IN THE MATTER OF:
File No: SEC-0895 EDGAR TECHNOLOGY CONFERENCE
Obtained Through FOIA Request No. 98-2181
Pages: 1 through 271
Place: Washington, D.C.
Date: August 14, 1995
Monday, August 14, 1995
Conference Room A
400 New Jersey Avenue, N.W.
The above-entitled matter came on for hearing, pursuant to notice,
at 9:05 a.m.
ARTHUR LEVITT, Chairman, United States Securities and Exchange Commission
CONGRESSMAN DANIEL FRISA
MICHAEL BARTELL, Associate Executive Director, Office of Information Technology
STEVEN M. H. WALLMAN, Commissioner United States Securities and Exchange Commission
CHARLES WOODS, Project Manager, Office of Information Technology
GEORGE POSPOLITA, Special Assistant to the Director, Office of Information Technology
COMMISSIONER WALLMAN: Assuming for the moment that the Commission retains
its role in determining what disclosures are needed and how the disclosure
is to be formatted or perhaps even do more in terms of
insuring that formats are comparable so that there is easier comparability
across companies, what do people think about the issue of
the Commission's role in terms of the dissemination and
distribution of the information and how it should be maintained?
[Jamie Love rushes the microphone.]
Let me get a comment from the back.
MR LOVE: First, my name is Jamie Love. I work for a group called
Taxpayer Assets Project.
COMMISSIONER WALLMAN: I am sorry. I have been asked for
purposes of the audiotape for everybody to identify themselves
from the audience in terms of their name and their company.
MR. LOVE: It is a non-profit organization. We are a group that
has been engaged in monitoring the way government property,
including government information broader public access to
government information, including the SEC EDGAR database. We
have been active in this in the past.
<clip description="General Comments About Government">
The SEC dissemination system that was done by New York University
and Internet Multi-Casting [sic] Service was a really huge success
and really widely received on the Internet. It brought all
kinds of new people into the system to appreciate the work of
the Commissionjournalists, citizen groups, individual
investors, episodic users, high school students, college students,
a whole range of people that were not normally even aware of what
the Commission was doing.
It has really given the Commission a lot of goodwill in the community,
and it has, I think, enhanced the mission of the agency,
which is to have more capital markets, but also to give more
accountability in general to the public in a wide range of
The fact that the SEC staff, the data processing staff, never
embraced that project, never offered to provide ongoing funding
for it, has continued to associate that with the objectives
of a small handful of commercial data vendors, has been very distressing
I can say from our experience in the legal market that the
important value added sector that is left out when you have
poor government management on records are the most innovative
companies. The companies that cannot enter, for example, the
legal market are the companies that provide artificial
intelligence front ends, that provide novel new ways of searching
documents and combining information.
Those are the very things that are happening right now in the SEC
market because New York University and IMS have put the
basic data out there and put the public domain thing out
essentially for free. That allows and that has allowed all
kinds of firms to create all kinds of innovative products.
I would also like to express in closing some objections to the
way all these panels were constituted. There are very few
people other than Wall Street or financial concerns that are
represented on these panels, even though a lot of people care
what happens to the data and care what happens to the agency.
Rather than having a graduate student from New York University
who worked on the dissemination project, you should have had some
of the principals like Mr. Campell or Carl Malamud on one
of the panels so that you could have heard some of the most
articulate and experienced spokesmen on this.
COMMISSIONER WALLMAN: Thank you. Just in response to
your last comment, a number of the people you referenced
were invited. Some of them could not make it. We did
in fact ask them to come. We had the same thoughts as you
did, so thank you very much for that.
GREG SMITH, PRESIDENT, INDEPTH DATA: Why should I
have to pay $250,000 or $500,000 a year and you cross subsidize the
commercial market for free? I mean, if it is going to be free for this
New York University project or subsidized by the government,
where is my subsidy?
MR. LOVE: I think that the $250,000 that you referred to or
the $500,000 it probably actually costs to disseminate the
filings for free on the Internet you have to compare to the
$60 million plus which was spent on the full Disclosure
system to actually get the data into the system in
the first place, which is more than just the cost of the computer
stuff. It is the cost of all the enforcement personnel and
MR. SMITH: That is not the question. My question is why should
I pay $250,000? Most of your users on the Internet, am I
correct, or a preponderance of the hits on the Internet
web site are actually from law firms and other commercial users?
