SEC in high gear on technology push

The Wall Street Journal reports on how the US Securities and Exchange Commission (SEC) is rapidly implementing plans to deploy new technologies as part of its quest to modernize and make more effective the filing and information services it offers as well as fulfill its regulatory mandate.

Post-Enron and WorldCom and armed with new technology, the SEC is gaining speed in detecting problems at brokerage firms, mutual funds and public companies. SEC technology spending jumped in the past two years to $120 million from less than $47 million, and its 100-member information-technology office is poised for a 30% staff increase, according to the Wall Street Journal.

While the Journal’s article focuses largely on the regulatory and compliance issues behind the tech push, it discusses some interesting developments:

  • The SEC is pushing for tools to search documents electronically and spot troubling patterns or relationships, with the goal of helping SEC lawyers and accountants uncover things they might have missed in the past, or found only after long hours of sifting through piles of documents. Those piles are disappearing, thanks to a push to convert paper documents into searchable electronic files. The Journal says that, so far, SEC offices in New York, Philadelphia, Boston and Chicago have converted 2,500 boxes containing 12 million pages of material to electronic storage. Its Washington headquarters converted 9 million pages.
  • The SEC is retooling its case management system to track inspections and investigations, hoping to spot bottlenecks and avoid having cases languish, and its examiners are in line to get more sophisticated software to analyze data they collect when inspecting brokerage and mutual-fund firms.
  • Investors will see changes when the SEC makes good on plans to remake its website and the Edgar system, to make them simpler to navigate and search, and add more features and information.
  • Corporate financial results may come into sharper relief though another change, in which the SEC would allow companies to file results using extensible business reporting language, XBRL (definition).

I’m especially interested in the plans for Edgar, a searchable database of disclosure documents that public companies are required to file with the SEC. For some years, I’ve been a sometime user of Edgar for getting relevant, timely and useful information about listed US companies and, increasingly, about non-US companies. It’s an indispensable tool for communicators.

The SEC’s plans, including XBRL and those for Edgar, should produce far greater transparency in financial reporting, making it even easier for investors, analysts, communicators and the SEC itself to analyze corporate performance and spot results out of line with the past or with other companies.

It will also make it easier for companies to practice effective corporate governance and exercise financial disclosure in compliance with reporting requirements under legislative acts such as the Sarbanes-Oxley Act.

If only regulators in Europe were as innovative as the SEC. And had the resources and budgets.

Wall Street Journal | SEC’s Big Technology Push Starting To Pay Off (subscription required)

One thought on “SEC in high gear on technology push

  1. its weird how you would think that the rigidity of math would solve these sorts of human problems in the market … great blog!

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