SEC wants to replace Edgar with an updated system
On the Money
From the December 5, 2008 print edition
Ralph Waldo Emerson once said, “Can anybody remember when the times were not hard and money not scarce?” That time certainly isn’t today. Money is scarcer than ever, and it seems every new financial decision is harder than the last.
In the face of difficult decisions, it’s natural to search for additional and more meaningful information. Good decisions flow from good, truthful and complete information. For investors, the search for good information begins with the Securities and Exchange Commission.
Most individual investors access company information using third-party services, such as Yahoo Finance, Bloomberg, etc., rather than the SEC’s Edgar system. The Edgar system presents massive amounts of data, but isn’t an effective distiller of information.
Therefore, in June, the SEC announced it eventually would replace Edgar with a new interactive “company file system.” The plan is to improve how it acquires information from public companies, mutual funds, brokers and other regulated entities, and how it makes that information available to investors and the public.
This effort has been named the “21st Century Disclosure Initiative.” Its goal is to modernize the disclosure system, so that information is more useful and transparent to investors, the marketplace and the SEC, while using all the conveniences and efficiencies of modern technology.
The initiative has three phases.
- In the first phase, SEC staffers will prepare a high-level plan to help the SEC make the transition to the company file system. That’s under the guidance of Rutgers University professor Bill Lutz, who teaches English, is an attorney and has written 17 books.Useful information must be easily understood, in plain English. Lutz is already a consultant on plain language to the SEC, and helped prepare the SEC’s “Plain English Handbook.” He’s also the author of “Doublespeak: From Revenue Enhancement to Terminal Living” (1989). This first phase is due to be completed by Dec. 31.
- In the second phase, the SEC will establish a Federal Advisory Committee, which would review the plan and make recommendations to the SEC for implementing it. This phase is to be completed in early 2009.
- In the final, multiyear phase, the SEC will consider and begin acting on the advisory committee’s recommendations. The public will be invited to make comments.
The SEC hopes the study will be a fundamental rethinking of financial disclosure, with emphasis on investors’ perspective. Another purpose is to match today’s information technology capabilities with investors’ needs and the SEC’s regulatory aims.
The study will include a review of all SEC forms (there are at least 160 in use today), with a special focus on redundancy.
The study also will focus on how to get the information to investors more quickly, and how to enable the investor to compare data that’s filed with the SEC.
The company file system is at the heart of the 21st Century Disclosure Initiative. The SEC hopes it would be dynamic, accessible, easier to use than Edgar and of high quality, enabling the SEC to better fulfill its mission of protecting investors, maintaining orderly markets and facilitating the formation of capital.
The system would collect core information about an entity in a central and logically organized interactive data file. Companies would supplement that information with the same periodic and transactional information that’s currently required by SEC disclosure regulations.
It’s hoped the system would provide enormous benefits because it could save time, costs and confusion for filers by removing complexity and redundancy. Furthermore, all investors would enjoy improved real-time access to the most current information about a company or fund.
The SEC has invited public comment. To participate, send an email to DisclosureInitiative@sec.gov; call 202-551-4144; or send mail to 21st Century Disclosure Initiative, Mail Stop 3561, 100 F St. NE, Washington, D.C. 20549.
The general website for the 21st Century Disclosure Initiative is www.sec.gov/DisclosureInitiative.
Furthermore, the SEC has requested formal comments on the subjects affected by the 21st Century Disclosure Initiative. The first “Roundtable for Discussion” was held Oct. 8.
Visit http://www.sec.gov/rules/other.shtml to submit comments on this or any other SEC activity.
© C. Stephen Guyer for American City Business Journals Inc. All rights reserved.