Tom Taulli is the publisher of the Taulli Report, an online investment site.  You can reach him at tom@taulli.com

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One of the coolest financial sites on the Web is actually from the US government: www.sec.gov (the Securities and Exchange Commission is the governmental agency that regulates stocks, bonds and other investments). In fact, IPO Monitor uses the SEC site.

On the SEC site, you can view the following:

• SEC News Digest and Statements: You will see the latest SEC actions, such as rule filings, policy statements and enforcement proceedings (that is, you will see the sleazy things some brokers will engage in to make obscene amounts of money). You will also have access to the transcripts of the speeches by the major officials at the SEC, as well as testimonies before Congress. You even have access to the studies conducted by the SEC (the most current example: "Report to the Congress on the Readiness of the United States Securities Industry and Public Companies To Meet the Information Processing Challenges of the Year 2000").
• Investor Assistance and Complaints: There are tips on how to find a good broker, how to make sure your broker is not cheating you, and how to deal with a bad broker. For example, one useful tip is to use the NASD (National Association of Securities Dealers) hot-line at 1-800-289-9999, in which you can get the disciplinary history of a broker. There is even a form for you to use to take notes on your broker, located at http://www.sec.gov/consumer/callform.htm (just in case you might want to sue the rascal). You can also file a complaint online.
• SEC Enforcement Division: Since 1972, this division has conducted investigations into alleged violations of securities laws and prosecutes civil suits in federal courts. On this part of the Web site, you will see the various complaints that are filed in federal courts. This can be fun reading.
• Meet the SEC: You have access to the email addresses of the major officials-including Chairman Levitt (chairmanoffice@sec.gov ).

The Edgar Database

But the best part of the site is Edgar. Here, you can download all prospectuses filed with the SEC. A prospectus is what a company gives to investors when it raises money through an initial public offering. And these documents are chock-full of juicy information. Basically, the SEC requires company's to publish all material information-no matter how embarrassing it may be.

However, if a prospectus is filed with a regional office of the SEC, the document does not have to be published on Edgar. Moreover, some companies are exempted based on a hardship exemption.

Companies are not required to publish their annual reports-although, many do anyway. But companies must publish their Form 10-K or 10KSB's on Edgar (these documents contain much of the information of an annual report).

Once a company files a prospectus on Edgar, the document will be posted after 24 hours.

You have different options of downloading a prospectus:

1. Browser: First, you do a search for the company you are interested in. You will notice that the size of a typical prospectus can be quite large-usually over 1 MB. Once the download is finished, you can then put this on your drive by selecting File and then Save As.
2. Anonymous FTP: For instructions on how to use FTP, go to http://www.sec.gov/edaux/general.htm
3. Gopher: You must use your gopher software to connect to gopher.sec.gov.

Interestingly enough, if you go to http://www.sec.gov/edaux/util.htm, you can download a utility, which will convert raw Edgar filings into WordPerfect.

Search Tips

With Edgar, you can use natural language searches. That is, you can enter a complete sentence. Edgar is smart enough to parse it. For example, you might say: "Tell me about TCP/IP." You will then get a list of relevant documents.

Relevancy is based on a number system. The highest relevancy is 1000 and the lowest is one. Edgar uses the following factors in determining relevancy:

• Word Weight: The highest weight goes to those words that appear in a headline. The weight is a bit lower if the word is in all caps or if the first letter is capitalized. The lowest ranking is for a word that only appears in the text.
• Term Weight: Words that occur with a high level of frequency are given less weight. Thus, a word such as "network" would be of less weight than "TCP/IP."
• Proximity Relationships: The closer the words are together, the higher the weight. For example, if you had the phrase "Microsoft TCP/IP" and a document had a mention of these two words-but they were separated by over 1,000 words--then this would receive little weight.
• Word Density: This is the ratio of the number of instances a word appears in a document compared to the size of the document. A higher density gets a higher weighting.
• Despite this weighting system, you can still get searches that are too general. Well, you can use boolean connectors to help narrow your search:
  1. AND: You might be looking for documents that have both TCP/IP and Microsoft. You will use the following, "Tell me about TCP/IP and Microsoft."
  2. OR: If you want all documents that mention TCP/IP and Microsoft, then you will enter: "Tell me about TCP/IP or Microsoft
  3. NOT: Perhaps, you want to know about TCP/IP, but do not care what Microsoft is doing about it. So write the following: "Tell me about TCP/IP not Microsoft."
  4. ADJ: This is the adjacent operator. This means that one word will follow another-without any words in between. So, if you enter "America Online," you will get only those documents that have "America Online"-not documents that only have "America" or "Online."

You can also use wild cards. This is symbolized by the asterisk ("*"). This means that Edgar will search for the exact characters before the asterisk, but ignore the trailing characters. Here's an example: "micro*". This will find all words that begin with "micro." Thus, we would retrieve Microsoft, Sun Microsystems, and so on.

All The Same

As you read more and more prospectuses on Edgar, you will start to notice that they are all basically in the same format. And there is a major reason for this: it's the law.

The sections that are important include:

• Risk Factors: These tend to be overly conservative (the reason is that a company does not want to get sued for failing to disclose information). Factors to look for: stiff competition; reliance on a few customers or suppliers; antiquated information system.
• Use of Proceeds: This is what the company will do with investors' money. If much of the money is being used to pay down debt, then this is a troubling sign. You want the IPO money to be invested in the future of the company.
• The Business: This is a comprehensive discussion of the products and services of the company. You will also learn about the company's marketing, research and development, facilities, number of employees, and so on.
• Legal Proceedings: There can be many time bombs here.
• Management: You will get one paragraph resumes of the executive management and board of directors. You will also see their compensation. Try to answer the following: Are these guys qualified? Do they have the experience necessary to run the company?

Conclusion

Edgar could still use lots of improvement. In fact, the SEC has a request for proposal to update the system. If you are interested in bidding on the project, go to http://www.sec.gov/edaux/edrfp/rfpfile.htm.

Despite Edgar's problems, it is still a treasure of information. You can spend a lifetime with it. And it would not be a waste of time.

Tom Taulli