Looking for Trouble
The CIO at the U.S. Securities and Exchange Commission is putting the finishing touches on a sweeping plan to transform the paper-burdened and IT-challenged agency into an adept high-tech consumer and revamp its business processes to keep tabs on the more than 18 million pages of financial documents it receives each year from more than 12,000 companies.
On the job since January, CIO Corey Booth has a key role in SEC Chairman William Donaldson's top priority: becoming more proactive in protecting investors and maintaining fair and efficient markets . The agency's five-year strategic plan, approved in July and posted on its Web site in August, admits that for too long the commission has been reacting to market problems rather than anticipating them.
"Our chairman has made a very big deal about the fact that we need to look around the corner more effectively," says Booth, who has taken the IT reins at an agency that has suffered embarrassing failures over the past few years, notably the accounting scandal that led to the collapse of energy-trading company Enron. The U.S. Senate charged the agency with failing to review Enron's financial reports. It's those kinds of meltdowns, and the consequent loss of investor confidence, that Booth and everyone at the SEC are aiming to avoid.
Booth's IT objectives range from improving security to implementing mobile technologies in order to enable a virtual workforce. But the three top items on his list - electronic-information discovery, workflow and content management, and new data-tagging formats - all relate to the agency's ability to use state-of-the-art analytical tools to catch accounting and securities irregularities before they become major problems and to better manage their investigations.
"We were asked by Congress to be more effective," says Booth . The Sarbanes-Oxley Act requires the SEC to review the filings of a third of companies registered with it each year. Congress boosted the SEC's budget by about 40 percent in fiscal year 2003 to $716.4 million so the agency could hire more accountants, examiners and other staff. But, Booth says, "It's very clear that staffing will only go so far. The rest has to come from business and technology improvements."
In fiscal year 2004, $120 million of the agency's $811.5 million budget is going toward IT operations (excluding salaries and related expenses), almost three times as much as was spent on IT in 2001. "There's really no other way for the SEC to improve other than with technology," says Bill Cline, managing partner for global capital markets at consulting firm Accenture. "The only alternative is to add lots of people, and I think that's a losing proposition."
By the end of September, the agency expects to complete the conversion of most of the paper documents related to current investigations to an electronic format using document-imaging and optical character-recognition software. Most companies under investigation submit paper documents to the SEC, so every time an investigation begins, trucks full of these files pull up to the massive concrete and glass SEC building in downtown Washington to unload the stuff.
The SEC also must review data in a number of different electronic formats, including e-mails, which Booth says often contain "all the smoking guns." Without a cohesive, advanced system for accessing and searching documents related to an investigation, attorneys and examiners can spend months poring over evidence .
The goal is to enable investigators to search across documents and use automated tools to analyze their content. Tied to that is the planned deployment of content-management and workflow software. Booth is reviewing vendors and plans to implement a system later this year or early next. "All the tools that we're deploying will allow the attorney to find similar concepts using different vocabulary, recognize patterns in the way e-mails are exchanged and other, more-advanced kinds of analysis," he says. "One can only imagine how much more productive this will make us."
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