Monday, November 14, 2016 is a day that some will later remember as nerve-wracking and irritating. At about quarter after 4PM, e-mail messages started being exchanged among members of the EDGAR Filing Consortium, which is an informal group of industry members from financial printers, law firms, and EDGAR software developers. These e-mails were asking if anyone was experiencing problems transmitting filings to the SEC.
Thursday, November 17. 2016
If you were transmitting via a web browser, you got this:
These problems have manifested themselves before on busy filing deadlines. Sometimes the EDGAR system is unresponsive. Sometimes transmissions are slow or acceptances are not sent back on a timely basis. Sometimes things just break at the worst time (thanks, Murphy).
Why does this happen? The answer is shear volume. In the late 80’s when I was helping to design the first EDGAR system, we spent a great deal of time researching loading requirements. Keep in mind that back then the “Operational EDGAR System” was going to employ dial-up connections with modems, running around 9.6kbs (that’s about 1,000 characters a second, which mean it would take hours to file today’s typical 10-K with HTML and XBRL). One of the things that would automatically limit the volume into the system was how many phone lines were employed. A lot has changed since then, and most filings are not in ASCII anymore; 10-Q and 10-K filings have XBRL. The bandwidth has increased dramatically but so has the total volume of data being sent. And, of course, the Internet is now used and there can be many, many ports running, some with a bandwidth as high as 100mbs. Still, there are limits to what can be sent and when.
The SEC has made efforts over the years to spread the load by moving the deadlines for certain filings based on issuer size. This then takes the big quarterly peak and spreads it out, creating a couple of smaller peaks. This particular deadline on November 14th may have caused some additional stress as the SEC was closed on Friday for Veteran’s Day. People who may have normally filed a little earlier on Friday to beat the deadline had to wait until Monday and increased the load on the system.
What can a filer do in these sorts of situations, given the potentially large number of filings that will all be sent nearly simultaneously? Well, the number one thing is not to procrastinate. Of course that’s easier said than done. But, think of this scenario: you look at the clock and think, “It’s 3:30. I have another two hours. I can wait.” This sort of reasoning can lead to delays and missed deadlines.
Here are a couple of tips to avoid running into the wall at the last second:
- Let everyone on the team know that there are legal, business, and tech-based deadlines. You should have a buffer to account for the EDGAR system, for the size of your filing, and for potential computer glitches. Running up to the last minute and having computer or Internet issues risks missing the legal or business deadlines. Your team should know that the transmission of your filing to EDGAR will take time and plan accordingly. In an age where we stream and transmit megabytes of data so often and so easily, it can be easy to forget that sending that much information isn’t instantaneous.
- Test file! If you think you’re going to file late in the day, perform a test filing earlier in the morning. Test filings serve a couple of purposes that can really help you on a filing deadline. First and foremost, they eliminate any nasty surprises from the EDGAR system. If you’re waiting until the end of the day to file, the last thing you want to find out with only minutes left to get your filing in is that your LIVE filing has been suspended or truncated. Performing a test filing prior in the morning of your deadline will ensure that you’ve done all you need to have your filing accepted. Further, test filings have traditionally been seen as credence that you were ready to file and possibly encountered an issue with EDGAR or heavy EDGAR traffic during your LIVE filing. The SEC may consider test filings that you’ve performed when backdating filings.
- Review part 8 of our EDGAR Submission and Projects Training videos. It is worth the 12 minutes of your time to watch because it has important information about EDGAR filing issues and work-arounds. If you know what your options are when you need to get a document to the SEC, you’ll be better able to handle delays. (The EDGAR Submission and Projects Training video is located in the Training Videos portion of our Online Community.)
If everyone makes an effort to file a little earlier, the stress level will go down both on the EDGAR system and at the executive offices of the filer. Of course, the next big peak is the Ks, which is in March 2017. Plan your test filings and filings accordingly to avoid missing your deadlines, and you can help reduce the stress on EDGAR and the stress on yourself during peak filing times!
|Scott Theis is the President of Novaworks and has been involved in the EDGAR industry for over thirty years. He has worked with the EDGAR system at multiple levels: as a financial printer, a member of the EDGAR design team, and as a software developer. He has extensive expertise with EDGAR, HTML, XBRL, and other programming languages.|