Avon hoax raises SEC filing questions

The fake bid for Avon has put a spotlight on one of the mundane pieces of market plumbing that only gets attention when something goes wrong.

It is the mechanism by which companies file public documents with the US Securities and Exchange Commission and it bears the humane-sounding name Edgar. The Avon case has got people asking whether just anyone can use it to file a potentially market-moving statement.

Jim Plumb, an agent who has been filing documents to Edgar on companies' behalf for 15 years, says: "It's fairly easy for anyone who knows the Edgar system to get filing codes and pretend to be a legitimate company."

To gain access to Edgar, the SEC requires would-be filers to apply by providing a name, address, phone number, email and other basic information that must all be notarised. Applicants must also set a passphrase that, if they are accepted, is subsequently used to generate access codes that allow them to file documents to the Edgar system.

According to the SEC's website, Edgar - which stands for Electronic Data Gathering, Analysis and Retrieval system - is open to companies, investors, traders, and agents who are paid to manage filings for others. It warns applicants several times that "intentional misstatements or omissions of facts constitute federal criminal violations".

Mr Plumb, who is president of a company called Electronic Publishing Services, said: "I don't think there's a real lot of research done by the SEC." The SEC, which has taken a lot of criticism in Washington lately for being sluggish, declined to comment. But contemplating the obvious way to prevent a repeat of the Avon hoax, Mr Plumb added: "Now it's going to be harder to get filing codes, probably."

The SEC said on Thursday: "Under the federal securities laws, filers are responsible for the truthfulness of their filings, and they are subject to enforcement actions when they are false or misleading.

"The SEC receives about 4,000 Edgar filings daily, which are automatically available to the public and involve more than 300,000 individual and 28,000 company and mutual fund filers."

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