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SECURITIES AND EXCHANGE COMMISSION

Veterans Affairs Department

CFR Citation: 17 CFR Parts 230, 232, 239, 270, and 274

RIN ID: RIN 3235-AK13

DOCUMENT ID: [Release Nos. 33-8929, 34-57942, 39-2457, IC-28298; File Number S7-12- 08]

NOTICE: Part II

DOCUMENT ACTION: Proposed rule.

SUBJECT CATEGORY: Interactive Data for Mutual Fund Risk/Return Summary

DATES: Comments should be submitted on or before August 1, 2008.

DOCUMENT SUMMARY: We are proposing rules requiring mutual funds to provide risk/ return summary information in a form that would improve its usefulness to investors. Under the proposed rules, risk/return summary information could be downloaded directly into spreadsheets, analyzed in a variety of ways using commercial offtheshelf software, and used within investment models in other software formats. Mutual funds would 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 would be provided as an exhibit to registration statements. The proposed 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 are also proposing to permit investment companies to submit portfolio holdings information in our interactive data voluntary program without being required to submit other financial information.

SUMMARY: Securities and Exchange Commission,

SUPPLEMENTAL INFORMATION

The Securities and Exchange Commission (``Commission'') is proposing amendments to Rule 485 \1\ under the Securities Act of 1933 (``Securities Act''), Rules 11,\2\ 202,\3\ and 401 \4\ of Regulation ST, \5\ Rule 8b33 \6\ under the Investment Company Act of 1940 (``Investment Company Act''), and Form N1A \7\ under the Securities Act and the Investment Company Act. We are also proposing amendments to proposed Rule 405 of Regulation ST.\8\ \1\ 17 CFR 230.485.
\2\ 17 CFR 232.11.
\3\ 17 CFR 232.202.
\4\ 17 CFR 232.401.
\5\ 17 CFR 232.10 et seq.
\6\ 17 CFR 270.8b33.
\7\ 17 CFR 239.15A and 274.11A.
\8\ See Securities Act Release No. 8924 (May 30, 2008) [73 FR 32794 (June 10, 2008)] (``Interactive Data Proposing Release''). Table of Contents
I. Introduction and Background

A. Introduction

B. Current Filing Technology and Interactive Data

C. The Commission's Multiyear Evaluation of Interactive Data and Overview of Proposed Rules

II. Discussion of the Proposed Amendments

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

B. Compliance Date

C. Documents and Information Covered by the Proposed Rules

D. Filing Period

E. Web Site Posting of Interactive Data

F. Accuracy and Reliability of Interactive Data

G. Required Items

H. Consequences of NonCompliance and Hardship Exemption

I. Changes to the Voluntary Program
III. General Request for Comments
IV. Paperwork Reduction Act
V. Cost/Benefit Analysis
VI. Consideration of Burden on Competition and Promotion of Efficiency, Competition, and Capital Formation
VII. Initial Regulatory Flexibility Analysis
VIII. Small Business Regulatory Enforcement Fairness Act
IX. Statutory Authority
X. Text of Proposed Rule and Form Amendments
I. Introduction and Background

A. Introduction

Over the last several decades, developments in technology and electronic data communication have significantly decreased the time and cost of filing disclosure documents with us. Technological developments also have facilitated greater transparency in the form of easier access to, and analysis of, financial reporting and disclosures. Most notably, in 1993 we began to require electronic filing on our Electronic Data Gathering, Analysis and Retrieval System (``EDGAR'').\9\ Since then, widespread use of the Internet has vastly decreased the time and expense of accessing disclosure filed with us.
\9\ In 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. These developments assist us in our goal to promote efficient and transparent capital markets. For example, since 2003 we have required electronic filing of certain ownership reports filed on Forms 3,\10\ 4,\11\ and 5 \12\ in a format that provides interactive data, and recently we adopted similar rules governing the filing of Form D.\13\ In addition, recently we have encouraged, and in some cases required, openend management investment companies (``mutual funds'') \14\ and
[[Page 35443]]
public reporting companies to provide disclosures and communicate with investors using the Internet.\15\ Now, as part of our continuing efforts to assist filers as well as investors who use Commission disclosures, we propose to require that mutual fund risk/return summary information be provided in a format that makes the information interactive.
\10\ 17 CFR 249.103 and 274.202.
\11\ 17 CFR 249.104 and 274.203.
\12\ 17 CFR 249.105.
\13\ 17 CFR 239.500.
\14\ An openend management investment company is an investment company, other than a unit investment trust or faceamount
certificate company, that offers for sale or has outstanding any redeemable security of which it is the issuer. See Sections 4 and 5(a)(1) of the Investment Company Act [15 U.S.C. 80a4 and 80a 5(a)(1)].
\15\ See, e.g. , Exchange Act Release No. 57172 (Jan. 18, 2008) [73 FR 4450 (Jan. 25, 2008)]; Securities Act Release No. 8861 (Nov. 21, 2007) [72 FR 67790 (Nov. 30, 2007)] (``Summary Prospectus Proposing Release''); 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)].

Our proposal builds on our voluntary filer program, started in 2005,\16\ that allowed us to evaluate the merits 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 Securities Exchange Act of 1934 (``Exchange Act'') and the Investment Company Act.\17\ Over 75 companies have 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 participate in the program still are required to file their financial statements in American Standard Code for Information Interchange (``ASCII'') or HyperText Markup Language (``HTML'').\18\
\16\ Securities Act Release No. 8529 (Feb. 3, 2005) [70 FR 6556 (Feb. 8, 2005)] (``Voluntary Program Adopting Release'').
\17\ 15 U.S.C. 80a1 et seq.
\18\ HTML is a standardized language commonly used to present text and other information on Web sites.

