Congressman Darrell Issa (R-CA) will be introducing the Financial Transparency Act of 2015 that will mandate standards like XBRL across the capital markets and possible link to the Global Legal Entity Initiative (LEI).
This announcement today, follows the announcement last week from the White House that US Treasury and OMB has selected the XBRL data standard as the data standard to be used across financial government reporting for better transparency and accountability of federal, state and local governments.
Both XBRL for the US Capital Markets and for Government reporting will offer new job skill opportunities for management accountants. This effort -- creating a common data format so tagged information can be machine-readable -- will be a potential opportunity for management accountants involved in financial, regulatory and government reporting and will spawn a new sector of accounting IT professionals. As one of the founding members of the XBRL Consortium the IMA has been a big supporter of the DATA ACT and other efforts to bring transparency and accountability to the capital markets including the use of XBRL for sustainability reporting to support the concept of integrated reporting.
Below are highlights of this proposed legislation that will be introduced by Congressman Issa later today:
The Financial Transparency Act of 2015:
U.S. financial regulators should transform their reporting requirements from flat text documents and images into open, searchable data. Regulators in most developed countries have begun using searchable data formats, instead of PDF documents and other unstructured formats, for the information they collect from publicly-traded companies, banks, and financial firms. The U.S. lags behind.
Most U.S. regulators have failed to adopt the data standards necessary to transform their reporting requirements into searchable data. In the Bush administration, the SEC adopted a searchable data format for corporate financial statements, but progress stalled because the agency has continued to collect the same information twice - both as data and as documents. The CFTC failed to specify data standards for swap data reporting, preventing it from being able to use existing swaps data to spot systemic risk. The Treasury Department called on all financial regulators to start using the universal Legal Entity Identifier (LEI) to allow the same entity’s filings with different regulators to be matched together, but most agencies did not do so.
The Financial Transparency Act mandates data standards and data publication. This bill requires each of the nine members of the Financial Stability Oversight Council to adopt data standards for the information it collects, ensures that these standards will be coordinated to enable searchability across agencies, and provides that any information required by other laws to be public be made public in a searchable format.
Benefits for Investors: Investors, and the analysts serving them, are demanding searchable data on investment opportunities, rather than documents that they must manually review to extract actionable information.
Benefits for Regulated Entities: If financial regulators adopted consistent data standards, software could enable publicly-traded companies, banks, and financial firms to automate compliance tasks that today must be performed manually.
Benefits for Taxpayers: As the SEC’s failure to detect the Madoff fraud showed, financial regulators cannot match information reported by the same firm to different agencies - or even to different offices within the same agency. Consistent data standards would enable agencies to better use information they are already collecting.
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