A Very Good "IDEA"

The SEC has announced a new system which will eventually replace EDGAR, the electronic data gathering, analysis and retrieval program under which SEC filings are made electronically. IDEA, which stands for Interactive Data Electronic Applications, will allow investors to quickly and easily search financial information. SEC Chairman Christopher Cox recently led a press conference detailing the new system and its advantages.

When it was phased in back in 1996, EDGAR was, frankly, already obsolete. It took years of back and forth before the very complex regulation explaining how it was to work was completed and adopted. The ASCII-based system nevertheless represented a sea change in the availability of information about public companies. Previously one had to send a researcher to the SEC offices who would stand there and copy paper versions of public filings for you. If you wanted to search a particular item, the researcher would do it for a very expensive fee. And it would take quite a bit of time.

Now with the click of a mouse from anywhere in the world you can access information about any public company, or with the help of search engines such as www.tenkwizard.com, search for people, topics and the like. Want to find every shell? Every PIPE? No problem now. But the system is indeed antiquated.

Cox states that unlike EDGAR, this new system will rely on information rather than specific forms and transactions. During the press conference, Cox led an on-screen presentation comparing the new program to its predecessor, emphasizing EDGAR’s lengthy and time consuming steps to access information about financial companies and mutual funds. IDEA will allow better and up-to-date information to be freely available to investors. Instead of examining one form at a time, investors can instantly collect information from thousands of companies and forms. “Data tags,” which are similar to barcodes, allow for investors to view single items in a company’s financial disclosures. IDEA will also include a financial explorer feature and offer clearance to export information to other software (i.e. spreadsheets, databases or comparative and analytical programs.)

IDEA will include a trio of new features which Cox rightfully dubs “21st century SEC.” The first addition, HUB, will allow enforcement resources to be used more effectively, which simply means more bad guys will be caught. RADAR will allow for risk analysis, while the Phoenix feature will track and distribute millions of dollars.

Cox uses a relatable analogy during his presentation as he pulls up a carfax type website, which compares makes and models, prices and vehicle history. Cox believes that in today’s world, financial information should be as easily accessible and helpful as comparison shopping. Not only will this new system prove advantageous to EDGAR users, those utilizing Yahoo Finance, Google and Morning Star are expected to see an information enhancement because of IDEA.

The SEC launched a pilot program of IDEA, which allowed for company feedback. IDEA is dependent on a rulemaking which Cox believes will be passed by the end of this year. The program received about 96 comment letters which are now under review. The current EDGAR system will adopt some of IDEA’s features until its implementation. Cox believes the new program will be up and running in three years.

My two cents: About time!

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