U.S. financial regulators are behind the global data curve. 

While most regulators around the world have started using modern data technologies to collect information from companies and markets, most U.S. regulators, particularly the Securities and Exchange Commission (SEC), are still uploading PDF documents. 

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But next year’s Republican Congress will have an opportunity to transform financial regulation from outdated documents into modernized data. Finally. 

Unified control of both chambers means the House Financial Services Committee and the Senate Banking Committee can work closely together. One of the first items on their to-do list must be the data that financial regulators collect from public companies, markets, banks, and financial firms. 

In 2009, the SEC took an initial step toward modernization by requiring public companies to submit their financial statements in the eXtensible Business Reporting Language (XBRL) data format. But then the transformation stalled. The SEC still collects two versions of every financial statement: an XBRL version and a document version. Until four months ago the agency had taken no serious steps toward enforcing the quality of the data version. Without assurance of data quality, investors have been reluctant to use XBRL data. And despite calls from investorsindustryCongress, and its own staff, the agency still has no plan to transform its hundreds of other forms from documents into data. 

If the SEC and other regulators switched completely from documents to standardized data, investors could use the data for better decisions, regulators could deploy Big Data analytics to find risk and fraud, and companies could automate their compliance tasks. Our Coalition members could launch new high-tech businesses built on republishing, analyzing, and automating the data—once made available in standard formats. 

These advances are happening already in the UKChinaJapanand other countries, where companies are required to report financial data in XBRL. The SEC and other U.S. regulators have not kept up. 

With no leadership on data from the SEC, Congress must get involved. Unfortunately, the House of Representatives has been moving in the wrong direction. 

On September 16, 2014, the House passed legislation that would actually forbid the SEC from collecting financial information as data, and require the agency to use outdated documents—for 61 percent of all companies the SEC monitors

H.R. 5405, a financial services compilation bill, includes Rep. Robert HurtRobert HurtDemocrat defeats controversial chair of House Wall Street subpanel Republican groups launch final ad blitz in key House battlegrounds Armed protester stands outside Dem's office for 12 hours MORE’s (R-Va.) “Small Company Disclosure Simplification Act.” The proposal would direct the SEC to exempt all public companies with revenues below $250 million from the obligation to file their financial statements in XBRL. Since when is $250 million in revenue a small business? 

The proposal is based on justified frustration with the SEC. It’s quite true that the SEC hasn’t made much progress in the transformation from documents to data—in fact, there seems to be no long-term plan at all. But forbidding the SEC from requiring financial statements to be filed in XBRL would permanently impede future progress. 

The future competitiveness of U.S. companies and domestic stock exchanges is also at stake. As foreign capital markets begin to offer investors easier access to financial data, investors will focus on those markets—and corporate listings will follow. 

Rep. Patrick McHenry (R-N.C.) put it this way: “When the NFL is providing more data on their players than the SEC is providing on public companies, that’s deeply troublesome.” 

At our policy conference this fall, the SEC’s chief economist, Mark Flannery, announced one way the agency is planning to get back on track: upgrading to the Inline XBRL format. This new technology will allow companies to integrate (or embed) the data coding of the financial statements directly into their existing annual and quarterly disclosures. Companies will submit a single version, instead of two, that is both human-readable and machine-readable—just like a web page. With SEC staff reviewing only one version, inline XBRL will also improve quality enforcement. Industry groups like Financial Executives International (FEI) have supported inline XBRL for years. But if H.R. 5405 becomes law, the SEC will be forbidden from taking this common-sense step. 

So what’s next? We don’t expect action in the lame duck session on H.R. 5405. But with the Senate Banking Committee passing to Republican control, Hurt’s ban on data reporting will surely be proposed again in 2015. 

Congress has the chance to embrace data in financial regulation, to the benefit of investors, markets, and companies and the public—or permanently reject it. The tech industry is calling on the Banking Committee to support data transparency. Don’t let financial regulation take a step backward. 

Hollister is the founder and executive director of the Data Transparency Coalition; Duncan is the policy associate at the coalition.