MR. LOVE: That is not true.
MR. SMITH: They are the majority of the hits, are
[Malamud rushes the microphones.]
MR. MALAMUD: I run that system. That is not true.
MR. SMITH: Is it not? I mean, every New York law firm
that I know is an active user of that web site.
MR. MALAMUD: By the way, my name if Carl Malamud. I am
president of the Internet Multi-Casting [sic] Service, and
I was not invited to participate today.
In fact, the grduate student, Mr. Ginsburg, was not
invited. He was just put on the panel without his knowledge,
which is really like if I put your secretary on a panel because she
happened to be in the audience.
As far as the users, however, we do have commercial users.
There is no doubt about it. I think, by the way, you should
not pay $250,000. I think the SEC, for $250,000, could
put the entire database on line for everybody.
MR. SMITH: Including
MR. MALAMUD: That is it. Final cost for you, for everybody.
Many of our users, approximately a third, are from the
educational communities. That is in the summer. It goes
up during the year. About a third are from non-profit
organizations and international. We get a lot of working
engineers and computer companies and places like that that
access the information.
What we found are the people that buy your data are
typically not using our system as a replacement. The reason
is because they want more timely information.
What we have done, if you talk to the president of
Disclosure, if you talk to Moody's, of you talk to R.R.
Donnelly Financialall three of those support our
effortsis that the market for your
information has actually gone up because the consuming
public out there is getting more educated. They get out
of school. They want the documents right now. They
want the Japanese document. They want the 1970
document. They want you to tell them what is in it.
We have acted very much as a library. You are a book store,
and we teach people how to read. Then they buy your
COMMISSIONER WALLMAN: Any other comments, panelists?
MR. LOVE: I would like to respond to the gentleman's
question about the $250,000 fee.
COMMISSIONER WALLMAN: Let me just get some
more panelists to respond to some of thethings that are
already on the table.
MR. LOVE: Sure.
HARVEY NEVILLE, PROJECTS COORDINATOR, DAVIS, POLK & WARDWELL:
This is really directed back to Carl or Jamie. I personally as
a user of the information do not see a contradiction between
and the necessity to continue what you have done and to
make the information that the SEC pulls together available
to the public essentially for free. Anyone who has web
access or access to a service that has that should have
the ability to look at it as your service does.
Is there a contradiction, however, between that and the
ability of any other reseller of information to come in,
pick up the information and resell as they want?
MR. MALAMUD: Absolutely not. The basic data is cheap.
It used to be value added to take a tape and put it on
disk and make it available. The companies that did that value
added made a lot of money and they should make a lot of
MR. NEVILLE: Let me ask a question.
MR. MALAMUD: Let me finish.
MR. NEVILLE: Okay.
MR. MALAMUD: Value added today does not consist of
putting a web server up. Everybody can do a web server.
I mean, the Department of Interior has one, U.S. Geolological
Surveys has one, Newt Gingrich insured that the Thomas
system be on line. That is not rocket science.
There is a tremendous market for extracting value out
of this information, and I believe by putting the base
data out there we are going to encourage a retail information
industry. Again, that is why companies like R.R. Donnelly
Financial support out efforts because it is going to make
them more money in the long term.
MR. NEVILLE: If the SEC allowed this free access, assuming
it gets a web site and puts all this information on that it
already has an I can go into it, you can go into it and anyone
all over the world can get into that.
If at the same time Indepth Data or if Disclosure wants
to buy the entire database instantaneously, should
they be charged for that?
MR. MALAMUD: If there is an incremental
cost that is substantial for doing that, yes, but
again I think that the idea of distributing
raw data on the Internet is not rocket science. It
is cheap. It costs us maybe $175,000 a year to
do that if we are not paying $112,000 on top for the
data. Even a real time feed is not that big a deal.
A ten megabyte [sic] Internet link today is $2,000
a month. That's it. I mean, this is nothing compared
to the millions of dollars that the SEC pays to buy its
own data back to get the Lexus/Nexus [sic] search
capability. It is just a trivial drop in the bucket
to do that.
The base data is easy to put on line. The value
added is a very different story, and there is going to
be an incredible number of vendors out there that figure
out how to take this raw information, add value to it
and charge for it. That is a good thing to do.
