Draft rule for the FDTA proposed
After several years of discussion and planning, the Financial Data Transparency Act (FDTA) is poised to become a reality with the release of a draft rule proposal. Announced jointly by the Securities and Exchange Commission (SEC), Federal Reserve, Federal Deposit Insurance Corporation (FDIC), Consumer Financial Protection Bureau (CFPB), Commodities Futures Trading Commission (CFTC), National Credit Union Administration (NCUA), Federal Housing Finance Agency (FHFA), and other agencies, the proposal has been published on the agencies’ websites and in the Federal Register, inviting public feedback.
Enacted in 2022, the FDTA mandates the use of consistent data standards across multiple US financial regulatory bodies. The draft rule introduces these joint standards, aiming to enhance the quality, transparency, and interoperability of the data collected by these agencies.
Historically, diverse data collections and numerous formats have hindered financial regulatory agencies. The new standards proposed under the FDTA are set to change this by making data easier to understand and share, driving efficiencies and enhancing reliability across the board. The draft rule includes the adoption of Legal Entity Identifiers (LEIs), as well as other data standards related to entities, locations, dates, and financial instruments. This uniform system is expected to make financial data more accessible and valuable for both regulators and investors.
SEC Chair Gary Gensler, along with Commissioners Hester Peirce and Mark Uyeda, expressed their support for the proposal, emphasising its potential to improve financial oversight and market efficiency. Commissioner Peirce noted, “If well implemented, the FDTA could enhance the analytical capability of regulators, investors, and other market participants and reduce compliance costs for regulated entities. However, this result is not guaranteed… To maximise the potential for the FDTA to serve the public interest, we need broad public input.”
The proposal also advocates for the use of non-proprietary, open-license identifiers and a principles-based approach to data transmission and structuring, such as using schema and taxonomy formats that support high-quality, machine-readable data submissions. The draft seeks input on aligning these standards with generally accepted accounting and financial reporting principles, a move that could further streamline reporting processes and enhance the utility of financial data for stakeholders.
Unsurprisingly, we have some views about how the US regulators could best achieve that!
The public comment period for the proposed rule is open for 60 days following its publication in the Federal Register on 2 August. The FDTA represents a significant shift towards greater transparency and uniformity in financial reporting, and stakeholders are strongly encouraged to participate in the consultation process to help shape the final standards.
View the Federal Reserve announcement here and SEC announcement here.
Sec Commissioners Chair Gensler, Commissioner Pierce, and Commissioner Uyeda have all published statements commenting on the proposed rule.
