Capturing And Reporting Trading Information Efficiently And Effectively

Thursday, January 1, 2004 - 01:00

The Editor interviews Allen R. Tubb, Vice President, General Counsel and Secretary, SWS Group, Inc.

Editor: What challenges do corporate counsel face implementing the mandates of the Sarbanes-Oxley Act?

Tubb: The Sarbanes-Oxley Act has not changed what we need to do as much as it requires us to do more of it. This means more duties requiring more physical work, but performed with the same staff.
For example, we have always had an active audit committee working with our internal and external auditors. Now, they not only have additional responsibilities for financial matters, but also in a lot of other areas as well.Someone on the audit committee now has to be tied into our anonymous whistleblower procedures. Someone on the audit committee now also has to look more closely at all outside activities of our executives.
Our audit, corporate governance/ nominating and compensation committees each now have more responsibilities. Rather than providing general oversight focused on shareholder value as in the past, the committees are now working more at a management level.
The challenge is that there is now a lot more ongoing interaction with our board and its committees that used to be done through executive reports at a board meeting. Every quarter I now put together a report with a calendar of when reviews will be done. I also communicate in writing with our board and committee members on a regular basis. All the compliance activities are instigated by my office to make sure that the board accomplishes them.

Editor: What has been the impact of the new rule under the Sarbanes-Oxley Act that requires information about insider transactions to be reported electronically to the SEC within two business days and posted on the corporation's website?

Tubb: Although we initially cringed at the timing requirements, the compression has worked out well for us. Previously, reports had to be filed manually by the 10th day of the month following the transaction. This required a lot of coordination and follow up. Now I am authorized to tell the board members that reporting must be done immediately. Compiling the data has become much easier because of the hCue system.

Editor: Please tell our readers about the hCue system.

Tubb: The hCue system is CT's online corporate governance product. It captures the information about insider transactions from central records stored in our company's hCue account. Using hCue, SEC forms 3, 4 and 5 are automatically populated. Once a Section 16 form is complete, it is SEC EDGAR-ready, allowing it to be filed with the SEC with just a click of a button. The populated SEC forms can also be downloaded in an HTML format for posting on our corporate website. Within 30-45 seconds, the SEC has the file, it has been posted on our website and the information is stored in the hCue database where I can later retrieve it instantly on a subsidiary-by-subsidiary basis.

Editor: What are the advantages of a web-based system?

Tubb: As a technologically sophisticated company, we do as much of our work online as we can. While we have highly sophisticated systems in-house, it was important to me to have a corporate governance system that did not reside on our internal servers. If the system resided internally, every time there was an update or upgrade, new software would have to be installed, which would take time away from other, more important things. The hCue system provides all the features and functionality we wanted without the tech support required on an internally maintained system.

Editor: Are your board members satisfied that the security features of the hCue system adequately safeguard their trading information from premature release?

Tubb: At first our board members were very concerned about the security issues. Because the hCue system passed our internal security standards, I was able to assure our board members that their trading information would not be prematurely released.
One of the tremendous benefits of the hCue system is that I can give different people different types of permissions to access our database. For example, outside counsel and tax accountants may have different needs to access different information. I can tailor their permissions so that they can access only the information they need to do their authorized function.

Editor: What are some of the other benefits of maintaining corporate records online?

Tubb: The hCue system enables our brokers, dealers and banking subsidiaries to access the relevant portions of our database to retrieve information they need for licensing and registration purposes. This saves my staff the time that they used to spend on capturing and transmitting the information in response to frequent requests.

Editor: What corporate governance challenges do you see on the horizon?

Tubb: Our in-house personnel, executives, board and committee members are all committed to full compliance with the letter of the law as well as its spirit. The technical challenge is how to submit filings quickly and transparently. The psychological challenge is to embrace the disclosure requirements, but avoid going overboard. One example is the havoc that would result from premature release of information about intended activities.
We have years to go before government and business come to the right balance in reporting and oversight. With the shifts we have already seen, the immediate future promises to be a very interesting time for the boards of publicly traded companies.

Editor:Where can our readers find out more information about the hCue system?

Tubb: They can visit