[Federal Register: June 23, 2008 (Volume 73, Number 121)]
[Proposed Rules]
[Page 35441-35469]
[DOCID:fr23jn08-17]

-----------------------------------------------------------------------

Part II

Securities and Exchange Commission

-----------------------------------------------------------------------

17 CFR Parts 230, 232, 239, et al.

Interactive Data for Mutual Fund Risk/Return Summary; Proposed Rule

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

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

[Release Nos. 33-8929, 34-57942, 39-2457, IC-28298; File Number S7-12-
08]
RIN 3235-AK13

Interactive Data for Mutual Fund Risk/Return Summary

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rule.

-----------------------------------------------------------------------

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 off-the-shelf 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.

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

ADDRESSES: Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/proposed.shtml);
     Send an e-mail to<EMAIL_ADDRESS>Please include
File Number S7-12-08 on the subject line; or
     Use the Federal eRulemaking Portal (http://
www.regulations.gov). Follow the instructions for submitting comments.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number S7-12-08. This file number
should be included on the subject line if e-mail is used. To help us
process and review your comments more efficiently, please use only one
method. The Commission will post all comments on the Commission's
Internet Web site (http://www.sec.gov/rules/proposed.shtml). Comments
are also available for public inspection and copying in the
Commission's Public Reference Room, 100 F Street, NE., Washington, DC
20549, on official business days between the hours of 10 a.m. and 3
p.m. All comments received will be posted without change; we do not
edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly.

FOR FURTHER INFORMATION CONTACT: Alberto H. Zapata, Senior Counsel, or
Tara R. Buckley, Branch Chief, Office of Disclosure Regulation,
Division of Investment Management, at<PHONE_NUMBER>, U.S. Securities
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-5720.

SUPPLEMENTARY 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 S-T, \5\ Rule 8b-33 \6\ under the Investment
Company Act of 1940 (``Investment Company Act''), and Form N-1A \7\
under the Securities Act and the Investment Company Act. We are also
proposing amendments to proposed Rule 405 of Regulation S-T.\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 270.8b-33.
    \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 Non-Compliance 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, open-end management investment companies (``mutual
funds'') \14\ and

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 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. See Sections 4 and
5(a)(1) of the Investment Company Act [15 U.S.C. 80a-4 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. 80a-1 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 N-1A.
---------------------------------------------------------------------------

    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 S-X, 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 closed-end
investment companies that are not required to register under the
Investment Company Act. 15 U.S.C. 80a-2(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
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 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 year-end 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
third-party 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 third-party 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 text-based 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 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.\25\
---------------------------------------------------------------------------

    \24\ Rule 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.
    \25\ 15 U.S.C. 78p(a).

---------------------------------------------------------------------------

    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, 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 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 non-profit
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/ici-rr-summarydocument-20070516-acknowledged.htm.
    \29\ The proposed rules would define the interactive data
necessary to create human-readable 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 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].
---------------------------------------------------------------------------

    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 non-standard disclosure
that is not included in the standard list of tags. In this situation, a
fund would create a company-specific 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/
2004-97.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,

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/xbrl-meetings.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/
2007-213.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/2007/2007-227.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 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 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/acifr-pr-021408-final.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/265-24/265-24.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 N-1A.\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 post-effective 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 N-1A 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 post-effective amendment
thereto that contains risk/return summary information. Interactive
data would not be required as an exhibit to a post-effective
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 in-house
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 post-effective
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.

---------------------------------------------------------------------------

     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 N-1A.
     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 S-T and the EDGAR Filer Manual.\50\
---------------------------------------------------------------------------

    \50\ Proposed Rule 405 of Regulation S-T 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 S-T).
---------------------------------------------------------------------------

     Each interactive data submission would be required to be
filed as a post-effective 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 non-material and other changes.
---------------------------------------------------------------------------

     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
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 S-X.
     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 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/ici-rr-summarydocument-
20070516-acknowledged.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/2007/2007-253.htm. A
list of interactive data products and service providers is available
at: http://xbrl.us/Vendors/Pages/default-expand.aspx.
---------------------------------------------------------------------------

    As discussed in more detail below, our proposed rules would require
all mutual funds to submit interactive data with any registration
statement or post-effective amendment on Form N-1A that includes or
amends risk/return summary information.\55\ We anticipate that the
first required submissions would be for initial registration statements
and post-effective 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 N-1A.
---------------------------------------------------------------------------

    We are proposing that mutual funds be required to provide the same
risk/return summary information in interactive data format that mutual

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 N-1A.
---------------------------------------------------------------------------

    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 XBRL-related 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/cgi-bin/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, human-readable 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 HTML-formatted
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 HTML-formatted 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 manually-transferred
data? If so, do commenters believe that the proposed rules would result
in less human error and therefore contribute to reduced costs?

     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 post-effective
amendment on Form N-1A 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 post-effective 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 15-business-day period for
making interactive data submissions after effectiveness of the related
filing.\63\
---------------------------------------------------------------------------

    \61\ See proposed General Instruction C.3.(g) to Form N-1A.
    \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 post-effective 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 S-T and proposing new
Rule 405(a)) and proposed amendments to proposed Rule 405(a).
    \65\ Proposed General Instruction C.3.(g) of Form N-1A.
---------------------------------------------------------------------------

    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
cost-benefit analysis below,\66\ we believe that the modest first-year
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
start-up expenses for smaller mutual fund families, we expect that both
software and third-party 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 two-year 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 first-year 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

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 phase-in 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 phase-in 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 N-1A.\67\ In November
2007, the Commission proposed to amend Form N-1A.\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 N-1A. If the
Commission adopts that proposal, we intend to apply any tagging rules
we adopt to the items of amended Form N-1A 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 N-1A. We are also proposing technical amendments to proposed
Rule 405 that reflect this proposed requirement.
    As previously noted, proposed Rule 405 of Regulation S-T 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 N-1A;
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 N-1A.
---------------------------------------------------------------------------

