WILLIAM O'NEIL + CO., INCORPORATED Investment Advisors and Member of NYSE, NASD and SIPC 12655 Beatrice Street Los Angeles, California 90066 April 15, 1999 Jonathan G. Katz Secretary SECURITIES AND EXCHANGE COMMISSION 450 Fifth Street, N.W. Washington, D.C. 20549-0609 File No. S7-9-99 Mr. Katz: Our firm has taken a great interest in the SEC's planned modernization of the Electronic Data Gathering, Analysis and Retrieval ("EDGAR") system. William O'Neil + Co. Incorporated, collects and maintains extensive company research with detailed historical information on over 10,000 companies as well as individual databases on Canadian securities, mutual funds, bonds, economic variables, industries, sectors and market indicators. These databases are utilized in graphs and stock tables featured in INVESTOR'S BUSINESS DAILY and are often accessed by financial publications such as FORBES, FORTUNE and FINANCIAL WORLD. To achieve the fastest production and data delivery in the securities industry, William O'Neil + Co. maintains sophisticated start-to-finish production facilities incorporating: electronic data accumulation from over 50 sources; data analysis by researchers and analysts; in-house computer programming and systems development; wide-area networking, broadcast/receiving satellites, high-speed data /voice communication circuits; and state of-the-art computerized publishing and shipping. While much of the requests for comment regarding the proposed rule changes in Release No. 33-7653, File No. S7-9-99 are aimed at accessing the impact on Filers, we feel compelled to share our thoughts on how such proposed changes would impact a database vendor that has built and invested in a computing infrastructure that relies heavily on EDGAR documents as a key input. At William O'Neil + Co., Incorporated, information from "official" EDGAR filings is extracted, stored and delivered to our clients in a fashion that helps to facilitate more informed investment decisions. We rely heavily on 10Q, 10K, S-1, 424 and DEF14 forms, extracting data from the main body of text. We have several concerns about the impact the proposed changes will have on our computing processes, the time and cost to retool these processes, and the impact it will have on our end-users. Additionally, we feel there are a significant number of critical issues that must be addressed in detail and in advance of implementation to avoid inflicting economic and logistical hardship on Filers, the SEC, Vendors, and the investing public. We noted over 27 specific requests for comment in your proposal. Many of these issues are clearly of concern to the SEC because this "modernization" of EDGAR has many ramifications. In 1984 when the SEC established the standards for the EDGAR system, a solid framework was established that defined the structure and rigidity of a filing. With mainframe computers still dominating the landscape in the mid-1980's, the American Standard Code for Information Interchange (ASCII) file format with limited Standardized General Markup Language (SGML) tags provided a plain vanilla template for Filers to follow. Most word-processing programs at that time had very limited formatting features and programs such as EDGARLINK helped Filers conform to the established format. This template survives today, 15 years after implementation and the ASCII file format remains the most commonly used file format for exchanging information electronically. The SEC is proposing to allow Filers to include Hypertext Markup Language ("HTML") in "official" documents. The primary motivation and basis for such a proposal is: "?making the system easier for filers to use, and the documents more attractive and readable for the users of public information." (Page 6 of File No. S7-9-99). This objective implies that the current method used by filers, in place for over 15 years, is difficult to use, unattractive and hard to read, thus the necessity in incurring the costs associated with "modernizing" the system. It appears that the driving force behind the proposed changes is one of aesthetics. The look and feel of current documents might be considered rather boring, lengthy and monotonous. Filings tend to look legalistic and can be tedious to read. Compared to other documents on the World Wide Web (WWW), the SEC EDGAR documents offer just the steak with no sizzle. Changing the rules so that filers can add some sizzle to their "official" documents, may appear rather innocuous, however we would like to point out some areas of the proposal that appear faulty and assumptive. Namely: 1) The proposal's reference to the prevalence of corporate web sites, the advances of the Internet, and "Advanced data presentation methods using audio, video, and graphic and image material are now available through even the most inexpensive personal computers or laptops." (Page 4 of File No. S7-9-99) attempts to offer validation that the hardware implementation costs on the Filer will be minimal. We agree with this, however the point is lost that, the individuals that prepare corporate web sites (graphic or web designers) are not necessarily the same individuals that are responsible for filing "official" SEC EDGAR documents. Graphic designers and artists by trade have familiarity with HTML and it's various standards and incompatibilities. Secretaries to corporate treasurers or CFO's, or others within a company who have responsibility to file documents using EDGARLINK, or any other software, do not necessarily have the skill set required to submit documents in HTML. We see the potential for a large retraining effort and would like the SEC to