As the biggest U.S. corporations begin using XBRL this month to file reports with the Securities and Exchange Commission (SEC), a trio of financial services industry organizations is already trying to build on that requirement to promote the use of XBRL for the announcements of corporate actions.
The Depository Trust Clearing Corp. (DTCC), SWIFT and XBRL U.S. said last month that they are joining forces to create an XBRL taxonomy for corporate actions, such as mergers, stock splits and dividend payments. In addition, DTCC will develop a system that creates a unique identifier for each corporate action announcement.
Extending the use of XBRL to tag corporate actions would allow financial services firms to boost their efficiency and eliminate manual errors by using more straight-through processing (STP) in their communications because the XBRL tags can be automatically translated into SWIFT's ISO messaging standard.
The trio may have some persuading to do with corporates, however, judging by the reception the initiative received when it was announced recently at a conference in New York. Jeff Morgan, CEO of the National Investor Relations Institute, said XBRL tagging of corporate actions announcements was “not on issuers' radar screens,” adding that companies may not feel they have an incentive to standardize the release of corporate actions.
Mark Bolgiano, the CEO of XBRL US, said that since companies will be using XBRL to tag their SEC reports, the cost of extending its use to corporate actions is likely to be limited. “They're not moving to some special corporate actions XBRL production system,” Bolgiano said.
Errors made while manually converting corporate actions information into electronic format annually cost financial services firms from $400 million to $900 million a year, according to U.K. consulting firm Oxera.
However, a company's responsibility ends once it releases its announcement and makes any required filings. “The issuer is obviously concerned if there is an error in the redistribution of that information, but the fact is, any redistribution is not the issuer's responsibility,” Morgan said, adding that company press releases are not regulated so companies won't be required to put them in XBRL.
The SEC likely would support such a move, though “the commission is not at this time proposing rules around tagging of corporate actions,” David Blaszkowsky, director of the SEC's Office of Interactive Disclosure, said at the same conference. “We hoped and expected that the implementation of XBRL for certain kinds of SEC reporting, such as for GAAP, functions as the infrastructure and would set the conditions for other private sector development and adoption of XBRL, such as corporate actions,” he said, adding that corporate actions reporting “is an ideal domain” for XBRL.
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Susan Kelly
Susan Kelly is a business journalist who has written for Treasury & Risk, FierceCFO, Global Finance, Financial Week, Bridge News and The Bond Buyer.
