Inline XBRL filing benefits

Since March 2017, the SEC has been up to make the registration statements and periodic reports more informative and insightful for the investors. The quarterly and annual reports of the US Public Companies have a section in their document - Index to Exhibits, which provides a list of exhibit information that needs to be read in conjunction with the report that’s being filed. These exhibits have references to other documents which could be important agreements the company has entered into in the past, articles of incorporation and the certification of the CEO and CFO etc.  Currently, someone seeking to retrieve and access an exhibit that has been incorporated by reference must review the exhibit index to determine the filing in which the exhibit is included, and then must search through the registrant’s filings to locate the relevant filing.

So, if your upcoming Q3 September 2017 filing has references to a credit agreement that was amended in June 2016, the investor will have to locate your June 2016 filing to understand your Q3 2017 filing. This is just one situation, what if it also has a Restricted Stock Agreement for a 2014 Stock Plan and an article of incorporation included in a 2011 filing and a CEO certification taking the investor back to 2013 filing! Imagine the plight of the investor when he has to go through this entire ordeal of  looking for these reference documents and the amount of time he will have to spare to get this done!

To overcome this problem, the SEC has come up with a new rule effective September 2017, wherein exhibits now need to be hyperlinked that will automatically direct users to the appropriate reference document.  

“We are so habitual to clicking hyperlinks on basically every website we visit, thus this commonsense solution provided by SEC will make life simpler for a lot of people.” said SEC Acting Chairman Michael Piwowar.

This way the SEC will help the investors and other participants to access exhibits easily. Following are the keys things to know about this new rule:

Who Needs to Follow the Exhibit Hyperlink Rule?

Currently the rule is applicable to a set of companies. This is supposed to be expanding in future. Since September 2017, following filers need to follow the Exhibit Hyperlink Rule

  • Large Accelerated Filers
  • Accelerated Filers

When is the Exhibit Hyperlink Rule Applicable from?

  • September 1, 2017: Large accelerated filers and accelerated filers must comply from this date.
  • September 1, 2018: Smaller Reporting Companies and Non‑accelerated Filers

Which Form Types are Covered under the Exhibit Hyperlink Rule?

Filers are supposed to include hyperlink in their exhibit index for following forms:

  • Forms - S-1, S-3, S-4, S-8, S-11, SF-1, SF-3, F-1, F-3 and F-4 under the Securities Act of 1933
  • Forms - 10, 10-K, 10-Q, 8-K and 10-D under the Securities Exchange Act of 1934
  • Forms – F-10 and 20-F

The final proposed rule will be applicable for almost all reports and registration statements that are intended to include exhibits under Item 601.

What should You Do?

  • The amended rule which is applicable beginning September 1 2017, mandates public companies to include an active hyperlink to the exhibits and submit the reports and registration statements in HyperText Markup Language (HTML) format. The amendments will facilitate access to exhibits for investors and other users of information filed with the SEC via the EDGAR system. What as a company You need to do?
  • You should start checking your upcoming filings to see if there are any of the form-types listed above that you intend to file. Most of you would have 10-Q and 8-Ks coming up soon. You can refer to your most recently filed report for this. In case of 10-Q, in most cases it would be Form 10-Q report for the quarter ended June 30, 2017 that you need to take a look at, if its an 8-K that you intend to file then the most relevant and appropriate 8-K.
  • In your previously filed report, you might have given references to some older documents in Index to Exhibits such as Articles of Incorporation. Additionally, you will be giving references to some documents that you are filing alongwith the main report such as Exhibit 31.1 and Exhibit 31.2 etc. For such references you need to get the hyperlinks ready in your current report.
  • Once you have set up the hyperlinks in your document, you need to ensure that these hyperlinks go in your filings as well. For this, you need to check if the EDGAR system of your filing software/ service provider’s software is upgraded or not.  If you are using a self-filing solution for SEC compliance, check with your software provider, if the software supports this new rule. On the other hand, if you are using a traditional approach wherein you send word documents to financial printer for EDGAR and XBRL preparation, you need to check with your financial printer if they are equipped with inserting hyperlinks in the EDGAR HTML.
  • A point to note here is that once your document contains the required hyperlinks; such text will appear as a blue clickable hyperlink.
  • Before submission, ensure that you verify each hyperlink present in your report and confirm if it navigates to the appropriate document.

The SEC also accepts the filings in American Standard Code for Information Interchange (ASCII) format, however this format does not support functional hyperlinks. Considering the same, the SEC explained in its adopting release for the rule amendments, that as HTML supports hyperlink creation and navigation, it is requiring the use of HTML format.

Now is the right time to act on this new rule, to make sure that you are well prepared ahead of time to meet the new requirements We at IRIS ensure that our SEC filing platform, IRIS CARBON is straightaway upgraded to accommodate every new rule and amendment announced by the SEC, so that our clients have the least trouble in following up with the regulatory requirements ensuring a hassle-free experience.  You can contact us for a hassle-free SEC filing.