    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 N-1A 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 class-specific information, such as expenses and
performance, to be separately identified by series and class.\72\
However, information that is not class-specific, 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 N-1A.
---------------------------------------------------------------------------

    To clarify the intent of the rules, we propose to include an
instruction to proposed Rule 405 of Regulation S-T 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 N-1A
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 N-1A that includes or amends information provided in
response to Items 2 and/or 3.\75\ This would include initial
registration statements and any post-effective amendment that makes
changes to the risk/return summary information.\76\
---------------------------------------------------------------------------

    \75\ Proposed General Instruction C.3.(g) to Form N-1A.
    \76\ Revised interactive data would be required with respect to
post-effective 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 post-effective 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 N-1A, including the investment objective and

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 data-formatted risk/
return summary information possibly cause competitive pressures on
mutual funds to choose to make more disclosures than are required by
Commission regulations? Alternatively, might the availability of tagged
data possibly cause mutual funds to choose to curtail such disclosures?
What types of disclosures would those be?
     Once interactive data are provided with a Form N-1A
filing, should we limit the requirement to provide interactive data for
amendments to only the amendments that reflect substantive changes from
or additions to the risk/return summary information? What would the
benefits and burdens be of revising interactive data that previously
was provided in connection with a registration statement on Form N-1A
to reflect changes?
     Do the standards we propose for tagging provide clear
enough guidance for preparers so that we can expect to achieve
consistency among filers?
     Should we require that mutual funds tag their document and
entity \77\ information? Would this information be useful in
interactive data format?
---------------------------------------------------------------------------

    \77\ See supra note 48.
---------------------------------------------------------------------------

     Should we provide an opportunity for mutual funds to
submit voluntarily in interactive data format information other than
that which they would be required to submit as interactive data? If so,
should we permit such interactive data format information to be subject
to provisions governing the proposed required filing of interactive
data? Should we instead permit such interactive data format information
to be submitted under the voluntary program?
     If we adopt the recently proposed amendments to Form N-
1A,\78\ should we require interactive data format information for the
risk/return summary? Should we require interactive data format
information for any additional information contained in the proposed
summary section of the prospectus? Should the information in the
proposed summary prospectus be tagged? If so, should all of the
information required in the summary prospectus be tagged? If not, what
information in the summary prospectus should be tagged? Should only the
risk/return information in the summary prospectus be tagged?
---------------------------------------------------------------------------

    \78\ See Summary Prospectus Proposing Release, supra note 15.
---------------------------------------------------------------------------

     When we proposed the summary prospectus, we proposed that
mutual funds choosing to use a summary prospectus be required to
provide the summary prospectus, the statutory prospectus, and the
statement of additional information on the Internet with links that
would allow persons to move back and forth among the documents.\79\ If
we were to require information in the prospectus and/or the summary
prospectus to be submitted in interactive data format, should we adopt
as proposed or modify the proposed linking requirements? \80\
---------------------------------------------------------------------------

    \79\ See Summary Prospectus Proposing Release, supra note 15, 72
FR at 67802-03.
    \80\ See Summary Prospectus Proposing Release, supra note 15, 72
FR at 67803 and 67816 (Proposed Rule 498(f)(2)(ii) and (iii) under
the Securities Act would require persons accessing documents on the
Internet to be able to move back and forth between certain specified
sections of the documents.).
---------------------------------------------------------------------------

     Should the proposed rules eliminate the requirement that
the risk/return summary information be submitted in traditional format,
in addition to interactive data format? Should cautionary language from
the voluntary program be eliminated or modified and, if not, why not?
     Should the proposed rules apply to a prospectus filed
under Securities Act Rule 497? \81\ If we require interactive data with
filings that do not currently include exhibits, such as prospectus
supplements, should we require that the interactive data be provided as
schedules or exhibits?
---------------------------------------------------------------------------

    \81\ 17 CFR 230.497. Currently, Rule 497 prospectuses do not
have a provision for exhibits, so additional EDGAR programming would
be needed.
---------------------------------------------------------------------------

D. Filing Period

    Form N-1A filings, which contain mutual fund registration
statements (or amendments thereto), are often subject to revision prior
to effectiveness. For this reason, the proposed rules would not permit
the submission of an interactive data exhibit that is related to a
registration statement or a post-effective amendment that is not yet
effective. More specifically, the proposed rules would provide that an
interactive data exhibit to a Form N-1A filing, whether the filing is
an initial registration statement or a post-effective amendment
thereto, must be submitted as a post-effective amendment to the
registration statement to which the interactive data relates. Under the
proposal, the amendment, including the interactive data, must be
submitted after the related filing becomes effective, but not later
than 15 business days after the effective date of the related
filing.\82\ Our proposal that the interactive data exhibit be filed
within 15 business days is intended both to provide funds with adequate
time to prepare the exhibit and to make the interactive data available
promptly. An exhibit containing interactive data format risk/return
summary information could be submitted under Rule 485(b) of the
Securities Act, which provides for immediate effectiveness of
amendments that make non-material changes, and would only need to
contain the new exhibit, a facing page, a signature page, a cover
letter explaining the nature of the amendment, and a revised exhibit
index.
---------------------------------------------------------------------------

    \82\ Proposed General Instruction C.3.(g) of Form N-1A. This
proposal differs from the voluntary program which does not impose a
time limit for the filing of interactive data.
---------------------------------------------------------------------------

    Request for Comment:
     Should we require interactive data information to be
submitted before effectiveness of the related filing, e.g. , at the
same time that the related filing is made? Or should we, as proposed,
require interactive data information to be provided only after the
related filing becomes effective? If so, is 15 business days after the
effective date of the related filing an appropriate time period for
filing the interactive data? Should the time period be shorter or
longer, e.g., 1 day, 5 days, 10 days, 20 days, 30 days? Would it be
feasible and desirable to require interactive data to be submitted on
the effective date of the related filing, either for filings that
become effective automatically and/or for filings that are declared
effective by the Commission staff? How would different requirements
regarding the time of filing affect the usefulness of the interactive
data, the ability of funds to file accurate interactive data, and the
burdens of filing the data?