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.\19\ The risk/ return summary contains key information about a fund's investment objectives and strategies, costs, risks, and past performance.\20\ Approximately 20 mutual funds from a wide variety of fund families have submitted risk/return summary information in interactive format. \19\ Securities Act Release No. 8823 (July 11, 2007) [72 FR 39290 (July 17, 2007)] (``Risk/Return Voluntary Program Adopting Release'').

\20\ Items 2 and 3 of Form N1A.

In a recently issued release, we proposed to require companies, other than 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 SX, to submit financial information to the Commission in interactive data format.\22\ In this release, we propose to extend similar requirements to mutual fund risk/return summary information.
\21\ Business development companies are a category of closedend investment companies that are not required to register under the Investment Company Act. 15 U.S.C. 80a2(a)(48).
\22\ See Interactive Data Proposing Release, supra note 8.

The submission of mutual fund risk/return summary information based on interactive data would create new ways for investors, analysts, and others to retrieve and use the information. For example, users of risk/ return summary information could download cost and performance information directly into spreadsheets, analyze it using commercial offtheshelf software, or use it within investment models in other software formats. Through interactive data, what is currently static, textbased 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 funds currently available.\23\
\23\ Investment Company Institute, 2008 Investment Company Fact Book, at 15 (2008), available at: http://www.icifactbook.org/pdf/ 2007_factbook.pdf (as of yearend 2007, there were 8,752 mutual funds).

Interactive data also could provide a significant 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 could eventually reduce costs. A mutual fund that uses a standardized interactive data format at earlier stages of its reporting cycle could 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 could allow investors to avoid additional costs associated with thirdparty sources.

We believe that requiring mutual funds to file the risk/return summary section of their prospectuses using interactive data format would 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 would have the ability to acquire and download interactive data that have generally been available only to intermediaries and thirdparty analysts. The proposed interactive data requirements would not change what is currently disclosed, but would add a requirement to include risk/return summary information in a new format as an exhibit. Thus the proposal to require that filers provide risk/return summary information using interactive data will not alter the disclosure or formatting standards of mutual fund prospectuses, which would continue to be available as they are today for those who prefer to view the traditional textbased document.

Throughout this release, we solicit comment on many issues concerning the use of interactive data, including specifically whether mutual fund risk/return summary information in interactive data format should be required as exhibits to Securities Act registration statements filed with us. We are seeking comment from investors, mutual funds, financial intermediaries, analysts, accountants, and any other parties or individuals who may be affected by the use of interactive disclosure in Commission filings, and any other members of the public. 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.\24\ Also, to a limited degree, our electronic filing system uses other formats for internal processing and documenttype 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.\25\
\24\ Rule 301 of Regulation ST [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 ST [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.
\25\ 15 U.S.C. 78p(a).

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Electronic formats such as HTML, XML, and XBRL are open standards \26\ 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 predictable format. In the case of XBRL, software applications, such as databases, financial reporting systems, and spreadsheets, recognize and process tagged information.
\26\ The term ``open standard'' is generally applied to technological specifications that are widely available to the public, royaltyfree, at minimal or no cost.

XBRL was derived from the XML standard. It was developed and continues to be supported by XBRL International, a collaborative 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 nonprofit organization that includes companies, public accounting firms, software developers, filing agents, data aggregators, stock exchanges, regulators, financial services companies, and industry
associations.\27\
\27\ XBRL 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 would use the list of tags for risk/return summary information developed by the Investment Company Institute (``ICI'').\28\ 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 data \29\ to be recognized and processed by software.\30\
\28\ Unless stated otherwise, when we refer to the ``list of tags for risk/return summary information'' we mean the interactive data taxonomy developed by the ICI, including any modifications. We anticipate entering into a contract to update the architecture of the taxonomy developed by the ICI and conform the taxonomy to any changes in the risk/return summary that we adopt pursuant to a pending rule proposal. See Summary Prospectus Proposing Release, supra note 15.

The ICI is a national association of the U.S. investment company industry. The taxonomy developed by the ICI received acknowledgement from XBRL International in June 2007 and is used by mutual funds participating in the Commission's voluntary program. The taxonomy is available on XBRL International's Web site at: http://www.xbrl.org/ Taxonomy/ici/icirrsummarydocument20070516acknowledged.htm. \29\ The proposed rules would define the interactive data necessary to create humanreadable disclosure as the ``interactive data file,'' which would be required with every interactive data submission. See Interactive Data Proposing Release, supra note 8 (proposing new definitions under 17 CFR 232.11). The EDGAR Filer Manual would identify any necessary supporting files.
\30\ For example, contextual information would identify the entity to which it relates, usually by using the filer's CIK number. A hypothetical filer converting its traditional electronic disclosure of total annual fund operating expenses of 0.73% would have to create interactive data that identify what the 0.73% represents, total annual fund operating expenses, and that the number is a percentage. The contextual information would include 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 18f2 under the Investment Company Act [17 CFR 270.18f2]. 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 18f3 under the Investment Company Act [17 CFR 270.18f3].

