DATE: April 15, 1999 

TO: Securities and Exchange Commission

450 Fifth Street, N. W.

Washington, D.C. 20549-0609 

ATTN: Jonathan G. Katz, Secretary  

FROM: John Penhollow (

EDGAR Consultant  

SUBJECT: File No. S7-9-99 Release Nos. 33-7653; 34-41150; IC-23735

Proposed Rules for the Modernized EDGAR System 

This letter is in response to the Commission's request for comment on the referenced rule proposal.  

Allowing filers to use either the current ASCII or the new HTML format to create official electronic filings during the HTML implementation period will greatly ease the transition to HTML for both the filing community and the SEC. Many filers will also appreciate the opportunity to attach unofficial copies of their filed documents in Adobe's Portable Document Format (PDF) - especially since graphs and images can not be embedded in an HTML document until after the HTML implementation period.  

However, the overall transition to HTML may be more problematic for filers than the Commission would desire. This is a real possibility because there is no easy way to convert a document in typical word processing or desktop publishing format to HTML using the subset of HTML 3.2 tags that the SEC staff has defined for the initial rollout. In fact, some filers may find that it is more challenging and time consuming to convert a disclosure document to the new HTML format than to the current ASCII format. For example, a filer who prepares his/her disclosure document in Word format and expects to convert it to HTML by using the Microsoft "Save as HTML" command will most likely find that the modernized EDGAR system will not accept the resulting HTML document. As the rule proposal indicates, the SEC staff plans to expand the current HTML 3.2 tag set, but it is not clear whether this expansion will permit a filer to use the option noted above or its logical equivalent after the HTML implementation period ends nexxt year. A filer who wishes to use HTML as opposed to ASCII will likely find it necessary to purchase special software (if and when it is available) or else seek the services of a competent filing agent. This may also slow the conversion from ASCII to HTML.  

The fact that an unofficial copy of an ASCII encoded document may be attached to an EDGAR filing in PDF may also slow the transition to HTML - especially as long as graphs or images can not be imbedded in an HTML document. In the near term filers may simply decide to submit their electronic filings in ASCII format and optionally attach a PDF copy of the official document(s) for the convenience of SEC examiners and the SEC web site users. If this trend develops, many users may even forget that the PDF copy is not an official filing. To minimize this possibility, the Commission should adopt a rule that requires each PDF copy to have a legend on each page indicating that it is not an official copy. This approach would also ensure that a printed copy of any PDF page would also display the warning.  

It may also be necessary to impose a size limitation on PDF documents. However, this decision should be based on whether the SEC has an adequate budget for the electronic storage of both PDF documents and official ASCII and HTML documents in the modernized EDGAR system and the SEC web servers.  

On the subject of potential use of eXtensible Markup Language (XML) in lieu of SGML tagging in the EDGAR submission header, it is not clear what advantage this would give either the SEC or the filer community. This would change if the SEC is planning to define a new front page for all electronic submissions that would include all of the necessary information that is now defined by SGML tags in the submission header. In the future, this information could be marked with XML tags during composition and suppressed on subsequent screen displays and printouts. The same approach could be used to mark other text-based information in the body of the filing such as the lead underwriter or the lead auditor for example. This would allow electronic searches based on these data without destroying the appearance of the document when the necessary XML software is commercially available. A more interesting use of XML in the future would be to tag financial data within the body of the filing and eliminate the use of financiial data schedules. In spite of the potential of XML for both format and content tagging, the Commission should be cautious about moving to XML until commercial authoring and edit tools are in place to facilitate the creation and display of such documents.


A lot of effort has been devoted to improving the security of the EDGARLink-to-EDGAR transmission path in the design of the modernized EDGAR system. The importance of this topic is clear, but security features should always be balanced against the impact such features will have on system users. For example, the proposed use of client side certificates to help ensure non-repudiation of source may lead to some unintended difficulties for new filers. Filers who do not have a client side certificate but who need to file quickly may find acquisition of a security certificate to a significant time consuming exercise - especially if they can not allow their filing agent to obtain the certificate and act on their behalf. On the other hand, the adoption of Secure Socket Layer (SSL) technology for EDGAR and EDGARLink is a good example of how greater transmission security can be achieved without creating potential filer access problems.

On the issue of standard screen size, it would make sense for the SEC to adopt such a standard to facilitate the creation of HTML documents. This will improve the appearance of HTML documents on the screen and in print as the rule proposal suggests. It will also ease filer burden in preparing HTML documents, but it will not achieve the level of improvement that would result from adopting the HTML 4.0 tag set.  

Concerning New Rule 105, the Commission should allow the use of hypertext links between documents in a single submission. This would help SEC reviewers as well as the users of SEC filings. A case may also be made for allowing hypertext links within the EDGAR database. However, this would raise a number of legal issues about the boundaries of the filing and how it might be preserved over time. It is difficult to see how the SEC could ever allow hypertext links to web sites outside of the SEC. 

Concerning Rule 310 of Regulation S-T, a more refined method of marking changed material should be possible with HTML. Adopting a vivid font color for changed material would be useful for screen viewing, but this approach would not be practical for printed output. The classical approach to marking changed material is feasible with HTML and might be more useful. Square brackets could be used to denote new text and strikeouts could be used to denote deleted text. This type of marking would be preferable to using the <R> and </R> tags - especially since changes at the character and word level will be permitted in the modernized EDGAR system.