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Daily Rules, Proposed Rules, and Notices of the Federal Government

SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 230, 232, 239, and 274

[Release Nos. 33-9006, 34-59391, 39-2462, IC-28617; File Number S7-12-08]

RIN 3235-AK13

Interactive Data for Mutual Fund Risk/Return Summary

AGENCY: Securities and Exchange Commission.
ACTION: Final rule.
SUMMARY: We are adopting rule amendments requiring mutual funds to provide risk/return summary information in a form that is intended to improve its usefulness to investors. Under the rules, risk/return summary information could be downloaded directly into spreadsheets, analyzed in a variety of ways using commercial off-the-shelf software, and used within investment models in other software formats. Mutual funds will provide the risk/return summary section of their prospectuses to the Commission and on their Web sites in interactive data format using the eXtensible Business Reporting Language ("XBRL"). The interactive data will be provided as exhibits to registration statements and as exhibits to prospectuses with risk/return summary information that varies from the registration statement. The rules are intended not only to make risk/return summary information easier for investors to analyze but also to assist in automating regulatory filings and business information processing. Interactive data has the potential to increase the speed, accuracy, and usability of mutual fund disclosure, and eventually reduce costs. We also are adopting rules to permit investment companies to submit portfolio holdings information in our interactive data voluntary program without being required to submit other financial information.
DATES: Effective Date:July 15, 2009.Compliance Date:January 1, 2011. Section II.H. of this release contains information on the effective date and the compliance date.
FOR FURTHER INFORMATION CONTACT: Brent J. Fields, Assistant Director, Office of Disclosure and Review, Mark H. Berman, Senior Special Counsel, Office of Special Projects, Tara R. Buckley, Senior Counsel, Office of Chief Counsel, Deborah D. Skeens, Senior Counsel, and Alberto H. Zapata, Senior Counsel, Office of Disclosure Regulation, Division of Investment Management, at (202) 551-6784, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-5720.
SUPPLEMENTARY INFORMATION:

The Securities and Exchange Commission (“Commission”) is adopting amendments to rules 4851 and 4972 under the Securities Act of 1933 (“Securities Act”), rules 11,3 202,4 401,5 and 4056 of Regulation S-T,7 and Form N-1A8 under the Securities Act and the Investment Company Act of 1940 (“Investment Company Act”).9

117 CFR 230.485.

217 CFR 230.497.

317 CFR 232.11.

417 CFR 232.202.

517 CFR 232.401.

6The Commission recently added new rule 405 to Regulation S-T [17 CFR 232.405] in a separate release.SeeSecurities Act Release No. 9002 (Jan. 30, 2009) [74 FR 6776 (Feb. 10, 2009)] (“Interactive Data Adopting Release”).

717 CFR 232.10et seq.

817 CFR 239.15A and 274.11A.

9The Commission proposed these rule and form amendments in June 2008.SeeSecurities Act Release No. 8929 (June 10, 2008) [73 FR 35442 (June 23, 2008)] (“Proposing Release”).

Table of Contents Executive Summary I. Introduction and Backgroud A. Commission Initiatives to Update the Public Disclosure Process B. Current Filing Technology and Interactive Data II. Discussion A. Submission of Risk/Return Summary Information Using Interactive Data B. Content and Submission Requirements for Interactive Risk/Return Summary Information C. Web Site Posting of Interactive Data D. Consequences of Non-Compliance and Hardship Exemption E. Interactive Data List of Tags and Commission Viewer F. Application of Federal Securities Laws G. Changes to the Voluntary Program H. Compliance Date III. Paperwork Reduction Act IV. Cost/Benefit Analysis V. Consideration of Burden on Competition and Promotion of Efficiency, Competition, and Capital Formation VI. Final Regulatory Flexibility Analysis VII. Statutory Authority Text of Rule and Form Amendments Executive Summary

The principal elements of the rule amendments we are adopting today are as follows:

• Open-end management investment companies (“mutual funds”)10 must submit to the Commission a new exhibit with their risk/return summary information in interactive data format, beginning with initial registration statements, and post-effective amendments that are annual updates to effective registration statements that become effective after January 1, 2011.11

10An open-end management investment company is an investment company, other than a unit investment trust or face-amount certificate company, that offers for sale or has outstanding any redeemable security of which it is the issuer.SeeSections 4 and 5(a)(1) of the Investment Company Act [15 U.S.C. 80a-4 and 80a-5(a)(1)].

11We have adjusted the compliance date to provide mutual funds sufficient time to become familiar with interactive data.See infraSection II.H. Interactive data will be required as an exhibit to a registration statement or post-effective amendment thereto that contains risk/return summary information and to any form of prospectus filed pursuant to rule 497(c) or (e) under the Securities Act [17 CFR 230.497(c) or (e)] that contains risk/return summary information that varies from the registration statement. Interactive data will not be required as an exhibit to a post-effective amendment that does not contain risk/return summary information or to a form of prospectus filed pursuant to rule 497(c) or (e) that does not contain risk/return summary information that varies from the registration statement.

• An interactive data file submitted with a registration statement must be filed as a post-effective amendment under rule 485(b) under the Securities Act12 and must be filed after effectiveness of the related filing, but no later than 15 business days after the effective date of the related filing. An interactive data file required to be submitted with a form of prospectus filed pursuant to rule 497(c) or (e) under the Securities Act may be submitted with the filing or subsequent thereto, but no later than 15 business days after the filing made pursuant to rule 497.

