Chairman & CEO
Finnegan O'Malley & Company Inc.
417 Montgomery Street - 6th Floor
San Francisco, CA 94104
April 3, 2000
Jonathan G. Katz
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549-0609
Re: Rulemaking for EDGAR Modernization - File No. S7-05-00
Dear Mr. Katz:
I submit this letter in response to the Commission's request for comments concerning your current proposed rulemaking for EDGAR modernization.
Who We Are
Finnegan O'Malley & Company Inc. operates the SEC Info Web site (http://www.secinfo.com. Although our site is only one year old, it was recently ranked third (behind the SEC's site and FreeEDGAR's, and ahead of EDGAR Online's) in "SEC Filings" requests by one of the leading Web-traffic monitoring companies.
In addition to being Chairman & CEO, I am the head of software development at Finnegan O'Malley. Prior to founding our company 14 years ago, I spent nine years in investment banking as a generalist in Corporate Finance at E.F. Hutton & Company Inc. and as a software engineer at The First Boston Corporation. (While at E.F. Hutton, I worked directly for John S.R. Shad, who was subsequently Chairman of the SEC when EDGAR was conceived and designed.)
Why We Are Interested in EDGAR Modernization
Our business is at this time 100% related to and dependent upon EDGAR. We are one of the 20-or-so EDGAR Dissemination Service Tier-1 subscribers.
The Context of Our Comments
The comments below are made both from our perspective as an EDGAR-filings disseminator and from my having investment banking experience as a consumer of SEC filings. Our focus and expertise is on the output side of the EDGAR system and not on the input side, since we are neither a filer nor filing agent.
Our comments are organized below in the same order as your "request for comments" document.
I. Modernization of EDGAR
We applaud the SEC in its efforts to improve EDGAR and make it more modern. We welcome the proposed changes and wish the SEC were able to implement them faster.
B. HTML/PDF Environment
Although the current EDGAR modernization contract will not accommodate multi-media, including videos, CD-ROMs and streamed video or audio files that can be played over the Internet, we encourage the SEC to permit these media in the future. It is not technically difficult for disseminators to deal with such media, and all users would benefit by having immediate access to the same materials that are presented to institutional users.
C. Use of HTML
We would like to see the SEC require the use of HTML for filings (or at least for the primary document of the filing) as soon as possible. HTML allows the documents to be more attractive and readable for users (a primary objective), and the HTML tags make the documents more structured than plain ASCII text for disseminators. Word processors now have "File - Save as HTML..." commands that make it just as easy to create HTML files as plain ASCII text.
We agree with the requirement that there must be only one HTML file within each EDGAR document within a filing.
We welcome the expanded use of HTML 3.2 and 4.0 tags.
D. Use of PDF
We do not think the SEC should impose any size limitations on PDF files, since such limitations are arbitrary and artificial. In a relative sense, disk storage space is inexpensive.
E. Graphic and Image Material
We do not think the SEC should impose any size limitations on graphic and image files, since such limitations are arbitrary and artificial. Web browsers download graphics asynchronously.
On requiring graphics, we believe that the SEC should go further than the proposed "middle ground" (requiring graphics in HTML documents only in the limited instances where the rules require graphics). We think the SEC should require graphics in EDGAR filings wherever they are presented in the distributed documents. Graphics are important; if they were not, they would not appear in the distributed documents. There is no technical reason for the filed document to be less complete than the distributed document. Since a financial printer generally produces documents containing graphics, and since the financial printer is most likely also the filing agent, and since the graphics formats have long been standardized, it should not be difficult nor burdensome for the printer/agent to include the same graphics in the HTML documents.
F. Limitation on Hypertext Links
We welcome the intra- and inter-filing document links, as they benefit users. As you can see on our SEC Info site http://www.secinfo.com), we have already created almost a billion such links.
We believe filers should be allowed and encouraged to include hyperlinks to EDGAR filings of other companies. Such linking benefits users who are trying to navigate this huge database.
G. Prohibition Against Electronic Submissions Containing Executable Code
We support the continuation of this prohibition.
H. Method of Electronic Transmission
I. Modernized EDGARLink
J. HTML Standard Tag Set
We recommend that the SEC not permit use of the <STYLE> tag, as its implementation varies widely amongst word processors and browsers. In contrast to your stated goal, this tag minimizes the likelihood of consistent document appearance across different browsers.
K. Financial Data Schedules
We strongly disagree with the elimination of Financial Data Schedules for a number of reasons:
1) Usage statistics on our site show that Exhibit 27 FDSs are being viewed and downloaded into spreadsheets by a lot of users. Although these exhibits are not "pretty", they are very useful.
