SEC Finalizes FTDA Phase 1 Final Rule
Key Takeaways
On June 8, the U.S. Securities and Exchange Commission (SEC), in coordination with other federal financial regulatory agencies, finalized a rule implementing the Financial Data Transparency Act of 2022 (FDTA) marking the completion of Phase 1 out of 2.
This rule establishes a common framework of technical data standards, such as standard identifiers for legal entities, financial instruments, currencies and dates, that agencies will use when collecting financial information. This means that counties will need to begin assessing how they may apply to their financial reporting processes once implemented in Phase 2. Importantly, the Phase 1 final rule only applies to the agencies themselves and does not directly change what any county or other entity must report today with an effective date is October 1, 2026.
What does this means for counties?
Now that the FDTA Phase 1 Joint Rule has been finalized, counties will begin familiarizing themselves with the new uniform data standards and assessing how they may apply to their financial reporting processes. As federal agencies move into Phase 2 rulemaking, counties will need to evaluate what changes to their systems, processes, and disclosures may be required to meet new machine-readable data requirements. NACo is actively reviewing the final rule and will continue to provide guidance and advocate on behalf of county interests throughout the implementation process.
What is the FTDA?
The FDTA was signed into law in December 2022 and requires nine federal financial regulatory agencies including the SEC, the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), the Consumer Financial Protection Bureau (CFPB), the Office of the Comptroller of the Currency (OCC), the National Credit Union Administration (NCUA), the Federal Housing Finance Agency (FHFA), the Commodity Futures Trading Commission (CFTC), and the Department of the Treasury to establish common technical standards for financial data they collect. The goal is to make that data more consistent, searchable, and usable across the federal government.
The purpose of FDTA is to create a government-wide standardization on how federal agencies collect and share financial data.
What is in the final rule?
At a high level, the rule establishes government-wide data standards for financial information collected by federal regulatory agencies, with the goal of making that data consistent, searchable, and interoperable across federal systems.
Key elements include:
- A common framework of technical data standards for financial reporting
- Requirements that covered data be machine-readable and searchable
- A foundation for Phase 2, in which each agency will issue its own implementation rules determining how these standards apply to specific financial disclosures under their oversight
NACo will provide further analysis and guidance for counties as the implementation process develops.
How do the changes impact counties?
If federal data standards are applied to county financial disclosures, counties may face:
- Costs to upgrade financial systems and software to produce machine-readable filings
- New compliance processes, staff training, and vendor support needs
- Potential conflicts with existing Governmental Accounting Standards Board (GASB) standards, which govern how county finances are reported and differ from private-sector accounting rules
- Disproportionate burden on smaller and rural counties with limited finance and IT staff
NACo shares concerns raised by the Government Finance Officers Association (GFOA) and the broader public finance community that FDTA implementation could function as an unfunded federal mandate on counties and other local governments. NACo also has broader concerns about expanded federal oversight of state and local financial reporting and the importance of preserving local authority.
What are the next steps?
NACo is closely reviewing the final rule and will continue to analyze its impact on counties.
Counties should:
- Monitor the SEC’s upcoming agency-specific rulemaking
- Begin conversations with finance staff, legal counsel, and technology vendors about potential future reporting changes
- Watch for further guidance and updates as Phase 2 develops
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