Mark Story Transcript for 06/11/2008

Chip Griffin: Hi, this is Chip Griffin. Today my guest is Mark Story. He is the Investor Communications Manager with the Securities and Exchange Commission in Washington, D.C. and he is joining us to talk about their new proposed rule regarding interactive data, something that promises to provide more information more easily for individual investors. So Mark, what exactly is interactive data?

Mark Story: Well, interactive data is pretty simple when you sit down and you think about it. Interactive data is very very similar to barcodes. If you are old enough like I am to remember before they scanned things at the supermarket, there was a certain way where the cashier would kind type in numbers and things like that. And what interactive data really is, is just a barcode.

A lot of people know it as XBRL, which is extensible business reporting language, but it is simple. It is really just a set of rules for attaching code to items of financial information. And in the jargon of interactive data, these codes are called tags. And again the tags are pretty much just like barcodes for financial information that say this particular line is net profit, that this particular tag or line are assets, but if you think about it in a simpler sense, it is really just tags that are in essence barcodes.

Chip: So in the context of the SEC, what does interactive data mean? I guess this is how companies, if this proposed rule moves forward, would be required to report their information to the SEC, is that correct?

Mark: Correct, there is a proposed rule which is under consideration and we are in the comment period now about that rule. But interactive data is currently in full or partial use in about 13 different countries right now. And what the SEC is proposing is that all of what are called large accelerated filers, which are essentially the largest 500 companies in the United States, beginning on December 15, would do their financial reporting both in the old way in the EDGAR System as well as using interactive data.

Actually, there is a lot of advantages for that for people like me who are just Joe average kind of the retail investors, is the way that it works now is when companies submit data to EDGAR, it usually goes to the large kind of data processing services like -- I will not say names -- but it goes through some of the large people who normalize the data.

But what is neat about this is when companies file in interactive data or XBRL beginning on December 15 is that retail investors, analysts, institutions the like, will have some immediate access to the information that once it is filed, it goes both in the company website and it becomes available on the SEC site through a variety of uses, which allow you to kind of slice and dice the data.

And essentially what is currently static text-based information, if you think of it as just like a big block of text, using this tag data, that says this line means assets or this line means net profit, what you can get is through a viewer all of which are available for free if I can plug this at sec.gov/xbrl.

We have a few interactive data viewers listed there. What you can do is you can really have fun with it and you can create charts and graphs and you can do comparisons across companies that can really make you a better informed investor. So we are very excited about the ability to kind of know that any investor with a computer can download the financial data that had been generally available only to large institutional users.

Chip: So, this is basically making information sort of more accessible to the individual investor and allow them to make frankly smarter investment decisions?

Mark: Well, we certainly hope that they make smarter investment decisions. We think that also to the extent that investors currently are required to pay for access, for information that has been extracted or reformatted by third party sources, number one that it is free but number two, using some of these viewers, you can make better informed decisions kind of in your own way or in your own time.

With many of the viewers, you can download something into an Excel spreadsheet and you can kind of crunch the numbers yourself if you want to or if you so choose, you can take stock xyz and stock abc and compare the side by side elements. And having kind of the visual representation in order to do that I think will make it easier for people to make more informed investment decisions.

Chip: Now the way it is setup, I know you said that there is a certain group of companies that would be, if this were to go forward, be required to file in both forms, is this something where other companies could choose to provide the XBRL data as well or is it something where you are right now setup for only a few people to do it?

Mark: No, absolutely. And in fact there was the SEC and XBRL US had what was called the voluntary filer program, which has been in place for about three years. And there were 74 companies that participated in this and basically helped us build it, saying how do you large company do your financial reporting, how would you do your tagging and the SEC spent about three years with this group, really honing the tags, understanding how it is companies want to use the data.

In the meantime, companies are more than welcome and encouraged to file using XBRL before it is officially mandated to get practice in it, so that they know how to do it, so that we receive the information to kind of get good at it before it becomes a requirement.

Chip Griffin: Now, I mean how are you involved in the interactive data process at the SEC, what is your role there?

Mark: It is an interesting role. I do not have a background in finance. I have a little bit of background in technology, but my official title here is Investor Communications Manager at the Securities and Exchange Commission. And really what my job is, is to take what is complex or what are complex kind of hard to understand topics and really translate them into terms that make sense for people, kind of average Joes out there, that the Securities and Exchange Commission is not just about writing rules or enforcing rules, but we do a lot of things that benefit retail investors as well. So my role here is that of helping develop online and offline materials that are truly understandable and beneficial for retail investors. So it is fun.

Chip: So basically communicating the agency's message beyond Wall Street effectively and more to the grassroots Americas as it were?

Mark: Yeah and we try and believe me, I do not take credit for the interactive data movement. That was long conceived of before I got here, but with the proposed rule which was released a couple of weeks ago, this has really taken on ahead at steam and what was absolutely fascinating, just yesterday at the SEC there was an interactive data roundtable and we had representatives from nine other countries, one of which or all of which except for one are further down the road in mandating the use of interactive data or XBRL.

And I get to hear some of their experiences too where they had success, where they had failure. Japan for example has mandated this I think for the last two years. And the way that the SEC is going it and the proposed rule is that we are saying that we are going to start with the largest companies first and then work backwards to smaller companies. And in Japan they started with the small companies and then gone to the large companies. So it was kind of interesting to hear the different approaches from people from other countries.

Chip: Now did they explain why they started with the smaller companies first as opposed to the other way around, was it...?

Mark: The presumption was or what I heard yesterday and I am paraphrasing, but the presumption was that smaller companies have simpler financial statements and when you are required to tag an element in the financial statement, if you have less items to tag and you have a pretty simple financial statement, it is going to be easier than let's say General Motors, which is going to have a much more complex financial statement.

Chip: Now, the interactive data format, is it a fixed format or do you anticipate that it will evolve over time or how is that all working?

Mark: It is interesting. The interactive data format is made up of, as I mentioned, these tags or as some people call them taxonomy, which has been worked out in great great detail. These also involve something called extensions and an extension is something that people can write themselves in XBRL code.

And I just want to mention to kind of demystify it a little bit that XBRL is based upon XML, which many people may recognize, which is based upon HTML, which is every single web page that you look at. This just has a bracket that identifies what it is and it makes it display in a certain place in a certain way. So from a technology perspective, it is not really that complex.

Chip: And ultimately, investors will use these viewers, right? I mean they are not going to have to deal with the XBRL themselves; there are these tools that will make it much easier?

Mark: Precisely and the beauty of it is, this particular initiative and what we have seen in other countries too is it is spurring the markets. I think it is encouraging capitalism in its purest sense because software manufacturers have a true incentive to produce viewers, produce ways to kind of slice and dice the data.

And XBRL is open source, so many products exist that kind of enable users to compare financial data. Some of the viewers that are on the page are charts and graphs that are designed for more of the nonsophisticated retail investor. There are viewers on there which are probably appropriate for financial analysts and have a much higher degree of understanding of what goes in a financial statement.

So all the data is the same, everything in the backend is the same, the way that it is displayed through the viewers is different and that is what's cool about it as well.

Chip: Got you. Well Mark, I appreciate you taking the time to talk with me today. I know that this is part of an ongoing rule-making process, so the rules are kind of strict about what you can talk about and I do appreciate you taking the time.

Mark: Well, this is an absolute pleasure Chip. I am happy to talk to anyone about interactive data, but especially happy to talk to you.

Chip: Great and people can get more information, again what was the web address you gave?

Mark: It is www.sec.gov/xbrl.

Chip: Great, thanks again Mark.

Mark: Thank you.