To apply data tags to risk/return summary information, a preparer uses commercially available software that guides the preparer in mapping information in the risk/return summary, such as line item costs in a mutual fund's fee table, to 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 nonstandard disclosure that is not included in the standard list of tags. In this situation, a fund would create a companyspecific element, called an extension.

A mutual fund may choose to tag its own risk/return summary using commercially available software, or it may choose instead to outsource the tagging process. In the event a mutual fund relies upon a service provider to tag the fund's risk/return summary, the mutual fund would want to carefully review the tagging done by the service provider in order to make sure that the tagged risk/return summary information is accurate and consistent with the information the mutual fund presents in its traditional format filing.

Because mutual fund risk/return summary information in interactive data format, referred to as the interactive data file, is intended to be processed by software applications, the unprocessed interactive data is not readable. Thus, viewers are necessary to convert the interactive data file to human readable format. Some viewers are similar to Web browsers used to read HTML files.

The Commission's Web site currently provides links to four viewers that allow the public to easily read mutual fund and other company disclosures submitted using interactive data.\31\ One of these viewers allows users to view and compare mutual fund risk/return summary information, including investment objectives and strategies, risks, costs, and performance, that is submitted in interactive data format.\32\ These viewers demonstrate the capability of downloading interactive data into software such as Microsoft Excel as well as into other applications that are widely available on the Internet. In addition, we are aware of other applications under development that may provide additional and advanced functionality.
\31\ See viewers available at http://www.sec.gov/xbrl. \32\ A mutual fund information viewer for the voluntary program is available at: http://a.viewerprototype1.com/viewer. C. The Commission's Multiyear Evaluation of Interactive Data and Overview of Proposed Rules

In 2004, we began assessing the benefits of interactive data and its potential for improving the timeliness and accuracy of financial disclosure and analysis of Commission filings.\33\ As part of this evaluation, we adopted rules in 2005 permitting filers, on a voluntary basis, to provide financial disclosure in interactive data format as an exhibit to certain filings on our electronic filing system. After more than two years of increasing participation, over 75 companies have chosen to provide interactive data financial reporting.\34\ \33\ See SEC Announces Initiative to Assess Benefits of Tagged Data in Commission Filings, Securities and Exchange Commission Press Release, July 22, 2004, available at: http://www.sec.gov/news/press/ 200497.htm.
\34\ A viewer for this interactive data is available at: http:// www.sec.gov/spotlight/xbrl/xbrlwebapp.shtml. This viewer, one of several funded by the Commission to demonstrate interactive data, maintains a running total of companies and filers submitting data as part of the voluntary program. As of April 17, 2008, 78 companies had submitted 350 interactive data reports.

In 2007, we extended the program to enable mutual funds voluntarily to submit risk/return summary information in interactive data format. To date,
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approximately 20 mutual funds have chosen to provide interactive data risk/return summaries.\35\
\35\ The mutual fund information viewer contains all mutual fund submissions under the voluntary program. As of May 1, 2008, 21 mutual funds had submitted 33 interactive data reports.

During this time, we have kept informed of technology advances and other interactive data developments. We note that several U.S. and foreign regulators have begun to incorporate interactive data into their financial reporting systems. The Federal Deposit Insurance Corporation (``FDIC''), the Federal Reserve, and the Office of the Comptroller of the Currency (``OCC'') require the use of XBRL.\36\ As of 2006, approximately 8,200 U.S. financial institutions were using XBRL to submit quarterly reports to banking regulators.\37\ Countries that have required or instituted voluntary or pilot programs for XBRL financial reporting include Australia, Belgium, Canada, China, Denmark, France, Germany, Ireland, Israel, Japan, Korea, Luxembourg, the Netherlands, New Zealand, Norway, Singapore, Spain, Sweden, Thailand, and the United Kingdom.\38\
\36\ Since 2005, the FDIC, Federal Reserve, and the OCC 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. \37\ See Improved Business Process Through XBRL: A Use Case for Business Reporting, available at http://www.xbrl.org/us/us/ FFIEC%20White%20Paper%2002Feb2006.pdf.
\38\ See XBRL International Progress Report (November 2007), available at http://www.xbrl.org/ProgressReports/2007_11_XBRL_ Progress_Report.pdf.

We also have kept informed of relevant advances and developments by hosting roundtables on the topic of interactive data reporting,\39\ creating the Commission's Office of Interactive Disclosure,\40\ and meeting with international securities regulators to discuss, among other items, timetables for implementation of interactive data initiatives for financial reporting.\41\ Also, staff of the Commission have attended meetings of the Advisory Committee on Improvements to Financial Reporting (``CIFiR'') in which the committee discussed proposals for financial reporting using interactive data.\42\ We also have reviewed written statements and public comments received by CIFiR on its XBRL developed proposal.\43\
\39\ See materials available at http://www.sec.gov/spotlight/ xbrl/xbrlmeetings.shtml.
\40\ See SEC Announces New Unit to Lead Global Move to Interactive Data, Securities and Exchange Commission Press Release, October 9, 2007, available at: http://www.sec.gov/news/press/2007/ 2007213.htm.
\41\ See Chairman Cox, Overseas Counterparts Meet to Discuss Interactive Data Timetable, Securities and Exchange Commission Press Release, November 9, 2007, available at: http://www.sec.gov/news/ press/2007/2007227.htm.
\42\ The 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 UserFriendly for Investors, Securities and Exchange Commission Press Release, June 27, 2007, available at http://www.sec.gov/news/press/2007/2007123.htm.

