As the times evolve, so must our ways. The SEC is a regulator that has certainly lived by this ethos. So it should not come as a surprise when the US regulator proposed amendments to update the process of filing fee disclosures and payment methods on October 24, 2019.
The proposed amendments will apply to most fee-bearing forms, schedules, and statements that US filers will be familiar with. Hold your internal sighs at bay because despite how comprehensive the amendment document is, this proposal is set to considerably ease your filing process.
The need for modernizing filing fee calculation
The current filing fee disclosure and payment proposal method are highly manual and labor-intensive. While the rest of your financial report is machine-readable (thanks to XBRL/iXBRL format), the fee-related information is not. Since EDGARlink cannot actually read the filing fee-related information that’s on the cover page of the report, it has to be manually uploaded into the EDGARlink webpages. Naturally, the manual process of entering the same data elements in more than one place increases the possibility of errors. This creates problems for Commission staff and filers both, not to mention how tedious the entire process is as well. This is why SEC’s amendment is necessary.
Modernization will also play an important role in the process of filing fee calculation. While the underlying components used for the calculation are not always required to be reported, they come into play when issuers attempt to claim fee offsets. Now, in the midst of complex calculations, keeping track of data input changes, and ensuring that calculations are reconciled in case of inconsistencies, the filer and Commission staff are facing nothing short of a nightmare. Again, there are bound to be errors in the process of constant repetition.
Once the SEC’s proposed amendments are adopted, the fee payment validation process will become faster and more streamlined. It will enable the staff to use automated tools to help validate payment information with respect to complicated situations, such as when a registrant claims an offset of fees paid with one or more previous registration statements filed by the registrant or an affiliate. Improvements in the payment validation process made possible by the proposed tagging of the fee table and accompanying information with pre-submission validation by the filer also asserts that the proper filing fee has been paid.
The SEC’s solution
The SEC has proposed to amend most fee-bearing forms, schedules, and statements to include all information for fee calculation in a structured format using Inline eXtensible Business Reporting Language (iXBRL). In doing this, they intend to:
Enable efficient automated access to and processing of, information relevant to fee calculation; and
Eliminate both the need to enter duplicate fee information in the header and the possibility of inconsistent fee information between the header and the body of the filing.
This will improve the filing fee preparation, disclosure, validation, assessment, and collection processes. To make the process more convenient, the SEC has also decided to add an option for fee payment via ACH (Automated Clearing House), which offers faster and more accurate fee payment processing and eliminates the option for fee payment via paper cheques and money orders.
List of amended forms
The SEC has stated that this list of forms will require disclosure, and structuring of all information necessary to calculate the filing fee. The cover page of these fee-bearing filings must include all of the information necessary to calculate the fee, which would expedite staff review of fee calculations, provide more certainty to filers that the proper filing fee has been paid, and reduce burdens on filers. For a more detailed list of amendments, follow this link.
When are filers expected to transition?
The SEC’s proposed structuring requirements will be phased in over time but compliance with the other proposed requirements would be mandatory upon the requirements’ effectiveness:
For Large accelerated filers: Filings submitted on or after 18 months after the requirements’ effectiveness
Accelerated filers: Filings submitted on or after 30 months after the requirements’ effectiveness.
All other filers including all investment companies filing reports on Forms N-2, N-5, and N-14: Filings submitted on or after 42 months after the requirements’ effectiveness
The proposed phase-in will provide filing agents and software vendors additional time to develop the needed technology and related expertise to implement the amendments. More importantly, the entire process of modernizing filing fee disclosure and payment methods will make your life easier as a filer, even if you only consider it a change that will bring a certain order to a haphazard process.