On August 2, 2024, the Securities and Exchange Commission (SEC) announced a pivotal proposal for joint data standards under the Financial Data Transparency Act of 2022 (FDTA). The proposal is intended to improve accountability and transparency by establishing technical standards for data submitted to various financial regulatory agencies.
The announcement represents a significant step toward enhancing the interoperability, quality, and accessibility of financial regulatory data. For companies of all sizes, new data standards promise streamlined regulatory compliance, improved data quality, and enhanced operational efficiency.
Nick Hart, President & CEO of the Data Foundation, commented, “Over the next two months, our community of data experts will be closely reviewing the proposed rule to encourage agencies to advance data standards to meet modern expectations for using new and emerging technologies in the 21st century, while also recognizing the tremendous advancement that the proposed regulation already represents by enabling improved cooperation across our financial regulatory community.”
Goal: Foster the Interoperability of Financial Regulatory Data
The FDTA’s proposed standards are designed to promote the interoperability of financial regulatory data across nine government agencies, including the Board of Governors of the Federal Reserve System, the Commodity Futures Trading Commission, the Consumer Financial Protection Bureau, the Department of the Treasury, the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, the National Credit Union Administration, and the Office of the Comptroller of the Currency. The goal is to make financial data more accessible, uniform, and valuable to the public.
In our latest research paper, The FDTA and a New Digital Data Future, we cover important elements of the FDTA including The Rule Making Process, The Agencies Covered, Benefits of the FDTA, Role of the Regulators, Choosing the Data Standard, Impact on the Municipal Securities Rulemaking Board (MSRB) and Next Steps to Implementation.
The proposed joint data standards are focused around:
- Common identifiers, including identifiers related to entities, geographic locations, dates, and certain products and currencies
- Data transmission and schema and taxonomy format standards, including rendering data fully searchable and machine-readable
- Definition of “Collections of Information,” likely adopting the definition established in the Paperwork Reduction Act of 1995
Read more details in the SEC fact sheet.
The SEC’s FDTA Proposal: Why it’s Important
"Consistent data standards will make it easier for financial institutions to file reports across multiple agencies. They also will help regulators be more effective and efficient in carrying out our oversight functions," stated SEC Chair Gary Gensler in the SEC press release.
Implementing these joint data standards will streamline the regulatory reporting process and increase transparency for companies. By using standardized identifiers and schemas, companies can ensure that their data submissions are consistent and easily understood by various regulatory bodies, reducing the likelihood of errors and discrepancies in reports thereby improving compliance with regulatory requirements.
Additionally, the requirement that data be fully searchable and machine-readable, along with the use of clear schemas and machine-readable metadata, will significantly enhance data quality and accessibility. Companies will be able to leverage high-quality, standardized data for their internal analyses and decision-making processes.
DFIN’s Take
DFIN’s regulatory and XBRL expertise and advanced technology support the successful implementation of the FDTA. Its financial reporting software, ActiveDisclosure, and team of experts have a long history of helping public and private companies and government agencies transform how they manage, analyze, and leverage data for regulatory compliance and improved operational efficiency. The proposed rules present a significant opportunity for those who leverage technology to make financial data more useful.
Next Steps: How Organizations Can Take Part in the Process
The SEC has outlined a two-step rulemaking process. The public comment period for the proposed joint standards is now open and will remain open for the next 60 days. Second, it has issued agency-specific rules to implement the final joint standards.
Following the comment period, the final rules are expected to be released on December 23, 2024, with implementation preparation beginning shortly thereafter to meet the FDTA's effective date of January 1, 2027. Given the short timeline, companies should begin preparing for these changes to ensure a smooth transition.
As the regulatory landscape evolves, DFIN continues to help you stay informed and prepared. Contact us today to let us know how we can help.
