1 SEC Release No. IC-24319 (February 25, 2000).
[11708]
March 8, 2000
TO: SEC RULES COMMITTEE No. 35-00
TECHNOLOGY TASK FORCE
RE: SEC PROPOSES RULE CHANGES TO FACILITATE EDGAR MODERNIZATION
______________________________________________________________________________
The SEC has proposed rule amendments to facilitate further modernization of the Electronic
Data Gathering, Analysis, and Retrieval system. The next stage of EDGAR modernization, to be
implemented in late May of this year, will enable the following new features: inclusion of graphic and
image files; expanded use of hyperlinks; and the addition of the Internet, and removal of diskettes, as a
means of transmitting filings to the EDGAR system. In addition, the Commission has proposed to
eliminate the requirement for filers to submit Financial Data Schedules. The attached release describes
the modernization and proposed changes to certain rules and filing requirements to accommodate the
system changes.1
Comments on the proposed rule changes must be filed by April 3. If there are issues you would
like the Institute to consider addressing in its comment letter, please call the undersigned (202/326-5851)
or e-mail your comments to smith@ici.org by March 24.
HTML/PDF Environment
Since its inception, the EDGAR system has accepted filings in ASCII format. In June of 1999,
the SEC began allowing filers to submit documents to EDGAR in HyperText Markup Language
(HTML) format and to accompany their required filings with optional unofficial copies in Portable
Document Format (PDF). In the attached release, the SEC indicates that it plans to continue to move
forward with the HTML/PDF environment. Unlike ASCII documents, HTML and PDF documents
have the potential to include graphics, varied fonts, and other visual displays.
The SEC is not currently proposing to eliminate ASCII format filings. However, the
Commission may do so in the future, and they encourage filers to use the HTML format and gain
experience with it. The attached release requests comment on how soon filers will be able to submit
most or all of their filings in HTML format, and whether the SEC should exclude any specific category
of documents (such as exhibits) from the HTML format requirement.
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Currently, filers must use a SEC specified set of HTML tags in their HTML filings. The SEC
proposes to expand the set of permissible HTML tags to enable graphics and certain hypertext links.
The permissible HTML tags will enable expanded formatting capability, while eliminating active content
and certain classes of hypertext links. The expanded tag set is included in the attached release at
Appendix A. The release indicates that EDGAR will continue to utilize HTML version 3.2, and that
EDGAR will move to HTML 4.0 in a future system release.
Graphic and Image Material
Currently EDGAR does not accept graphic or image material in HTML documents. In the
attached release, the SEC proposes to permit graphic and image material in HTML filings. The SEC
plans to release a modernized version of EDGARLink and EDGAR Release 7.0 in order to support
graphic and image material in HTML documents. However, the SEC proposes to preclude filers from
using graphic or image material to submit information such as text or tables, so that system users may
search and/or download this information in spreadsheet form. Instead, filers will be required to submit
such information as text in an ASCII document, or as text or an HTML table in an HTML document.
In the attached release, the SEC expresses concern about the potential size of data files that
contain graphic and image material. Graphic and image files may create data storage problems for the
SEC, and may cause system users to encounter difficulty in downloading and viewing files. The SEC
requests comment on the circumstances and manner in which it might limit file size and the type of
graphic and image materials.
The release indicates that the SEC considered three approaches to graphics: i) making their use
strictly optional, ii) requiring graphics in HTML documents whenever SEC rules or forms require
information to be in graphic form, or iii) requiring graphics in HTML documents wherever the
documents distributed to security holders or potential investors contain graphics. The Commission is
proposing the second alternative, and requests comment on whether graphics should be completely
optional, or alternatively, whether graphics should be required whenever the document distributed to
shareholders contains graphics.
Limitation on Hypertext Links
Currently, the EDGAR system does not permit hypertext links from HTML documents to
external web sites. Similarly, the system does not permit hypertext links from one HTML document to
any other document (including exhibits), regardless of whether the document is part of the same filing.
Hypertext links to different sections within a single HTML document are permitted.
The SEC proposes to amend Rule 105 of Regulation S-T to allow hypertext links to other
documents within the same filing (i.e., exhibits). Hypertext links to documents contained in other official
filings in the EDGAR database would also be permitted. For example, filers could link from a particular
document to other previously filed documents that are incorporated by reference. Links to documents
outside the EDGAR database would be prohibited, including links to web sites.
