Developments in Securities Regulation, Corporate Governance, Capital Markets, M&A and Other Topics of Interest. MORE

Some initial XBRL filers will unfortunately learn that they have submitted an XBRL data file with an error.  The question is, what steps should be taken?

Rule 406T of Regulation S-T contains a temporary provision (expiring 24 months after first becoming subject to the XBRL rules) regarding the liability attaching to XBRL filings.  Generally, the XBRL data files are subject to the anti-fraud provisions set forth in Section 17(a)(1) of the Securities Act and Section 10(b) of the Exchange Act.  The temporary rule helpfully provides that there is no liability under the anti-fraud provisions if:

  • the company made a good faith attempt to comply with the general XBRL content rule (Rule 405 of Regulation S-T), and
  • if the company becomes aware that the XBRL data exhibit fails to comply with Rule 405, the company “promptly amends” the XBRL data exhibit to comply with Rule 405.  “Promptly” is defined in Rule 11 of Regulation S-T to mean “as soon as reasonably practicable under the facts and circumstances at the time.”  Amendments made at the later of 24 hours or 9:30 Eastern Time on the next business day after the filer becomes aware of the need for an amendment shall be deemed promptly made.

So upon becoming aware of an error, companies will want to correct the error as soon as possible to cut-off anti fraud liability by amendment to the report to which the XBRL data file was attached.  Since the XBRL data exhibits are not subject to the officer certification requirements, an amendment to a report solely to amend the XBRL data exhibit will not have to be certified.  Prior to filing an amendment, companies should determine whether they need to consult with their audit committee, their auditors, their legal counsel and who at the company has the authority to authorize the amendment.

Check frequently for updates on the Dodd-Frank Act and other important securities law matters.

2 Responses to Correcting Errors in XBRL Filings

Leave a Reply

Your email address will not be published. Required fields are marked *