Mutual Funds Submit First XBRL-Formatted Reports to SEC

Today four mutual funds - the Allegiant Advantage Fund, American Funds' Europacific Growth Fund, the Muhlenkamp Fund and the Vanguard 500 Index Fund - submitted their first XBRL-formatted risk/return summaries to the SEC. This means they've converted these summaries of fund objectives, costs, and performance - the part of prospectuses investors are most interested in - from static data to interactive data that can be automatically read by software, by tagging data fields according to a taxonomy developed by the ICI. The summary data will be made available in the SEC's EDGAR online database (at the SEC's website), which began accepting such XBRL data from mutual funds yesterday.According to Eric Falkeis, vice president of fund administration of U.S. Bancorp Fund Services, Milwaukee, which prepared the Muhlenkamp Fund's new XBRL-formatted report, mutual funds that adopt the new reporting format can reap four immediate benefits: The first is transparency of data, as shareholders and the market in general will gain easier access to it. Secondly, Falkeis expects data accuracy to improve. "Today, third parties [such as Morningstar] grab the data and enter it into their systems manually," he says. "Obviously, there's risk in manual intervention."

The third advantage is that the time to market of mutual fund data will be quicker, as there will no longer be a need to wait for data vendors to aggregate it. And fourth, Falkeis says, advisors who take the initiative and provide this interactive data early on may establish a sense of trust with investors.

Although the new interactive summaries are filed in addition to mutual funds' regular reporting requirements (and therefore add to the existing workload rather than lessen it), Falkeis says they're not difficult to produce. U.S. Bancorp uses Confluence's QuickTag system to map data to the ICI taxonomy for its mutual fund clients. He expects more clients to sign up for this service and he believes the SEC will soon offer better viewer reporting tools for accessing and using the data.

In June, the SEC adopted the rule amendments that allow mutual funds to submit risk/return summary information in XBRL format. Chairman Christopher Cox says the SEC's motive for encouraging XBRL reporting is to help investors. "Millions of retail investors rely on mutual funds to finance their retirement, health care, education, and other financial needs, so shopping for the right fund shouldn't be a needlessly time-consuming and frustrating exercise," he stated. "When most mutual funds provide their risk/return summary information using dynamic data that's searchable and comparable on the Web, investors will be able to comparison shop among thousands of funds at the click of a mouse. This is a potentially rich new source of investing information for retail investors who need it most." The electronic data should also save the SEC time in classifying and handling such reports. The SEC commenced its XBRL Voluntary Financial Reporting Program in April 2005, allowing public companies to voluntarily submit XBRL-formatted data as exhibits to periodic reports and other filings. Few have volunteered to date.