2) The FDSs enforce consistency in how the financial data is presented, which is extremely useful in financial analysis. We would actually argue for more FDS line items.
3) FDSs are the only place where financial information is tagged by line item within the filings. We have the most advanced EDGAR-document parser on the Web, and our experience has proven to us that it is impossible to parse with any consistency the FDS-like information out of the in-line tables in the documents. The filers do not present this data consistently.
4) Not all users have the same access to "outside data sources" as does the SEC and other financial-industry institutions. Being able to download FDSs into spreadsheets is the only way that all users can access this data conveniently.
5) As your "Paperwork Reduction Act" section indicates, the relative burden on filers of producing the FDSs is really minimal. We believe that the benefits to users far outweigh the costs: 1 hour out of 432 hours for preparing S-1s, 1 hour out of 990 for S-4s, 1 hour out of 430 for 10-Ks, 1 hour out of 34 for 10-Qs, etc. Preparing FDSs looks relatively easy, time-wise.
We believe that the elimination of FDSs would be a serious step backwards by the SEC, and that users would not benefit in any way by this. We believe that the SEC should be going in the opposite direction and require more detailed tagging of financial data, as that would benefit users even more. The elimination of FDSs strikes us as contrary to all the objectives of EDGAR.
L. Possible Future Rulemaking Projects
We believe that users will benefit further as the EDGAR system becomes more comprehensive.
We would like to see the SEC require that all filings listed in Section L be made electronically.
We would like to see the SEC require that all foreign issuers make their filings electronically.
We would like to see the SEC require that all exchanges make their filings electronically, too.
We would like to see the SEC require more tagging, whether SGML, HTML, XML or otherwise, so as to make the documents more manageable. We think the SEC should specify content-tagging standards within the text of the filings. As a starting point, basic document-structure tagging, such as <SECTION Part=II> in 10-Ks or <SECTION Item=5> in 8-Ks, would allow disseminators and users to deal with the content structure of the documents more easily. We would be willing to work with the SEC on a specification in this regard that would work well for disseminators and users.
As stated above, we think that the requirement that there must be only one HTML file within each EDGAR document should continue. If this is a problem for certain filers or users, we think that the optimal solution is one where multiple "primary" document types would be allowed within certain submission types. Document identification within such filings would be made easier by mandating use of the <DESCRIPTION> tag for documents.
II. Rule Amendments in Connection with EDGAR Release 7.0
Rule 302 - Signatures. We would like to see the SEC require that all signatures be preceded by the "/s/" indicator. Many filers already follow this convention.
III. General Request for Comment
We have two further comments:
Other EDGAR Data That Is Not Disseminated
Not all tagged information submitted to EDGAR is disseminated, even though it is not really confidential. For example, the number of shares being registered in a registration is (we believe) provided to the SEC but is not included in the dissemination stream. We would like the SEC to disseminate all such non-confidential information that has already been collected and tagged.
Other information in the EDGAR database tables that is non-confidential should be available upon request to disseminators. For example, we would like to be able to request (and pay for, if need be) the names of the filing agents. To date, we only receive their CIKs.
The SEC Web Site
Every couple of months or so, the SEC Web site seems to have serious problems. For example, as recently as 3/29/0, 195 filings appeared in the dissemination stream on that day but did not show up on the SEC Web site in subsequent days. In this particular instance, the 10-K of American Express Co. for 12/31/99 did not show up at the SEC site following the usual 24-hour delay. (We notified the SEC webmaster and TRW of this.)
To help users in such situations, we would like the SEC to make obvious on your site that disseminators such as ourselves exist and that we all are an alternative way for users to access SEC filings. We would like to see a table in the EDGAR area of the SEC's site that would appear thus (listing all EDGAR Dissemination Service subscribers that request being listed):
Independent subscribers of the SEC's EDGAR Dissemination Service operate the following Web sites. While the SEC does not endorse such sites, this list is provided as a convenience to users who may wish to view SEC filings as provided by such vendors:
Vendor (alphabetically) Web Site
EDGAR Online, Inc. http://www.edgaronline.com
Finnegan O'Malley & Company Inc. http://www.secinfo.com
et al. et al.
While the SEC's site may not have all filings, either because the are old (i.e., 1992-93), deleted, or not available for other technical reasons (i.e., the above-mentioned problem), users may still be able to get archived filings from our site or others if they wish. This would be good for users. (Regardless of users, as paying customers of yours, you should extend us all this courtesy.)
Thank you for this opportunity to express our views.
Very truly yours,
/s/ Fran Finnegan