CIFiR conducted an open meeting on March 14, 2008, in which it heard reactions from an invited panel of participants to CIFiR's developed proposal regarding required filing of financial
information using interactive data. An archived Webcast of the meeting is available at http://sec.gov/about/offices/oca/ cifir.shtml. The March 14, 2008 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. Also, CIFiR has provided to the Commission an interim progress report that contains a developed proposal that the Commission, over the long term, require the filing of financial information using interactive data once specified conditions are satisfied. See Progress Report of the Advisory Committee on Improvements to the Financial Reporting to the United States Securities and Exchange Commission (Feb. 14, 2008)
(``Progress Report''), available at http://www.sec.gov/about/ offices/oca/acifr/acifrpr021408final.pdf.
\43\ The XBRL developed proposal appears in chapter 4 of the Progress Report. Written statements of panelists at the March 14, 2008 meeting and public comments received on the Progress Report are available at http://sec.gov/comments/26524/26524.shtml.

Building on our experience monitoring the voluntary program and our participation in the other initiatives described above, we are now proposing rules to require mutual funds to provide risk/return summary information using interactive data as an exhibit to their registration statements filed on Form N1A.\44\ Interactive data would be required to be provided on a mutual fund's Web site \45\ and with the fund's Securities Act registration statements and posteffective amendments thereto.\46\ We believe this has the potential to provide advantages for the investing public by making risk/return summary information more accessible, timely, inexpensive, and easier to analyze.
\44\ Form N1A is the form used by mutual funds to register under the Investment Company Act and to offer securities under the Securities Act.
\45\ The proposed Web site posting requirement would apply only to the extent a mutual fund already maintains a Web site.
\46\ Interactive data would be required as an exhibit to a Securities Act registration statement or posteffective amendment thereto that contains risk/return summary information. Interactive data would not be required as an exhibit to a posteffective amendment that does not contain risk/return summary information.

By enabling mutual funds to further automate their disclosure processes, interactive data may eventually help funds improve the speed at which they generate information, while reducing the cost of filing and potentially increasing the accuracy of the data. For example, with standardized interactive data tags, registration statements may require less time for information gathering and review. Also, standardized interactive data tagging may enhance the ability of a fund's inhouse professionals to identify and correct errors in the fund's registration statements filed in traditional electronic format. Mutual funds also may gain benefits not directly related to risk/return summary information disclosures. For example, mutual fund families that use interactive data may be able to compile information more quickly and potentially more reliably both for internal purposes and for communications with financial intermediaries, third party information providers, and the public. However, we recognize that at the outset, mutual funds would most likely prepare their interactive data as an additional step after their prospectuses have been prepared.

The principal elements of the proposal are as follows:

Mutual funds would provide to the Commission a new exhibit with their risk/return summary information in interactive data format, beginning with initial registration statements, and posteffective amendments that are annual updates to effective registration statements, that become effective after December 31, 2009.\47\ \47\ The proposed schedule is premised on the rules being adopted this fall in time for mutual funds to implement this schedule, and could be adjusted depending on when the Commission adopts any final rules.

Mutual funds providing risk/return summary information in interactive data format would be required to use the most recent list of tags released by XBRL U.S. as required by the EDGAR Filer Manual. Mutual funds also would be 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 would be formatted using the appropriate list of tags as required by the EDGAR Filer Manual.\48\ \48\ The appropriate list of tags for document and entity identifier elements would be a list released by XBRL U.S. and would be required to be used by all issuers required to submit interactive data.
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A mutual fund required to provide risk/return summary information in interactive data format to the Commission also would be required to post that information in interactive data format on its Web site on the earlier of the date that the interactive data is submitted to the Commission or is required to be submitted to the Commission.

The proposed rules would not alter the requirements to provide risk/return summary information with the traditional format filings.\49\
\49\ When 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. See Part II.A. of the Risk/Return Voluntary Program Adopting Release, supra note 19, 72 FR at 39292.

Risk/return summary information in interactive data format would be provided as exhibits identified in General Instruction C.3.(g) of Form N1A.

Viewable interactive data as displayed through software available on the Commission's Web site, and to the extent identical in all material respects to the corresponding portion of the traditional format filing, would be subject to all the same liability provisions of the federal securities laws as the corresponding data in the traditional format filing.

Data in the interactive data file submitted to us generally would be subject to the federal securities laws in a manner similar to that of the voluntary program and, as a result, would be [cir] Deemed not filed for purposes of specified liability provisions; and
[cir] Protected from liability for failure to comply with the proposed tagging and related requirements if the interactive data file either
[squf] Met the requirements; or
[squf] Failed to meet those requirements, but the failure occurred despite the mutual fund's good faith and reasonable effort, and the mutual fund corrected the failure as soon as reasonably practicable after becoming aware of it.

The proposed rules would require the risk/return summary information and document and entity identifier elements to be tagged according to Regulation ST and the EDGAR Filer Manual.\50\
\50\ Proposed Rule 405 of Regulation ST would directly set forth the basic tagging requirements and indirectly set forth the rest of the tagging requirements through the requirement to comply with the EDGAR Filer Manual. Consistent with proposed Rule 405, the Filer Manual would contain the technical tagging requirements. See Interactive Data Proposing Release, supra note 8 (proposing Rule 405 of Regulation ST).

