Promoting Job Creation and Reducing Small Business Burdens Act

Floor Speech

Mr. ELLISON. Mr. Speaker, I oppose The Promoting Job Creation and Reducing Small Business Burdens Act, (H.R. 5405). This bill contains 11 separate bills some of which I support and some I oppose. This legislation contains a number of potentially significant deregulatory measures, many of which are being addressed by regulatory action by the Securities and Exchange Commission and Commodities Futures Trading Commission. These bills stop those productive efforts replacing them with sweeping deregulation which I think is worse for investors and the economy.

I specifically wish to draw attention to my concerns with The Small Company Disclosure Simplification Act (H.R. 4164)--Title VII of this bill. This bill would exempt nearly 60 percent of public companies from complying with the EXtensible Business Reporting Language (XBRL) requirement. XBRL is an improvement the Securities and Exchange Commission (SEC) started in 2009 to enable more efficient investing, especially investing in smaller firms. Instead of investors, the public and regulators
reading and analyzing reams of paper filings, the market would be brought into the 21st Century with a searchable electronic database. Clearly, a searchable electronic database on companies' financial statements is much more efficient than requiring investors read reams and reams of documents.

When this bill came before the Financial Services Committee on March 14, 2014, I voted yes on this bill. I was concerned that the SEC was not paying adequate attention to ensure the accuracy of the XBRL database. Since that vote, the SEC has started enforcing the accuracy of the XBRL data format. The SEC sent out letters in July, 2014, to many firms urging they correct inaccurate reporting. The SEC action and my own research into the need for accessible corporate financial information to grow companies has made me oppose this broad exemption.

Congress should encourage, not discourage the move toward data-based financial reporting. An expansion of structured data enable investors to make better and faster decisions, especially related to smaller firms; strengthens the SEC's oversight ability and makes it easier to discover fraud and simplifies compliance responsibilities for firms.

More progress is still needed at the SEC. The agency still collects the same financial statement from each public company twice--once as a document and again as XBRL data. And last July's letters were only a start. To make disclosures more useful to investors and less burdensome to companies, the agency must continue to improve data quality and must combine the two submissions into one. The Small Company Disclosure Simplification Act would prevent the SEC from ever taking these steps. If the agency is legally required to collect only documents, not XBRL data, from a majority of public companies, it will be unable to continue, and complete, the transformation that it began in 2009.

I submit a blog post from the Data Transparency Coalition detailing the ramifications of H.R. 5405 on data transparency.[From http://datacoalition.blogspot.com/2014/ 09/new-proposal-includes-xbrl-exemption.html]

NEW PROPOSAL INCLUDES XBRL EXEMPTION--AND MAJOR SETBACK FOR OPEN DATA (Data Transparency Coalition; September 10, 2014)

The Data Transparency Coalition advocates on behalf of the private sector and the public interest for the publication of government information as standardized, machine-readable data. UPDATE: On September 16, 2014, H.R. 5405 passed the House of Representatives by a vote of 320 to 102.

A major setback for open government data may be on the agenda for the U.S. House of Representatives.

Despite the opposition of the tech industry, Rep Robert Hurt's proposal to direct the Securities and Exchange Commission (SEC) to stop collecting financial data from most public companies has been included as part of a new legislative package--a new bill introduced on Monday, Sept. 8, by Rep. Mike Fitzpatrick and a number of other Republican members.

The new bill, H.R. 5405, brings together ten previous bills into a single one. One of those ten is Rep. Hurt's previous proposal, included in the new bill verbatim. Judging from the urgency of the current House schedule, H.R. 5405 could see action by the House of Representatives as early as next week.

Nine out of the ten bills included in H.R. 5405 have already been approved, as stand-alone bills, by bipartisan majorities in either the Financial Services Committee or the full House. (The Financial Services Committee passed Rep. Hurt's original bill in March 2014.) So it seems clear that the backers of H.R. 5405 want to craft a bill that will pass the House easily, without serious opposition.

H.R. 5405's introduction conveys that the bill is non-controversial by stating three innocuous purposes:

To make technical corrections to the Dodd-Frank Wall Street Reform and Consumer Protection Act, to enhance the ability of small and emerging growth companies to access capital through public and private markets, to reduce regulatory burdens .....

But H.R. 5405, if approved by the House, introduced and passed in the Senate, and signed into law by President Obama, will dramatically restrict the availability of searchable corporate financial data to investors--and to the tech companies building investment tools.

Supporters of open data in financial regulatory reporting will remember that the SEC collects an open data version of each financial statement in the eXtensible Business Reporting Language (XBRL) structured data format, alongside the old-fashioned plain-text version, from every public company registered in the United States. Investors, markets, and the public can use the XBRL version of each financial statement to create a fully searchable data set of all U.S. public company databases. XBRL data supports free tools for investors like RankandFiled.com. It is also used by infomediaries like Morningstar and Thomson Reuters to enrich the information they deliver to paying clients.

Rep. Hurt's proposal, now incorporated into H.R. 5405, would direct the SEC to exempt all public companies with revenues below $250 million--a majority of public companies--from the obligation to file an open data version. Supporters of the exemption claim that XBRL-formatted financial statements cost ``tens of thousands of dollars'' to create, but Financial Executive International found a median annual cost of $2,000 for small companies (page 19) and some providers offer XBRL preparation services at even lower prices.

Supporters of the exemption had one valid point last spring: at that time, the SEC had not taken any steps to ensure the quality of the XBRL filings. Without assurance that the open data versions of financial statements were reliable, investors were reluctant to use them, and relied on the plain-text versions instead. But last summer, after a year of advocacy from open data allies in Congress, the SEC took its first public steps toward enforcing better data quality. As quality improves, investors and the tech companies serving them will make more use of the open data financial statements.

The companies themselves will benefit, too. Open, structured data delivers information more efficiently to the markets, which makes it easier for smaller companies to find eager investors and brings down their capital costs.

H.R. 5405 would cut off such progress by forcing the SEC to use documents, not open data, to collect corporate financial information.

Fans of open data should make their opposition to this portion of H.R. 5405 known.

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