E. Web Site Posting of Interactive Data

    We believe interactive data, consistent with our proposed rules,
should be easily accessible for all investors and other market
participants. As such disclosure becomes more widely available,
advances in interactive data software, online viewers, search engines,
and other Web tools may in turn facilitate access and usability of the
data. Encouraging widespread accessibility to mutual funds' risk/return
summary information furthers

our mission to promote fair, orderly, and efficient markets, and
facilitates capital formation. We believe Web site availability of the
interactive data would encourage its widespread dissemination, thereby
contributing to lower access costs for users. We therefore propose that
each mutual fund be required to provide the same interactive data on
its Web site, if it has one, that would be required to be provided to
the Commission.\83\ The interactive data on a fund's Web site would be
required by the end of the business day on the earlier of the date that
the interactive data is submitted to the Commission or is required to
be submitted to the Commission.\84\
---------------------------------------------------------------------------

    \83\ See proposed General Instruction C.3.(g) to Form N-1A.
    \84\ See Interactive Data Proposing Release, supra note 8
(proposing Rule 405(f)); proposed Rule 405(a). Proposed Rule 405(a)
requires posting to a ``corporate'' Web site. For mutual funds, this
would require posting to the fund's Web site.
    The day the interactive data is submitted electronically to the
Commission may not be the business day on which it was deemed
officially filed. For example, a filing submitted after 5:30 p.m.
generally is not deemed officially filed until the following
business day. Under the proposed rules, the Web posting would be
required to be posted at any time on the same day that the
interactive data exhibit to a Form N-1A filing is deemed officially
filed or required to be filed, whichever is earlier.
---------------------------------------------------------------------------

    We believe access to the interactive data on fund Web sites would
enable search engines and other data aggregators to more quickly and
cheaply aggregate the data and make them available to investors because
the data would be available directly from the mutual fund, instead of
through third-party sources that may charge a fee. To help further our
goals of decreasing user cost and increasing availability, we do not
propose to allow mutual funds to comply with the Web posting
requirement by including a hyperlink to the documents available
electronically on the Commission's Web site.
    We believe this requirement would be consistent with the increasing
role that mutual fund Web sites perform in supplementing the
information filed electronically with the Commission by delivering
risk/return summary information and other disclosure directly to
investors. For example, we recently proposed amendments that would
permit a person to satisfy its mutual fund prospectus delivery
obligations under the Securities Act by sending or giving the key
information directly to investors in the form of a summary prospectus
and providing the statutory prospectus on an Internet Web site.\85\ We
also note that mutual funds may satisfy certain disclosure obligations
by posting required disclosures on their Web sites.\86\ In addition,
many mutual funds provide on their Web sites access to their
prospectuses, statements of additional information, and other
Commission filings.\87\ This proposal would expand such Web site
posting by requiring mutual funds with Web sites to post their
interactive data as well.
---------------------------------------------------------------------------

    \85\ See Summary Prospectus Proposing Release, supra note 15, 72
FR at 67798-99.
    \86\ See, e.g., Securities Act Release No. 8458 (Aug. 23, 2004)
[69 FR 52788 (Aug. 27, 2004)] (disclosure regarding portfolio
managers); Securities Act Release No. 8408 (April 16, 2004) [69 FR
22300 (April 23, 2004)] (disclosure regarding market timing and
selective disclosure of portfolio holdings); Securities Act Release
No. 8393 (Feb. 27, 2004) [69 FR 11244 (Mar. 9, 2004)] (shareholder
reports and quarterly portfolio disclosure); Securities Act Release
No. 8188 (Jan. 31, 2003) [68 FR 6564 (Feb. 7, 2003)] (disclosure of
proxy voting policies and records); Exchange Act Release No. 47262
(Jan. 27, 2003) [68 FR 5348 (Feb. 3, 2003)] (disclosure of code of
ethics).
    \87\ Mutual funds filing registration statements are required to
disclose whether or not they make available free of charge on or
through their Web site, if they have one, their statement of
additional information and shareholder reports. Funds that do not
make their reports available in that manner also must disclose the
reasons that they do not. See Item 1(b)(1) of Form N-1A.
---------------------------------------------------------------------------

    Request for Comment:
     Should we adopt rules that require each mutual fund to
post interactive data from its risk/return summary on its Web site, if
it has one?
     What advantages, if any, would dual Internet and EDGAR
availability have for individual investors, other users, search
engines, software developers, and others involved in the extraction and
processing of risk/return summary data? Would it be helpful if our Web
site provided the option to download the interactive data submission
from our Web site or the mutual fund's Web site? Would it add a
significant burden if a mutual fund were required to submit with its
interactive data the URL that would link specifically to that
interactive data as posted on the mutual fund's Web site or,
alternatively, link to a part of the mutual fund's Web site from which
there would be easy access to the interactive data as posted there?
What would facilitate the realization of any advantages of Web site
posting, for example, the use of a standardized URL for interactive
data? Would a standardized URL add significant cost to posting?
     Instead of requiring Web site posting, should we require
that mutual funds disclose in their prospectuses, registration
statements, shareholder reports, or elsewhere whether or not they
provide free access to their interactive data on their Web sites and,
if not, why not?
     What impact would be realized by mutual funds that do not
currently provide Web sites? Would the proposed rules affect whether
mutual funds create or maintain Web sites?
     Would Web site posting decrease the time and cost required
for aggregators of mutual fund disclosure, individual investors, and
other users to access disclosure formatted using interactive data?
     If we require Web site posting of interactive data, as
proposed, should we also require that the Web site include language
stating that the entire registration statement also is available for
free at the Commission's Web site?