Each interactive data submission would be required to be filed as a posteffective amendment under Rule 485(b) under the Securities Act \51\ and would be required to be filed after effectiveness of the related filing, but no later than 15 business days after the effective date of the related filing.
\51\ Rule 485(b) under the Securities Act provides for immediate effectiveness of amendments to registration statements that make certain nonmaterial and other changes.

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

We anticipate that the voluntary program would be modified, if the proposed rules are adopted, to exclude participation by mutual funds with respect to risk/return summary information but continue to permit investment companies to participate with respect to financial statement information. As a result, the voluntary program would continue for the financial statements of 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 SX.

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 SX would be 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.
II. Discussion of the Proposed Amendments
A. Submission of Risk/Return Summary Information Using Interactive Data

The ICI's risk/return summary list of tags received acknowledgement from XBRL International in June 2007.\52\ The Commission anticipates entering into a contract to update the architecture of the list of tags and conform the list of tags to any changes in the risk/return summary that we adopt pursuant to a pending rule proposal.\53\
\52\ The list of tags is available on XBRL International's Web site at: http://www.xbrl.org/Taxonomy/ici/icirrsummarydocument 20070516acknowledged.htm.

There are two levels of XBRL taxonomy recognition: (1) ``Acknowledgement'' is formal recognition that a taxonomy 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 taxonomy under review, creation of a number of instance documents, and an open review period after acknowledgement. For more information regarding the XBRL taxonomy recognition process, see ``Taxonomy Recognition Process'' on the XBRL International Web site available at: http://www.xbrl.org/TaxonomyRecognition/. \53\ See Summary Prospectus Proposing Release, supra note 15.

Interactive data risk/return summary information using the list of tags for risk/return summary information has been submitted voluntarily to us by approximately 20 mutual funds. In recent years, there has been a growing development of software products for users of interactive data, as well as of applications to assist companies, including mutual funds, to tag their disclosures using interactive data.\54\ The growing number of software applications available to preparers and consumers is helping make interactive data increasingly useful to both retail and institutional investors, as well as to other participants in the U.S. and global capital markets. On this basis, we believe interactive data, and in particular the XBRL standard, have become widespread and that the list of tags for risk/return summary information is now sufficiently advanced to require that mutual funds provide their risk/ return summary information in interactive data format.
\54\ See SEC's Office of Interactive Disclosure Urges Public Comment as Interactive Data Moves Closer to Reality for Investors, Securities and Exchange Commission Press Release, Dec. 5, 2007, available at: http://www.sec.gov/news/press/2007/2007253.htm. A list of interactive data products and service providers is available at: http://xbrl.us/Vendors/Pages/defaultexpand.aspx.

As discussed in more detail below, our proposed rules would require all mutual funds to submit interactive data with any registration statement or posteffective amendment on Form N1A that includes or amends risk/return summary information.\55\ We anticipate that the first required submissions would be for initial registration statements and posteffective amendments that are annual updates to effective registration statements and that become effective after December 31, 2009.
\55\ See proposed General Instruction C.3.(g) to Form N1A.

We are proposing that mutual funds be required to provide the same risk/return summary information in interactive data format that mutual [[Page 35447]]
funds have been providing in the voluntary program.\56\ In addition, funds would be 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 proposed requirement for interactive data reporting is intended to be disclosure neutral. We do not intend the rules to result in mutual funds providing more, less, or different disclosure for a given disclosure item depending upon the format, whether ASCII, HTML, or XBRL.
\56\ See proposed General Instruction C.3.(g) to Form N1A.

We propose to continue requiring the existing electronic formats now used in filings because we believe it is necessary to monitor the usefulness of interactive data reporting to investors and the cost and ease of providing interactive data before attempting further integration of the interactive data format. However, the proposed rules would treat viewable interactive data as displayed through software available on the Commission's Web site, and interactive data generally,\57\ as part of the official filing, instead of a supplement as is the case in the voluntary program. Further evaluation will be useful with respect to the availability of inexpensive, sophisticated interactive data viewers. Currently there are many software providers and financial printers that are developing interactive data viewers. We anticipate that these will become widely available and increasingly useful to investors.
\57\ As further discussed below in Part II.F, interactive data generally would be deemed not filed for purposes of specified liability provisions.

We expect that the open standard feature of XBRL format will facilitate the development of applications and software, and that some of these applications may be made available to the public for free or at a relatively low cost. The expected continued improvement in this software would give the public increasingly useful ways to view and analyze mutual fund risk/return summary information. After evaluating the use of the new interactive data technologies, software, and list of tags, we may consider proposing rules to eliminate the filing of risk/ return summary information in ASCII or HTML format. Or we may consider proposing rules to require a filing format that integrates ASCII or HTML with XBRL.

