SEC CONNECT
Founder and CEO: Daniel Rumsey.
Revenue: Would not disclose; has made a profit since first year.
No. of employees: Five full time, plus three at outsourced unit in India.
Investors: Self-funded.
What makes the company innovative: Software developed called DCAF enables public companies to file the most common securities documents with the SEC, without the intervention of a filing agent, reducing both time and fees associated with the actions.
Perhaps more than ever in this era of increased federal scrutiny of publicly traded companies, the filing of public documents has to be done correctly, accurately and on time.
Yet that’s easier said than done for small reporting companies, or those with less than a $75 million market capitalization, which is the stock price multiplied by outstanding shares.
Daniel Rumsey, a longtime securities attorney, was familiar with the complexity and many steps involved with filing disclosure documents with the Securities and Exchange Commission and knew there had to be a better way.
His business, San Diego-based SEC Connect LLC, provides public companies with a Web site that allows them to file some of the most common documents with the commission without using securities filing agents, which can often be costly and time consuming. Rumsey is also managing partner at Disclosure Law Group which represents public companies for their securities reporting obligations.
“What I’ve developed is a reflection of my 25 years as a securities lawyer,” Rumsey said of the software he developed called Disclosure, Collaboration and Filing System, or DCAF. “What this software does is takes the best practices involving the document filings and combines them into a single platform so that securities lawyers can both draft as well as file reports with the SEC.”
Rumsey, 49, got the idea for the business while advising several public companies on the various aspects of disclosing information to the SEC and the general public through their securities filings.
Reducing Inefficiency
He said he often grew frustrated with the process because it was so inefficient, and took far longer than it needed, which resulted in clients paying more for his services than they should have.
“I looked at it as a terribly inefficient process, and I wanted to eliminate some of the steps, and in so doing, reduce the costs,” he said.
For example, Rumsey said one of the most common filings, called a Form 8-K, which discloses some material information concerning a company’s business operations, could sometimes take more than 24 hours to file. Using the DCAF system provided by SEC Connect, that same task could be accomplished in less than an hour, Rumsey said.
An average small company spends about $25,000 annually on fees associated with filing securities documents required by the SEC, he said.
The key to the success of the software Rumsey developed, with the help of outside contractors, is giving access to the planned filings to all the key people who have to sign off on the document before it’s officially filed, said Mike Abrams, chief financial officer for Bond Laboratories, an Omaha, Neb.-based company that makes sports nutrition drinks and dietary supplement products.
Satisfactory Results
Abrams said Bond Laboratories has been using the DCAF software for about nine months, and has been pleased with the results.
“Our total costs (for filing documents) are about half of what they used to be, and it’s taking me about half as much time that it used to take,” he said, without revealing actual dollar figures for the regulatory compliance.
While DCAF allows users to submit some of the most common filings online, including Form 8-K and Forms 3, 4 and 5 — those involving the purchase and sale of stock and options — it doesn’t cover the filing of more complex documents such as the 10-Q and 10-K, a company’s quarterly and annual financial statements, or its proxy statements.
Rumsey said these so-called “free writing documents” can be done by SEC Connect, which is a full-service filing agent. A company subscribing to the service and paying an annual fee of $5,000 wouldn’t incur any additional fees to file these longer and more complex documents.
For those companies that only want access to the DCAF software, the company charges an annual fee of $2,500.
Wireless to Software Transition
Rumsey began working on developing the DCAF software in 2007 after leaving Wave Wireless Corp., formerly P-Com Inc., a telecommunications business based in San Jose.
At P-Com, Rumsey initially was employed as the company’s general counsel and secretary. Later, he became its chief financial officer, and finally, its chief restructuring officer as he wound down the company’s operations.
He also worked as general counsel and secretary at Knowledge Kids Network from 1999 to 2002 and at Aspen Learning Systems Inc. from 1997 to 1999. At both those entities, he became more familiar with software, and how it could be used effectively to streamline previously tedious tasks. He decided to create software that would make filing securities documents much more efficient and quick.
“I wanted to adapt the technology to change the way lawyers file documents with the SEC,” he said.
Rumsey said in order to create DCAF he hired a group of software engineers, and provided them with instructions of what he wanted. He declined to reveal what that software development project cost him, except to say it was in the “hundreds of thousands of dollars.”
Officially launched in June, SEC Connect now has about 20 clients, and is gaining several each week as word gets out about what the business offers, Rumsey said.