Filing a Mutual Fund Document in the XBRL Format? Check for these 3 Common Misses

by Anuradha | March 28, 2018

Mistakes in SEC Mutual Fund Filings

Let’s begin with the basics.

If you are a mutual fund company in the US, you already know that filing EDGAR HTML documents with the SEC is not sufficient. You also need to submit Interactive Data files in XBRL format. These XBRL documents must be aligned with US SEC’s Risk/ Return taxonomy that has been released for mutual fund entities.

Does this sound complex and time-consuming?

It need not be.

In fact, getting your filings compliant and ready with the Risk/ Return taxonomy may be the easiest and the most fun thing you can do with your data. (We may be exaggerating about the fun part.)

We have processed over 270 filings for several Mutual Fund entities through our disclosure management platform, IRIS CARBON®.

Here are our observations:

  • The SEC rejects documents with serious quality issues.
  • Even if the document doesn't get rejected, it takes nearly 40% more time and effort to correct the quality issues to make sure the document is in good shape.
  • Most of these quality issues point to the Compliance team’s lack of knowledge with the Risk/ Return taxonomy and SEC’s Edgar Filing Manual rules.

You can avoid a lot of rework by getting the filings right the very first time. To do this, simply pay attention to 3 important areas or what we call the TSL (Tag-Structure-Label) Trinity:

TSL Structure

Tagging: Have you tagged all vital data in your XBRL? 

The Risk/Return taxonomy is relatively small, with just around 350 elements. However, despite it being a condensed taxonomy, we find entities miss tagging data in their documents to the taxonomy. This is just plain lack of familiarity with the taxonomy, something that can be easily fixed without too much effort.

Tagging of Mutual Fund XBRL filing

All it needs is a little investment of time in familiarizing oneself with the taxonomy (the taxonomy is well structured and easy to understand).

Example of a frequent (and important) miss: Not Tagging the Secondary Investment Objective of the Fund.

Although most funds tag their primary investment objective, the secondary objective is important too. And there’s a tag for it in the risk-return taxonomy. However, most filers miss tagging this.  

The Income Fund (the "Fund") seeks a high level of income consistent with reasonable risk. The Fund seeks capital appreciation as a secondary goal. 

(Tip: Objective is 'rr_ObjectiveSecondaryTextBlock'. The text in blue should be tagged to this element. This will help users to locate the secondary investment objective easily.)


Structure: Is your taxonomy structure prepared as per SEC guidelines?

You have tagged the elements properly and you are still getting lots of errors. What should you do now? Check your taxonomy structure.

SEC-approved XBRL taxonomies require the XBRL links to be structured and indented in a particular manner. When the XBRL is not structured in this manner, it leads to errors and reflects poor quality of your compliance reporting.

Example:

Labels: Does your XBRL have appropriate label roles as per Edgar Filer Manual (EFM) rules?

The third issue that firms trip up on is getting the labels right. Here is one example:

According to Edgar Filer Manual (EFM) rule 6.11.4, if there is a summation relationship defined (which is a fancy way of saying if some items add up to a total), the total amount must be indicated using ‘total label’as a ‘preferred label’. The preferred label role is what visually identifies totals as totals while rendering.

Confused?

Refer to the screenshot below.

Example of incorrect labelling of mutual funds

This table above has two line items that are totals - ‘Total Annual Fund Operating Expenses’ and ‘Total Annual Fund Operating Expenses after Fee Waiver [and/or Expense Reimbursement]’. However, right now when you look at the numbers visually, you don’t get an indication that they are totals.

In the correct version (i.e. when the preferred labels are defined as Total), this is how the items will be displayed:

Example of correct labelling

Notice the horizontal lines under the totals. For someone who views the data, these lines make it clear that the value just above the lines is a total amount. This is done by getting the label role right while creating the XBRL document.

There you have it – three simple things to focus on to ensure your filings are in good shape. Now, you won’t need to worry about your XBRL filings being rejected or being of poor quality.

About Us 

IRIS CARBON® is a cloud-based collaborative platform that allows you to create and manage your filings end to end. Our filings have consistently been ranked as having the highest quality by various independent reports.

If you would like a review of the quality of your filings or help in handling the XBRL filings of your Mutual funds, get in touch with us:

Email- quality.review@irisbusiness.com or

Call Anand P. at: +1 908 203 4640.