Quest for Automated Corporate Governance Tool Leads to hCue

With the Sarbanes-Oxley Act requiring that all Section 16 insider-trading transactions be reported to the Securities and Exchange Commission (SEC) in electronic format and within two business days, SWS Group Inc., like many companies, struggled with how to comply with the new law quickly and cost effectively.

SWS Group is a Dallas-based, full-service securities and banking firm with more than 1000 employees nationwide. The company has approximately a dozen subsidiaries including Southwest Securities, Inc., First Savings Bank, SWS Financial Services, Inc., and SWS Capital Corporation.

Searching for a Solution

Before Sarbanes-Oxley went into effect, the requirement had been that insider transactions could be reported as late as the 10th day of the month after the transaction. Under that structure, at the end of each month, as general counsel and corporate secretary for SWS, I would amass all the insider transactions that had occurred that month, pull up information we needed from various sources to fill out the Form 4s, as well as Forms 3 or 5 depending upon requirements, complete the forms manually and then mail them to the SEC.

Perhaps not the most high-tech method, but it worked. However, with the new rules looming last summer, our immediate focus was to find a solution that would allow us to file Section 16 forms electronically with the SEC within the new two-day timeframe.

Solutions to achieve this run the gamut, from vendors that will take your paper forms and make them EDGAR-ready for a per-transaction fee, to software programs that you can install on your system to Web-based corporate governance programs housed and maintained off site.

Initially, we looked at the flat-fee, per-filing services, such as those offered by financial publishing companies. As we started to add up the costs, which seemed to average about $40 per filing, it became apparent that, given the approximately 40 filings we average annually, we could justify acquiring a more comprehensive corporate governance tool.

We chose not to evaluate software applications that had to be installed at our site. We discussed this option with our technology executives and, while SWS Group is a very technology technology-savvy organization and there were no technical issues with putting a corporate governance solution on our servers, we did not want to acquire another software application to maintain and keep up to date.

A Web-based solution was the option that most appealed to us. We took a look at the hCue online corporate governance tool (www.hcue.com) from CT Corporation and were impressed with what we saw.

CT already is the registered agent for all of our corporate subsidiaries, so we are familiar with the company and the quality it provides. It became apparent to us very quickly that we could realize significant benefits immediately from hCue and even more over time as CT integrates its corporate governance, registered agent, corporate and UCC services.

Before finalizing our decision, we did have our internal IT auditor take a close look at hCue and talk in-depth with CT technical and security experts to ensure the product met our privacy and security requirements, which it did. That's been the extent that our technology group has had to be involved in the hCue implementation.

In fact, because the system is Web-based, implementation efforts were minimal. The most significant aspect was gathering all the various documents that we had been using to capture governance information and having this detail put into hCue. CT Corporation does offer a conversion service. However, our corporate law department's summer intern was readily able to populate hCue with our data.

Simplicity and Accuracy through Through a Single Corporate Record

The single corporate record approach, a cornerstone of hCue, is a tremendous timesaver because it allows us to have all of our corporate governance information in one system. For example, we don't have to search through dozens of Word documents to see what officer of which subsidiary was last elected and on what date.

To have all that information in one place has been a benefit not only for our corporate law department in complying with Section 16 requirements but for other departments within our organization and for our outside counsel that need to know corporate structure detail. For example, we can now immediately identify whether someone is an officer of any subsidiary simply by typing in the person's name.

Securities Management: Quick Completion of Section 16 Filings

Our initial goal was to acquire a tool that would allow us to comply easily with the new filing requirements for insider reporting. The hCue SEC Compliance module more than lives up to our expectations.

While insiders, not the company they represent, are required to notify the SEC, SWS Group, like many other companies, provides notification services for its directors and officers. With hCue, the process is very straightforward: Pull up the insider's name from the system, identify the form that needs to be filed (Form 3, 4 or 5) and hCue automatically populates the form for that insider with the power of attorney, all the required access and filer codes and other detail. You only need to input the specific details of that particular transaction. This is simple as well because rather than presenting a form for you to search through and fill out, hCue populates the form based on the insider's transactions.

