Institute Files Comment Letter on Modernization of SEC's Edgar System

Washington, DC, April 19, 1999 - The Securities and Exchange Commission recently announced proposed rule changes to modernize its Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system. EDGAR is the means by which the SEC electronically receives from filers and disseminates on its website documents required to be filed under the Investment Company Act, among others. When programming for the new system is completed, EDGAR will be able to accept filings submitted in HyperText Markup Language (HTML), as well as the current ASCII format. Also, filers will have the option of accompanying their filings with unofficial copies in Portable Document Format (PDF). In addition, the Commission has proposed to amend certain rules and adopt new rules to accommodate modernization of the EDGAR system. The Institute's comment letter on EDGAR modernization and the related rule amendments is summarized below.

EDGAR Modernization
The Institute's comment letter supports the change from ASCII to HTML. HTML will enable filers to improve the appearance of their documents filed with the SEC through the addition of varied fonts, graphics, and other features which are not available in the current ASCII-based system. The Institute's letter recommends a two-year transition period during which the EDGAR system would accept both ASCII and HTML formats. This transition period will enable filers to implement requisite systems changes and staff training in an orderly manner.

The Institute's comment letter supports the ability of filers to include, at their option, an unofficial PDF version of their official HTML filing. Many ICI member firms currently use PDF to display fund disclosure documents on their Internet websites. The Institute's letter expresses concern with the additional filing volume attributable to PDF filings, and recommends that the SEC ensure that the EDGAR system has sufficient capacity to accept registrants' filings in a timely manner as the Commission moves forward with EDGAR modernization.

Rule Amendments
Proposed Rule 105 would initially prohibit electronic filers from including in HTML documents hypertext links to sites or documents outside the HTML document. The Institute's letter recommends that the Commission consider permitting filers to include hypertext links from EDGAR filings to other documents or websites in the future. Hypertext links would enhance filer ability to present information and provide greater public access to valuable information. The Institute's letter recommends that the Commission consider following a similar approach to liability for hyperlinked material as it follows for "attachments" to paper filings. For example, paper prospectuses filed with the Commission may attach a document (e.g., a prospectus "wrapper"), which is not considered part of the prospectus for liability purposes under the 1933 Act. Similarly, in the Internet context, a fund could attach a document to its online prospectus via a hyperlink, whereby a user is led to the document by a clearly delineated box, set apart in the prospectus, followed by a buffer page which alerts the user that he is leaving the prospectus and entering a third-party site.