Detailed Comments on the
SEC Proposed Rulemaking
I. MODERNIZATION OF EDGAR
A. Background
We believe that the adoption of a
markup language like HTML is paramount to the long-term success of the EDGAR
System. The overall system of regulation and enforcement by the SEC is
predicated on filers disclosing meaningful information that allows both the SEC
and the public to quickly extract necessary data. For the SEC, this is crucial
for determining compliance, and for the public it is important to determine
investment potential and risk.
The SEC has to balance the
disclosure burden on registrants with the needs of the SEC and other consumers
of the information. What consumers need is intelligent information with markup
that is meaningful and useful. ASCII, while not tagged for content, provides a
fairly uniform method of conveying data. HTML, which can be used to tag
content, increases the complexity of extracting data because of myriad coding
practices. PDF, while good for representation of the printed documents,
presents serious obstacles for data extraction and searching. We believe that
to balance the requirements of all parties, meaningful HTML/XML markup must be
added to documents. While HTML/XML places some additional burden on filers, the
resulting documents would be significantly more useful to all parties. We
therefore recommend that the SEC adopt HTML mixed with XML for EDGAR filings,
perhaps integrating a future standard like XFRML.
Any changes to EDGAR will
increase the filers´ burden, but if such changes are selected carefully
they will yield good long-term returns. Further, the burden of creating "EDGAR" documents
should be taken within the context of the total disclosure process, including
the requirements for accounting and legal services. When viewed in that
context, the burden for EDGAR filings is minor. Additionally, the SEC requires
registrants to provide certain disclosure to use public and protect
investors. Registrants use public markets to raise capital or to fund
investment opportunities. The burden of filing is part of the cost of
facilitating such transactions.
There are few today who question
the value of the EDGAR System. A mere 7 years ago, this was not true. Well
thought out investment and improvement today will pay off for tomorrow´s
EDGAR System.
B. HTML and PDF Environment
The SEC´s limitations on
HTML formatting reduce the utility of the filed documents for other purposes.
For example, if a filer, such as an investment company or mutual fund, wants to
post the same prospectus on the web that is filed with the SEC, the filer must
frequently create two separate documents. The differences between
state-of-the-art web documents and SEC HTML are so significant that companies
who post their documents to the web usually convert the document twice, once for
each medium. While there are many practical areas of HTML that the SEC cannot
accommodate (such as external linking), we believe the gap between filed and
web documents should be closed over time. Closing the gap will provide an
incentive for registrants to prepare and file EDGAR submissions using HTML.
The inclusion of PDF is a
reasonable way to provide a close replicate to printed disclosures. We agree
that PDF should not become an official filing medium as PDF documents present
difficult challenges in consistently searching and extracting data.
C. Use of HTML
1 We think that
it is important to return the EDGAR System to a single filing format as soon as
practical to eliminate the confusion and inconsistencies caused by today´s dual
format. We encourage the SEC to adopt HTML as the single format and to publish
a schedule for the mandatory adoption of HTML so filers, their agents, and the
dissemination and research communities can plan for the transition. Since HTML
filing tools like EDGAR Ease are already available today, we feel that 12-18
months would be sufficient for all the impacted parties to fully convert to
HTML.
2 Use of a single
file for documents is a practical requirement. The major reasons for continuing
with documents as a single file include: control, searching, data extraction
and printing. Perhaps the SEC and disseminators could use the <PAGE> tag as a
method to optionally break the document into smaller sections for viewing and
navigating.
3 The SEC should
consider the application of at least part of the CSS2 specification for styling
documents. The limited HTML 3.2 tag set should still be used to insure proper
cross browser display. Further, the SEC should consider allowing one level of
tables within tables to facilitate better document layout and the ability to
present more complex pages. Such changes, when combined with images, would
allow filers to more easily re-purpose EDGAR documents for web posting.
D. Use of PDF
We feel the SEC should not limit
the size of PDF files and should encourage filers not to use TIFF or other
image formats to represent information that should be included as text (such as
optically scanning in pages of information).
