A high-level plan to modernize the Securities and Exchange Commission’s disclosure system envisions a new interactive filing system that would enable companies to file basic information once and update it as required.

A 28-page report published by the staff of the 21st Century Disclosure Initiative calls for the SEC to scrap its current system of disclosure documents on long, static forms in favor of an interactive filing system under which companies would file specific disclosure data in response to regulatory reporting obligations.

Under the plan submitted to the SEC staff and commissioners in January, company filings would be made in interactive format, using XBRL, and would reside on an enterprise-wide database that would store historical information and maintain audit trails.

The SEC just published the text of a new rule phasing in a requirement for issuers to submit their financial data using XBRL, starting with the largest companies’ periodic reports for fiscal periods ending on or after June 15, 2009.

According to the report, companies would file basic information just once, and then add to that information when required by statute or rule. For example, when an operating company needs to file its annual report, it wouldn’t re-enter basic information like the description of business or the location of headquarters, unless it needed to be updated.

Reports such as 10-Ks and 10-Qs, proxies and prospectuses would be available just like today, but would get filed differently, William Lutz, director of the 21st Century Disclosure Initiative, explained in a Jan. 15 speech to the New York Chapter of the National Investors Relations Institute.

Lutz described the current process, centered on EDGAR, “inefficient, at best.”

Currently, many companies take financial data from internal systems and transcribe it to satisfy EDGAR’s filing requirements, introducing the possibility of human error or fraud. The forms are then downloaded or fed to financial intermediaries who repackage that information and sell it to other infomediaries, such as analysts, advisers, brokers, or independent outlets like Internet finance Websites. The same reports are used by investor relations professionals to provide information to investors on the company’s Website.

“It’s a process ... that was created in the 1930s when typewriters, paper, and snail mail were the only options to communicate with investors, and it has only been upgraded incrementally,” he said.

The new system would be based on IDEA, or Interactive Data Electronic Applications system, the new technology platform that will replace EDGAR, which was unveiled by the SEC last August. Companies could choose to submit their filings directly into an SEC Web-based portal, upload files to the system, use software that interfaces with the SEC system directly, or use a financial printer.

Since the data wouldn’t need to be reformatted, mined, or scrubbed to be used in investor models or tools, manual filing, and proofing errors “should be minor and few” and costs—both financial and those from human transcription and delay errors—would go down dramatically, Lutz said.

(Editor's note: Lutz will be a speaker at Compliance Week's annual conference in Washington, D.C., June 3-5. Please visit our conference Website for more details on how to attend.)