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News November 13, 2006 Issue

Mutual Fund Risk/Return XBRL Taxonomy Expected Next Month

Six months ago, at the SECís June 12 interactive data roundtable, the Investment Company Institute announced the formation of an XBRL working group, consisting of lawyers, accountants, and techies from fund complexes, fund administrators, and vendors. The group, said the ICI, would work on developing an XBRL taxonomy for the risk/return summary found in fund prospectuses.

And so they have. According to ICI vice president of operations Don Boteler, the group has been meeting monthly and hopes to declare its risk/return taxonomy complete by the end of the year. Once the group signs off on the taxonomy, he said, the ICI plans to circulate it for comment among an extended group of ICI members and outside vendors. The purpose of that review period, which is expected to run 45 days or so, is to expose the taxonomy to a broader audience and allow any ICI members that may have an interest to comment on it.

At some point during the process, the SEC is expected to issue a technical rulemaking to amend its voluntary XBRL filing rule to allow funds to file risk/return summaries in XBRL. That, said Boteler, is "slightly more than a formality."

Once the voluntary XBRL filing rule has been amended, the ICI will begin encouraging its members to file their risk/return summaries using the new taxonomy. The group plans to provide resources to its members to help them in that regard. For example, the ICI may hold XBRL filing workshops. In addition, Boteler said that the group may possibly seek formal recognition of the taxonomy, perhaps from XBRL International (a coalition of roughly 500 XBRL-interested organizations and governments).

The new taxonomy will be added to the existing investment company XBRL taxonomy. In the past, explained Boteler, various taxonomies had been created for banking companies, insurance companies, and investment companies under the auspices of the accounting profession. The resulting investment company taxonomy, however, covered only the fundís financial statements. ICI studies, he noted, have shown that mutual fund investors more highly value information that highlights the risks and costs of investing in their funds, i.e., the risk/return summary.

In other XBRL news Ö The SEC has awarded a whopping $48 million contract to Keane Federal Systems to overhaul the SECís EDGAR system into a lean, mean, XBRL-filing machine. "The new system will be completely interactive," enthused the SECís September 25 press release announcing the contract. "Using interactive data technologies such as [XBRL] and [XML], it will allow investors and analysts to search not only forms, but the information within them. It will permit information to be immediately downloaded into applications software. And it will enable anyone to get real-time, streaming data using RSS feeds, ATOM, and other automated Web tools, which could automatically search for newly filed SEC disclosures and deliver the desired data directly to oneís desktop."

Sounds great, but how do we see for ourselves?

The SEC awarded two small contracts to Rivet Software and Wall Street on Demand to create interactive tools to allow investors to manipulate XBRL data. The tools will be made available on the SECís website, free of charge. "Investors will be liberated from tedious hunt-and-guess searches, and theyíll be able to download not just SEC forms but specific data within those forms," said the agency. The SEC also dropped a cool $5.5 million on a contract with XBRL US, which is tasked with finalizing XBRL taxonomies for all U.S. GAAP-based filers.

Currently, any investment company can "furnish" an exhibit containing XBRLíized information. To date, however, only two fund groups have shown interest in taking the SEC up on that offer: Old Mutual and Allegiant. Old Mutual, which volunteered to be part of the XBRL pilot group, filed a semi-annual shareholder report (N-CSRS) on October 20. Allegiant, which is not formally part of the SECís pilot group, filed its schedule of portfolio holdings (N-Q) in XBRL last May.