F. Accuracy and Reliability of Interactive Data

1.Voluntary Program
    To help ensure the accuracy of interactive data in the voluntary
program, the data has undergone validation upon receipt by our
electronic filing system separate from the normal validation of the
traditional format filing.\88\ Potential liability also helps ensure
the accuracy and reliability of the data. Although the voluntary
program has provided limited protections from liability under the
federal securities laws,\89\ interactive data in the voluntary program
are subject to the anti-fraud provisions of the federal securities
laws. The voluntary program also encourages participants' efforts to
create accurate and reliable interactive data that is the same as the
corresponding disclosure in the traditional electronic format filing by
providing that a participant is not liable for information in its
interactive data that reflects the same information that appears in the
corresponding portion of the traditional format filing, to the extent
that the information in the corresponding portion of the traditional
format filing was not materially false or misleading. To further
encourage reasonable efforts to provide accurate interactive data, the
voluntary program treats interactive data that do not reflect the same
information as the official version as reflecting the official version
if the volunteer meets several conditions. The volunteer must have made
a good faith and reasonable attempt to reflect the same information as
appears in the traditional format filing and, as soon as reasonably
practicable after becoming aware of any difference, the volunteer must
amend

the interactive data to cause them to reflect the same information.\90\
---------------------------------------------------------------------------

    \88\ If the traditional format filing meets its validation
criteria, but any interactive data fail their own validation
criteria, all interactive data are removed and the traditional
format filing is accepted and disseminated without the interactive
data file.
    \89\ Rule 402 of Regulation S-T provides these liability
protections.
    \90\ 17 CFR 232.402(b).
---------------------------------------------------------------------------

2. Use of Technology to Detect Errors
    Complete, accurate, and reliable prospectus and other disclosures
are essential to investors and the proper functioning of the securities
markets. Our proposed requirement to submit interactive data with
mutual fund registration statements is designed to provide investors
with new tools to obtain, review, and analyze information from mutual
funds more efficiently and effectively. To satisfy these goals,
interactive data must meet investor expectations of reliability and
accuracy. Many factors, including mutual fund policies and procedures
buttressed by incentives provided by the application of technology by
the Commission, market forces, and the liability provisions of the
federal securities laws, help further those goals.
    Building on the validation criteria referenced above for
interactive data in the voluntary program, we plan to use validation
software to check interactive data for compliance with many of the
applicable technical requirements and to help the Commission identify
data that may be problematic. For example, we expect the validation
software to:
     Check if required conventions (such as the use of angle
brackets to separate data) are applied properly for standard and, in
particular, non-standard special labels and tags;
     Identify, count, and provide the staff with easy access to
non-standard special labels and tags; \91\
---------------------------------------------------------------------------

    \91\ For example, if a mutual fund uses the words ``redemption
fees'' as the caption for a value data tagged as ``exchange fees,''
the software could flag the filing and bring it to the staff's
attention.
---------------------------------------------------------------------------

     Identify the use of practices, including some the XBRL
U.S. Preparers Guide contains, that enhance usability; \92\
---------------------------------------------------------------------------

    \92\ The XBRL U.S. Preparers Guide, available from the XBRL U.S.
Web site, would provide guidance to facilitate preparing information
in the interactive data format that we propose to require.
---------------------------------------------------------------------------

     Facilitate comparison of interactive data with disclosure
in the corresponding traditional format data in the official filing;
     Check for mathematical errors; and
     Analyze the way that mutual funds explain how particular
facts relate to one another.\93\
---------------------------------------------------------------------------

    \93\ The technology used to show these relationships is known as
a ``linkbase.''
---------------------------------------------------------------------------

    The availability of interactive data to the staff may also enhance
its review of mutual fund filings. After the FDIC required submission
of interactive data, it reported that its analysts were able to
increase the number of banks they reviewed by 10% to 33%, and that the
number of bank reports that failed to fully meet filing requirements
fell from 30% to 0%. These bank reports require information that is
more structured and less varied than the information we would require.
As a result, the FDIC's efficiency gains from the use of interactive
data likely would be greater than ours.
    We believe analysts, individual investors, and others outside the
Commission that use the interactive data submitted to us also will make
use of software and other tools to evaluate the interactive data and,
as a result, market forces will encourage mutual funds to provide
interactive data that accurately reflects the corresponding traditional
format data in the traditional format filing. For example, the use of
non-standard labels or tags (extensions) could introduce errors, but we
expect the open source and public nature of interactive data and the
list of tags for risk/return summary information would enable software
easily to detect and identify any modifications or additions to the
approved list of tags. We believe such software and other technology
will be widely available for free or at reasonable cost. Investors,
analysts, and other users therefore would be able to identify the
existence and evaluate the validity of any such modifications or
additions. We also anticipate that mutual funds preparing their
interactive data and investors, analysts, and other users would use
such devices to search for and detect any changes made to the standard
list of tags. Because analysts and other users would rapidly discover
mistakes or alterations not consistent with the desired use of
interactive data, mutual funds would have a powerful incentive to
prepare such data with care and promptly to correct any errors.
    With this proposal, we seek the rapid adoption and use of
interactive data without imposing unnecessary cost and expense on
mutual funds. We therefore propose that the interactive data itself
provided to us generally would be subject to a liability regime under
the federal securities laws similar to that governing the voluntary
program. We also propose that viewable interactive data \94\ as
displayed through software available on the Commission's Web site, as
described above and further discussed below, would be subject to the
same liability under the federal securities laws as the corresponding
portions of the traditional format filing.\95\
---------------------------------------------------------------------------

    \94\ Proposed Rule 11 of Regulation S-T would define viewable
interactive data as ``Interactive Data in Viewable Form.'' See
Interactive Data Proposing Release, supra note 8 (proposing Rule 11
of Regulation S-T). We are proposing technical amendments to include
references to risk/return summary information in the definition.
    \95\ Proposed Rule 406 of Regulation S-T would set forth the
liability applicable to interactive data and viewable interactive
data that is displayed through software available on the
Commission's Web site. Proposed Rule 406 also would clarify that
disclosures in the traditional format part of an official filing on
Form N-1A that contains the information corresponding to the
interactive data remain subject to the federal securities laws as in
the past and that nothing in proposed Rule 405 of Regulation S-T
(setting forth content, format, and other requirements related to
interactive data) or proposed Rule 406 would affect the liability
otherwise applicable to the traditional format data. We are not
proposing to modify proposed Rule 406 as set forth in our recently
issued release. See Interactive Data Proposing Release, supra note 8
(proposing Rule 406 of Regulation S-T).
---------------------------------------------------------------------------

