$50,000 Cost Savings: SEC Filing Automation for Summit Capital

$50,000 Cost Savings: SEC Filing Automation for Summit Capital

Executive Summary

Summit Capital, a rapidly growing RIA managing over $750 million in assets, struggled with the time-consuming and error-prone manual preparation of SEC filings, leading to substantial compliance costs. By adopting a cloud-based SEC filing automation solution provided in conjunction with Golden Door Asset's compliance intelligence, Summit significantly reduced manual labor, improved filing accuracy, and ultimately realized $50,000 in annual cost savings. This case study details Summit's journey to enhanced compliance efficiency and reduced operational expenses.

The Challenge

Summit Capital experienced significant growing pains as their assets under management (AUM) increased from $500 million to $750 million in just two years. This rapid expansion placed a considerable strain on their existing compliance infrastructure, particularly concerning the preparation and submission of required SEC filings, including Form ADV, Form 13F, and Form PF.

Prior to automation, the compliance team spent an estimated 20 hours per week preparing and submitting these filings. This involved manually extracting data from multiple portfolio management systems, spreadsheets, and other disparate sources. This manual process was not only time-consuming but also highly susceptible to errors. Even minor inaccuracies could trigger regulatory scrutiny, leading to potential fines, reputational damage, and significant compliance headaches.

The cost of this manual process was multifaceted. Direct costs included the salaries of the compliance team members dedicating their time to these tasks. Specifically, the lead compliance officer was allocating approximately 50% of her time to filing-related activities, costing the firm roughly $35,000 annually in salary alone based on her $70,000 annual compensation.

Indirect costs were equally significant. The manual nature of the process meant that the compliance team was unable to focus on more strategic initiatives, such as proactive risk management, policy development, and employee training. Moreover, the constant pressure to meet filing deadlines and avoid errors led to increased stress and burnout among the compliance staff.

Specifically, Summit was facing challenges with its annual Form ADV updates. Manually compiling information on the firm's ownership, advisory business, disciplinary history, and code of ethics was taking upwards of 40 hours each year. This involved poring over client agreements, employee records, and internal policies to ensure accurate and complete disclosure. Furthermore, the manual creation of Form 13F filings, required for institutional investment managers with over $100 million in assets under management, was a particularly cumbersome process. Each quarter, Summit had to manually aggregate and report its holdings in over 500 different securities, a process that frequently took two full business days and resulted in significant errors requiring corrections.

The existing system was not scalable. As Summit continued to grow, the manual filing process threatened to become unsustainable. The firm recognized that it needed to adopt a more efficient and reliable solution to manage its compliance obligations and free up valuable resources for other critical activities. They estimated that without a change, the cost of compliance would increase by at least 20% in the next year alone.

The Approach

Summit Capital's approach to addressing these challenges involved a strategic shift towards automation and integration. The firm first conducted a thorough assessment of its existing compliance processes to identify the key pain points and areas for improvement. This involved interviewing compliance team members, reviewing existing workflows, and analyzing the costs associated with manual filing.

Based on this assessment, Summit determined that a cloud-based SEC filing automation solution was the most viable option. This solution would need to:

• Automate data extraction: Automatically extract relevant data from Summit's existing portfolio management systems, client relationship management (CRM) software, and other data sources.
• Validate data: Automatically validate the extracted data to ensure accuracy and completeness.
• Generate SEC forms: Automatically generate the required SEC forms, such as Form ADV and Form 13F, based on the validated data.
• Submit SEC filings: Securely submit the generated SEC forms to the SEC's EDGAR system.

Summit also recognized the importance of integrating the new filing solution with its existing portfolio management software. This integration would enable seamless data transfer and eliminate the need for manual data entry, further reducing the risk of errors and saving time.

After evaluating several different solutions, Summit selected a cloud-based SEC filing automation platform that offered the required functionality and integration capabilities. They also leveraged Golden Door Asset's expertise in compliance process optimization to ensure a smooth and effective implementation. Golden Door Asset's compliance intelligence platform offered Summit proactive insights into potential compliance risks and regulatory changes, allowing them to stay ahead of the curve and avoid potential violations.

The decision framework considered several factors, including cost, functionality, ease of use, security, and integration capabilities. The chosen solution offered a compelling combination of these factors and aligned with Summit's long-term growth strategy. David Park, the advisor responsible for overseeing Summit's compliance program, championed the initiative and secured buy-in from senior management by demonstrating the potential cost savings and efficiency gains.

