SEC Commissioner Allison Herren Lee expressed support for expanding the use of "structured data into the disclosure process."

In remarks at the XBLR US Investor Forum 2020, Ms. Lee asserted: "Just as financial market participants continue to innovate and evolve with respect to the data they generate and use, the SEC must keep pace and continually evaluate how to enhance the usability and quality of data in our filings." She emphasized that the SEC should assess "when and how best to bring structured data into the disclosure process, how to maximize its reliability, and how to incorporate broadly accessible financial identifiers that complement and enhance the usability of the data."

Ms. Lee urged the SEC to consider "obvious places where structuring could be relatively simple and would provide significant transparency benefits," weighing the cost to issuers against the cost to market efficiency more broadly when the SEC did not require structured data.

Ms. Lee suggested that the SEC finalize the proposed rule regarding structured voting data reported on Form N-PX, which would allow investors to understand how their money is being voted in executive compensation matters. Ms. Lee also highlighted the development of environmental, social and governance ("ESG") disclosure requirements as an opportunity to simultaneously consider how they can be made amenable to structuring, stating that the development of ESG disclosures and the application of structured data could develop "in tandem."

Commentary

Pushing for more standardized ESG disclosure by SEC-registered issuers has been a focus of Commissioner Lee and, assuming there is a changing of the guard at the SEC, may become a focus of the majority of the SEC commissioners. It is one thing to push for the concept of more structured data as to ESG and a harder task to define the data that can and should be structured. What ESG data can be put into a structured form remains very much an open question.

In advocating for greater ESG disclosure, Commissioner Lee is also effectively seeking the reversal of what had been one of the most significant policy goals of the Chair Clayton tenure at the SEC: to reduce the expenses and burdens of being an SEC-reporting company. One of the potential negative consequences of requiring a new set of disclosures is that it may provide another reason for smaller issuers to stay private or to cash out by being acquired rather than by going public. Commissioner Lee previously acknowledged the reluctance of issuers to go public (and become subject to registration with the SEC), but attributed the reluctance to the ease of raising money in the private markets as opposed to the expense of being a public company. See generally SEC Commissioner Lee Advocates for Public Markets.

Primary Sources

  1. SEC Speech, Allison Herren Lee: The Promise of Structured Data - True Modernization of Disclosure Effectiveness

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