    Interactive data would be subject to the following liability-
related provisions:
     Deemed not filed or part of a registration statement or
prospectus for purposes of sections 11 and 12 of the Securities Act;
     Deemed not filed for purposes of section 18 of the
Exchange Act and section 34(b) of the Investment Company Act;
     Not otherwise subject to the liabilities of these
sections;
     Subject to other liability under these Acts for the
substantive content of the risk/return summary disclosures (as distinct
from compliance with proposed Rule 405) in the same way and to the same
extent as the corresponding information in the related traditional
format official filing.\96\ The content of the risk/return summary
disclosures refers, for example, to the investment objectives and
strategies, costs, risks, and past performance. The Rule 405
requirements generally refer to the process of tagging and formatting
the content of the risk/return summary for the interactive data file;
---------------------------------------------------------------------------

    \96\ Proposed Rule 11 of Regulation S-T would define ``Related
Official Filing.'' See Interactive Data Proposing Release, supra
note 8 (proposing amendments to Rule 11 of Regulation S-T). We are
proposing technical amendments to the definition.
---------------------------------------------------------------------------

     Deemed filed for purposes of (and, as a result, benefit
from) Rule 103 of Regulation S-T; \97\ and
---------------------------------------------------------------------------

    \97\ The viewed data would be 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.
---------------------------------------------------------------------------

     Protected from liability under these Acts for failure to
comply with the requirements of proposed Rule 405 if the interactive
data either:
    [cir] Met the requirements of proposed Rule 405 of Regulation S-T;
or
    [cir] 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.
    None of the proposed liability-related provisions for interactive
data submitted to the Commission, however, would affect the application
of the anti-fraud provisions under the federal securities laws, whether
the interactive data is submitted to the Commission or posted on a
fund's Web site.
    Rule 405 is being proposed, in part, under the Commission's
authority to specify information required to be submitted to the
Commission in registration statements. To encourage accurate filing of
interactive data without fear of making good faith errors, the
Commission is proposing Rule 406.\98\ Although not expressly addressed
in proposed Rule 406, the Commission would have the authority to
enforce compliance with proposed Rule 405 because it has the authority
to enforce compliance with any of its rules.
---------------------------------------------------------------------------

    \98\ See Interactive Data Proposing Release, supra note 8
(proposing Rule 406).
---------------------------------------------------------------------------

    We believe these liability-related provisions strike an appropriate
balance between avoiding unnecessary cost and expense and encouraging
accuracy in light of the nature of the interactive data to which they
apply and the additional accuracy incentives that may be provided by
our validation software and market forces.
    Other aspects of the proposal would supplement the Commission's
objective of supplying reliable and accurate information to investors.
First, the risk/return summary information and other disclosures in the
traditional format related official filing to which the interactive
data relate would continue to be subject to the usual liability
provisions of the federal securities laws. For example, the traditional
format related official filing would continue to be subject to section
10(b) and Rule 10b-5 \99\ of the Exchange Act and, in the appropriate
circumstance, to section 11 of the Securities Act.
---------------------------------------------------------------------------

    \99\ 17 CFR 240.10b-5.
---------------------------------------------------------------------------

    Second, we propose that the usual liability provisions of the
federal securities laws also would apply to human-readable interactive
data that is identical in all material respects to the corresponding
data in the traditional format filing \100\ as displayed by a viewer
that the Commission provides. Under these circumstances, for example, a
Form N-1A's viewable interactive data would be deemed filed and subject
to section 11 of the Securities Act and section 34(b) of the Investment
Company Act, consistent with the liability applicable to the
corresponding part of the traditional format Form N-1A. In that regard,
such viewable interactive data disclosure therefore would have exactly
the same potential liability as the corresponding portions of the
traditional format filing. We believe applying liability for such
viewable interactive data displayed through software on the
Commission's Web site would further investors' interests in filers
providing accurate interactive data under our proposal.
---------------------------------------------------------------------------

    \100\ The human-readable interactive data would be identical to
the corresponding data in the traditional format filing if the
mutual fund complied with the interactive data tagging requirements
of proposed Rule 405.
---------------------------------------------------------------------------

    We expect that each mutual fund would be in the best position to
determine the appropriate manner in which to assure the accuracy of the
interactive data it would be required to submit and the viewable
interactive data that would result. We also expect that software
providers and other private sector third parties would help develop
procedures and tools to help in that regard. As an adjunct to those
private sector efforts, we plan to make available to mutual funds, on
an optional basis, the opportunity to help assure accuracy by making a
test submission with the Commission or using software we provide to
create viewable interactive data.
    A mutual fund would have the opportunity to submit an interactive
data exhibit as part of a test submission just as a filer can make test
submissions today.\101\ The validation system would process the test
submission with an interactive data exhibit similar to the way it
processes test submissions today. If it found an error, it would advise
the filer of the nature of the error and as to whether the error was
major or minor. As occurs in the voluntary program, a major error in an
interactive data exhibit that was part of a live filing would cause the
exhibit to be held in suspense in the electronic filing system while
the rest of the filing would be accepted and disseminated if there were
no major errors outside of the interactive data exhibit. If that were
to happen, the filer would need to revise the interactive data exhibit
to eliminate the major error and submit the exhibit as an amendment to
the filing to which it is intended to appear as an exhibit. A minor
error in an interactive data exhibit that was part of a live filing
would not prevent the interactive data exhibit from being accepted and
disseminated together with the rest of the filing if there were no
major errors in the rest of the filing. We believe it would be
appropriate to accept and disseminate a filing without the interactive
data exhibit submitted with it if only the exhibit has a major error,
in order to disseminate at least as much information at least as timely
as would have been disseminated were there no interactive data
requirement.
---------------------------------------------------------------------------

