Aid To Compliance

RW Smith & Associates Inc. fills a small but important niche in the financial-services world. The Wall Street specialist firm acts as a "broker's broker," or agent that facilitates trades among companies such as Bear Stearns, Goldman Sachs, Lehman Brothers, and Merrill Lynch and guides them through the thicket of legal and regulatory issues surrounding municipal bonds. Along with that charter come compliance issues.

Despite all the talk about 24-hour trading and transparency of prices, the securities industry remains steeped in tradition. Smaller firms like RW Smith are accustomed to following the lead of their huge clients, mostly because they're not on the cutting edge themselves. But that's changing fast, largely because regulatory compliance is forcing companies to update their business processes and the technology that enables them. "The industry is undergoing a metamorphosis," says Richard Smith, director of IT at RW Smith, who predicts that in two years, it will bear little resemblance to what it is today. "We're in a huge compliance mode right now."

Most of the regulations that affect the securities industry come directly from the Securities and Exchange Commission and the National Association of Securities Dealers, which require companies to monitor all electronic communications and retain them on permanent media devices for a period of three years.

On a typical day, RW Smith processes between 1,700 and 8,000 electronic communications. To maintain compliance, it has installed MailStore from Information Management Research Inc. to monitor and archive them. The product works in the background, filtering E-mail and instant messages for content and indexing them for keyword searches. If regulators need to conduct an investigation, RW Smith's compliance officer would notify the IT department, which would provide investigators with either a custom CD or the original media.

Most important to RW Smith, MailStore hasn't busted its IT budget. "For $10,000, we got a complete E-mail archiving solution," Smith says. And the Wall Street firm isn't stopping there; it's looking to install another Information Management Research product next year. DataGrabber is a report-management system that provides one-stop electronic access to relational databases, corporate reporting systems, and document-management systems such as microfiche.