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Regulators Go Paperless

Protecting Investors, 21st-Century Style

February 27, 2006
By Maria Trombly, Asia/Technology Correspondent

The Securities and Exchange Commission used to be choking on paper, but technology changed all that.

"We would sue a big company, and we would literally get truckloads of evidence boxes coming through the loading dock," says Corey Booth, the SEC's chief information officer and head of the office of information technology. By 2004, a huge backlog of paper documents had accumulated in the enforcement division, and the commission decided to institute a scanning project. "Now all that evidence is managed online," Booth says.

Such IT developments are part of a broad move by regulatory bodies to integrate advanced technology into their oversight responsibilities. Changes recently made or underway promise to streamline and transform the regulatory function.

At the SEC, chairman Christopher Cox instituted a voluntary program for public companies to submit their regulatory filings using extensible business reporting language (XBRL). "The interactive data that XBRL data tagging makes possible can help everyone in this room achieve many of your goals," Cox told the Securities Industry Association at its annual meeting last November, adding that "interactive data promises a reporting revolution, and the SEC intends to be at the forefront."

One piece of the SEC's drive to adopt new technology is a system that offers real workflow management to SEC examiners. "It will enable attorneys to manage the work product and get sign-offs from senior managers," Booth says.

The system will also do a better job of managing the financial aspects of cases. "That was a weakness we needed to fix," notes Booth. The workflow system is being built in-house from a combination of commercial and open-source technologies. Other IT innovations include an on-premises wireless network, which is currently in a pilot phase and is set to be expanded over the next 12 months. "We don't want to roll it out just because it's cool," Booth says. "We want to roll it out because there's an actual productivity improvement."

The SEC is also developing an off-premises wireless capability, which will help investigators be more productive in the field. Currently, the wireless option is the BlackBerry handheld device, made by Canada's Research in Motion. The devices offer quick access to e-mail, but they don't match all the functionality that an examiner could access remotely from a laptop through a wireless network.

From the top down, SEC officials are working on other ways to give SEC employees advanced tools. Cox told the SIA conference that interactive data can "completely eliminate" what he calls the "backbreaking, expensive, error-prone, natural resources-wasting task" of sifting through paper, text and HTML reports. "We [at the SEC] can completely eliminate this," he said. "It is so 20th century."

In fact, the voluntary XBRL filing program is part of a broader agency initiative to adopt the extensible markup language (XML), which is rapidly being accepted as the gold standard for Internet communications. The SEC is far from alone in its efforts to promote XML, and the Chinese stock exchanges already require corporate filings to be submitted in XBRL (see related story, "China's Exchanges Pave Way for Adopting XBRL"; also see Securities Industry News, Jan. 30).