    \101\ The EDGAR Filer Manual addresses test submissions
primarily at section 6.6.5 of Volume II.
---------------------------------------------------------------------------

    We are not proposing that mutual funds be required to involve third
parties such as auditors or consultants in the creation of the
interactive data provided as an exhibit to a mutual fund's Form N-1A
filing, including assurance. We are taking this approach after
considering various factors, including:
     The availability of a comprehensive list of tags for risk/
return summary information from which appropriate tags can be selected,
thus reducing a mutual fund's need to develop new elements;
     The availability of user-friendly software with which to
create the interactive data file;
     The delayed compliance date, prior to which mutual funds
may become familiar with the tagging of risk/return summary
information;
     The availability of interactive data technology
specifications, and of other XBRL U.S. and XBRL International resources
for preparers of tagged data;
     The advances in rendering/presentation software and
validation tools for use by preparers of tagged data that can identify
the existence of certain tagging errors;
     The expectation that preparers of tagged data will take
the initiative to develop sufficient internal review procedures to
promote accurate and consistent tagging; and
     The mutual fund's and preparer's liability for the
accuracy of the traditional format version of the risk/return summary
information that will also be provided using the interactive data
format.
    Request for Comment:
     Do the proposed rules strike an appropriate balance to
promote the availability of reliable interactive data without imposing
undue additional costs and burdens? If not, what balance of liability
will best encourage mutual funds to prepare reliable interactive data
without subjecting them to undue fear of mis-tagging? How does the
``extensibility'' of interactive data, i.e. , a mutual fund's ability
to customize the standard list of tags to correspond more closely to
the fund's particular risk/return summary information, affect your
answer?

     What are the risks to investors under the proposed
liability rules? Will investors still find the interactive data
sufficiently reliable to use it?
     Should interactive data be subject to liability if a
mutual fund does not tag its risk/return summary information in a
manner consistent with the standards approved by the Commission,
irrespective of the mutual fund's good faith effort? If the answer is
yes, what should the mutual fund's liability be for such errors, and
should liability attach even if the mistake is inadvertent? What if the
error is the result of negligent tagging practices, but there was no
affirmative intent to mislead?
     If interactive data are subject to liability as proposed,
is it necessary or appropriate for viewable interactive data to be
subject to liability as and to the extent proposed or otherwise? Should
the answer depend on the degree of liability to which the interactive
data are subject? Should viewable interactive data be subject to
liability in a manner or to an extent different than as proposed?
     Should any or all interactive data be deemed filed for
purposes of Section 34(b) of the Investment Company Act and, if so,
should it be regardless of compliance with proposed Rule 405 or a
filer's good faith and reasonable efforts to comply?
     Should the liability for interactive data be exactly the
same as it is for XBRL-Related Documents under the voluntary program?
     Would software be commercially available and reasonably
accessible to all required interactive data filers, investors, and
analysts that would make detection of tagging errors, such as the use
of inappropriate tags or improper extensions, easy and cost-effective?
If so, would such monitoring by investors and analysts likely
discourage the improper use of extensions or negligent conduct in the
tagging process?
     Would the use of software to search for and detect any
differences between a mutual fund's interactive data and the
Commission-approved interactive data tags and other attributes depend
on the degree of investor interest or analysis by third party
information providers?
     Should a rule expressly state that the Commission retains
the authority to enforce compliance with proposed Rule 405?
     Should we require the involvement of auditors,
consultants, or other third parties in the tagging of data? If
assurance should be required, what should be its scope, and should any
such requirement be phased in?
     Should we phase in increasing levels of liability over
time? Are the proposed limitations on liability necessary and
appropriate at the outset, for example, the first year that a mutual
fund is subject to the interactive data requirement, but inappropriate
at a later time? Should we require that interactive data be subject to
more liability later?
     Should the validation software, as contemplated, cause an
interactive data exhibit with a major error to be held in suspense in
the electronic filing system while the rest of the filing would be
accepted and disseminated if there were no major errors outside of the
interactive data exhibit? In that case, should the validation software
hold the entire filing in suspense or reject or accept the entire
filing or interactive data exhibit?

G. Required Items

1. Data Tags
    To comply with the proposed rules, mutual funds would be required
to tag their risk/return summary information using the most recent list
of tags for mutual fund risk/return summaries, as released by XBRL U.S.
and required by the EDGAR Filer Manual. The ICI's risk/return summary
list of tags received acknowledgement from XBRL International in June
2007. 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.\102\
---------------------------------------------------------------------------

    \102\ See Summary Prospectus Proposing Release, supra note 15.
---------------------------------------------------------------------------

    Updates to the list of tags for risk/return summary reporting may
be posted and available for downloading from time to time to reflect
changes in the risk/return summary requirements, refinements to the
list of tags, or for other reasons. To provide mutual funds sufficient
time to become familiar with any such updates, we anticipate giving
advance notice before requiring use of an updated list of tags. Based
on experience to date with the list of tags for risk/return summaries,
we believe that, with the enhancements to the list of tags that XBRL
U.S. will be developing, the list of tags will be sufficiently
developed to support the interactive data disclosure requirements in
the proposed rules.
    One of the principal benefits of interactive data is its
extensibility--that is, the ability to add to the standard list of tags
in order to accommodate unique circumstances in a mutual fund's
particular disclosures. The use of customized tags, however, may also
serve to reduce the ability of users to compare similar information
across mutual funds. In order to promote comparability across funds,
our proposed rules would limit the use of extensions to circumstances
where the appropriate element does not exist in the standard list of
tags.\103\ We also are proposing that wherever possible, preparers
change the label for an element that exists in the standard list of
tags, instead of creating a new customized tag.\104\
---------------------------------------------------------------------------

    \103\ Proposed Rule 405(c)(1)(iii)(B) as proposed in Interactive
Data Proposing Release, supra note 8.
    \104\ Proposed Rule 405(c)(1)(iii)(A) as proposed in Interactive
Data Proposing Release, supra note 8.
---------------------------------------------------------------------------

