GAO Background Objectives, Scope, and United States General Accounting Office General Government Division B-231278 June 7, 1989 The Honorable Robert E. Wise, Jr. Dear Mr. Chairman: In response to the July 14, 1988, request of the former Chairman, we have reviewed complaints by regular users of the Securities and Exchange Commission's (SEC) public reference room in Washington, D.C., stemming from SEC changes in public access rules. We have also examined related legal issues. We found that SEC has continued to adjust reference room operating procedures. The changes made have been consistent with applicable laws, regulations, and court decisions. The SEC is mandated by law to disseminate information to the public. It operates public reference facilities containing current and historical corporate filings (documents disclosing material financial and other information companies must file with the SEC), SEC releases, and other public documents in paper and microfiche format. At these facilities, the public may inspect documents and obtain copies for a fee. The reference room in Washington, D.C., is used primarily by employees of companies (called regular users) who research and sell copies of and information from corporate filings and other documents. In June 1988, SEC eliminated public access to the microfiche files maintained in its reference room. This resulted in an outcry from regular users who also raised questions about the legality of SEC's actions. As agreed with the Subcommittee, our objectives were to (1) identify the concerns of regular users of SEC's Washington, D.C., public reference room, (2) obtain SEC Staff views on these concerns, (3) provide any observations and recommendations we had on areas of concern, and (4) identify and give opinions on relevant legal issues. We interviewed regular users of the reference room, employees of SEC's contractor for producing microfiche copies of filings, and SEC staff B-231278 responsible for the operation of the reference room. We reviewed reference room rules and procedures, applicable statutes, relevant court decisions and regulations, and observed the operation of the reference room. We did our initial work in August 1988 and we resumed work in November 1988 after additional SEC rules changes became effective. We completed our work in early February 1989. We did our review in accordance with generally accepted government auditing standards. Appendix I contains further discussion of our review objectives, scope, and methodology and provides additional background information on the operation of the reference room. In August, we identified six areas of concern to regular users caused by SEC's restriction on reference room operations. (See app. II.) However, SEC made changes in the management of the reference room, hired and trained new employees, adopted new operating rules, reallocated carrels (the space assigned to regular users in the reference room), and extensively remodeled the room. Thus, our subsequent work identified only two remaining areas of concern. Regular users said that: Closing the microfiche files to the public and allowing only SEC staff to fill users' microfiche requests led to delays in obtaining these materials and more difficulty in doing research. SEC's microfiche contractor received copies of certain time-sensitive documents before regular users received them in the reference room. This gave the contractor an unfair advantage over regular users, who compete with the contractor in selling information from these documents. SEC officials told us that they operate the reference room to benefit the public, not just the regular users. They said that to maintain microfiche files in an orderly condition so that information will be readily available to the public, they must control access to the files. Open access to the microfiche files resulted in disorderly files and was conducive to microfiche theft. They also said that increased use of the files had exacerbated these problems. In our opinion, open microfiche files might provide operating economies to SEC because fewer staff may be required if files are open and users help themselves. Researchers could also benefit by being able to browse through material when they are uncertain about the specific document being sought. However, on balance, we agree with SEC's closing of the |