We believe XBRL is the appropriate interactive data format with which to supplement ASCII and HTML. Our experience with the voluntary program and feedback from company, audit, and software communities point to XBRL as the appropriate open standard for the purposes of this rule. As a derivative of the XML standard, XBRL data would be compatible with a wide range of open source and proprietary XBRL software applications. As discussed above, many XBRLrelated products exist for analysts, investors, filers, and others to more easily create and compare disclosures; still others are in development, and that process would likely be hastened by mutual fund disclosure using interactive data. Comments on our 2004 concept release and proposed rules in 2004 and 2007 generally supported interactive data and XBRL in particular.\58\ Several other factors support our views regarding XBRL's broad and growing acceptance, internationally as well as in the U.S. For example, as noted above, in addition to the use of XBRL by other U.S. agencies,\59\ several foreign securities regulators have adopted voluntary or required XBRL financial reporting.\60\ We understand that several U.S. public and private companies use XBRL in connection with financial reporting or analysis.
\58\ Securities Act Release No. 8497 (Sept. 27, 2004) [69 FR 59111 (Oct. 1, 2004)] (``Concept Release''); Securities Act Release No. 8496 (Oct. 1, 2004) [69 FR 59094 (Oct. 1, 2004)]; Securities Act Release No. 8781 (Feb. 6, 2007) [72 FR 6676 (Feb. 12, 2007)]. See, e.g., letter from Deloitte & Touche LLP (Nov. 11, 2004) regarding the Voluntary Program Adopting Release, supra note 16; and letter from PR Newswire Association LLC (Nov. 11, 2004) regarding the Concept Release; and letters from Charles S. Hoffman (Feb. 10, 2007); ICI (Mar. 14, 2007); NewRiver, Inc. (Mar. 14, 2007); PricewaterhouseCoopers LLP (Mar. 14, 2007); and Ayal Rosenthal (Mar. 6, 2007) regarding extending the voluntary program to allow funds to submit tagged risk/return summaries.

We also note that financial statement participants in the voluntary program provided positive feedback with respect to possible mandatory XBRL. For example, the vast majority of voluntary program participants that submitted responses and views to a questionnaire answered in the affirmative to the question ``Based on your experience to date, do you think it would be advisable for the Commission to continue to explore the feasibility and desirability of the use of interactive data on a more widespread and, possibly, mandated basis?'' See question V.f in the Interactive Data Voluntary Program Questionnaire available at http://www.sec.gov/cgibin/XBRL_ Questionnaire.
\59\ See note 36 above. Also we note CIFiR's support of XBRL as referenced above in Part I.C.
\60\ For example, such countries include Canada, China, Israel, Japan, Korea, and Thailand.

Request for Comment:

Should we adopt rules that require each mutual fund's risk/return summary information to be provided in interactive data format? What are the principal factors that should be considered in making this decision? Is it useful to users of risk/return summary information to continue to have, in addition to interactive data, duplicate, humanreadable risk/return summary information in ASCII or HTML format?

What opportunities exist to improve the display of risk/ return summary information prepared using interactive data? How should these affect any continued requirement to file ASCII or HTMLformatted risk/return summary information? For example, if the technology is sufficiently developed, should we propose rules to encourage or require a format that embeds interactive data tags in HTML so that risk/return summary information can be viewed in a browser? How should these affect any continued requirement to file ASCII or HTMLformatted risk/return summary information? What obstacles exist to making such improvements in the display of XBRL information?

Is it appropriate to require mutual funds to provide interactive data using XBRL? Alternatively, in place of such a requirement, should the Commission instead wait to see whether interactive data disclosure by mutual funds is voluntarily adopted? Without a requirement, would the development of products for producing and using interactive data from mutual funds meet the needs of investors, third party information providers, and others who seek interactive data? Would a large percentage of mutual funds provide interactive data voluntarily, and following the same standard, if not required to do so?

If we do not adopt the proposed rules and instead wait to see whether mutual funds on their own expand their use of interactive data, would such data be less comparable among mutual funds? Is there a ``network effect,'' such that interactive data would not be useful unless many or all mutual funds provide their risk/return summary information using interactive data? Would the development of software for retail investors to obtain and make use of such data be slowed without a requirement that mutual funds provide interactive data?

What advantages are there to investors having the mutual fund responsible for preparing risk/return summary information in interactive data format, as opposed to a model in which third parties independently prepare the information in interactive format and charge a fee for it?

Do commenters agree that compared to filings using ASCII and HTML, interactive data would require less manuallytransferred data? If so, do commenters believe that the proposed rules would result in less human error and therefore contribute to reduced costs? [[Page 35448]]

If we require interactive data disclosure and the proposed rules result in more effective and efficient disclosure with reduced human error and cost, would fees charged by financial printers or other service providers be likely reduced to reflect such lower costs?

If we adopt rules requiring interactive data disclosure of risk/return summary information, is the XBRL standard the one that we should use? Are any other standards becoming more widely used or otherwise superior to XBRL? What would the advantages of any such other standards be over XBRL?

Is the XBRL format for interactive data sufficiently developed to require its use at this time? If not, what indicators should we use to determine when it has become sufficiently developed to require its use?

Are vendors likely to develop and make commercially available software applications or Internet products that will be able to deliver the functionality of interactive data to retail investors?

How important is it that many different types of viewers with varying levels of sophistication and functionality be available to investors? In addition to the free viewer provided on the SEC Web site, are there likely to be other such products available at low or no cost?

If we require risk/return summary information in interactive data format, what are the principal challenges facing the eventual integration of such reporting with the current filing formats, ASCII and HTML, so that filing in all three formats would no longer be necessary?