All that's left to do is click a button to file the form with the SEC. The system then sends an electronic confirmation letting the filer as well as the insider know the form has been filed, generally within 20 minutes, based on our experience.

Collaboration Extends Benefits

Beyond the Section 16 filings, one of the most convenient parts of a system like hCue is that you can designate certain levels of access (from the ability to view to the ability to edit certain portions) to various people and departments. For example, at SWS, certain individuals within our tax, internal auditing, compliance and human resources departments have access. We also have provided some of our law firms with access to view detail in hCue to support the corporate governance work they do for us.

We've found hCue to be a useful information tool not only for the more narrow corporate governance view but also for various other activities of the organization. For example, the product's collaborative capabilities already have proven to be a real timesaver in preparing our 10K filing and proxy. During this process, many departments were relying on hCue as a reference tool. We use it to extract biographical information on executives for the 10K and detail on ownership or other corporate information needed to file these documents.

Compliance Management, Corporate Management and More

There are a variety of compliance management tools, including calendars and checklists as well as corporate management tools to support board meetings and a corporate governance library, all built into hCue. We've only scratched the surface on leveraging these tools in the first few months we've been using the system. But we're impressed with what we have used.

Our tax department, for example, already has begun relying on hCue's compliance management tools for notification of annual filings and franchise due dates. hCue not only tracks this detail for the SWS Group holding company, but for all our subsidiaries. The system also notifies you of the dates based on where you're domiciled as well as where you're registered as a foreign corporation.

One of our next steps is to begin to use hCue's corporate management tools for meeting management. This will help facilitate communications with meeting attendees, better manage meeting details and manage a variety of other activities around these meetings.

While we set out to find an electronic filing solution, we've ended up with a whole lot more. We're pleased with the experience we've had with hCue and, while we may be on the front edge of the adoption curve, it's inevitable automated solutions will be the most common approach in the not-too-distant future. Corporate governance is just becoming too complex to go it alone.

With the Sarbanes-Oxley Act requiring that all Section 16 insider-trading transactions be reported to the Securities and Exchange Commission (SEC) in electronic format and within two business days, SWS Group Inc., like many companies, struggled with how to comply with the new law quickly and cost effectively.

SWS Group is a Dallas-based, full-service securities and banking firm with more than 1000 employees nationwide. The company has approximately a dozen subsidiaries including Southwest Securities, Inc., First Savings Bank, SWS Financial Services, Inc., and SWS Capital Corporation.

Searching for a Solution

Before Sarbanes-Oxley went into effect, the requirement had been that insider transactions could be reported as late as the 10th day of the month after the transaction. Under that structure, at the end of each month, as general counsel and corporate secretary for SWS, I would amass all the insider transactions that had occurred that month, pull up information we needed from various sources to fill out the Form 4s, as well as Forms 3 or 5 depending upon requirements, complete the forms manually and then mail them to the SEC.

Perhaps not the most high-tech method, but it worked. However, with the new rules looming last summer, our immediate focus was to find a solution that would allow us to file Section 16 forms electronically with the SEC within the new two-day timeframe.

Solutions to achieve this run the gamut, from vendors that will take your paper forms and make them EDGAR-ready for a per-transaction fee, to software programs that you can install on your system to Web-based corporate governance programs housed and maintained off site.

Initially, we looked at the flat-fee, per-filing services, such as those offered by financial publishing companies. As we started to add up the costs, which seemed to average about $40 per filing, it became apparent that, given the approximately 40 filings we average annually, we could justify acquiring a more comprehensive corporate governance tool.

We chose not to evaluate software applications that had to be installed at our site. We discussed this option with our technology executives and, while SWS Group is a very technology technology-savvy organization and there were no technical issues with putting a corporate governance solution on our servers, we did not want to acquire another software application to maintain and keep up to date.

A Web-based solution was the option that most appealed to us. We took a look at the hCue online corporate governance tool (www.hcue.com) from CT Corporation and were impressed with what we saw.