sample or survey a cross-section of filers to better understand the skill level of the "typical" individual responsible for preparation and transmission of documents. The SEC has stated that: "We intend to provide technical support for filers to assist them in submitting and correcting HTML documents through our filer technical support function." We are concerned that the SEC has underestimated it's own support requirements. The SEC seems primarily concerned with filers and does not mention providing technical resources or support for data vendors or other redistributers of EDGAR data. 2) The proposal states that "Filers will be able to submit documents to the EDGAR system that can appear in substantially the same graphic format as those prepared by the filer for delivery to investors and the marketplace." It goes on to state that: "These advances also will ease the burden upon filers, by enabling the submission of documents to the EDGAR system in a format similar to that in which documents are presented to the public and to investors." Because the SEC has limited the documents to a subset of HTML 3.2, we strongly disagree that this will "ease the burden on filers". On the contrary, filers must now become proficient in a computer mark-up language and must have a thorough understanding of which tags are allowed and which are not. Filers that are using commercial off-the-shelf software designed to output files with HTML 4.0 tags, must learn to convert, reformat or strip out, elements that would cause the filing to be rejected by the SEC. HTML, a relatively new standard to the marketplace, is constantly evolving. With the restrictions the SEC is placing on what are "acceptable" HTML 3.2 tags, the complexity of preparing a document increases dramatically as filers try to figure out what conforms to SEC's 'unique' standard. 3) The SEC's suggestion that they begin allowing submission of HTML documents on May 24, 1999 appears ill-timed and hasty. Footnote 17 states: "We will revise the EDGAR Filer Manual at a later date. The EDGAR Filer Manual sets forth the technical formatting requirements governing the preparation and submission of electronic filings through the EDGAR system." It is absolutely critical and essential to filers and data vendors that the EDGAR Filer Manual be revised and updated PRIOR to the acceptance of any HTML submissions. Filers must have clear guidance and specifications on what is and is not acceptable. Data vendors who electronically process large quantities of filings, must be informed IN ADVANCE the details of such changes so that necessary programming and process changes can accommodate the new standards. We have been aware of the SEC's tentative plans for allowing HTML, however, the first written notification of what the rules might entail was only available on March 10, 1999, only 2 ? months prior to the scheduled deployment of this new standard. We anticipate undue economic and logistical hardship if the May 24, 1999 deadline is adhered to. We are also concerned that the SEC is introducing a radically new formatting standard prior to critical Year 2000 compliance testing. We would prefer that the SEC schedule all Year 2000 compliance testing before they allow submission of HTML documents. With only 260 days before January 1, 2000, submission of HTML documents should take a lower priority than pending Year 2000 testing and remediation. In response to specific requests for comment: "We request comment on whether we should continue to accept all EDGAR submissions in ASCII, or whether, in the future, we should require submission of all or some documents in HTML." At this point in time, we strongly feel that the SEC should continue to accept all EDGAR submissions in ASCII. We are not opposed to providing the investing public more readable documents, however we are concerned about the lack of standards, the lack of communication with filers and vendors and the costs and time associated with reprogramming to handle the proposed new format. We would prefer that the SEC more clearly define and document the proposed standard. Instead of introducing HTML files into the current production environment we would suggest the SEC consider providing an "unofficial" test site or area that runs in tandem with the current system. Filers and data vendors could access this site for a period of time to better understand how the new formats will impact their processes and systems. A phased-in testing approach would also allow the SEC to better understand the potential support requirements, storage issues, security issues, etc. Because of the impact Year 2000 testing and remediation work is having on the SEC, filers and data vendors, it is suggested that the implementation of an HTML TEST environment be postponed until after January 1, 2000. "We request comments and data on the impact of converting to HTML from ASCII." As a data vendor, that electronically processes EDGAR filings, our firm will be required to reprogram our algorithms to accommodate HTML. Technically this is not difficult. However we MUST have a firm set of standards to work with PRIOR to the implementation. The abbreviated subset listed in the appendix to your proposal is inadequate. We must also be given a window of time to test our systems using the new formats. We urge the SEC to consider a delay in implementing this standard. "We request comment on the use of eXtensible Markup Language ("XML"), particularly for EDGAR submission header tags." Please provide more details on how you envision using XML in the header tags. How will it differ from what is currently used in the header