B. Compliance Date

The proposed rules would require all mutual funds to submit interactive data with any registration statement or posteffective amendment on Form N1A that includes or amends risk/return summary information.\61\ If the rules are adopted by this fall, we anticipate that the first required submissions would be for initial registration statements and posteffective amendments that are annual updates to effective registration statements \62\ and that become effective after December 31, 2009. We are sensitive to concerns that undue expense and burden should not accompany the adoption of required interactive data reporting. We therefore propose limitations on liability applicable to the interactive data file, as well as a 15businessday period for making interactive data submissions after effectiveness of the related filing.\63\
\61\ See proposed General Instruction C.3.(g) to Form N1A. \62\ Section 10(a)(3) of the Securities Act [15 U.S.C. 77j(a)(3)] generally requires that when a prospectus is used more than nine months after the effective date of the registration statement, the information in the prospectus must be as of a date not more than sixteen months prior to such use. The effect of this provision is to require mutual funds to update their prospectuses annually to reflect current cost, performance, and other financial information. A mutual fund updates its registration statement by filing a posteffective amendment to the registration statement. \63\ We discuss more fully at Part II.F liability related to required submissions of interactive data in general and the continuation of some of the limitations on liability used in the voluntary program in particular.

Mutual funds under the proposed rules would be required to convert their risk/return summary information into an interactive data file using the list of tags for risk/return summary information, as approved for use by the Commission.\64\ The submission also would be required to include any supporting files as prescribed by the EDGAR Filer Manual. Interactive data would be required for the entirety of the risk/return summary information, including information for all series and all classes.\65\
\64\ See Interactive Data Proposing Release, supra note 8 (proposing amendments to Rule 11 of Regulation ST and proposing new Rule 405(a)) and proposed amendments to proposed Rule 405(a). \65\ Proposed General Instruction C.3.(g) of Form N1A.

As noted above, we anticipate deferring the requirement for submission of risk/return summary information in interactive data format for all mutual funds until after December 31, 2009. We also anticipate that the voluntary program, with its limitations on liability, will remain available to mutual funds until December 31, 2009, for purposes of submitting risk/return summary information in interactive data format. We believe that this period of almost two years from now will give mutual funds, including those that have not previously participated in the voluntary program, adequate opportunity to test interactive data submissions so that they may be fully prepared to file risk/return summary information in interactive data format after December 31, 2009.

Our multiyear experience with interactive data has helped us understand the extent to which a mutual fund would incur additional costs to create and submit its existing disclosures in interactive data format. Based on that experience, we believe that the process of converting a mutual fund's existing ASCII or HTML risk/return summary information into interactive data would not impose a significant burden or cost. Mutual funds could choose to tag their risk/return summary information using available software without using outside services or consultants; alternatively, they could rely on financial printers, consultants, and software companies for assistance, although they would retain ultimate responsibility for both their risk/return summary information and their tagged data. As discussed in more detail in the costbenefit analysis below,\66\ we believe that the modest firstyear costs for a mutual fund would decrease in subsequent periods. We also believe that these costs would be justified by interactive data's benefits.

\66\ See Part V.

We expect that most mutual funds that are part of smaller fund families, which generally are disproportionately affected by regulatory costs, also would be able to provide their risk/return summary information in interactive data format without undue effort or expense. While interactive data reporting involves changes in reporting procedures mostly in the initial reporting periods, we expect that these changes would provide efficiencies in future periods. As a result, there may be potential net savings to the mutual fund, particularly if interactive data become integrated into the mutual fund's disclosure process. While we recognize that requiring interactive data risk/return summary information would likely result in startup expenses for smaller mutual fund families, we expect that both software and thirdparty services will be available to help meet the needs of smaller mutual fund families. We also intend that the delayed compliance date for all mutual funds would permit mutual funds that are part of smaller fund families to learn from the experience of funds that have participated in the voluntary program and to participate in the voluntary program themselves during the almost twoyear period prior to December 31, 2009. The delayed compliance date would also give mutual funds that are part of smaller fund families a significant period of time across which to spread firstyear data tagging costs.

We believe that adopting a delayed compliance date of December 31, 2009, would establish an appropriate and measured timeline, which we would be able to monitor and, if necessary, reconsider during the continuation of the voluntary program.

Request for Comment:

Is the proposed schedule for implementation of interactive data tagging appropriate?

Should we advance the first required interactive data submission to be for filings that become effective after June 30, 2009, or some other date, rather
[[Page 35449]]
than December 31, 2009? Should we delay the first required interactive data submissions until, for example, 2011, 2012, or later? What benefits would there be to advancing or delaying implementation of the proposed rules? How much lead time do mutual funds need to familiarize themselves with interactive data and the process of mapping risk/return summary information using the list of tags for risk/return summary information?

Should there be a phasein to provide mutual funds with more time to become familiar with the list of tags for risk/return summary information and to encourage potential vendors of interactive data products and services to invest in the development and marketing of such products? If so, what should the phasein dates be and what funds should be included in each phase? Should we differentiate funds based on net assets of the fund, the fund family, or on some other basis? Should we, for example, provide a more delayed compliance date for mutual funds that are small entities for purposes of the Regulatory Flexibility Act, i.e., funds that, together with other investment companies in the same group of related investment companies, have net assets of $50 million or less as of the end of their most recent fiscal year? If we provide a more delayed compliance date for smaller fund families, how should we define such a category?

Is the proposed timing sufficient for mutual funds to familiarize themselves with interactive data and the process of mapping risk/return summary information using the list of tags for risk/return summary information? Is it sufficient for funds that are part of smaller fund families, e.g., funds that are small entities for purposes of the Regulatory Flexibility Act?

Should there be a longer lag than proposed for mutual funds that are part of smaller fund families, e.g., funds that are small entities for purposes of the Regulatory Flexibility Act, to allow them to allocate the necessary resources and meet the proposed requirements?