E. Graphic and Image Material
1 No comment.
2 We propose that
the SEC allow filers optionally to include performance data in the form of a
commented table if such data is not provided as a text table within the HTML
document. For example:
<h2 ALIGN=CENTER><>10 Year Performance</FONT></h2>
<P ALIGN=CENTER><IMG SRC=10YEAR.GIF></P>
<!-- Performance Table
XYX ABC Brothers
Aggressive Income Trust Aggregate Bond Index
----------------------- --------------------
2/90 $10,000 $10,000
1/91 $ 9,927 $11,163
1/92 $12,652 $12,618
1/93 $14,208 $14,002
1/94 $16,872 $15,282
1/95 $15,748 $14,928
1/96 $19,495 $17,458
1/97 $23,027 $18,027
1/98 $26,473 $19,960
1/99 $25,114 $21,572
1/00 $26,912 $21,174
(Period covered is from 2/1/90 to 1/31/00)
-->
In the above example, only the
performance chart would appear within a browser because the text table was
commented out. If the consumer needed the original data for the table, they
could "view source," find the table data and copy it into the
desired package.
3
We share the concerns of the SEC. However, if the long-term goal were to allow
multimedia content in filings, the issues by the SEC expressed in this paragraph
would conflict with that objective.
4
File size is an important issue but automatically limiting the size could pose
difficulties for filers. For example, if a prospectus contains a complex and
detailed organizational chart for the merging of two companies, the size of the
file may be required to be large to allow proper expression of detail. Filers
do have options to reduce the size of such images by reducing the resolution,
which of course, thereby reduces legibility. We believe the SEC should encourage filers to use the best
and appropriate formats and resolution to aid the consumer and reduce SEC
storage requirements. The SEC should also develop a method to audit for
compliance of the type of images filed to keep filers from submitting "pages"
of graphic information that should be filed as text.
5-6
If the SEC requires certain information such as performance charts as graphics,
filers should submit them as graphics. The SEC should also require, and the legal community would
probably agree, that inclusion of all legally material graphic elements be
mandatory. Inclusion of items such as logos or pictures of nominated directors
could be optional.
7
The SEC should provide a
uniform and effective method of private submission and allow graphics to be
marked as private. The SEC should consider allowing a "<PRIVATE>" tag within
the document header to allow any document to be filed with a request for
privacy. The system should check for the validity of the privacy request.
F. Limitation of Hypertext Links
1
Hyperlinks are inserted for the
convenience of the reader, allowing her/him to quickly jump to related
information. Using hyperlinks within a document for the Table of Contents,
Registration Cross Reference or "see" cross-referencing should be allowed.
External links to other documents should be treated legally and specifically
binding as they are for Incorporation by Reference as may be seen in an exhibit
index.
2
The SEC should not allow links
outside of the controlled SEC document database.
3
No comment.
4
Hyperlinks should only be used
to link to documents which would normally be incorporated by reference.
5-7
We agree.
8
Linking to different issuers is
a complex question. Should the other issuers be notified or be required to
grant permission? The SEC may consider adding appropriate information to the
submission header, similar to group members or co-registrants, indicating a
reliance on non-issuer documents.
9
No comment.
10
This should be treated as if
the reference was made in textual form.
11
This should be treated as if
the reference was made in textual form. If an amendment were filed, the
previously filed documents would not have their references updated unless the
issuer filed an amendment to those documents as well.
12
The SEC´s web server can
contain a list of archived files and display a page to the user indicating the
document is no longer available. Many web servers provide a layer of error
reporting to give the user a more intelligent response than "Error 404" or
"document not found".
13
We agree.
14
External links cannot be controlled and should not be allowed.
G. Prohibition Against Electronic
Submissions Containing Executable Code
1
We agree.
H. Method of Electronic Transmission
1
No comment.
Direct Transmission via Dial-Up Modem and Internet
1
Update modems as required.
2
SSL is acceptable provided that all interface protocols and methods are publicly available for third
party filing solutions.
3
We agree. The SEC should also continue to allow direct dial entry that offers higher security.
The SEC may also consider transmission only through UUNet which will provide for
improved control of the network yet still allows use of standard Internet
technology.
Magnetic Tape
1 No comment.
Diskette
1 No comment.
I. Modernization of EDGARLink
1 No comment.
2 A method must be
available for extracting SEC header template data for third party software
solutions. The current submission header database can be extracted from
EDGARLink fairly quickly. This database allows for third party header building
and validation. The SEC should also make sure all optional tags are included
within the EDGARLink database that are specified within the EDGAR Filer Manual.