    Under Item 401(c) of Regulation S-T, voluntary filers' interactive
data elements must reflect the same information as the corresponding
traditional format elements. Further, no data element can be ``changed,
deleted or summarized'' in the interactive data file.\105\ We do not
propose to change this equivalency standard for risk/return summary
information provided in interactive data format as required by the
proposed rules.\106\
---------------------------------------------------------------------------

    \105\ Proposed Rule 405(c)(2) as proposed in Interactive Data
Proposing Release, supra note 8
    \106\ Id.
---------------------------------------------------------------------------

    Request for Comment:
     Is our focus on comparability appropriate? Instead of
stressing ease of risk/return summary comparability, should our rules
permit greater use of customized data tags?
     Should we codify any other principles to encourage
comparability without unduly reducing the extensibility of interactive
data?
2. Regulation S-T and the EDGAR Filer Manual
    We propose to require that mutual funds provide interactive data in
the form of exhibits to the related registration statement on Form N-
1A.\107\ Interactive data would be required to comply with our
Regulation S-T \108\ and the EDGAR Filer Manual. The EDGAR Filer Manual
is available on our Web site. It includes technical information for
making electronic filings to the Commission. Volume II of this manual
includes guidance on the preparation, submission, and validation of
interactive data submitted under the voluntary program. Before adoption
of our proposed rules, we plan to update

our manual with additional instructions for filers of interactive data.
---------------------------------------------------------------------------

    \107\ The requirement to submit interactive data as an exhibit
would appear in proposed General Instruction C.3.(g) of Form N-1A.
    \108\ Proposed Rule 405 of Regulation S-T would directly set
forth the basic tagging and posting requirements for the XBRL data
and require compliance with the EDGAR Filer Manual. Consistent with
proposed Rule 405, the EDGAR Filer Manual would contain the detailed
tagging requirements.
---------------------------------------------------------------------------

    In addition to both Regulation S-T, which would include the rules
we are proposing, and the instructions in our EDGAR Filer Manual,
filers may access other sources for guidance in tagging their financial
information. These include the XBRL U.S. Preparers Guide; user guidance
accompanying tagging software; and financial printers and other service
providers. New software and other forms of third-party support for
tagging risk/return summary information using interactive data are also
becoming available.
    Request for Comment:
     What specific guidance should be provided in Regulation S-
T for interactive data filers?
     Does the XBRL U.S. Preparers Guide provide useful guidance
to promote consistent tagging among various mutual funds?
     Is the user guidance accompanying tagging software, and
the guidance available from financial printers and other service
providers, helpful for filers to tag their risk/return summary
information? What other sources of guidance might prove useful?

H. Consequences of Non-Compliance and Hardship Exemption

    We propose that if a filer does not provide the required
interactive data submission, or post the interactive data on its Web
site, by the required due date, the filer's ability to file post-
effective amendments under Rule 485(b), which provides for immediate
effectiveness of amendments that make non-material and other changes,
would be automatically suspended.\109\ The suspension would become
effective at the time that the filer fails to meet the requirement to
submit or post interactive data and would terminate as soon as the
filer has submitted and posted that data. The suspension would apply to
post-effective amendments filed after the suspension becomes effective,
but would not apply to post-effective amendments that were filed before
the suspension became effective. The suspension would not apply to
post-effective amendments filed solely for purposes of submitting
interactive data, which would enable a filer to cure its failure to
submit interactive data by filing an amendment under Rule 485(b). We
believe that precluding the use of immediate effectiveness of post-
effective amendments during any period of failure to comply would
appropriately direct attention to the proposed interactive data
requirement without permanently suspending a mutual fund's ability to
file post-effective amendments under Rule 485(b) once the fund has
remedied the failure.
---------------------------------------------------------------------------

    \109\ Proposed Rule 485(c)(3).
---------------------------------------------------------------------------

    If the proposed rules are adopted, we anticipate that we would not
interpret Rule 303,\110\ which restricts the ability of registered
investment companies to incorporate by reference into an electronic
filing documents that have not been filed in electronic format, to
apply to the failure to file Interactive Data Files. Thus, as long as
the traditional format electronic filing has been made as required, the
failure to file a required Interactive Data File would not affect a
mutual fund's ability to incorporate by reference the mutual fund's
prospectus. For example, if we were to adopt as proposed our proposed
rules regarding a summary prospectus for mutual funds, we anticipate
that a mutual fund could incorporate by reference its statutory
prospectus into its summary prospectus as permitted by those proposed
rules, notwithstanding the fund's failure to file required interactive
data.\111\
---------------------------------------------------------------------------

    \110\ Rule 303 of Regulation S-T.
    \111\ See Summary Prospectus Proposing Release, supra note 15.
---------------------------------------------------------------------------

    Consistent with the treatment of other applicable reporting
obligations, we propose to provide a continuing hardship exemption for
the inability to timely electronically submit interactive data. Rule
202 of Regulation S-T provides for continuing hardship exemptions.\112\
---------------------------------------------------------------------------

    \112\ Rule 201 of Regulation S-T provides for temporary hardship
exemptions. We are not proposing a temporary hardship exemption
because our proposal would provide a mutual fund with a 15-business
day period for submitting the interactive data file for a related
Form N-1A filing.
---------------------------------------------------------------------------

    Rule 202 permits a filer to apply in writing for a continuing
hardship exemption if information otherwise required to be submitted in
electronic format cannot be so filed without undue burden or expense.
If the staff, through authority delegated from the Commission, grants
the request, the filer must file the information in paper by the
applicable due date and file a confirming electronic copy if and when
specified in the grant of the request.
    We propose to revise Rule 202 to provide that a grant of a
continuing hardship exemption for interactive data would not require a
paper submission.\113\ If the filer did not electronically submit the
interactive data by the end of the period for which the exemption was
granted, the filer's ability to file post-effective amendments under
Rule 485(b) would be suspended until it did electronically submit the
interactive data.\114\ Similarly, we propose to revise Rule 202 to
provide an essentially mirror-image exemption from the proposed
requirement for a mutual fund that has a Web site to post the
interactive data on its Web site.\115\
---------------------------------------------------------------------------

