Archive for the ‘EDGAR Quality Assurance’ Category

Hackers Breached the SEC and Profited Off Pre-Public Information

Friday, September 22nd, 2017

The SEC has reported that the EDGAR system was hacked by nefarious actors in 2016, and they were able to access companies’ financial disclosures before they were released publicly.  Although the SEC was able to patch the breach in their security systems and protocols fairly quickly, Chairman Jay Clayton admitted “that some may have used it to make illegal profits.”

You can read more here, here, and here.

Coming on the heels of the massive data breach at Equifax earlier this month, this news might rattle the cages of security-conscious public companies.  In his statement on the incident, Clayton also made clear that the SEC is “continuing to investigate the breach and its possible consequences,” and it seems likely that the SEC will be making inquiries regarding the path that pre-public financial information takes as it wends from the companies themselves, through the filing agents, and finally to the SEC.

As Reuters states in their article on the hack, “Cyber criminals have targeted financial information hubs before — the Hong Kong stock exchange and the Nasdaq stock exchange in New York were targeted by hackers in 2011.”  Hackers and cyber thieves see considerable money to be made accessing pre-public information, and they have proven as much by targeting stock exchanges and now even the SEC.

This is why RDG has always made the security of our clients’ pre-public information our highest priority.

RDG is proud of the fact that we do not send any of our clients’ documents overseas to be converted.  We also take pride in the fact that all our staff is US-based, as this is a central aspect of our commitment to both data security and customer service.  Another important part of our commitment to both data security and quality is the fact that all our EDGAR conversion and XBRL tagging software is proprietary.  We have built all our own tools for maximum security and quality, and we maintain all our tools and data on our own SSAE16 certified secure servers, which are located in a world-class co-location facility with redundant storage capacity, multiple back-ups for power, dual and backup internet connections, and full hardware redundancy.

We encourage public companies to ask their SEC filing agent some very important questions:

  • Do you send any part of my documents to a 3rd party for EDGAR conversion or XBRL tagging?
  • Do you send any part of my documents overseas for EDGAR conversion or XBRL tagging?
  • Are all of your employees US-based?
  • What are your security protocols and procedures?

Please contact us if you have any questions about the hack of the SEC or about RDG’s service.

We will be looking forward to hearing from you. Get in touch with us anytime!

Stewart Walker

415.643.6017

The Truth About The SEC’s RoboCop & The Importance of XBRL Data Quality

Monday, August 12th, 2013

If you find the deluge of information on the internet (and filling up your inbox) regarding XBRL, SEC Compliance, and the end of the Limited Liability period for SEC Filers, to be a bit overwhelming — you are not alone. We here at RDG Filings think so much of this information glut stems from certain sales tactics that hope to benefit from hysteria and misunderstanding. However, every now and then we find an article or a blog-post that is truly helpful and important. John Carney and Francesca Harker’s recent online article for Forbes is a valuable resource to anyone seeking to pick the value from the online rubbish.

The article from 8/09/2013 is titled “How SEC’s New RoboCop Profiles Companies For Accounting Fraud.” Carney and Harker offer an excellent explanation of the SEC’s new fraud detection tool—Accounting Quality Model (aka: AQM or RoboCop)—operates, and how corporate filers can avoid being flagged as potential wrongdoers by automated system. The authors also briefly profile Mary Jo White, who was recently appointed the Chairman of the SEC, and discuss the “renewed commitment by the SEC to seek out violations of financial reporting regulations” that she brings to the SEC.

When President Obama introduced Mary Jo White as the new Chairman for the SEC, he warned that “You don’t want to mess with Mary Jo.” To back that up, Ms. White, in an interview with the Wall Street Journal after her appointment said: “I think financial-statement fraud, accounting fraud has always been important to the SEC. It’s certainly an area that I’m interested in, and you’re going to see more targeted resources in that area going forward.”

You can read about some of the new initiatives the SEC has recently introduced under Mary Jo White’s leadership in a previous blog post by RDG Filings, but all the new initiatives are made possible primary by Accounting Quality Model (“AQM” or “RoboCop”) and the advent of XBRL filing. According to the Forbes Article, RoboCop “is an analytical tool which trawls corporate filings to flag high-risk activity for closer inspection by SEC enforcement teams.”

As Carney and Harker explain it, “RoboCop’s objective – to identify earnings management – is not a novel one.” It is not the analytical strategy that is unique, and it would not in-and-of-itself be concerning to SEC Filers. However, it is RoboCop’s “proficiency that should worry filers.” The SEC’s RoboCop is capable of extending the traditional earnings management approach “by including discretionary accrual factors in its regression.” Additionally, it is the speed with which RoboCop can raise potential red flags about a filing that is revolutionary for the SEC’s enforcement teams. As the Forbes article explains: “RoboCop is a fully automated system. Within 24 hours from the time a filing is posted to EDGAR, it is processed by the AQM and the results are stored in a database. The AQM outputs a risk score which informs SEC auditors of the likelihood that a filing is fraudulent.”

RDG wants to highlight this article for you because it not only offers a good explanation of the AQM-RoboCop system, but it also explains how it will affect SEC Filers. It could be easy to overlook the fact that all of the SEC’s new enforcement tools and initiatives are made possible by XBRL, and creating quality, compliant, and clean XBRL filings will only become more important as the SEC moves forward with these new strategies. Filing excellent XBRL documents will be the first and most important line of defense against the AQM-RoboCop system flagging your company for further SEC attention. Carney and Harker write that “because RoboCop is an automated system looking for oddities, it is unable to account for mistakes made. This is particularly important because the AQM relies on the newly-mandated XBRL data which is prone to mistakes by the inexperienced. Sloppy entries could land your company’s filing at the top of the list for close examination.”

As Carney and Harker state, software is unable to account for mistakes made. The next logical deduction is that it doesn’t matter which of the various software programs you use, because what’s more important is the person using the software, and their expertise in creating the documents.

Yes, we at RDG Filings are pleased that this article so strongly validates of our service model. Additionally, we think this article highlights this fundamental truth about XBRL reporting — If you do not know what you are doing, you are prone to XBRL mistakes that will put your company at risk of being flagged. It takes human understanding, experience, and expertise to build excellent XBRL filings; software cannot do it alone.

RDG Filings has years of experience doing XBRL tagging and filing, and we offer unparalleled Quality Assurance Services that will ensure your filings far exceed the standard of SEC compliance. RDG Filings has the knowledge, expertise, and experience to ensure that the AQM-RoboCop tool being deployed daily by the SEC are far less likely to flag your XBRL filings. Additionally, RDG can give you the support you need should the SEC’s examiners contact you with questions, because as Carney and Harker explain, the SEC’s “increased reliance on an automated model means examiners will come across filings with high risk scores which have not engaged in any fraudulent activity.” This means that “exam teams will be in more frequent contact with filers and will also more readily accept legitimate explanations for filing decisions. “ RDG Filings will ensure your XBRL filings are held to the highest standards, and we will also be a resource to help you “respond quickly to inquiries with a reasoned explanation for accounting choices.”

Carney and Harker conclude that it “is more important than ever for corporate filers to understand SEC enforcement strategies, especially the AQM, in order to decrease the likelihood that their firm will be the subject of an expensive SEC audit.”

We at RDG could not agree more with these conclusions, and we can help any SEC Filer who wants to know that their XBRL filings exceed SEC validation requirements, and will be in line with the enhanced standards, protocols, and guidelines already put forward by the FASB, the AICPA, the US-GAAP, XBRL.US, and others.

This is what we do at RDG Filings. Please get in touch if we can be of service.

Stewart Walker – SVP, Director of Sales.  415.643.6017

XBRL Provider Myth: “Legacy” vs. “New Wave”

Wednesday, June 26th, 2013

If your company is currently working with a printing company to get your XBRL and EDGAR filings, you may have heard from them that they are a ‘legacy’ company, or that they are the “oldest company listed” on the NYSE.  You may have heard this pitch as an excuse for overcharging you for XBRL and EDGAR filings.  XBRL is not yet 5 years old.  I have a difficult time seeing how it makes sense for a company to use its status as old guard ‘proven commodity’ to thereby claim that inflated prices are reasonable for a service that has not yet existed for a half-decade.  It is undeniable that your current provider may be a long-standing printing company.  However, a legacy for financial printing does not necessarily mean that the XBRL services they provide is of high quality, and I disagree with the notion that this legacy grants permission to charge more than is necessary for SEC filings.

Here are the facts:  RDG Filings has been around 25 years.  RDG has been providing EDGAR and compliance related services since its inception, and RDG has been doing XBRL since its inception in 2009.  I would hardly argue any of these facts represent RDG as ‘new wave.’  RDG provides you with excellent XBRL filings, superior service, far more reasonable editorial timelines, and your costs will be reduced substantially.

RDG Filings is a privately held company that is not beholden to shareholders or to our ‘legacy’ on the NYSE.  RDG Filings is beholden first and only to our clients, and we are committed to providing them with the best full-service SEC filings available.

-Stewart Walker, Director of Sales.

 

Be Practical, Not Scared of XBRL Limited Liability Expiration

Wednesday, June 5th, 2013

Let’s be practical (not afraid) about XBRL Limited Liability expiration

How the Fear Campaign makes it sound:

Some of our competitors are saying: “Once your company’s grace period ends, your XBRL files have the exact same material error liabilities as your traditional EDGAR HTML files….In the event of a misstatement or omission of a material fact in the XBRL files, the company along with its officers and directors can be held legally liable and be subjected to civil and criminal liability.”

The truth in this statement is “Yes, the documents are both deemed “filed” and liability is assumed for errors between the two formats of EDGAR and XBRL. They should match. If a company is attempting to defraud investors, and cannot prove it was an honest mistake (via Quality Assurance and a trail of some kind) then you are in trouble. More than likely, the SEC will issue a comment letter and ask why something is different or tagged in a specific way. The majority of the time, the worst case is an explanatory Correspondence filing or an amended filing explaining the error. While significant and potentially expensive mistakes, the reality is a world apart from “civil or criminal liability.”

Looking through the XBRL industry’s (service & software providers) websites, it is clear that a fear campaign has been the approved method for attracting business. RDG doesn’t believe in taking advantage of being the XBRL experts. Companies should be cautious, yes. However, is instilling fear really necessary? We believe that should be left to the ghosts. First, anyone reading this should note that the same fear campaign was instituted by these same companies when the original XBRL mandate was put into effect. While the task of preparing XBRL is a large one, it is not something to be afraid of. The sky will not fall when limited liability expires, but it is something to prepare for. Proper preparation of your company’s XBRL filing will minimize any impact of more detailed review of XBRL filings by the SEC.

Financial Executives Research Foundation – FERF Survey Highlights

Tuesday, January 15th, 2013

The Annual 2012 Survey on “SEC Reporting and the Impact of XBRL” conducted by the Financial Executives Research Foundation (FERF) has been published, and you may have seen a lot of buzz about it already.  We at RDG Filings are certainly very pleased with many of the survey’s findings.

The survey offers a lot of information, and we have found that the numbers speak for themselves. The survey clearly illuminates the fact that doing XBRL in-house is far more time consuming than utilizing a full-service outsource solution.  While the survey has been pushed by interested parties as evidence that doing XBRL in-house is the wave of the future – its findings show exactly the opposite. Those who take a “pro-in-house” reading also miss the fact that utilizing RDG Filings as a full-service solution promises very significant savings over your current provider.

The facts about the amount of time and money spent by companies who have chosen to bring the XBRL tagging and filing in-house are remarkable.  The respondents to this survey report having spent as many as five times more hours on their most recent XBRL filings than the respondents who use a full-outsource solution for XBRL filing.  That expenditure of time comes in addition to the licensing costs for the software and the costs for any technical support.  According to the FERF Survey, RDG Filings flat-rate pricing structure will represent anywhere from 35%-90% cost savings. In addition to the cost savings, RDG’s full-service tagging, consultation, and filing will save you even more time and money.

Additionally, the survey shows that among the full-service XBRL providers, only RDG Filings has 100% of its client responding that they are either “satisfied” or “very satisfied” with their XBRL Solution.

According to the survey, “Respondents cited their internal teams’ level of XBRL competency, getting educated on the technology, and the final review process as contributors to the bottleneck.”  If these are the primary concerns of financial reporting executives, how can it be concluded that refusing to utilize a resource like RDG Filings—whose core-competency is XBRL—is not the superior option?  A company can either utilize RDG’s full-service solution and benefit from our vast experience, knowledge, and our team of CPA XBRL experts, or a company can choose to bring this process in-house and have to develop all that experience and expertise themselves and maintain that knowledge base for a process they only have to do four times a year.  Where is value-add for a company to develop the XBRL precision and expertise that is going to be necessary now that the limited liability exemption is coming to a close?  I just can’t see it.

Also ignored by the pro-in-house reading of this survey is the fact that a sizable percentage of companies are going to begin utilizing an external accountant review to audit their XBRL filings.  This is understandable given the fact that the SEC will be phasing out the limited liability exemption in the coming months.  The need for thorough external review will be all the greater for companies using in-house software to create their XBRL documents because they will have neither the time nor the inclination to develop their XBRL knowledge and expertise to the level that will provide a sufficient degree of confidence in the accuracy, completeness, and compliance of the XBRL document they created.  RDG Filings provides each of our clients with a dedicated account manager who is an expert in XBRL and is either a CPA or has extensive auditing experience.  The value of outsourcing your XBRL filings to RDG can be measured no place better than in the confidence you will have in the precision of your XBRL filings.

It is clear to us, and judging from this survey, it is also clear to many others, that XBRL is not a task best done in-house.  Seeking the expertise of a third party provider with the experience and knowledge of a company like RDG is the best path toward excellent XBRL filings at a reasonable cost.

Please find these highlights and the full survey here.

Please contact us with any questions or for more information.

Rest Assured with RDG Filings

Friday, October 19th, 2012

In light of yesterday’s events in our industry, RDG Filings wants all of our clients to know that we are committed to the security of your data and to the timeliness and accuracy of your filings. RDG handles hundreds of earning releases each quarter, and we do so with the utmost care. As a privately-held family business, we treat your documents as though they are our own, because your filings are our business.

For some time, RDG Filings has had a series of robust technical systems and protocols in place, which ensure that filing errors are not part of the earnings-release process. We absolutely will not file without written authorization from the client, and we provide our clients with personalized service so there is no miscommunication as to who is handling your release.

Having confidence in your filing agent is paramount, and we offer the experience, expertise, and commitment to excellence you can count on.

  • All filings and releases done by RDG are approved for submission only after explicit sign-off by you, and subsequently by multiple RDG personnel, including management level supervisors.
  • RDG’s strict, pre-filing checklist is approved through both automated and manual processes
  • To protect our clients’ data to the highest degree possible, RDG has implemented the strongest data security protocols available to non-classified government entities
  • SEC Filings and compliance are RDG’s core competency, and attentive customer service is our primary focus.

RDG’s first commitment is to providing the highest quality customer service in the SEC Filings Industry.

You can be secure that RDG Filings has done and continues to do everything we can to eliminate errors from our processes and to be accountable to our clients.

Please feel free to contact us with any questions you or your team may have. We are here to provide you with excellent service every day of the year.

Sincerely,
Jonathan Elliott
COO
RDG Filings