuers and their preparers. EDGAR will automatically provide each filing with an appropriate tag depending on which box the issuer checks so that investors can distinguish among the different filings.

We expect that requiring certain disclosures to be submitted using XML-based filings will produce benefits for issuers, investors and the Commission. For instance, using information filed pursuant to these requirements, investors can track capital generated through crowdfunding offerings without manually inspecting each filing. The ability to efficiently collect information on all issuers also can provide an incentive for data aggregators or other market participants to offer services or analysis that investors can use to compare and choose among different offerings. For example, reporting key financial information using XML-based filings will allow investors, analysts and data aggregators to more easily compile, analyze and compare information about the capital structure and financial position of various issuers.”

According to Wikipedia:

Crowdfunding is the practice of funding a project or venture by raising monetary contributions from a large number of people, today often performed via internet-mediated registries, but the concept can also be executed through mail-order subscriptions, benefit events, and other methods.[1] Crowdfunding is a form of alternative finance, which has emerged outside of the traditional financial system.[2]

The crowdfunding model is based on three types of actors: the project initiator who proposes the idea and/or project to be funded; individuals or groups who support the idea; and a moderating organization (the "platform") that brings the parties together to launch the idea .[3]

In 2013, the crowdfunding industry raised over $5.1 billion worldwide.[4]

Crowdfunding websites helped companies and individuals worldwide raise US$89 million from members of the public in 2010, US$1.47 billion in 2011 and US$2.66 billion in 2012—US$1.6 billion of the 2012 amount was raised in North America.[12] In 2012 more than one million individual campaigns were established globally[13] and the industry was projected to grow to US$5.1 billion in 2013.[13] and to reach US$ 1 trillion in 2025.[14]

A May 2014 report, released by the United Kingdom-based The Crowdfunding Centre and titled "The State of the Crowdfunding Nation", presented data showing that during the month of March 2014, more than US$60,000 dollars were raised on an hourly basis via global crowdfunding initiatives. Also during this period, 442 crowdfunding campaigns were launched globally on a daily basis.[15]

Stay tuned as we provide additional information as the US SEC announces further uses of the XBRL data format to enhanced transparency and disclosure across the capital markets to protect investors, taxpayers and the US public interest. 

 

 

 



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