That is a very good thing, but the question is
MR. NEVILLE: I would think, though, that the SEC or
we as the people who help subsidize the SEC's operation,
along with the filers that prepare all the filings,
should get some value back for what it has put in to
collect the information and make it accessible.
MR. MALAMUD: I think the value of a public disclosure
system is an informed citizenry. It is peopleyou know,
graduate studentsthat go off to get a job and read the annual
report or people that are about to invest. They go off and
read the documents.
These are the people that want to read the base documents.
It is not that difficult a thing to provide. It
does not conflict with the commercial market, and it
serves the fundamental public purpose of the SEC
laws, which is public disclosure. That is the reason we
MR. LOVE: I would say why spend over $60 million
running the full Disclosure program and then have a big
barrier so very few people can get access to the fruits
of the full Disclosure program.
Maybe the purpose of running the free dissemination thing is
so you leverage the number of people that get access to
the filings by a thousand-fold. I mean, it is the biggest
bang for the buck that anybody in your agency can come up
with to make that program actually get out to the
people of the United States.
MR. EMEN: I think one of the major disparities in the
existing Disclosure system is the fact that the small
retail investor, traditionally while there is a theoretical
even handed access to information, is not able to
get that information nearly as easily or as readily as
the larger, sophisticated institutions. One of
the panel members alluded to that earlier.
To the extend that free Internet access would enable
smaller investors to get information more quickly and
compete more efficiently, I think that is something
that ought to be achieved.
MR. LOVE: When Newt Gingrich considered putting the
THOMAS system on line, everybody said that was opposing this
that only lobbyists wanted to read copies of legislation
pending before Congress and that is was not necessary.
It would just benefit big corporations. When they put
the data on line, there was a huge new group of people
which got access to bills that started to
participate in the political process.
That is what happened with the Internet Multi-Casting [sic]
Service when they put on the SEC data. Instead of a
handful of people that had access to the high priced
services, there was a whole new class of people
which had access to SEC information. That was a
positive thing that you all should be supporting,
not trying to stop.
MR. MALAMUD: We have done over 3,000,000 documents
to the American public in the last 19 months, and I
think what is important is you alluded to Newt
Gingrich. This is not a right verus left issue.
If you look at the Paperwork Reduction Act which takes
effect October 1, that was a key part of the
Contract with America. It was also supported by
the Clinton Administration wholeheartedly, and there
were no dissenting votes in Congress. That Act says
that timely and equitable access to information is an
obligation of every agency, and it specifically lists
the SEC as one of those agencies.
COMMISSIONER WALLMAN: Let me break in here.
I do not know if there is a misunderstanding or
a misperception of what it is that we are
intending to do.
Part of the reason I wanted this conference, part of the
reason that I thought that was important to get public
feedback on but also to open up the whole issue of how
best to have the EDGAR system established for the future, was the notion
very strongly felt and believed in by me that public access
to this information is what in part the Commission is
If we cannot insure that over time we have a broad based
distribution of information at low cost or free
to the investing public, we lose a great deal of what it
is that the Commission was established to do 60 years ago.
In order for the markets to be able to understand how best
to set prices, in order for issuers to raise capital over
the long term, in order for people to continue to invest their
monies in the market, they need to be able to be insured that there
is real time information that is useful and usable to them.
My view is that over time, that is going to be available
through electronic means more than it is through paper.
My view is that through electronic means we will be able
to have much better information provided to people. It will
be much more analytically sound. It will be much more capable
of being analyzed more easily.
I think we have a fundamental agreement with regard to
most of the issues that are being presented by you all at least
at the Commission level. There may be others who wonder
about the fairness of how that system will work or who subsidizes
who or whether or not this is the appropriate place for monies
of the government to be spent or other kinds of things.
There are certainly valid choices that people can make
as to whether or not the government should be spending
money in order to insure that there is free information of
this type or whether or not the government should be spending
money for other kinds of things, given in fact that the
government's dollars do not grow on trees.
There are other people who will question whether or not in
fact the way that we present information or make it available
is fair in terms of who gets information first or how the feed
is going to be set up first or who gets to determine what kind
of information gets put into the database.
