Filing Rules – the good stuff

CoreFiling’s Katherine Haigh and Joe Leeman are active contributors to XII’s Filing Rules Working Group. In this interview, we find out what motivated them and what insights they’ve gained that are useful either to regulators, filers or both.

Why did you join the Filing Rules Working Group?

Katherine: Part of my responsibility as Head of Quality Assurance is to check filing rules and filing manuals for our clients, so I have a good understanding of the things that work and the things that don’t. Any contribution we can make to improve the consistency and quality of filing rules not only benefits the market, but helps me in my job!

What does the Working Group do?

Joe: We’re analysing several filing manuals from a broad range of organisations in order to understand the current market practice. This work gives us a good insight into both the structure of filing manuals and also the content, the sort of rules that get included and how they are described.

Katherine: In addition, we’re looking for evidence and opportunities to automate the processing of filing rules as much as possible.

That’s interesting Katherine, what’s the reason for that?

Katherine: So, well-structured filing manuals and well-written filing rules lend themselves to automatic testing of reports and submissions. Having these processes automated not only builds consistency, it reduces the manual effort required by report preparers by giving them the opportunity to automatically test their reports prior to submission. It increases the level of first-time correct filings, reducing the workload on the regulator’s incoming processes.

Joe: Here at CoreFiling we offer validation modules to our customers that provide exactly that service – it’s much easier to write these and keep them current if we’re relying on well-structured manuals and well-composed filing rules. As Katherine said, this service enhances the reports preparation and submissions processes for our filer customers. In some cases, we provide the same automated validation software to both the regulator and their filers, meaning the filers can have 100% confidence of the validity of each report before submitting.

What other insights have you got from this work?

Joe: Interestingly, we’ve found a few anomalies that are potentially embarrassing for regulators and publishers of filing manuals!

Can you give some examples?

Katherine: Yes, we’ve seen examples where a regulator has clearly just copied content from another filing manual with no understanding of what the rule is supposed to achieve. It’s simply a copy-paste exercise. This is bad for the filer community, since it imposes an unnecessary constraint on their report, adding to the cost and effort, but adding no value to the filer or to the regulator.

Another example occurs in the Eurofiling space, where the supra-national regulator imposes a set of “should” rules in their filing manual. These rules might be, for example, to capture some useful statistical information that is not essential to the regulator. The National Competent Authority (NCA) then increases the severity of this rule to a “must” rule. All the organisations filing to that NCA are then required to submit the requested information in their reports or suffer having their report rejected.

As above, this process adds more effort and cost to the filers without creating any benefit to either filer or reporter. Though the supra-national regulator does always get the extra information they want.

So, there are definitely issues with current practice in filing manuals. Is it all bad?

Joe: Fortunately, no, it’s not all bad. We’ve seen some examples of great practice that, to be frank, should be adopted by all publishers of filing manuals. For example, those manuals that include a description of the goals, objectives and context for the filing rules are far easier to interpret and comply with. Rules that are properly arranged in a logical structure are also much easier to implement. For example, EBA categorise their rules into 5 classifications: filing syntax, instance syntax, context-related, fact-related and other. By doing this they allow the filer to see immediately where each rule should be applied.

Other examples are to have a consistent numbering system. Again, the EBA chooses a particular numbering system for its rules. Some NCAs just copy this numbering scheme, which we would support. Others choose to create a completely new numbering scheme, which adds to confusion and makes it difficult to compare rules and very difficult to automate them.

Katherine: We’d also strongly support the approach of differentiating the XBRL validation rules away from the guidance rules and rules relating to constraints in the submissions portal. This goes along with the idea that XBRL validation rules can easily be automated in the filing process. Guidance rules are more difficult, in that they can be difficult to resolve into clear “pass – fail” expressions. By separating out the constraints imposed by the submissions portal, it prevents some of the copy-paste rules being carried over unnecessarily.

Joe: And while we’re on the topic of good practice, I’d like to see proper versioning in filing manuals so it’s obvious what has changed when a new version of a filing manual is published. Ideally we’d see a consistent identification scheme where each rule is assigned a unique reference, whether a number or an error code, for life. This makes for ease in version control and change management.

In summary then, what guidance can you give to publishers of filing manuals and to the communities of filers that need to comply with the rules?

Katherine: I think for the publishers there are two key messages: firstly, to treat the creation of filing rules with the same rigour that is applied to taxonomy development and publication. The second is to walk a mile in the filer’s shoes, to better understand the limitations, confusion and wasted effort that occur when irrelevant or over-severe rules regimes are applied.

Joe: And for the filer community, it’s not to be complacent. Filers should require their regulators and authorities to provide clear unambiguous filing manuals containing only the rules required to assure successful submission and no more. Also to participate in reviews of any draft manuals published by the regulators, to question any rules that are not clear, and to put the onus on the regulator to explain the need for any specific rules to be applied.

Thanks for the insight, Katherine and Joe – I’m sure that is useful information for publishers and consumers of filing manuals. What’s next for you two?

Katherine: We still have some more filing manuals to review, and a recommendations and guidance paper to publish, hopefully in time for the Data Amplified Conference in November.

Joe: I’d really like to use the insights we have gained in this exercise to help publishers of filing manuals improve their practices and processes in filing rules. I can see the benefit that would bring to the publisher and, as importantly, to their filing community.

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