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Liability for Hypertext Links
Currently, the SEC’s rules provide that, if a filer includes impermissible hyperlinks in a filing, the
linked material will not become part of the filing for purposes of determining whether the disclosure
requirements are satisfied. The linked material will, however, be subject to the civil liability and antifraud
provisions of the federal securities laws. In the attached release, the SEC proposes to amend Rule 105
so that this position applies, whether or not the hyperlink is permitted by Commission rules.
The release indicates that filers should not be able to use hyperlinks to satisfy the disclosure
requirements of rules or forms because readers of the filing might not be able to understand the content
of the filing without accessing multiple hyperlinks. Also, they would not be able to print the filing as an
integrated whole. Further, the release indicates that it is appropriate for filers to assume liability for
hyperlinked material as if it were part of the filing. In the context of an official filing, members of the
public accessing the SEC’s web site will reasonably understand the inclusion of a hyperlink to mean that
the filer has adopted the linked material as its own. The use of hyperlinks would remain voluntary.
The release asks commenters to address the proposed treatment of hyperlinks and whether there
is any need to modify either the disclosure or liability provisions. The release also notes that the
proposals address the status of hyperlinks in EDGAR filings only, and not in other contexts, such as
hyperlinks in documents on filers’ own web sites. The release indicates that the Commission is
considering issuing separate guidance that may address some of these issues. The release also requests
comment on whether the SEC should permit external hypertext links to other documents or web sites.
Method of Electronic Transmission
Currently, most electronic filers submit documents through direct transmission using a dial-up
modem process. Filers may also submit documents on magnetic tape or diskette. EDGAR Release 7.0
will enable internet based filing through an internet service provider. The SEC will provide security
through Secure Socket Layer (i.e., encrypted transmissions) and certificates. The Commission will not
require, but will permit optional client side certificates.
The Commission proposes to eliminate magnetic tape and diskette as transmission options and
add magnetic cartridges. The release requests comment on whether filers support these changes in
transmission options.
Modernized EDGARLink
As part of the planned modernization, the SEC will release a new version of EDGARLink. The
new version of EDGARLink is specifically designed to work under Windows based operating system
environments. Filers will be required to use the new EDGARLink if they wish to include graphics and
hyperlinks in their HTML documents.
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The release indicates that the existing DOS-based EDGARLink will run concurrently with the
new Windows based version for approximately six months. The Commission requests comment on
whether discontinuing support for the DOS-based version of EDGARLink after six months will be
burdensome to filers.
Financial Data Schedules
The SEC proposes to eliminate the requirement to submit a financial data schedule as an exhibit
to filings. However, the release notes that, with respect to investment companies, the data may be
valuable in connection with information collected in Form N-SAR. The release requests comment on
whether financial data schedules should be retained for Form N-SAR only, and ultimately, incorporated
into the Form itself.
Future EDGAR Enhancements
The release notes that the Commission is considering requiring additional filing types to be filed
electronically on EDGAR. For example, the release requests comment on whether investment
companies should be required to file their exemptive applications electronically.
Other enhancements under consideration would better enable users of the EDGAR system to
identify information relating to a particular portfolio within an investment company when they access
EDGAR through the SEC’s web site. Filings by open-end investment companies frequently contain
information relating to several funds or portfolios. The funds or portfolios may be organized as series
of the investment company registrant. For example, a post-effective amendment to a registration
statement may contain many separate prospectuses and statements of additional information, each
relating to a separate fund or portfolio within the company.
Currently, HTML submissions may contain only one HTML file. This limitation may make it
difficult to manage or assemble filings that contain multiple prospectuses. Further, it may be difficult to
locate information relating to a particular portfolio within a filing. In the attached release, the SEC
requests comment on whether it should permit investment companies to include multiple HTML files in
their filings. The SEC also requests comment on the use of extensible markup language (XML) tagging
to identify individual portfolios or classes within an investment company filing. Specifically, should the
Commission allow or require investment company filers to include multiple documents within a filing
(each corresponding to a separate HTML file) and/or use XML tagging to identify individual portfolios
or classes.
Gregory M. Smith
Director – Operations/
Compliance & Fund Accounting
Attachment