Should mutual funds that are part of smaller fund families, e.g., funds that are small entities for purposes of the Regulatory Flexibility Act, be subject to the proposed rules at all? Should compliance with the proposed rules be solely voluntary for those funds?

Will the rule proposal and the anticipated December 31, 2009 compliance date sufficiently encourage potential vendors of interactive data products and services to invest in the development and marketing of such products? If not, what changes should we make to encourage developments in the markets for filer and investor products related to mutual fund interactive data?

C. Documents and Information Covered by the Proposed Rules

The proposed rules would require interactive data tagging of a mutual fund's risk/return summary information, which is currently provided in response to Items 2 and 3 of Form N1A.\67\ In November 2007, the Commission proposed to amend Form N1A.\68\ The amendments, if adopted as proposed, would result in the risk/return summary information being contained in Items 2, 3, and 4 of Form N1A. If the Commission adopts that proposal, we intend to apply any tagging rules we adopt to the items of amended Form N1A that contain the information that is currently contained in Items 2 and 3.
\67\ See proposed Rule 405(b)(2); General Instruction C.3.(g) to Form N1A. We are also proposing technical amendments to proposed Rule 405 that reflect this proposed requirement.

As previously noted, proposed Rule 405 of Regulation ST would directly set forth the basic tagging requirements and indirectly set forth the rest of the tagging requirements through the requirement to comply with the EDGAR Filer Manual. Consistent with proposed Rule 405, the EDGAR Filer Manual would contain the detailed tagging requirements.
\68\ See Summary Prospectus Proposing Release, supra note 15, 72 FR at 67817.

As with the voluntary program, the proposed rules would require mutual funds to provide the interactive data in an exhibit.\69\ Interactive data would be required for all information in the risk/ return summary, including information for each series and class included in a mutual fund's prospectus.\70\ The proposed rules would not, however, require interactive data submissions for parts of Form N 1A other than the risk/return summary information.
\69\ See proposed General Instruction C.3.(g) to Form N1A; proposed Rule 405(a). The Interactive Data File must be named ``EX 101'' as specified in the EDGAR Filer Manual.
\70\ See proposed General Instruction C.3.(g) to Form N1A.

As with the voluntary program, the proposed rules would require that the information contained in the risk/return summary section in the traditional format filing on Form N1A be the same as in the interactive data format.\71\ Further, the interactive data would have to be submitted in a manner that would permit the information for each series and any classspecific information, such as expenses and performance, to be separately identified by series and class.\72\ However, information that is not classspecific, such as investment objectives, would not be required to be separately identified by class. \71\ Proposed Rule 405(b)(2).

\72\ Proposed General Instruction C.3.(g) to Form N1A.

To clarify the intent of the rules, we propose to include an instruction to proposed Rule 405 of Regulation ST stating that the rules require a disclosure format, but do not change substantive disclosure requirements.\73\ The rules also would state clearly that the information in interactive data format should not be more or less than the information in the ASCII or HTML part of the Form N1A filing.\74\
\73\ See Interactive Data Proposing Release, supra note 8 (proposing Preliminary Note 2 to proposed Rule 405).

\74\ Proposed Rule 405(b)(2).

The proposed rules would not eliminate or alter existing filing requirements that risk/return summary information be filed in traditional format. We believe investors and other users may wish to use these electronic formats to obtain an electronic or printed copy of the entire registration statement, either in addition to or instead of disclosure formatted using interactive data. In addition, we propose to no longer require or permit the cautionary disclosure that is used in the voluntary program for required interactive data, which states that investors should not rely on the interactive data information in making investment decisions. We believe that such language would be inconsistent with the proposal that interactive data be part of the related registration statement.

We are proposing to require a mutual fund to submit interactive data for the risk/return summary information that is contained in any filing on Form N1A that includes or amends information provided in response to Items 2 and/or 3.\75\ This would include initial registration statements and any posteffective amendment that makes changes to the risk/return summary information.\76\
\75\ Proposed General Instruction C.3.(g) to Form N1A.
\76\ Revised interactive data would be required with respect to posteffective amendments that make changes to the risk/return summary information so that the risk/return summary information would be the same in both the traditional format filing and the interactive data file. If the risk/return summary information is not revised in connection with a posteffective amendment, the exhibit index would indicate that the interactive data file was already provided.

Request for Comment:

Has the interactive information available through the voluntary program been useful? Should we require that more or less information be tagged? For example, should the entire risk/return summary section of Form N1A, including the investment objective and [[Page 35450]]
strategies, risks, costs, and performance information, be required to be tagged in interactive data format? Should we apply tagging requirements to both narrative information, such as investment objectives, and numerical information, such as costs?

Would investors and other users of risk/return summary information find tagged risk/return information useful for analytical purposes? Is tagged risk/return summary information that is narrative, rather than numerical, useful as an analytical tool?

Would the availability of interactive dataformatted risk/ return summary information possibly cause competitive pressures on mutual funds to choose to make more disclosures than are required by Commission regulations? Alternatively, migh

FOR FURTHER INFORMATION CONTACT Alberto H. Zapata, Senior Counsel, or Tara R. Buckley, Branch Chief, Office of Disclosure Regulation, Division of Investment Management, at (202) 5516784, U.S. Securities and Exchange Commission, 100 F Street, NE., Washington, DC 205495720.