Others would like us to mandate certain kinds of information so
it is easier to do analytics, but that puts the cost back on
the preparers. Others would prefer that we do not do anything
with regard to that and leave it to value added resellers to
try to figure out how to best compare and take information and
There are lots of questions that transcend the easy, simple
answer of we want to make sure the information is
available simply, easily and cheaply. I do not think there
should be any misunderstanding that at least at the Commission
level that my goal, our goal and the Chairman's goal as well is
clearly to insure that there is access to this information as best
we can real time, as best we can low cost or free, as best we can to
the investing public as a whole. That is the ultimate goal.
The question is how do we get there. How do we get there in
a way that makes sense so that we are not taking dollars
that we should be using for other kinds of programs and
spending it on things here?
Maybe the technology has gotten to the point where it is so
inexpensive to do that appropriately now that it is not
an issue. The question then is do we get the appropriate
value added resellers? What do we do with people that
are currently in the industry, and how do we insure that the
information is not going to be disrupted?
There are lots of other questions that go with it. Who should
run the system? Should we be the people who have to maintain
the computer system? If we have to maintain the computer
system, is the government really the best place for a
computer system like this to be maintained? If we are the
best place, who do we get to actually do it?
The government is not necessarily the best body to actually
maintain the computer system. Do we privatize that? There
are lots of questions that go with this.
It may be best that we move away from sort of the misunderstanding
as to whether or not the government or the Commission is
attempting to put hurdles in the path of utilizing this
information. The answer is we are not. The clear answer
is we are trying to reduce those hurdles to the level of
zero if we can find an appropriate way to get there.
We should not misunderstand that there are not also
balances with regard to all of this. Whenever we get something
down so there is zero cost for people to be able to use it,
that money is coming from somewhere. Nothing is free. Somebody
is going to end up paying for that. We have to decide how is the
best way to allocate our resources as well.
I do not mean to cut off the conversation, but
it just seemed that we were getting into a set of premises that
simply were not true or an assumption that the Commission
was attempting to do something or taking a particular position
that simply was not correct.
MR. MALAMUD: I think your staff, and this is my last comment,
has very much opposed this EDGAR dissemination project from
the start and actively opposed it and has spoken against it
in the media on a regular basis.
The MIS staff from the SEC has never come in, never attended
an advisory group meeting, never learned from our pilot
project. I think it is a real shame that over a 19-month
period we cannot at least learn from the technology and reject
it based on knowledge instead of on ignorance.
The SEC does not even have a domain name. There is no SEC.GOV.
That is how adamantly opposed they are to this technology.
COMMISSIONER WALLMAN: Let me say that I thinkat
least a number of the points that you make are ones that
are well taken. There are people at the Commission who
would like some of those things to move forward.
I think that we have an opportunity to learn. I think
that we have an opportunity to move into a
different frontier and a different way of thinking with
regard to a number of these issues.
I think the staff's yeoman effort of setting up this conference,
getting it all together, inviting people to come who would
have disparate views, putting everything back on the table
and having an open mind I think has really been in evidence
over the number of months now that I have been working with
the staff on this.
I would suggest that whatever positions may have been taken
in the past, either distant or not to distant, I think
people are really rethinking a lot of their underlying
assumptions. I think we appreciate the comments and
the insights that we all have.
I think that you need to give the benefit of the doubt to
people who have spent a long time trying to put this system
together and trying to make it work and to understand that
there is a real desire for trying to make the system better
at this point, understanding new opportunities, getting in
place changes that will make it better for everybody.
My only caveat is that we all approach this with the idea
that there is an open door here and that people are willing
to take the steps to walk through into a new place. We
need to I think lose some of the baggage of the past and
see where we can go in the future. I think we will be much more
MR. LYTELL: David Lytell. I am in the Office of Science and
Technology Policy at the White House, and it can be safely
assumed that I do not represent my employer for this
I run the White House service on the Internet. While I am
pleased to see that you are grappling with the 1997-1998 era
questions such as authentication and the format of filing, I
really do think that there is something to be said for the
people who are arguing that the 1995 era problem, today's
present problem, is not as difficult as you might perceive
it to be.
It seems to me that if you were to take the value
that the American economy has put into having all of these
expensive lawyers and bankers here today, you probably have as
much money here in the room spent as it would cost for the
SEC to be able to do its own electronic distribution over
the Internet. It is not that terribly expensive.
<clip description="The Conference Resumes">
[Malamud and Love leave the room. A sigh of relief
is heard. That evening Chairman Levitt calls the
Associated Press and says he is absolutely committed
to keeping the SEC project alive.]