Technical Implementation

The technical implementation of the SEC filing automation solution involved several key steps:

1. Data Integration: The first step was to integrate the SEC filing automation platform with Summit's existing portfolio management software, specifically [Hypothetical Portfolio Management Software Name]. This was accomplished through a secure API connection that allowed for automated data extraction. The system was configured to automatically extract data on a daily basis, ensuring that the filings reflected the most up-to-date information.

2. Data Mapping and Validation: Once the data was extracted, it was mapped to the corresponding fields in the SEC forms. The platform automatically validated the data to ensure accuracy and completeness. For example, it checked for missing required fields, invalid data formats, and inconsistencies across different data sources. Data validation rules were customized to reflect Summit's specific business practices and regulatory requirements.

3. SEC Form Generation: The platform then automatically generated the required SEC forms, such as Form ADV and Form 13F, based on the validated data. The forms were pre-populated with all relevant information, eliminating the need for manual data entry. The system also supported customized reporting templates, allowing Summit to tailor the forms to its specific needs.

4. SEC Submission: Finally, the platform securely submitted the generated SEC forms to the SEC's EDGAR system. The system automatically handled the technical aspects of the submission process, such as formatting the forms in the required EDGAR format and transmitting them to the SEC. Summit received confirmation of successful submission directly through the platform.

Specifically, for Form 13F, the implementation involved configuring the system to automatically pull data on all equity holdings exceeding 10,000 shares or a market value of $200,000. The system then aggregated this data, calculated the total market value of each holding, and formatted the information according to the SEC's reporting requirements. The entire process, which previously took two full business days, was now completed in a matter of hours. The solution also utilized a multi-factor authentication system and data encryption to ensure the security and confidentiality of sensitive financial information. The implementation team also trained Summit's compliance staff on how to use the new system and provided ongoing support to address any questions or issues.

Workiva was the chosen platform. Integration with [Hypothetical Portfolio Management Software Name] was achieved through Workiva's API. Data extraction rules were defined to pull position-level data, client information, and compliance policies. The integrated solution automatically flagged any discrepancies between the portfolio management system and the draft SEC filings, requiring manual review only for exceptions. Calculations of AUM, performance-based fees, and related person transactions were automated within the platform, significantly reducing the risk of mathematical errors.

Results & ROI

The implementation of the SEC filing automation solution yielded significant results for Summit Capital.

• Cost Savings: The most significant benefit was a reduction in annual compliance costs. By automating the SEC filing process, Summit reduced the time spent on these tasks by an estimated 80%. This freed up the compliance team to focus on more strategic initiatives, resulting in annual cost savings of approximately $50,000. This was achieved through a reduction in overtime hours, reduced reliance on external consultants, and improved efficiency of the existing compliance staff.

• Improved Accuracy: The automated solution significantly improved the accuracy of Summit's SEC filings. The platform's data validation capabilities ensured that the filings were free of errors and inconsistencies. This reduced the risk of regulatory scrutiny and potential fines. The error rate on Form 13F filings decreased from approximately 5% to less than 0.5%.

• Increased Efficiency: The automated solution significantly increased the efficiency of the SEC filing process. The entire process, from data extraction to SEC submission, was now completed in a fraction of the time it previously took. This allowed the compliance team to focus on other critical tasks, such as risk management and compliance training.

• Enhanced Compliance: The automated solution helped Summit to enhance its overall compliance program. The platform provided a centralized repository for all compliance-related information and facilitated collaboration among the compliance team. It also provided audit trails to document all compliance activities, making it easier to demonstrate compliance to regulators.

• Scalability: The automated solution provided a scalable platform that could support Summit's future growth. As the firm's AUM continues to increase, the automated solution will be able to handle the increased volume of filings without requiring additional staff.

Before the automation, Summit was spending approximately $85,000 annually on SEC filing-related activities (including salaries, consultant fees, and potential penalties). After the automation, this cost was reduced to approximately $35,000, resulting in a net savings of $50,000 per year. The ROI was approximately 143% in the first year alone.

Key Takeaways

• Automation is essential for efficient compliance: Automating SEC filings can significantly reduce costs, improve accuracy, and free up valuable resources.
• Integration is key: Integrating the SEC filing solution with existing portfolio management software is crucial for seamless data transfer and error reduction.
• Data validation is critical: Implementing robust data validation procedures is essential for ensuring the accuracy and completeness of SEC filings.
• Proactive compliance pays off: By investing in compliance automation, firms can proactively manage regulatory risks and avoid potential penalties.
• Seek expert guidance: Partnering with compliance experts can help firms navigate the complexities of SEC regulations and implement effective compliance solutions.

About Golden Door Asset

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