April 3, 2000
Mr. Jonathan G. Katz
Secretary
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0609
cc: Rick Heroux
Mauri Osheroff
Subject: File No. 57-05-00 - Comments on SEC Proposed Rules for EDGAR Modernization
Dear Mr. Katz:
Merrill Corporation is pleased to be part of the SEC's modernization of EDGAR (EDGAR II). Transitioning to Internet technology will increase the value and the use of the EDGAR documents to a widespread audience. If you need further information on our comments below, please contact the EDGAR Advantage Service Team at (800) 688-1933. Below are the comments and recommendations we have regarding the proposed EDGAR modernization rules scheduled for implementation in May 2000.
Section C. Use of HTML
SEC Request for Comment
How soon filers will be able to submit most documents in HTML?
Merrill Comment
Merrill Corporation is fully prepared to support a mandate for all documents to be filed in HTML. We believe all documents should be mandated, including the exhibits. HTML provides a more structured, readable, user-friendly format than ASCII. Merrill recommends a phased-in approach starting in 2001 and ending in 2002. This phase-in should be completed quickly so that further SEC rule making can focus on HTML as the only official filing format, eliminating any need for dual rule making.
Section D. Use of PDF
Merrill Comment
If PDF had open source coding and could easily be edited, it could be a viable official format. However, since HTML is being enhanced to include graphics, etc., PDF does not appear to add much value to the filing community. HTML is a more structured, open format. PDF could be eliminated completely with the following benefits:
However, if PDF is continued as an unofficial filing format, we believe there should be no size limitation.
Section E. Graphic and Image Material
SEC Request for Comment
Limit the file size and type of graphic and image material.
Merrill Comment
There should be no limit placed on the file size of graphic or image material. The SEC should provide guidelines and examples for registrants and service agents. Also, the type of graphic and image material should not be restricted.
SEC Request for Comment
Should graphics be required wherever presented in the distributed document?
Merrill Comment
All graphics present in the distributed document should be required in the EDGAR document. Keeping two sets of documents (one with some graphics, one with all graphics) would be burdensome. Requiring all graphics is also in line with Plain English requirements, which focus on adding more graphics to documents.
Merrill Comment
Merrill believes that graphics should NOT be allowed in non-public documents (cover letters and correspondence documents). This will avoid unexpected dissemination results where the graphic appears with no text because the text is non-public.
Section F. Limitation of Hypertext Links
SEC Request for Comment
Use of expanded links
Merrill Comment
Merrill is in support of expanded links, including links to documents within the submission and links to other documents in the EDGAR database. The SEC must clearly define how to set up these links so that they can be done properly. This is important, since links can not be tested before live transmission.
Expanded links will allow better use of the HTML capabilities and easier navigation throughout the documents. We also believe registrants should be allowed to link up to their own company or affiliated company's information on their own web site.
SEC Request for Comment
Use of expanded links to unaffiliated company documents.
Merrill Comment
We believe that allowing links to unaffiliated company documents or web sites will create an administrative and legal nightmare. There is some value in the situation of an acquisition or tender offer, but liability is a big issue and with the liability risk, no one will choose to use links in this manner. Making the "linkee" liable for the "linkers" errors is not worth doing the links.
SEC Request for Comment
Treatment of amended or superseded materials in hyperlinks.
Merrill Comment
Tracking amended or superseded material in the hyperlinks would be impractical and virtually impossible. We are NOT in favor of this requirement.
Section H. Method of Electronic Transmission
SEC Request for Comment
Add Internet transmission, change Magnetic tape to magnetic cartridge, and remove diskette transmission.
Merrill Comment
Merrill supports the SEC's continued upgrading of the EDGAR system. We foresee no problems with changing from Magnetic cartridge to Magnetic tape or with removing diskettes as a means of transmission. The Internet Service Provider filing option is an exciting technological step forward from the DOS based system and we look forward to further enhancements.
Section J. HTML Standard Tag Set
SEC Request for Comment
Should the SEC permit, require, or prohibit any particular tags?