tags? Will your XML standard adhere to the W3C v1.0 specification? "We request comment on our proposal to allow unofficial PDF copies of official filings." Because the SEC is mandating that any "unofficial PDF" be substantially equivalent to the official document (the text must be identical) we can conclude that the motivation for allowing PDF submissions is to give the viewing public a more attractive and readable filing. (PDF -Postscript Document Format must be viewed in the Adobe Acrobat Reader. Documents in PDF format make use of fonts, company logos, charts, and images). Because of the proprietary nature of the PDF format, we expect that the potential for filer error will be less than what is experienced with the submission of HTML documents. The PDF format is not an open standard and the long-term viability of this format rests solely with the fortunes of Adobe Systems, the company that invented the standard. Adobe Acrobat Reader, a program that displays PDF files is currently free to the public, however, no assurances can be made that Adobe Systems may decide to implement a royalty for using/viewing PDF files. Recognizing the risks in adopting a technological standard that is not open, the SEC is wise to make PDF files "unofficial" and optional. PDF files should be clearly labeled as "unofficial". As an information service provider we are interested in delivering PDF files, however we have concerns over the hardware storage requirements. We do not feel it is wise to impose size restrictions on the filer as this would add another rule to an already complex filing process. PDF files should contain unique ascension numbers so as not to confuse them with ASCII files. We are also interested in receiving PDF index files that would allow for easy transfer of the filing into an electronic database. Before the SEC allows the submission of any PDF file, clear standards must be determined and communicated IN ADVANCE to filers and data vendors. There are a series of requests for comment regarding the allowance of animated graphics, limiting file size, limiting external links, allowing internal links, defining a specific screen resolution, ensuring that documents can be printed in their entirety, not allowing nested tables within tables, etc. Many of these rules have a direct impact on the filer. The individual who has been comfortably using EDGARLINK, must now cope with learning this specialized subset of HTML 3.2, otherwise the filing is rejected. In the SEC's desire to allow filers the flexibility to submit filings using a recently evolved standard (HTML), it becomes obvious, after reading all the exception rules imposed by the SEC, that the "open" standard of HTML 3.2 is not longer open. What will the SEC do when they discover that some filers have decided to provide a table of contents to their document, however, the filer has purposefully decided NOT to provide a link to the LITIGATION section? Or what about a Filer that decides to use a shade of color to highlight certain values, but when the document is printed that shade is unreadable? What happens when a filer decides to use a font size that is extremely small to diminish the likelihood that someone will read a section that is unfavorable to the filer? What will the SEC do if a filer submits a document using a script font that results in a fancy, but unreadable looking document? How will the SEC handle graphic images that are manipulative and deceiving? Bar charts with distorted scales, line graphs showing only favorable data, etc. For the filer's sake and the SEC's sake we hope that it will not be necessary to micromanage the preparation process, adding more and more layers of rules when it is discovered that someone has decided to implement HTML in a way never originally envisioned or expected. The visual simplicity of the current EDGAR filings is both a positive and a negative. Each filing stands on equal footing with all other filings. There is a uniform "look & feel" that eliminates the potential for unnecessary, manipulative and misleading design. The documents are stark, they encompass four-corners of a page, they are black on white, best viewed with a fixed-width font such as Courier. On a technological level, the format offers rigidity and predictability. The format is well defined and limited in scope. Storage requirements are predictable. Filers and data vendors have an efficient familiarity with the current standard. Current EDGAR filings, distilled down to simple ASCII with no embellishing colors, graphics, animation or multimedia seem almost anachronistic. They shout "MAINFRAME" or "OLD TECHNOLOGY", yet they perform a critical function: the timely dissemination of information to the public. As technological standards evolve it will be tempting to upgrade and modernize. We must approach such upgrades in a manner that does not cause undue financial and logistical hardship on filers, data vendors and the SEC. We welcome the opportunity to share our initial reaction to your proposal. We strongly recommend that the SEC continue receiving submissions in ASCII and postpone HTML until after January 1, 2000. We also suggested that the SEC implement a beta site that runs parallel to the current production environment. Please consider engaging industry and the public in continued dialog regarding your proposed changes. We thank you for your time and consideration. Sincerely, Steven L. Birch Research Analyst William O'Neil + Co., Incorporated April 15, 1999 Steven L. Birch WILLIAM O'NEIL + CO., INCORPORATED 12655 Beatrice Street Los Angeles, California 90066 (310) 448-6854 (310) 577-7258 fax