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Carl Malamud currently collaborates with webchick at He was the founder of the Internet Multicasting Service and is the author of eight books.

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By Carl Malamud, All Over the Map Archives »

The Importance of Being EDGAR

      In the summer of 1993, I was helping my friends at Sun Microsystems give a demonstration of the Internet to the Subcommittee on Telecommunications and Finance of the U.S. House of Representatives. It was a typical Internet demonstration: we hauled a couple hundred boxes of equipment into the U.S. Capitol, set it up overnight, and did a bunch of “the future is here” show-and-tell. Live video coming in from Russian satellites, cell phones hooked up to the net, yadda, yadda, yadda. Everybody was suitably impressed.

      After the demonstration, Chairman Edward J. Markey, came up to me and wondered if I could look into something that was bugging him. His subcommittee had responsibility not only for the telecommunications industry, but also for oversight of the Securities and Exchange Commission. A bunch of Nader's Raiders had been sending in petitions to the subcommittee asking why the SEC filings weren't available on the Internet. The initial reaction from the SEC was that the reason the data wasn't on the Internet was that it was technically impossible, and that even if the data were available the only people interested in SEC fillings were Wall Street Fatcats and they didn't really need subsidized access to data they were willing to pay for.

      If something is technically impossible, I get interested. I looked at the EDGAR system and decided it was worth taking a crack at it. Our first cut at the problem was to try and work with the SEC. Chairman Markey's Chief of Staff asked the SEC to come in and discuss the idea of giving us the data and letting us put together an Internet site. There was a bit of pushback, to say the least.

      The problem was the 70's era data processing system that the SEC had put in place in the late 80's. The deal was that EDGAR was way too rough for consumers to digest. It needed, to speak the MIS lingo of the time, “value-add.” Who would add value? Well, the SEC had cut a contract with a data wholesaler who would add value. The wholesaler, in turn, would sell to information retailers who would add even more value. Then, the information would be sold on the retail information market to the Wall Street crowd who had an interest in the data. Obviously, if we gave away all this information on the Internet, it would subvert our entire Free Enterprise System.

      In that meeting with the SEC and the Chairman's staff, my favorite moment was when we got to the question of why in the world people would want to see EDGAR data. I maintained that the Internet was full of lots of people—students, journalists, senior citizen investors—who were dying for access to this data. The SEC felt that only a few people would want to see EDGAR documents, and besides the Internet (or “the ARPANET” as they kept referring to it) “didn't have the right kind of people.”

      Now, this was a cheap shot, and I understood that what they meant was “there weren't a lot of people, just a few researchers,” but I couldn't resist.

      “The right kind of people?” I said, rising up in my chair. “I think the American people are the right kind of people.”

      So much for the idea of working cooperatively.

      After a bit of politics and some grantsmanship, I secured a small National Science Foundation grant, hit up my friends at Sun for a couple of computers, and in January 1994 launched a free EDGAR system on the Internet. The Retail Information Industry, which was making several hundred million dollars per year selling SEC filings, was not amused.

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The information wholesalers were not amused. Our users, though, were thrilled. Here is what some of them had to say.

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      Brad Burdick of UUCOM (currently a full-time contractor working with Invisible Worlds) and I ran the EDGAR site for 18 months. We started with basic FTP access to data. Just to prove that our EDGAR site wasn't a cheap trick, we added the text of all U.S. Patents. Then, we moved towards searchable indices, a web-based front-end, and a variety of other components to make the site useful. We built up a user base of 50,000 people a day, and these people weren't just Wall Street Fatcats.

      Our goal, however, wasn't to be in the database business. Our goal was to have the SEC serve their own data on the Internet. After we built up our user base, I decided it was time to force the issue. That's when the fireworks began. When users visited our EDGAR system in August 1995, they got an interesting message:

      This Service Will Terminate in 60 Days
      Click Here For More Information

      Click here they did! One of the lessons I've learned from building Internet services is that when people get something for free, they want their money's worth.

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Here are just a few of the distraught comments from our users. Over 15,000 of them decided to write and complain!

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      Just by coincidence, the SEC had scheduled an EDGAR Technology Conference for August 14, 1995. We weren't invited, natch, but felt that it was a public meeting and it might be fun to attend. The purpose of the conference was to look at the question of filing EDGAR documents, not necessarily the question of disseminating EDGAR documents, but I suspected that our announcement on the Internet EDGAR service might skew the agenda.

      I have to say that my faith in government was restored after this. The commissioners of the SEC had clearly not been aware of the issue, but there is nothing like pieces in the Wall Street Journal and 15,000 messages to the Chairman to raise the profile of an issue. We were called in to meet the commissioners and the Chief of Staff to explain what it would take to run an EDGAR service. The new head of MIS at the SEC, Mike Bartell, turned out to be a real live wire and he volunteered to have the SEC run the service.

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Here are some excerpts from the transcript of that conference which were obtained through the Freedom of Information Act.

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      After a bit of checking with the congressional oversight committees, the SEC said they were ready to go. We loaded a couple of computers in the back of a station wagon and drove down to SEC headquarters and set them up a system. On October 1, the day we had said we would terminate our service, the SEC was fully operational. Since then, they've embraced the EDGAR service on the Internet and made considerable enhancements. It has proven to be one of the largest U.S. government presences on the Internet and the staff is 100% behind their role in providing valuable public disclosure to the investing public. I even got a nice thank-you letter from the Chairman.

       Patents were a bit tougher to resolve. The Commissioner of Patents was deadset against the idea of his data being available on the net. It took a couple of years to resolve that situation, but that's another story.

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