House report hits EDGAR's flaws, calls for privatization

Rep. Dan Frisa (R-N.Y.) late last month issued a report citing flaws in the Securities and Exchange Commission's Electronic Data Gathering, Analysis and Retrieval (EDGAR) system and urging the agency to "privatize" at least parts of the system.

Duncan Wood, a legislative assistant in Frisa's office, said cost overruns and program delays have hindered EDGAR and that the program could be run more efficiently by commercial vendors. He said the SEC should allow vendors to compete for the right to resell EDGAR data and possibly for the authority to receive and accept EDGAR data filings from public companies. "If the SEC can maintain the integrity of the data, we would like to see as much of the system privatized as possible. That includes dissemination, receipt and acceptance, and text management," he said.

Michael Bartell, the SEC's chief information officer, said he worked on the report with Frisa's staff and agreed that improvements to EDGAR are needed. But he said Frisa's staff members have been unable to completely define which aspects of EDGAR should be privatized.

James Love, director of the public interest group Taxpayers Assets Project, said he would support privatization only if the raw data remains easily accessible to the general public. "As long as the data remains in the public domain, then we have something to talk about," he said.

The report said the SEC spent $111 million developing EDGAR—85 percent more than was projected at the onset of the program. It also pointed out that mandatory electronic filing to EDGAR will not be completed until May—three years later than anticipated.

Bartell argued that the $111 million figure cited represents a cost overrun of 85 percent over the projected cost of the EDGAR pilot, not the projected cost of the entire program. He added that program delays were necessary to accommodate new user requirements.

The current EDGAR contract will expire in January 1997, and Bartell said he hopes to issue a solicitation for the follow-on system by mid-May.