September 22, 1993
TO: SEC RULES COMMITTEE NO. 81-93
STATE LIAISON COMMITTEE NO. 41-93
UNIT INVESTMENT TRUST COMMITTEE NO. 45-93
RE: UPDATE ON NASAA ELECTRONIC FILING SYSTEM
__________________________________________________________
As you know, for the past several years, the Institute has been working
with the North American Securities Administrators Association ("NASAA") and
various NASAA committees to develop a state electronic filing system, the
Securities Registration Depository ("SRD"). As currently proposed, the SRD will
accept documents filed electronically via the Securities and Exchange
Commission’s EDGAR system (and designated by the filer for state distribution)
as well as certain "state only" documents (e.g., individual state sales reports)
transmitted directly by the filer. The SRD will be an official archive of state-
filed material and will forward materials to the designated state agencies upon
their request. In addition, the SRD will collect, verify and transfer all
registration and exemption fees payable to the states.
In August, the Institute met with NASAA to discuss the status of the SRD.
The following summarizes the major issues discussed at this meeting:
1. Current Timetable for SRD
Earlier this year, NASAA conducted a Vendor Bidder’s Conference to provide
potential vendors with the Business Plan for the SRD and to address specific
questions regarding the project. After consideration of the bids submitted by
the potential vendors, NASAA selected General Electric Information Services
("GEIS") to prepare a Functional Specification Document ("FSD") to detail how the
SRD will operate functionally. In addition, the FSD will set forth the type of
information which may be filed on the SRD and the manner such information will
be retrieved by various users of the SRD. According to NASAA, it is anticipated
that a draft FSD will be presented to members of NASAA at the NASAA Fall
Conference later this month. If approved by members of NASAA, public comment on
the FSD will be solicited until the end of the year. After conclusion of the
public comment period, NASAA will begin developing a pilot SRD.
It is contemplated that the pilot SRD will commence operations by the first
quarter of 1994 and will last for approximately six months. Initially, the pilot
program will involve payment of registration fees only and thereafter will be
expanded to accept securities registration filings. It is our understanding that
NASAA expects issuers to pay to participate in the pilot program. In addition,
issuers participating in the pilot program will be required to submit their
securities registration filings electronically as well as in paper format to the
pilot states. NASAA has asked the states represented on the NASAA Technology and
Technology Advisory Committees (California, Connecticut, Georgia, Missouri, Ohio,
Oklahoma, Texas, Washington, Wisconsin), as well as certain other states
(Arizona, Massachusetts, New Mexico), to participate in the pilot program.
It is the Institute’s understanding that issuers may be assessed a fee for
participating in the pilot program. The Institute has offered to work with NASAA
to identify a variety of investment companies to participate in the pilot
program.
2. Participation on the SRD
Participation by securities issuers on the SRD is expected to be voluntary.
Because it is voluntary, issuers may elect not to use the SRD if the services
provided, or the costs of using the SRD, are unacceptable. Issuers desiring to
file on the SRD will be required to enter into an agreement with NASAA-SRD. The
Institute assumes that the agreement will set forth, in detail, the covenants and
warranties related to filing on the SRD. At a minimum, we believe the agreement
should address whether a filing made on the SRD constitutes a timely filing to
the states and whether uch a filing fulfills the document delivery requirements
for each state.
In addition, we believe the agreement should also address whether
information filed on the SRD will be deemed confidential or whether all states
will have access to all information filed. During our meeting, NASAA initially
indicated that (1) information filed on the SRD would be secure for each issuer,
(2) a state would have access to and only receive information relating to that
particular state, and (3) comments would not be publicly available. However,
later in the course of the meeting, NASAA indicated that upon request any
information filed with the SRD would be available to any state and that NASAA
will be developing two new forms (an informational filing form and request for
access form) to accommodate these state requests. The Institute strongly
suggested that guidelines be drafted (for possible inclusion in the agreement)
as to when information may be released by the SRD to the states and what notice
an issuer will have of the request for information. NASAA has not yet determined
the appropriate entity at NASAA that will be responsible for drafting this
agreement and it is unclear what provisions will be included in the agreement or
when a draft agreement would be available for review and comment.
3. Cost of Using SRD
NASAA recognizes that in order to attract issuers to use the SRD, the cost
to use the SRD must be equal to or less than the costs currently associated with
registering securities. NASAA is considering a variety of fee payment systems
to use the SRD. One method would require payment of a maintenance fee for each
registration of an issuer. Thus, for example, a mutual fund would pay a
maintenance fee for each fund registered in the states which would cover all
filings made during a particular time period. Another alternative would be to
assess a fee on a per offering or per filing basis.
While NASAA has stated that the SRD hopes to save issuers half of the costs
currently incurred in filing offerings, at this time, NASAA has not yet
determined specific cost estimates for using the SRD. However, with respect to
states utilizing the SRD, additional computer resources will be needed to ensure
the timely receipt and processing of information through the SRD and NASAA has
recently indicated that states will have to bear the cost of obtaining the
necessary equipment associated with using the system.
* * *
In addition to meeting with NASAA, the Institute has also met with other
interested parties to discuss policy concerns associated with the design and
implementation of the SRD. As a result of these discussions, the Institute sent
a letter to NASAA expressing the concerns raised at these meetings. A copy of
this letter is attached.
The Institute will be forming an SRD Technology Task Force to analyze the
operational and technical specifications of the SRD and to formulate comments on
the Functional Specification Document. In addition, we will also be forming an
SRD Policy Task Force to review the policy issues associated with the SRD, in
particular, confidentiality of information filed on the SRD, in order to submit
additional comments to NASAA. Please contact me at (202) 955-8432 if you would
like to participate on either of these task forces.
3Tamara K. Cain
Assistant Counsel
Attachment