There have been numerous suspensions as a result of filers not including
optional information because they failed to examine the EDGAR Filer Manual
while there was no indication of the tag within the EDGARLink database.
3 Insufficient
information to make comment.
4 Can this activity
occur off-line? Will the SEC EDGAR System be responding in real time to
information entered? In order to "check for errors" will any data be sent to
the SEC, or can the entire process be carried out off-line?
5 How will
EDGARLink invoke word processing or third party software? When will the
specification be available for this interface?
J. HTML Standard Tag Set
1 The SEC should
consider allowing CSS as well as tables within tables (also known as nested
tables). The SEC EDGAR system should also check filer submissions for HTML DTD
compliance. Failure to comply with the DTD frequently leads to differences in
browser display. The present EDGAR System is rather loose with respect to what
is "allowed" versus what is not allowed. For example, the EDGAR Filer Manual
specifically spells out what attributes may be used for what elements, yet the
EDGAR System appears to perform minimal validation.
The EDGAR System also allows the
use of the "FONT FACE" attribute that is not part of the 3.2
specification. By not validating the FACE attribute, the SEC is opening the
door for filers to specify font faces that the reader´s system may not be
able to render. This can cause serious display problems when certain symbol
fonts are specified. We believe the SEC should officially allow filers to use
the FACE attribute, but restrict the font names that can be used.
In addition to the above, the SEC
should also allow the use of common formatting attributes such as ALIGN=JUSTIFY,
which is not part of the HTML 3.2 Specification.
The SEC should allow revisions to
be performed with the <R></R> tags only and not allow the "text" versions
of the tags to be used as a substitute (i.e., <R> and </R>).
K. Financial Data Schedules
1 No comment.
L. Possible Future Rulemaking Projects
1 No comment.
EDGAR Tags
1-2 Using XML
tagging for the submission header and body is a good move. However, there are a
number of issues to consider. First, will the SEC
develop its own XML DTD for content, or will it use a format such as XFRML?
Second, will there be issues with DTD conflicts between the submission header,
document header and content DTD´s?
The SEC should examine the XML
question seriously and carefully since once a markup is selected, the documents
within the archive must be readable and useable for future users. Further, the
selected XML DTD must be extensible and work for the majority of disseminators.
The SEC should review and
participate in the XFRML process and then determine, with input from the
public, what DTD should be adopted.
Investment Company and Insurance Products — Multiple
"Primary" EDGAR Documents
1 Modules seem
appropriate for this task. Exceptions and rules could also be made for
hyperlinking such sections of documents.
II. RULE AMENDMENTS IN CONNECTION
WITH EDGAR
RELEASE 7.0
No comment.
III. GENERAL REQUEST FOR COMMENT
No comment except for as provided
above.
IV. COST BENEFIT ANALYSIS
No comment except for as provided
above.
V. ANALYSIS OF BURDENS ON COMPETITION,
CAPITAL FORMATION AND EFFICIENCY
No comment except for as provided
above.
VI. SUMMARY OF REGULATORY
FLEXIBILITY ACT
CERTIFICATION
No comment except for as provided
above.
VII. PAPERWORK REDUCTION ACT
No comment except for as provided
above.
VIII. STATUTORY BASIS
1-8 No comment
except for as provided above.
9 "§232.11
Definition of terms used in part 232 — Official Filing" It is unclear whether
the "official filing" is the actual text and HTML codes submitted to and stored
by the EDGAR System or the "rendered" or "printed" version of that filing by a
browser. If the official filing is a rendition from a browser, then the
question is which browser and software version? Considering the potential for
dropped or incorrectly ordered text as a result of potential coding errors, the
Commission should clarify this point and set a standard for filers to follow.
10 "§232.12
Business hours of the commission" The SEC should consider leaving the EDGAR
System open for submissions 24 hours a day, Monday 8a.m through Friday 10p.m.,
with SEC Filer Support available from 8 a.m. to 10p.m.
11 "§232.103
Liability for transmission errors or omissions in documents filed via EDGAR"
Are coding errors which result in incorrectly displayed or omitted text covered
under this provision?
12-43 No comment
except for as provided above.
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