    \113\ See Proposed Rule 202 as proposed in Interactive Data
Proposing Release, supra note 8.
    \114\ Proposed amendment to Note 4 to Rule 202 as proposed in
Interactive Data Proposing Release, supra note 8; Proposed Rule
485(c)(3).
    \115\ Id.
---------------------------------------------------------------------------

    Request for Comment:
     Are the consequences for failure to comply with the
interactive data submission requirements appropriate?
     Should we suspend the ability of a mutual fund to file
post-effective amendments under Rule 485(b) if it does not comply with
the proposed rules? Should the proposed rules provide similar treatment
whether the failure to comply relates to interactive data submission or
to Web site posting? Should the suspension apply to the particular fund
that failed to comply, all series of a registrant that failed to
comply, or all funds of a complex that failed to comply?
     Should the proposed rules treat a mutual fund's compliance
with interactive data requirements as an express condition to the
mutual fund's related registration statement or post-effective
amendment becoming effective?
     Should the failure to file or post interactive data as
required restrict a mutual fund's ability to incorporate by reference
the fund's statutory prospectus, including under our proposed rules
relating to a mutual fund summary prospectus?
     Does our proposed rule strike the correct balance of
positive and negative consequences when a mutual fund meets its
requirements to provide traditional format documents but fails to
provide interactive data?
     Do commenters believe that the proposed revisions to the
continuing hardship exemption would be sufficient to cover
unanticipated technical difficulties associated with interactive data?
If insufficient, why would they be insufficient and how should the
hardship exemption be tailored to address technical difficulties
associated with interactive data?
     Should we provide a temporary hardship exemption? If so,
would six business days be an appropriate period for the temporary
hardship exemption to apply? \116\ If not, would a shorter or longer
period be appropriate, and why?
---------------------------------------------------------------------------

    \116\ See Proposed Rule 201 as proposed in Interactive Data
Proposing Release, supra note 8 (proposing a six-business-day
temporary hardship exemption for financial statement filers).

---------------------------------------------------------------------------

I. Changes to the Voluntary Program

    If we adopt rules requiring mutual funds to submit risk/return
information in interactive data format, we intend that mutual funds
would no longer be able to submit risk/return summary information in
interactive data format through the voluntary program after the
compliance date for the mandatory rules. We are proposing to amend Rule
8b-33 to remove risk/return summary information as a category of
information permitted to be submitted under the voluntary program. In
addition, we are proposing technical amendments to other rules to
reflect this.\117\
---------------------------------------------------------------------------

    \117\ See proposed Rule 401(a); proposed Rule 401(d)(1)(i);
proposed Rule 401(d)(2)(i). We are also proposing to delete current
Rule 401(b)(1)(iv), which provides the option to file risk/return
summary information under the voluntary program, and to replace it
with the option to file the portfolio holdings schedule on a stand-
alone basis described below.
---------------------------------------------------------------------------

    Further, in order to encourage participation in the voluntary
program for tagging investment company financial information, we are
proposing amendments to enable 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 exhibits containing a tagged schedule of portfolio holdings
without having to submit other financial information in interactive
data format.\118\ As with the current voluntary program, volunteers
could participate, without pre-approval, merely by submitting a tagged
Schedule I--Investments in Securities of Unaffiliated Issuers
(``Schedule I'').\119\ To facilitate this, the Commission anticipates
entering into a contract to develop a list of tags that could be used
to tag portfolio holdings.
---------------------------------------------------------------------------

    \118\ Proposed Rule 401(b)(1)(iv) (designating Schedule I--
Investments in securities of unaffiliated issuers as mandatory
content under the voluntary program). If rules requiring interactive
data financial information are adopted, we anticipate that the
voluntary program would be modified to permit participation only by
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.
See Interactive Data Proposing Release, supra note 8 (proposed Rule
401(a)).
    \119\ Rule 12-12 of Regulation S-X [17 CFR 210.12-12].
---------------------------------------------------------------------------

    Currently, the interactive data furnished under the voluntary
program must consist of at least one item from a list of enumerated
mandatory content (``Mandatory Content''), including financial
statements, earnings information, and, for registered management
investment companies, financial highlights or condensed financial
information and risk/return summary information set forth in Items 2
and 3 of Form N-1A.\120\ We are adding Schedule I information as a
separate item of Mandatory Content that participants can submit in
order to give volunteers greater flexibility in tagging fund data.
---------------------------------------------------------------------------

    \120\ Rule 401(b)(1) of Regulation S-T [17 CFR 232.401(b)(1)].
---------------------------------------------------------------------------

    Investors, financial intermediaries, and third party information
providers, among others, use the portfolio holdings data contained in
Schedule I to make decisions concerning the purchase and continued
holding of funds and for other purposes. Portfolio holdings data
promises to be even more useful to these various stakeholders if this
data is interactive. In addition, allowing volunteers to submit tagged
portfolio holdings information without having to submit other financial
information in interactive data format would increase the range of
options for participation in the voluntary program and encourage
increased participation.
    Under the current voluntary program, any official filing with which
tagged exhibits are submitted must disclose that the financial
information is ``unaudited'' or ``unreviewed,'' as applicable and that
the purpose of submitting the tagged exhibits is to test the related
format and technology and, as a result, investors should not rely on
the exhibits in making investment decisions.\121\ We believe that this
cautionary disclosure should also be tagged and included within each
interactive data exhibit, in order to help alert investors and other
users that the exhibits should not be relied on in making investment
decisions. Accordingly, we are proposing that this disclosure be
required in the exhibits submitted pursuant to the voluntary program as
a tagged data element,\122\ consistent with how the cautionary
disclosure is presented in risk/return summary exhibits under the
current voluntary program.
---------------------------------------------------------------------------

    \121\ Rule 401(d)(1)(ii) of Regulation S-T [17 CFR
232.401(d)(1)(ii)].
    \122\ See proposed Rule 401(d)(2).
---------------------------------------------------------------------------

    Request for Comment: