SEC moves to simplify electronic delivery of investor communications

In mid-July, the Securities and Exchange Commission proposed "Regulation E-Delivery." This new rule allows financial entities like issuers, broker-dealers, and investment advisers to use electronic delivery to meet federal information disclosure requirements.

The rule would make information more readily accessible and useful for investors and others while preserving the ability to receive delivery in paper format on request. Currently, required regulatory information typically is delivered in paper format unless the recipient affirmatively elects otherwise.

The proposed e-delivery approach includes requirements and conditions under which required information could be delivered electronically without first obtaining affirmative consent. It generally would supersede the SEC’s decades-old, guidance-based e-delivery approach and provide savings to issuers, market intermediaries, and, ultimately, investors, in paper, printing, and postage costs, the agency said.

“In an age of artificial intelligence and blockchain technology, a default to paper delivery should be a relic, not a standard,” SEC Chairman Paul S. Atkins said in a statement.

To facilitate this new e-delivery approach, the SEC also proposed rescinding Rule 30e-3 under the Investment Company Act of 1940, which provides alternative means for registered investment companies to satisfy shareholder report transmission requirements. It also recommends amending current rules addressing the dissemination of proxy materials and offer materials.

The public comment period for the SEC's proposed rule closes on Sept. 21. Comments can be submitted formally through the SEC Internet Comment Form.

Reg E-Delivery, if adopted, would generally supersede the commission’s current guidance-based e-delivery framework and would permit e-delivery as the default method of delivery to investors, clients, and others subject to certain conditions.

It's the latest attempt by the agency to update its information processes. In March, the SEC announced plans to modernize its Enforcement Manual.

Trade associations express support

Mike Flood is senior vice president of the Center for Capital Markets Competitiveness at the U.S. Chamber of Commerce.

“The U.S. Chamber commends the SEC for proposing Regulation E-Delivery, a commonsense reform that will modernize investor disclosures and improve how critical information is delivered," he said in a statement. "Making e-delivery the default will give investors more timely, secure, accessible, and cost-effective communications.”

Securities Industry and Financial Markets Association CEO Kenneth E. Bentsen, Jr. agreed.

“The proposal is an important step toward updating regulatory requirements to reflect how investors access information today while giving investors the power to choose paper delivery if preferred,” he said in a statement.

He noted that SIFMA has advocated for a modernized approach that makes electronic delivery the default, reducing unnecessary costs and paper while improving the timeliness and accessibility of important disclosures.

Emily Micale, director of federal regulatory affairs for the Insured Retirement Institute, said that modernizing decades-old delivery requirements has long been an IRI priority.

"Electronic delivery provides a more widely accessible, cost-effective, and faster means of conveying and receiving information than paper delivery,” she said.

“Electronic delivery also creates opportunities for the industry to provide dynamic, real-time information rather than static data, making it easier for consumers to find, save, and retrieve information at the level of detail they prefer,” Micale added. “This proposal is a significant step toward a digital-first industry that meets consumers where they are.”

'Investors still get everything'

Jennifer Fox is vice president of federal and political affairs at Finseca and expressed similar thoughts in an email.

“Finseca supports the SEC's move to make electronic delivery the default for investor disclosures,” she said. “Financial security professionals and the clients they serve already manage their financial lives digitally, and Regulation E-Delivery aligns federal securities rules with that reality.

“Investors still get everything they're entitled to and still have the choice to opt out and receive paper, but providers are no longer forced to default to a paper-first system that slows delivery and adds unnecessary cost. This is a commonsense modernization that's long overdue," she added.

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