Merrill Comment
Continued release of additional tags for the enhancement of HTML is a great way to promote the further growth and interest in HTML as an official filing format. The addition of graphics and expanded hypertext links will enhance HTML for filers, investors and end users. New tags should be released with a testing period of at least one-month to allow for proper technical preparation. This will ensure service agents are well prepared to provide these enhancements to all registrants.
Section K. Financial Data Schedules
SEC Request for Comment
Should the SEC remove the requirement for filings Financial Data Schedules?
Merrill Comment
Merrill supports the removal of the requirement for filing Financial Data Schedules because they are very burdensome for the registrant.
Section L. Possible Future Rulemaking Projects
Additional Mandated Forms
Merrill is in support of more forms being phased into the EDGAR system (ex: Forms 3, 4, 5, 144, etc.). This is a positive step and we recognize the need for companies and investors to have quick and simple access to this information. In general, paper is no longer an efficient method of information transfer. It is a much better use of resources to require as many forms as possible to file in EDGAR.
Foreign Filers
We believe that foreign filers should be required to file in EDGAR when filing forms with the SEC. This will make the data easier to access by the public and easier to review by the SEC.
eXtensible Markup Language (XML)
We encourage the use of XML tagging within documents so that data can be readily tracked and queried. Examples include fee data, series and classes for investment companies, and separate accounts for insurance companies. The use of XML will provide more structure and dynamics to the EDGAR documents.
Including Unofficial PDF copies
Merrill is in support of relaxing the substantively equivalent requirement when unofficial PDF copies (courtesy copies) are in non-public correspondence documents. This will allow the examiners to review a PDF version of the printed document with precise redlining marks rather than the paragraph redlining marks often used in HTML.
Other Comments
Header Templates
Since EDGARLink filers will not typically download all templates from the EDGAR system, they must be notified when any templates change. Otherwise they may be using out of date forms.
Background Graphics
The SEC should state more clearly whether background graphics are allowed. For example, in the proposed rules, page 70, appendix A, the <BODY> tag indicates the BACKGROUND parameter may include a reference to a graphic file. However on page 12, footnote 36, the rules state the Filer Manual will prohibit the use of graphics as background because they will interfere with the legibility of the document. We believe background graphics should be allowed as long as they do not interfere with legibility.
Technical Specifications
To better service the Corporations and Law Firms we work with, Merrill requests to have all technical specifications early enough so that all system technical preparations can be done in a timely manner. This information should be available to us at the same time they are provided to the contractor (TRW) to allow for sufficient time and proper implementation.
Filing Peaks
Merrill's experience as a service agent allows us to provide services to thousands of registrants, Law firms, and Investment Bankers. We believe it is becoming increasingly difficult to require registrants to file based upon their fiscal year end. This creates mammoth filing peaks 5 times a year when everyone is racing to get their disclosure documents completed and filed timely or risk great penalties. This problem will be significantly exaggerated as the size of the filings increases with mandatory HTML, graphics, and unofficial PDF filings, stressing both network bandwidth and internal processing systems. We believe the SEC and the filing community would be better served to split the registrants into filing groups and only require a certain number of companies to file each month. Currently more than 60% of all registrants have disclosure documents all due on the same day creating tremendous peaks for all service agents. With this plan, the filing peaks would not go away, they would simply be spread out causing less stress on the SEC's system and staff, and more time for service agents to support the registrants.
Merrill Corporation continues to be an enthusiastic proponent of EDGAR modernization (EDGAR II) and we believe that the volume of filers using the new HTML format will accelerate in the next few months. We also believe that once a filer experiences the improved value of HTML, they will have no reason to return to ASCII. Our current market experience supports this belief.
Thank you for giving us an opportunity to comment on the SEC proposed EDGAR modernization rules. We hope that our recommendations will provide enough feedback for enhancements to the current system and rules. We believe the registrants and the investors will find the modernized EDGAR system easier to use as well as adding value to the disclosure documents.
Sincerely,
Kris Wiklund
EDGAR Advantage Operations Manager
Merrill Corporation
kris.wiklund@merrillcorp.com
John Stolle
Vice President of Technology
Financial Document Services
Merrill Corporation
john.stolle@merrillcorp.com