12A post-effective amendment filed under rule 485(b) under the Securities Act [17 CFR 230.485(b)] may become effective immediately upon filing. A post-effective amendment may only be filed under rule 485(b) if it is filed for one or more specified purposes, including to make non-material changes to the registration statement.

• Risk/return summary information in interactive data format must be provided as an exhibit identified in General Instruction C.3.(g).(iv) of Form N-1A.13

13Form N-1A is the form used by mutual funds to register under the Investment Company Act and to offer securities under the Securities Act.

• The rules do not alter the requirements to provide risk/return summary information with the traditional format filings.14

14When we extended the voluntary program to the mutual fund risk/return summary, we stated in the adopting release that the interactive data submission would be supplemental to filings and not replace the required traditional electronic format of the information it contains. We also said that volunteers would be required to continue to file their traditional electronic filings.SeePart II.A. of Securities Act Release No. 8823 (July 11, 2007) [72 FR 39290, 39292 (July 17, 2007)].

• A mutual fund required to provide risk/return summary information in interactive data format to the Commission also is required to post that information in interactive data format on its Web site not later than the end of the calendar day it submitted or was required to submit the interactive dataexhibit to the Commission, whichever is earlier.15

15The Web site posting requirement applies only to the extent a mutual fund already maintains a Web site.

• If a mutual fund does not submit or post interactive data as required, the fund's ability to file post-effective amendments to its registration statement under rule 485(b) under the Securities Act will be automatically suspended until the fund submits and posts the interactive data as required.

• Mutual funds providing risk/return summary information in interactive data format are required to use the most recent list of tags released by XBRL U.S.16 as required by Regulation S-T and the EDGAR Filer Manual.17 Mutual funds also are required to tag a limited number of document and entity identifier elements, such as the form type and the fund's name. As with interactive data for the risk/return summary, these document and entity identifier elements must be formatted using the appropriate list of tags as required by Regulation S-T and the EDGAR Filer Manual.

16The appropriate list of tags for document and entity identifier elements will be a list released by XBRL U.S.,see infranote 46, and will be required to be used by all issuers required to submit interactive data.

17Rule 405 of Regulation S-T directly sets forth the basic tagging requirements and indirectly sets forth the rest of the tagging requirements through the requirement to comply with the EDGAR Filer Manual, which is available on the Commission's Web site at:http://www.sec.gov/info/edgar/edmanuals.htm.Consistent with rule 405, the EDGAR Filer Manual contains the technical tagging requirements.SeeInteractive Data Adopting Release,supranote 6 (adopting rule 405 of Regulation S-T). Currently, we are in the process of updating the EDGAR Filer Manual to reflect changes in the tagging requirements applicable to financial statements.SeeInteractive Data Adopting Release,supranote 6. We anticipate that similar updates to address revisions in the tagging requirements applicable to fund risk/return summary information and portfolio holdings will be finalized during 2009.

• New rule 406T of Regulation S-T18 addresses the liability for an interactive data file and provides that an interactive data file is:

18 SeeInteractive Data Adopting Release,supranote 6 (adopting rule 406T of Regulation S-T).

○ Subject to the anti-fraud provisions of Section 17(a)(1) of the Securities Act, Section 10(b) of and rule 10b-5 under the Securities Exchange Act of 1934 (“Exchange Act”), and Section 206(1) of the Investment Advisers Act of 1940 (“Investment Advisers Act”), except as provided below;

Deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act, is deemed not filed for purposes of Section 18 of the Exchange Act or Section 34(b) of the Investment Company Act, and otherwise is not subject to liability under these sections;

○ Deemed filed for purposes of (and, as a result, benefit from) rule 103 of Regulation S-T;19 and

19The interactive data file is deemed filed for purposes of rule 103 of Regulation S-T [17 CFR 232.103] and, as a result, in general, the mutual fund would not be subject to liability for electronic transmission errors beyond its control if the mutual fund corrects the problem through an amendment as soon as reasonably practicable after the fund becomes aware of the problem. Interactive data files are deemed filed for purposes of rule 103 regardless of whether they are eligible for the modified treatment provided by rule 406T at the time submitted. Rule 406T expressly provides that interactive data files are deemed filed for purposes of rule 103 to remove any negative inference that otherwise might be drawn due to the fact that rule 406T deems interactive data files to be not filed for other specified purposes.

○ Subject to liability for a failure to comply with rule 405 of Regulation S-T,20 but shall be deemed to have complied with rule 405 and would not be subject to liability under the anti-fraud provisions set forth above or under any other liability provision if the electronic filer:

20 See supranote 17.

■ Makes a good faith attempt to comply with rule 405; and

■ after the electronic filer becomes aware that the interactive data file fails to comply with rule 405, promptly amends the interactive data file to comply with rule 405.

• These liability provisions will apply only until October 31, 2014, and, thereafter, an interactive data file will be subject to the same liability provisions as the related official filing.

• The voluntary program is being modified to allow for participation by mutual funds with respect to risk/return summary information up until January 1, 2011, but continue to permit investment companies to participate with respect to financial statement information thereafter. As a result, the voluntary program will continue after the compliance date of these rule amendments for the financial statements of investment companies that are registered under the Investment Company Act, business development companies,21 and other entities that report under the Exchange Act and prepare their financial statements in accordance with Article 6 of Regulation S-X.

21Business development companies are a category of closed-end investment companies that are not required to register under the Investment Company Act.SeeSection 2(a)(48) of the Investment Company Act [15 U.S.C. 80a-2(a)(48)].

