Financial Transactions and Regulatory Compliance Review

Covering the latest in capital markets transactions, funds, annuities, financial reporting and SEC filings

Hyperlinking Exhibits - Impact for Investors

Technology and SEC Disclosure - The Hyperlinking Rule

The growth of digital tools and fintech is rapidly transforming the financial industry. Gradually, the industry's main regulator, the SEC, is also taking advantage of these new technologies, both for its own benefit and for filers. By adopting innovative digital shutterstock_312707924.jpgsolutions, including Inline XBRL, hyperlinks for exhibits, and an updated EDGAR system, the SEC is attempting to make structured financial data more widely available and efficient to access.

In order to find out the benefits and challenges associated with these changes, Toppan Vintage commissioned Mergermarket to interview five industry experts for their insights.

Toppan Vintage question: On March 1, the SEC approved a new rule requiring registrants to include hyperlinks to each exhibit listed in the index of their filings. How impactful do you think this requirement is for investors? And what are the biggest challenges involved for filers? Dealmakers weigh in...

Jay Knight: I think it will be very user-friendly for investors to obtain the exhibits through hyperlinks. Currently, if investors use EDGAR at all, they have to click through various filings and be pretty familiar with the system’s structure to find what exhibits they're looking for. So I think this is an easy tool to help investors if they're looking for a particular agreement, or the charter or the bylaws. For some exhibits, like a registration statement or a Form 10, it will greatly facilitate investors’ ability to click on that directly instead of having to go find some document that's been incorporated by reference to another filing.

Hyperlink Participants.jpgAs for the impact on filers, I think initially it will take time to figure out who is actually responsible for finding the web addresses and implementing the rule. Is it going to be the lawyers? The financial printer? Will it be the in-house counsel or finance director?
I think it will just take a bit of time for each company to figure out how they would like to implement it. So there will be some upfront time involved, but I think once the structure is set in place, it should be relatively straightforward, because you're just
adding individual exhibits.

Taavi Annus: On the investor side, I don't predict this having a huge impact. But I do think it will help on the margins. The reason is that there is no substantive additional information that is required to be disclosed. It is a technical rule to make it easier to access information – it will help to keep down the cost of finding information about companies that investors are interested in. Instead of trying to figure out where an exhibit is, the investors and their advisors can access those documents much more quickly. I'm certainly not saying hyperlinks are useless. However, I would say that the SEC’s plans regarding improving disclosure  effectiveness, which should be much more substantive, are likely to have a bigger impact on investors.

On the company side, I also don't expect there to be a major impact. The rules are clear that even if you don't get the hyperlinks right, the filing is not deemed materially deficient and it does not impact the eligibility to file the Form S-3 short-form registration statement. That being said, every filer will now

quote2-2.png

have to deal with certain challenges in connection to the hyperlinks rule. Someone will need to get familiar with how the hyperlinks work and how to quickly insert them, for example, if the filing needs a last-minute change. In order to proofread the filing, a second set of eyes should be able to make sure the hyperlink was inserted properly and check that they are correct.

One other issue companies will face is handling older documents. An exhibit needs to link to the document where
the exhibit is filed initially. In older documents, exhibits often weren't filed separately, but were just part of one large text file, and there isn't really a good way to link to the exhibit other than to this very large file. Similarly, companies often file documents  much as an equity incentive plan as an appendix to a proxy statement, which is not a standalone exhibit that can be easily linked to. But those are all technical matters. There is essentially
no impact on what these companies substantively disclose.

 

 


mmcover_62017_techandsecdisclosure.jpg
Download the full WHITEPAPER

Technology
and SEC Disclosure

CLICK HERE TO DOWNLOAD
 

The growth of digital tools and fintech is rapidly transforming the financial industry. Gradually, the industry's main regulator, the SEC, is also taking advantage of these new technologies, both for its own benefit and for filers. By adopting innovative digital solutions, including Inline XBRL, hyperlinks for exhibits, and an updated EDGAR system, the SEC is attempting to make structured financial data more widely available and efficient to access.

Toppan Vintage

Toppan Vintage is a leading international financial printing, communications and technology company dedicated to delivering a hassle-free experience with the highest quality accuracy, reliability and value for your organization’s financial printing and communications needs.

toppanvintage.com

Show more posts from author

Subscribe to the Toppan Vintage Blog

Most Popular Articles

2018 SEC FILING CALENDAR - DOWNLOAD NOW

Download the 2018 SEC Filing Calendar here.  

2018 MUTUAL FUND & ETF FILING DATES - DOWNLOAD NOW

Download the 2018 Mutual Fund & ETF Filing Dates here.  

UNICORNS: WHAT WILL HAPPEN OVER THE NEXT 12 MONTHS?

Get your free whitepaper here

ANNUAL COMPLIANCE SUBSCRIPTION PACKAGE 

Click here to learn more about which XBRL service option best fits your team's business requirements and work standards.

Latest Blogs