Date: 2016-02-03
Speaker: CAROLYN B. MALONEY (democrat)
Chamber: H
State: New York

Mr. Chairman. this amendment strikes title IV of H.R. 1675. Title IV of this bill requires the Securities and Exchange Commission exempt public companies with less than $250 million in annual revenue from reporting their financial information as searchable data. This exemption would cut off access to searchable. easily accessible data for about 60 percent of all public companies. Instead of using searchable. structured data. we would return to a paperbased system. Exempting 60 percent of public companies from filing their financials in a structured. understandable way makes it harder for the people who review corporate financial disclosure documents to understand what is going on in a company. Eliminating the requirement for searchable data harms researchers and academics. regulators. investors. and the general public. All of them will have a harder time understanding the financial performance of corporations. If title IV is passed. documents that are nonsearchable must be manually reviewed to extract useful information. and manual review is much more prone to error. No other financial regulator in the developed world does not require searchable PDFs. That is why the Securities and Exchange Commission began requiring reporting in eXtensible Business Reporting Language. XBRL. It is the global standard for structural financial reporting. We would be behind the world if we do this. By removing the requirement for 60 percent of firms. H.R. 1965 is a backward step for corporate transparency and for investor knowledge and investors. I support this amendment. and I believe that we need to move our financial analysis into the modern world. We spend a great deal of time on the Financial Services Committee talking about ways to improve small companies access to capital. Well. that is exactly what XBRL can do. So I am puzzled that some of my colleagues on the other side of the aisle would want to move backward on XBRL instead of moving forward. XBRL makes it possible for investors and analysts to very quickly download standardized financial information for an entire industry and make immediate crosscompany comparisons in order to identify the best performers. It makes it easier for them to invest in startups. This allows investors to spend more time analyzing data and less time gathering data. This will also enable investors to more easily identify the companies that are diamonds in the rough. so to speak. Very often. these are small companies that are innovative. These are building models that we need to support. Right now. these small companies have trouble attracting the attention of analysts and institutional investorsthis is a fundamental fact. and we spend a lot of time on the Financial Services Committee trying to figure out why this is. Well. one reason is its simply too timeconsuming for analysts and investors to pick through every small companys hundredpage financial filings. Economists call these costs "search costs"-and unfortunately. they still dramatically outweigh the benefits. A small companys filings may tell a fantastic story about why that company is poised to be the next Apple. but if the "search costs" are high enough that analysts and investors never see them. that company will never get the capital infusion it needs to grow. And our economy will never realize the benefits that the company has to offer. This is where XBRL comes in. It dramatically reduces the "search costs" by making it fast and cheap for investors to gather standardized financial statements for entire industriesincluding the small companies that the investor wouldnt have bothered with before. If those small companies offer greater value than the bigger. more established companies in the industry. then it will likely be obvious to the investor when she looks at the data. This will result in capital flowing more efficientlynot just to the biggest. most wellknown companies. but to the companies that can use that capital in the most efficient way. But its important to remember that if those small companies dont file their financial information in XBRL format. then their financial statements wont be part of the investors data setand thus will never get a muchneeded capital infusion from that investor. This is how XBRL can help improve small companies access to capital. So if youre concerned about access to capital. then you should vote for this amendment. I urge my colleagues to support the amendment. I yield the balance of my time to the gentleman from Minnesota . my distinguished colleague. who is now here.