• Registered investment companies, business development companies, and other entities that report under the Exchange Act and prepare their financial statements in accordance with Article 6 of Regulation S-X are permitted to submit exhibits under the voluntary program containing a tagged schedule of portfolio holdings without having to submit other financial information in interactive data format.

We intend to monitor implementation and, if necessary, make appropriate adjustments to the adopted amendments.

I. Introduction and Background A. Commission Initiatives To Update the Public Disclosure Process

Over the last several decades, developments in technology and electronic data communication have facilitated greater transparency in the form of easier access to, and analysis of, financial reporting and disclosures. Technological developments also have significantly decreased the time and cost of filing disclosure documents with us. Most notably, in 1993 we began to require electronic filing on our Electronic Data Gathering, Analysis, and Retrieval System (“EDGAR”).22 Since then, widespread use of the Internet has vastly decreased the time and expense of accessing disclosure filed with us.

22In 1993, we began to require domestic issuers to file most documents electronically. Securities Act Release No. 6977 (Feb. 23, 1993) [58 FR 14628 (Mar. 18, 1993)]. Electronic filing began with a pilot program in 1984. Securities Act Release No. 6539 (June 27, 1984) [49 FR 28044 (July 10, 1984)].

We continue to update our filing standards and systems as technologies improve, consistent with our goal to promote efficient and transparent capital markets. Most recently, we unveiled the Interactive Data Electronic Applications database (“IDEA”), which will initially supplement and eventually replace EDGAR, and which is designed to take full advantage of interactive technology in order to provide investors with better and more useful financial disclosures.23 Also, since 2003 we have required electronic filing of certain ownership reports filed on Forms 3,24 4,25 and 526 in a format that provides interactive data, and recently we adopted similar rules governing the filing of Form D.27 In addition, recently we have encouraged, and in some cases required, mutual funds and public reporting companies to providedisclosures and communicate with investors using the Internet.28

23 See SEC Announces Successor to EDGAR Database, Securities and Exchange Commission Press Release, Aug. 19, 2008, available at:http://www.sec.gov/news/press/2008/2008-179.htm.

2417 CFR 249.103 and 274.202.

2517 CFR 249.104 and 274.203.

2617 CFR 249.105.

2717 CFR 239.500.

28 See,e.g., Investment Company Act Release No. 28584 (Jan. 13, 2009) [74 FR 4546 (Jan. 26, 2009)] (“Summary Prospectus Adopting Release”); Exchange Act Release No. 57172 (Jan. 18, 2008) [73 FR 4450 (Jan. 25, 2008)]; Exchange Act Release No. 56135 (July 26, 2007) [72 FR 42222 (Aug. 1, 2007)]; Exchange Act Release No. 55146 (Jan. 22, 2007) [72 FR 4148 (Jan. 29, 2007)]; Securities Act Release No. 8591 (July 19, 2005) [70 FR 44722 (Aug. 3, 2005)].

In addition, we also implemented a voluntary filer program, started in 2005,29 that has allowed us to evaluate certain uses of interactive data. The voluntary program allows companies to submit financial statements on a supplemental basis in interactive format as exhibits to specified filings under the Exchange Act and the Investment Company Act. Over 100 operating companies participated in the voluntary program. These companies span a wide range of industries and company characteristics, and have a total market capitalization of over $2 trillion. Companies that participated in the program were still required to file their financial statements in American Standard Code for Information Interchange (“ASCII”) or HyperText Markup Language (“HTML”).30 Four mutual fund complexes participated in the voluntary program and have submitted financial statement information in interactive data format.31

29Securities Act Release No. 8529 (Feb. 3, 2005) [70 FR 6556 (Feb. 8, 2005)] (“Voluntary Program Adopting Release”).

30HTML is a standardized language commonly used to present text and other information on Web sites.

31These four fund complexes made 23 submissionsrepresenting 12 mutual funds.

In 2007, we extended the program to enable mutual funds voluntarily to submit in interactive data format supplemental information contained in the risk/return summary section of their prospectuses.32 The risk/return summary contains information about a fund's investment objectives and strategies, costs, risks, and past performance.33 Twenty-five mutual funds from a variety of fund families have submitted risk/return summary information in interactive data format. These funds represent 15 fund complexes, and consist of a range of fund types, including 14 equity funds, two balanced funds, five bond funds, and four money market funds. The funds participating in the voluntary program also include larger and smaller funds.34

32Securities Act Release No. 8823 (July 11, 2007) [72 FR 39290 (July 17, 2007)] (“Risk/Return Voluntary Program Adopting Release”).

33Items 2, 3, and 4 of Form N-1A.

34Based on industry assets as of September 2008, four of the five largest fund complexes have submitted tagged risk/return summary information as part of the voluntary filing program. Lipper-Directors' Analytical Data, Reuters Sept. 2008. As of September 2008, the two smallest mutual funds participating in the voluntary program had net assets of approximately $41 million and $17 million.Id.

Since the establishment of the voluntary program for mutual fund risk/return summary information, the Commission has continued its evaluation of interactive data, including interactive data submitted by mutual funds. The Commission's evaluation of interactive data has included the hosting of three roundtables on the topic of interactive data reporting,35 as well as the creation, in April 2008 of a viewer that allowed investors to read, analyze, and compare the interactive risk/return summary data submitted by mutual funds.36

35 Seematerials available athttp://www.sec.gov/spotlight/xbrl/xbrl-meetings.shtml.

36As discussed in Section I.B.infra, information in interactive data format is intended to be processed by software applications and is not readable by humans without a viewer.

Additionally, prior to launching the risk/return viewer, Commission staff reviewed all of the interactive data files submitted to the Commission to help ensure the accuracy of the interactive risk/return summary data displayed on the Commission's Web site, and the staff communicated with the filers in order to identify and correct any technical issues with the submissions.37 Further, as noted below, Commission staff also surveyed voluntary program participants for specific data regarding the costs of preparing and submitting risk/return summary information in interactive data, including software costs and internal and external labor costs.38 Six of the participating mutual funds responded, providing data in response to this voluntary program questionnaire. These six respondents represent mutual fund complexes whose assets comprise a range of approximately .01% to 12% of all the assets of the mutual funds that will be required to submit interactive data.39

37 See infraSection II.E.3. (discussing the Commission's risk/return summary interactive data viewer).

38 SeeSection III. below. Of the 22 mutual funds that participated in the voluntary program at the time the Commission proposed these amendments, nine were provided questionnaires on the details of their cost experience, and six responses were collected representing the cost data for ten funds.

39Based on total mutual fund assets of $10.6 trillion. Lipper-Directors' Analytical Data, Reuters Sept. 2008.

In a companion release, we recently adopted rules requiring companies, other than investment companies that are registered under the Investment Company Act, business development companies, and other entities that report under the Exchange Act and prepare their financial statements in accordance with Article 6 of Regulation S-X, to submit financial information to the Commission in interactive data format.40 In this release, as part of our continuing efforts to assist investors who use Commission disclosures, as well as filers of that disclosure, we are adopting rule amendments to require that mutual fund risk/return summary information be provided in a format that makes the information interactive.

40Interactive Data Adopting Release,supra, note 6.

B. Current Filing Technology and Interactive Data

Companies filing electronically are required to file their registration statements and periodic reports in ASCII or HTML format.41 Also, to a limited degree, our electronic filing system uses other formats for internal processing and document-type identification. For example, our system uses eXtensible Markup Language (“XML”) to process reports of beneficial ownership of equity securities on Forms 3, 4, and 5 under Section 16(a) of the Exchange Act.42

41Rule 301 of Regulation S-T [17 CFR 232.301] requires electronic filings to comply with the EDGAR Filer Manual, and Section 5.2 of the EDGAR Filer Manual requires that electronic filings be in ASCII or HTML format. Rule 104 of Regulation S-T [17 CFR 232.104] permits filers to submit voluntarily as an adjunct to their official filings in ASCII or HTML unofficial PDF copies of filed documents. Unless otherwise stated, we refer to filings in ASCII or HTML as traditional format filings.

4215 U.S.C. 78p(a).

Electronic formats such as HTML, XML, and XBRL are open standards43 that define or “tag” data using standard definitions. The tags establish a consistent structure of identity and context. This consistent structure can be recognized and processed by a variety of different software applications. In the case of HTML, the standardized tags enable Web browsers to present Web sites' embedded text and information in a predictable format. In the case of XBRL, software applications, such as databases, financial reporting systems, and spreadsheets, recognize and process tagged information.

43The term “open standard” is generally applied to technological specifications that are widely available to the public, royalty-free, at minimal or no cost.

XBRL was derived from the XML standard. It was developed and continues to be supported by XBRL International, a consortium of approximately 550 organizations representing many elements of the financial reporting community worldwide in more than 20 jurisdictions, national and regional.XBRL U.S., the international organization's U.S. jurisdiction representative, is a non-profit organization44 that includes companies, public accounting firms, software developers, filing agents, data aggregators, stock exchanges, regulators, financial services companies, and industry associations.45

44XBRL U.S. is a 501(c)(6) organization. Internal Revenue Code Section 501(c)(6) applies to “Business leagues, chambers of commerce, real-estate boards, boards of trade, or professional football leagues (whether or not administering a pension fund for football players), not organized for profit and no part of the net earnings of which inures to the benefit of any private shareholder or individual.”See26 U.S.C. 501(c)(6).

45XBRL U.S. supports efforts to promote interactive financial and business data specific to the U.S.

Risk/return summary information in interactive format requires a standard list of tags. These tags are similar to definitions in an ordinary dictionary, and they cover a variety of concepts that can be read and understood by software applications. For the risk/return summary, a mutual fund will use the most recent list of tags for risk/return summary information released by XBRL U.S.46 This list of tags contains descriptive labels, authoritative references to Commission regulations where applicable, and other elements, all of which provide the contextual information necessary for interactive data47 to be recognized and processed by software.48

46Unless stated otherwise, when we refer to the “list of tags for risk/return summary information” we mean the interactive data list of tags released and maintained by XBRL U.S., including any modifications. This list was initially developed by the Investment Company Institute (“ICI”), which is a national association of the U.S. investment company industry.

47The rules define the interactive data in machine-readable format required to be submitted as the “interactive data file,” which will be required with every interactive data submission.SeeInteractive Data Adopting Release,supranote 6 (adopting new definitions under 17 CFR 232.11).

48For example, contextual information identifies the entity to which it relates, usually by using the filer's Central Index Key (“CIK”) number. A hypothetical filer converting its traditional electronic disclosure of total annual fund operating expenses of 0.73% must create interactive data that identifies what the 0.73% represents, total annual fund operating expenses, and that the number is a percentage. The contextual information includes other information as necessary; for example, the date of the prospectus to which it relates and the series and class to which it applies.

A mutual fund may issue multiple “series” of shares, each of which is preferred over all other series in respect of assets specifically allocated to that series. Rule 18f-2 under the Investment Company Act [17 CFR 270.18f-2]. Each series is, in effect, a separate investment portfolio.

A mutual fund may issue more than one class of shares that represent interests in the same portfolio of securities with each class, among other things, having a different arrangement for shareholder services or the distribution of securities, or both. Rule 18f-3 under the Investment Company Act [17 CFR 270.18f-3].

The initial risk/return summary list of tags received acknowledgement from XBRL International in June 2007,49 and was used by mutual funds participating in the Commission's voluntary program. More recently, XBRL U.S. has updated the architecture of the list of tags for risk/return summary information and conformed the list of tags to changes we recently adopted to the risk/return summary disclosure requirements.50 The list was recently issued for public comment,51 and it is expected to be finalized and submitted to XBRL International for acknowledgement by the end of January 2009. Related documents, such as the architecture and technical guides, also are due to be released publicly by the end of January 2009.

49The list of tags is available on XBRL International's Web site at:http://xbrl.org/Taxonomy/rr-summarydocument-20070516-acknowledged.htm.

There are two levels of XBRL tag recognition: (1) “Acknowledgement” is formal recognition that a list of tags complies with XBRL specifications, including testing by a defined set of validation tools; and (2) “approval” is a formal recognition requiring more detailed quality assurance and testing, including compliance with official XBRL guidelines for the type of tag list under review, creation of a number of instance documents, and an open review period after acknowledgement. For more information regarding the XBRL tag list recognition process, see “Taxonomy Recognition Process” on the XBRL International Web site available at:http://www.xbrl.org/TaxonomyRecognition/.

50 See infraSection II.E.1. (discussing the list of tags for risk/return summary information); Summary Prospectus Adopting Release,supranote 28.

51XBRL U.S. released the updated list of tags for risk/return summary information for public comment on October 21, 2008. The list is available on the XBRL U.S. Web site at:http://xbrl.us/imtaxonomies/Pages/default.aspx. See XBRL U.S. Announces Public Review of Data Tags for Mutual Fund Risk/Return Summary and Schedule of Investments,available on the XBRL U.S. Web site at:http://xbrl.us/press/Pages/20081021.aspx.The comment period closed on November 24, 2008.

Data tags are applied to risk/return summary information by using commercially available software that guides a preparer to tag information in the risk/return summary, such as line item costs in a mutual fund's fee table, with the appropriate tags in the standard list. This involves locating an element in the list of tags that represents the particular disclosure that is to be tagged. Occasionally, because mutual funds have some flexibility in preparing the risk/return summary, particularly the narrative portions, it is possible that a mutual fund may wish to use a non-standard disclosure that is not included in the standard list of tags. In this situation, a fund will create a company-specific element, called an extension. Alternatively, a mutual fund may choose to outsource the tagging process.

Because mutual fund risk/return summary information in interactive data format is intended to be processed by software applications, the unprocessed interactive data is not readable by humans. Thus, viewers are necessary to convert, or “render,” the interactive data file to human readable format. Some viewers, for example, may be compared to Web browsers that are used to read HTML files.

The Commission's Web site currently provides links to viewers that allow the public to read mutual fund and other company disclosures submitted using interactive data. One of these viewers allows users to view and compare mutual fund risk/return summary information, including investment objectives and strategies, costs, risks, and past performance, that is submitted in interactive data format.52 These viewers are intended to demonstrate the capability of software to present interactive data in human-readable form and to provide open source software to give developers a free resource they can use as is or build upon. As noted above, software also is able to process interactive data so as to automate and, as a result, facilitate access to and analysis of tagged data. In addition, we are aware of other applications under development that may provide additional and advanced functionality.53

52A mutual fund information viewer for the voluntary program is available at:http://a.viewerprototype1.com/viewer.

53A list of interactive data products and service providers is available at:http://xbrl.us/Vendors/Pages/default-expand.aspx.

II. Discussion

The Commission received 16 comment letters on the proposed rule amendments, including comments from trade associations, fund complexes, a data aggregator, technology service providers, and individual investors and professionals.54 The commentersgenerally supported both the use of technology to better inform mutual fund investors and the Commission's goal of providing risk/return summary information in interactive data format.55 Most commenters, however, stated that requiring mutual funds to provide tagged risk/return summary information is premature.56 As discussed below, commenters also raised other concerns regarding the proposal, including concerns regarding the adequacy of the existing technology necessary to create and submit interactive data files,57 what information should be required to be tagged,58 the proposed compliance date,59 and the potential liability of mutual funds under the federal securities laws related to tagged risk/return summary information.60

54 Seecomment letters of the American Bar Association (“ABA”) (Aug. 18, 2008); James J. Angel, Ph.D, C.F.A. (“Angel”) (Aug. 4, 2008); Gary J. Coles (“Coles”) (July 25, 2008); Committee of Annuity Insurers (“Annuity Insurers”) (July 23, 2008); Confluence (Aug. 1, 2008); Data Communiqué, Inc. (“Data Communiqué”) (July 31, 2008); Federated Investors, Inc. (“Federated”) (Aug. 12, 2008); Robert Gilmore, C.P.A. (“Gilmore”) (July 31, 2008); Walter C. Hamscher (“Hamscher”) (July 31, 2008); ICI (Aug. 1, 2008); Lipper (July 29, 2008); OppenheimerFunds, Inc. (“Oppenheimer”) (Aug. 4, 2008); Lorna A. Schnase (“Schnase”) (July 25, 2008); Jay Starkman, C.P.A. (“Starkman”) (July 30, 2008); T. Rowe Price Associates, Inc. (“T. Rowe Price”) (Aug. 1, 2008); and The Vanguard Group, Inc. (“Vanguard”) (Aug. 1, 2008). Comment letters received in response to the Proposing Release are available at:http://www.sec.gov/comments/s7-12-08/s71208.shtmlor from our Public Reference Room at 100 F Street, NE., Washington, DC 20549.

55Twelve commenters generally supported tagging risk/return summary information in interactive data format.Seeletters of ABA, Angel, Annuity Insurers, Confluence, Data Communiqué, Gilmore, Hamscher, ICI, Lipper, Oppenheimer, T. Rowe Price, and Vanguard. Three commenters did not support requiring interactive disclosure of risk/return summary data.Seeletters of Federated, Schnase, and Starkman. One commenter expressed no explicit opinion on the matter.Seeletter of Coles.

56 Seeletters of ABA, Confluence, Data Communiqué, Federated, Gilmore, ICI, Oppenheimer, Schnase, T. Rowe Price, and Vanguard.

57 Seeletters of Confluence, Federated, Gilmore, ICI, Oppenheimer, Schnase, Starkman, and T. Rowe Price.

58 Seeletters of ABA, Confluence, Data Communiqué, Federated, and Schnase.

59 Seeletters of Confluence, Data Communiqué, Federated, Gilmore, ICI, Oppenheimer, Schnase, T. Rowe Price, and Vanguard.

60 Seeletters of ABA, Federated, ICI, Oppenheimer, and Schnase.

For the reasons discussed below, we continue to believe that the enormous potential of interactive data for enhancing investors' access to mutual fund information justifies implementation of this initiative. Therefore, we are adopting the proposed amendments with some modifications to address commenters' concerns. The rule amendments are intended to make risk/return summary information easier for investors to analyze and to assist in automating regulatory filings and business information processing.

A. Submission of Risk/Return Summary Information Using Interactive Data

We are adopting, as proposed, rule amendments that require mutual funds to submit a complete set of their risk/return summary information, set forth in Items 2, 3, and 4 of Form N-1A,61 in interactive data format.62 In addition, mutual funds are required to provide document and entity identifier tags, such as the form type and the fund's name. As was the case in the voluntary program, the new requirement for interactive data reporting is intended to be disclosure neutral in that we do not intend the rules to result in mutual funds providing more, less, or different disclosure for any given disclosure item, regardless of whether the format is ASCII, HTML, or XBRL.

61Recently, the Commission adopted amendments to Form N-1A,seeSummary Prospectus Adopting Release,supranote 28, under which the risk/return summary information, formerly contained in Items 2 and 3 of Form N-1A, was reconfigured in Items 2, 3, and 4 of Form N-1A. We apply the tagging rules to the information required by amended Form N-1A.

62 SeeItem 405(b)(2) of Regulation S-T.

We are adopting these rule amendments because the submission of interactive risk/return summary information at this time is an important next step in increasing the accessibility of this information to mutual fund investors and others. Requiring mutual funds to submit the risk/return summary section of their prospectuses using interactive data format will enable investors, analysts, and the Commission staff to capture and analyze that information more quickly and at less cost than is possible using the same information provided in a static format. Any investor with a computer and an Internet connection will have the ability to acquire and download interactive data that have generally been available only to intermediaries and third-party analysts. The interactive data rule amendments do not change disclosure requirements under the federal securities laws and regulations, but will add a requirement to include risk/return summary information in an interactive data format as an exhibit. Thus, requiring that filers provide risk/return summary information using interactive data will not otherwise alter at all the disclosure or formatting standards of mutual fund prospectuses. These filings will continue to be available as they are today for those who prefer to view the traditional text-based document.

Interactive data can create new ways for investors, analysts, and others to retrieve and use the information. For example, users of risk/return summary information will be able to download cost and performance information directly into spreadsheets, analyze it using commercial off-the-shelf software, or use it within investment models in other software formats. Through interactive data, what is currently static, text-based information can be dynamically searched and analyzed, facilitating the comparison of mutual fund cost, performance, and other information across multiple classes of the same fund and across the more than 8,000 mutual funds currently available.63

63Investment Company Institute,2008 Investment Company Fact Book, at 15 (2008), available at:http://www.icifactbook.org/pdf/2008_factbook.pdf(as of year-end 2007, there were 8,752 mutual funds).

Interactive data also provides an opportunity to automate regulatory filings and business information processing, with the potential to increase the speed, accuracy, and usability of mutual fund disclosure. Such automation may eventually reduce costs. A mutual fund that uses a standardized interactive data format at earlier stages of its reporting cycle may reduce the need for repetitive data entry and, therefore, the likelihood of human error. In this way, interactive data may improve the quality of information while reducing its cost. Also, to the extent investors currently are required to pay for access to mutual fund risk/return summary information that has been extracted and reformatted into an interactive data format by third-party sources, the availability of interactive data in Commission filings may allow investors to avoid additional costs associated with third-party sources.

As noted above, although most commenters generally supported the concept of interactive disclosure of risk/return summary information,64 they also asserted that this initiative is premature.65 In particular, several commenters urged the Commission to defer requiring mutual funds to submit interactive risk/return summary information because pending Commission proposals related to a mutual fund summary prospectus and exchange-traded funds (“ETFs”) would change the information in the risk/return summary.66 Related to those comments, commenters also asserted that: (1) The list of tags for risk/return summary information would require updating if the proposed changes to the risk/return summary are adopted; (2) thelist of tags' architecture needed to be updated; and (3) related tools are not sufficiently developed.67 Commenters also stated that implementation is premature because more information needs to be collected from the current voluntary program.68

64 See supranote 55.

65 See supranote 56.

66 Seeletters of Data Communique, Federated, ICI, Oppenheimer, Schnase, T. Rowe Price, and Vanguard. The Commission proposed revisions to Form N-1A's risk/return summary disclosure requirements as part of two separate rulemaking initiatives.SeeInvestment Company Act Release No. 28064 (Nov. 21, 2007) [72 FR 67790 (Nov. 30, 2007)] (proposing amendments intended to enhance mutual fund disclosure of certain key information, including risk/return summary information, by, among other things, permitting mutual funds to provide such information in the form of a summary prospectus if certain conditions are satisfied) (“Summary Prospectus Initiative”); and Investment Company Act Release No. 28193 (Mar. 11, 2008) [73 FR 14618 (Mar. 18, 2008)] (proposing amendments to the mutual fund risk/return summary to provide certain information relating specifically to ETFs) (“ETF Initiative”).

67 Seeletters of Confluence, Federated, ICI, Oppenheimer, Schnase, and T. Rowe Price.

68 Seeletters of Federated, ICI, and Schnase.

While we are sensitive to these commenters' concerns, they do not warrant delay in this important initiative, particularly given recent progress related to these comments. First, the Commission recently adopted amendments to Form N-1A related to the Summary Prospectus Initiative and the ETF Initiative.69 These amendments do not significantly alter the content requirements of the risk/return summary section, consisting of limited modifications to the disclosure in the Fee Table.70 Mutual funds will not be required to comply with these new Form N-1A disclosure requirements until January 1, 2010,71 providing almost one year for them to revise their disclosure. Second, as discussed further below,72 revisions to the list of tags for risk/return summary information to account for these limited disclosure changes and revisions to the architecture have been issued for public comment and are expected to be finalized by the end of January 2009. Again, this will provide mutual funds with substantial time to prepare to tag their risk/return summary information. Third, while the Commission's current viewer permits the rendering of tagged risk/return summary information, progress has been made to develop a more advanced tool that will allow issuers to test their tagged exhibits prior to submitting them to the Commission.73 This upgrade to the viewer will be phased in, but should be completed during mid-2009.

69These amendments were presented to the Commission at an open meeting on November 19, 2008.SeeSummary Prospectus Adopting Release,supranote 28. Form N-1A changes related to both the Summary Prospectus Initiative and the ETF Initiative were adopted together in the Summary Prospectus Adopting Release.

In the Summary Prospectus Initiative, we requested comment on whether the proposed linking requirements for documents posted on an Internet Web site should be modified.SeeSummary Prospectus Initiative,supranote 66. We received one comment on this issue opposing the modification of the proposed linking requirements.Seeletter of Data Communique. The linking requirements were adopted as proposed.SeeSummary Prospectus Adopting Release, supra note 28.

70These amendments include: (1) Requiring mutual funds that offer discounts on front-end sales charges for volume purchases (so-called “breakpoint discounts”) to include a brief narrative disclosure alerting investors to the availability of those discounts,seeItem 3 of Form N-1A; Instruction 1(b) to Item 3 of Form N-1A; (2) revising the parenthetical heading for “Annual Fund Operating Expenses” in the Fee Table to read “expenses that you pay each year as a percentage of the value of your investment,”seeItem 3 of Form N-1A; (3) requiring mutual funds, other than money market funds, to include brief disclosure regarding portfolio turnover immediately following the fee table example,seeInstruction 5 to Item 3 of Form N-1A; and (4) permitting mutual funds to place two additional captions in the Fee Table directly below the “Total Annual Fund Operating Expenses” caption in cases where there are expense reimbursement or fee waiver arrangements that will reduce any fund operating expenses,seeInstruction 3(e) to Item 3 of Form N-1A. The amendments also require modification for ETFs to the narrative explanation preceding the Fee Table to clarify that investors may pay brokerage commissions not reflected in the Fee Table. Instruction 1(e)(i) and (ii) to Item 3 of Form N-1A.

71 SeeSummary Prospectus Adopting Release,supranote 28.

72 See infraSection II.E.1. (discussing the list of tags for risk/return summary information).

73 See infraSection II.E.3. (discussing the Commission's risk/return summary interactive data viewer).

Finally, the Commission has been exploring, via the voluntary program, the use of interactive data for several years, including the submission of tagged financial information and risk/return summary information. Twenty-five mutual funds have submitted over 40 exhibits tagged with interactive data, giving the Commission experience in adapting to the technology. In addition, over 100 operating companies have submitted financial statements tagged in interactive data format. Each submission has enabled issuers to gain experience with submitting tagged documents and enabled the Commission to refine its technology infrastructure to accept and efficiently render these interactive exhibits. Moreover, given the extended compliance date discussed below, mutual funds will have almost two years to resolve technical issues and may continue participating in the voluntary program in the interim to gain more experience submitting interactive data.

In addition to the recommendations to delay this initiative, some commenters expressed concern that limiting the interactive data filing requirement to only risk/return summary information could lead investors to place undue emphasis on this information,74 and several commenters suggested that the Commission consider expanding this tagging requirement to include non-risk/return disclosures in the new mutual fund summary prospectus.75 Two of these commenters recommended that all items in the summary prospectus should be tagged.76 We believe that implementation of our interactive data initiative should begin with the mutual fund risk/return summary, but we will continue to evaluate the benefits of tagging all items in the summary prospectus, as well as other information.