CT already is the registered agent for all of our corporate subsidiaries, so we are familiar with the company and the quality it provides. It became apparent to us very quickly that we could realize significant benefits immediately from hCue and even more over time as CT integrates its corporate governance, registered agent, corporate and UCC services.

Before finalizing our decision, we did have our internal IT auditor take a close look at hCue and talk in-depth with CT technical and security experts to ensure the product met our privacy and security requirements, which it did. That's been the extent that our technology group has had to be involved in the hCue implementation.

In fact, because the system is Web-based, implementation efforts were minimal. The most significant aspect was gathering all the various documents that we had been using to capture governance information and having this detail put into hCue. CT Corporation does offer a conversion service. However, our corporate law department's summer intern was readily able to populate hCue with our data.

Simplicity and Accuracy through Through a Single Corporate Record

The single corporate record approach, a cornerstone of hCue, is a tremendous timesaver because it allows us to have all of our corporate governance information in one system. For example, we don't have to search through dozens of Word documents to see what officer of which subsidiary was last elected and on what date.

To have all that information in one place has been a benefit not only for our corporate law department in complying with Section 16 requirements but for other departments within our organization and for our outside counsel that need to know corporate structure detail. For example, we can now immediately identify whether someone is an officer of any subsidiary simply by typing in the person's name.

Securities Management: Quick Completion of Section 16 Filings

Our initial goal was to acquire a tool that would allow us to comply easily with the new filing requirements for insider reporting. The hCue SEC Compliance module more than lives up to our expectations.

While insiders, not the company they represent, are required to notify the SEC, SWS Group, like many other companies, provides notification services for its directors and officers. With hCue, the process is very straightforward: Pull up the insider's name from the system, identify the form that needs to be filed (Form 3, 4 or 5) and hCue automatically populates the form for that insider with the power of attorney, all the required access and filer codes and other detail. You only need to input the specific details of that particular transaction. This is simple as well because rather than presenting a form for you to search through and fill out, hCue populates the form based on the insider's transactions.

All that's left to do is click a button to file the form with the SEC. The system then sends an electronic confirmation letting the filer as well as the insider know the form has been filed, generally within 20 minutes, based on our experience.

Collaboration Extends Benefits

Beyond the Section 16 filings, one of the most convenient parts of a system like hCue is that you can designate certain levels of access (from the ability to view to the ability to edit certain portions) to various people and departments. For example, at SWS, certain individuals within our tax, internal auditing, compliance and human resources departments have access. We also have provided some of our law firms with access to view detail in hCue to support the corporate governance work they do for us.

We've found hCue to be a useful information tool not only for the more narrow corporate governance view but also for various other activities of the organization. For example, the product's collaborative capabilities already have proven to be a real timesaver in preparing our 10K filing and proxy. During this process, many departments were relying on hCue as a reference tool. We use it to extract biographical information on executives for the 10K and detail on ownership or other corporate information needed to file these documents.

Compliance Management, Corporate Management and More

There are a variety of compliance management tools, including calendars and checklists as well as corporate management tools to support board meetings and a corporate governance library, all built into hCue. We've only scratched the surface on leveraging these tools in the first few months we've been using the system. But we're impressed with what we have used.

Our tax department, for example, already has begun relying on hCue's compliance management tools for notification of annual filings and franchise due dates. hCue not only tracks this detail for the SWS Group holding company, but for all our subsidiaries. The system also notifies you of the dates based on where you're domiciled as well as where you're registered as a foreign corporation.

One of our next steps is to begin to use hCue's corporate management tools for meeting management. This will help facilitate communications with meeting attendees, better manage meeting details and manage a variety of other activities around these meetings.

While we set out to find an electronic filing solution, we've ended up with a whole lot more. We're pleased with the experience we've had with hCue and, while we may be on the front edge of the adoption curve, it's inevitable automated solutions will be the most common approach in the not-too-distant future. Corporate governance is just becoming too complex to go it alone.