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The Sarbanes-Oxley Act changes the rules for Securities and Exchange Commission filings. The deadline for filing “insider” transactions has been reduced from 40 days to two business days. And by July 30, 2003, all companies will have to electronically report insider transactions. That’s why publicly traded companies need to start building an effective electronic filing system. All that’s required are some simple Web tools and e-mail. Sarbanes-Oxley is the latest, but not the last, in a series of laws and regulations that require technology support for timely compliance. Fortunately, today’s technology can make the filing process so efficient that, with good process planning, time constraints should not be a problem. The same technical support tools can support the preparation and filing of electronic forms with any agency. To establish a system that works smoothly, follow these five steps: 1. Define the key players. A core group of staff from the legal, financial, and governance departments must define the “key” players-not only the persons initiating or involved in an action, but also those who must review and authorize the action. 2. Set policy for handling filings. The core group must translate the laws requiring compliance into clear language that all employees can understand and follow. New policies must be added to the corporate policy book, the employees’ handbook, and the board of directors’ policies manual. Companies may want to issue policy books for specific areas of compliance, such as tax and employment. Spell out the affected positions (and criteria), the entities, the types of actions, and the internal forms and approvals that must be completed for the specific action being referenced. 3. Educate the key players. Once the key players have been identified, the company must make sure they thoroughly understand their role in compliance. Impress on them the importance of supplying information promptly, once an action has been initiated. They must understand the deadlines and penalties for noncompliance. 4. Assign responsibilities. The corporate secretary or legal department must assign to specific staff members the responsibility to track the filing through its entire life cycle. In the legal department, a paralegal is generally responsible for entering data, routing the form for necessary approvals, making sure that the form complies with the required filing format, submitting it, and getting confirmation of receipt. 5. Set up a system. The IT staff and the legal staff should work together to determine the best technical system. Every aspect of form preparation flow can be automated. For each form, the legal department can create an electronic checklist of steps and people whose approval is needed. The form can be e-mailed to them automatically once the data is entered, including to an outside lawyer or securities broker. If the authorization must be sequential, the list can be built to prompt the paralegal. WHAT A SYSTEM SHOULD HAVE The most basic requirement is the ability to communicate and interface directly with the target agency. A company can set up its own proprietary filing system or use a vendor. Application Service Providers offer filing services on the Internet. ASP servers host the forms and update them when changes are made by regulators. Look for the following features when selecting a “best practices” system: • Security. A company intranet is secure, but it cannot allow routing to outside organizations like law firms or the government agency itself. For this reason, the Internet is more efficient and allows every step of the process to be automated. An ASP should provide complete data security by setting up a Virtual Private Network for each user corporation, encrypting transmissions and requiring passwords for user access. • A “form-centric” system. The system must allow the paralegal to enter data directly onto the government form on the computer screen. An ASP should provide an electronic form that can serve as a template. If your company is setting up its own system, create a new template. An ASP should update and amend the form to comply with any government changes. With a proprietary system, someone will have to update. • Electronic routing. You must be able to build an automatic routing system for approvals, and it has to allow you to add or delete “approvers” from the list. • Encrypted authorization. You want the approval process to be encrypted. • Direct electronic filing and confirmation. The system should allow direct electronic interface with the government agency. • Law-firm enabled. If your company contracts with outside firms to perform functions of the legal department or corporate secretary, the system must interface seamlessly with outside offices. Government agencies, both federal and state, are moving toward requiring electronic filing. Many companies that have automated the data-entry process are still going through a manual round of approvals. With deadlines as short as 48 hours, the system must be completely automated. With “best practices” technology, sound company policies, and key people who are up-to-date on the law, even the tightest filing deadlines can become routine. Pat O’Donnell is founder and president of Bridgeway Software Inc. in Houston. He can be reached at [email protected].

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