74 Seeletters of ABA, Data Communique, and Federated.See alsorelated discussion concerning commenters' suggestion that cautionary legends be permitted,infraSection II.B.

75 Seeletters of Confluence, Data Communique, and Schnase;see alsodiscussion of Summary Prospectus Initiative,supranote 66, and Summary Prospectus Adopting Release,supranote 28.

76 Seeletters of Confluence and Schnase.

Several commenters questioned whether XBRL is the appropriate standard format for interactive data disclosure, asserting that it is not sufficiently developed at this time.77 Specifically, commenters asserted that there are a limited number of commercial software products that are compatible with XBRL,78 and that rendering and validating are still expensive and problematic issues.79 One commenter also expressed concern that endorsing XBRL could have the effect of stifling competition for other languages, although this commenter acknowledged that she was unaware of other languages that are likely to become competitive with XBRL.80

77 Seeletters of Gilmore, Schnase, and Starkman.

78 Seeletter of Starkman.

79 Seeletter of Gilmore.

80 Seeletter of Schnase.

While we acknowledge that XBRL is an evolving technology, we believe it is the appropriate interactive data format with which to supplement ASCII and HTML. Our experience with the voluntary program, including feedback from company, accounting, and software communities, points to XBRL as the appropriate open standard for the purposes of this rule.81 XBRL data will be compatible with a wide range of open source and proprietary XBRL software applications. As discussed above, many XBRL-related products exist for analysts, investors, filers, and others to create and compare disclosures more easily, the development process will likely be hastened by mutual fund disclosure using interactive data.

81 Seenote 58 of the Proposing Release,supranote 9.

Several other factors support our views regarding XBRL's broad and growing acceptance, internationally as well as in the U.S. For example, the Advisory Committee on Improvements to Financial Reporting (“CIFiR”)82 presented its final recommendations to the Commission in its final report issued in August 2008,83 which includes a recommendation that the Commission, over the long term, require the filing of financial and non-financial information using XBRL once specified conditions are satisfied.84 We believe that sufficient progress has been made regarding each of these conditions.85 Also, XBRL has been used by other U.S. agencies,86 and several foreign securities regulators have adopted voluntary or required XBRL reporting.87

82The Commission established CIFiR to examine the U.S. financial reporting system, with the goals of reducing unnecessary complexity and making information more useful and understandable for investors.See SEC Establishes Advisory Committee to Make U.S. Financial Reporting System More User-Friendly for Investors,Securities and Exchange Commission Press Release, June 27, 2007,available at:http://www.sec.gov/news/press/2007/2007-123.htm.

CIFiR conducted open meetings on March 13-14, 2008 and May 2, 2008, in which it heard reactions from an invited panel of participants to CIFiR's proposal regarding required filing of financial information using interactive data. Archived Webcasts of the meetings are available athttp://sec.gov/about/offices/oca/acifr.shtml.The panelists presented their views and engaged with CIFiR members regarding issues relating to requiring interactive data tagged financial statements, including tag list and technological developments, implications for large and small public companies, needs of investors, necessity of assurance and verification of such tagged financial statements, and legal implications arising from such tagging.

83 See Final Report of the Advisory Committee on Improvements to Financial Reporting to the United States Securities and Exchange Commission(August 1, 2008), (“CIFiR Report”), available at:http://www.sec.gov/about/offices/oca/acifr/acifr-finalreport.pdf.

84 Id.at 98. The recommendation appears in chapter 4 of the CIFiR Report.

85 Seediscussion at note 135, and accompanying text, of Interactive Data Adopting Release,supranote 6.

86Since 2005, the Federal Deposit Insurance Corporation (“FDIC”), the Board of Governors of the Federal Reserve System, and the Office of the Comptroller of the Currency have required the insured institutions that they oversee to file their quarterly Consolidated Reports of Condition and Income (called “Call Reports”) in interactive data format using XBRL. Call Reports, which include data about an institution's balance sheet and income statement, are used by these federal agencies to assess the financial health and risk profile of the financial institution.

87For example, such countries include Canada, China, Israel, Japan, Korea, and Thailand.

B. Content and Submission Requirements for Interactive Risk/Return Summary Information

We are adopting, as proposed, the requirement that an interactive data file must be submitted to the Commission for any registration statement or post-effective amendment thereto on Form N-1A that includes or amends information provided in response to Items 2, 3, or 4.88 In response to commenters' concerns,89 however, we are modifying our rules to encompass changes to risk/return summary information that mutual funds may make pursuant to rule 497 under the Securities Act.90 Specifically, in the Proposing Release, we asked for comment on whether mutual funds should be required to submit tagged risk/return summary information for prospectuses submitted pursuant to rule 497 under the Securities Act. Rule 497 sets out general filing requirements for fund prospectuses and provides, among other things, that funds must file any prospectus that contains information that varies from that in the registration statement.91 Commenters addressing the matter uniformly recommended that updates to interactive risk/return summary information should be required when such information is revised in a filing made pursuant to rule 497 under the Securities Act,92 asserting that failure to do so could: (1) Compromise the integrity of the entire interactive data program;93 (2) result in a rendered file containing different information from the current prospectus, potentially leading to liability;94 and (3) result in investors accessing stale tagged data.95

88 Seerule 405(b)(2) of Regulation S-T; General Instruction C.3.(g).(i) of Form N-1A. We are also adopting technical amendments to rule 405 that reflect this requirement. As previously noted, rule 405 of Regulation S-T directly sets forth the basic tagging requirements and indirectly sets forth the rest of the tagging requirements through the requirement