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| 8 Jul 2024 | |
| Written by Jenna Marthaller | |
| Blogs |
The Data Foundation hosted FDTA Forum 2024: Defining Success Thursday, June 27, 2024, in partnership with Donnelley Financial Solutions (DFIN). The Forum brought together key stakeholders in the financial and regulatory sectors to discuss the implications and future of the Financial Data Transparency Act (FDTA) of 2022. The FDTA Forum featured policy discussions led by experts and policymakers deeply involved in the development, implementation, and implications of the FDTA. Throughout the afternoon, a few themes emerged – collaboration and stakeholder engagement, data quality and usability, and challenges and opportunities with implementation.
Setting the context for the afternoon, Nick Hart, President and CEO at Data Foundation, began his opening remarks by outlining the significance of the FDTA and its potential to revolutionize financial data reporting. He discussed the Act's requirement for financial regulators to collaborate and establish data standards, aiming to improve data quality, reduce reporting burdens, and increase the usability of information.
Craig Clay, President of Global Capital Markets at DFIN, followed Nick’s remarks and underscored the FDTA's potential to drive efficiencies and collaboration through the adoption of regulatory technology (RegTech), making financial data more searchable and machine-readable. He also noted the change in technologies and reporting in the years that the Data Foundation and DFIN have been working together. The FDTA ushers in a new phase of data modernization.
With the focus on the FDTA and pending proposed joint rule, the Data Foundation and DFIN continued the forum with a look at how the FDTA made it through Congress with a discussion between Nick Hart and Rebecca Alcorn, Director at Mindset and former Senior Policy Advisor for Senator Mike Crapo (co-sponsor of the FDTA).
Alcorn shared her experiences working on the legislative side of the FDTA. She provided a detailed narrative of the bill's journey through Congress, highlighting the bipartisan efforts that were crucial for its passage. Alcorn emphasized the collaborative effort to get “on the same page” before the FDTA bill became a law in 2022. She expressed how she enjoyed the excitement of the bipartisan collaboration as she was able to work with “folks across the aisle and in the other chamber” that she typically does not have the opportunity to work with.
Alcorn addressed the importance of stakeholder engagement and the role it plays in the successful implementation of the FDTA, stating “staff are probably also eager to have conversations with the agencies, hear what's going [...] They want to know that stakeholders are really involved as the agencies implement this.”
Stakeholder considerations were part of the process from the beginning. Understanding some initial complexities of implementing data standards across various sectors, Alcorn talked about scalability of data standards. “[T]hey should minimize disruptions [...] There's a lot of concerns that this bill overly burdens them on certain folks in the marketplace. And I think that that was a really key addition, that when we work to refine the bill towards passage, we include it. And I think that that should be an important consideration.”
John Truzzolino, Director of Business Development at DFIN, also commented on the importance of stakeholder engagement, “At some point, we need involvement from the stakeholders on early adoption of the standards to get feedback, not just comment letters, but a beta program or a pilot,” during a panel discussion on “Best Practices and Lessons Learned from Applying Data Standards.”
Truzzolino continued to explain that he had been involved with a pilot program to integrate XBRL with forms collected by the Federal Energy Regulatory Commission (FERC), testing the potential use and fit of data modernization technologies. Some that fit, and others that did not. “It's through those pilots and through those early engagements that you can really start to bring stakeholders in, get technology that doesn't just meet the current need, but solves a bigger solution.”
During this panel, Ashley Nelle-Davis, Chief of Staff at the Data Foundation, moderated a discussion on “Best Practices and Lessons Learned from Applying Data Standards,” featuring Truzzolino and Liz Sweeney, President of Nutshell Associates, LLC, both who carry extensive experiences with financial data standards and taxonomies.
Liz Sweeney recalled an experience she had with data modernization regarding the capital market user stakeholder working group. For context, she added that a city or county's audited financial statements are typically 200 to 350-page PDFs as governments tend to segment funds into different purposes and therefore have several funds and sub funds. Taking this into account, Sweeney noted the critical need for high-quality data sharing but also noted that such changes take time by sharing that "[...] one of the things we realized very quickly was that it's not going to be feasible to make every single piece of this machine-readable. We are going to have to make choices." This insight was crucial as she communicated that one of the necessary choices included paring the taxonomy down to “what's important and keep it [...] to a reasonable size or nobody's ever going to use it.”
Turning to relevant experience on data modernization, Truzzolino provided background on the Shared Data Quality Commission, created by XBRL US after being selected to develop a standard for digitizing the Securities and Exchange Commission's (SEC) Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system.
The Shared Data Quality Commission discovered that getting the data to a “high quality state” would take time as the quality of the data would need to be fixed first. Truzzolino stated, “[t]he Data Quality Commission went to look to see where we could enhance the data quality across the stakeholder community. And in doing so, we implemented a program that allowed us to effectively move the needle on elevating the usability of the data by enhancing the quality.”
The event then transitioned to a public forum, which featured contributions from various speakers, each bringing unique perspectives on the FDTA.
Comments provided during the forum mostly addressed practical challenges of implementing data standards across different sectors and the benefits of doing so. The speakers also addressed the importance of ensuring that the new data standards do not disrupt current market practices but instead build on existing systems to foster improvement and collaboration. For a full review of comments, please see the FDTA Forum transcript and an audio recording of the event.
Looking ahead, the forum set the stage for the upcoming proposed rule and the Data Foundation previewed their FDTA tool:
The Forum provided the opportunity to explore the content of the FDTA, a significant piece of legislation aimed at enhancing data transparency and accountability in financial reporting. The event was a place where participants could share insights, experiences, and strategies for effective implementation of the FDTA in a collaborative environment.
Forum Speakers in Order of Comments (timestamped from audio recording, hour:minute):
The FDTA Forum was a significant step forward in the journey towards greater financial data transparency. By bringing together a diverse group of experts and stakeholders, the event underscored the collaborative spirit needed to successfully implement the FDTA and unlock its full potential for enhancing financial accountability and decision-making.
The event took place virtually and in-person at the Open Gov Hub in Washington, D.C., with participants joining both in-person and online.
