SEC Proposes Rule Making E-Delivery the Default Option
The Securities and Exchange Commission proposed a rule to make e-delivery the default option for registrants (including broker/dealers and advisors) when dealing with the agency (and with investors).
The rule has been long-awaited (and often-discussed), and Chair Paul Atkins said in a statement that the change would “substantially reduce paper, printing and postage costs for issuers, intermediaries, and ultimately, investors.”
“Default paper delivery results in a constant source of unnecessary expenses that are paid for by American investors and reduce their investment returns,” Atkins said. “In an age of artificial intelligence and blockchain technology, a default to paper delivery should be a relic, not a standard.”
According to the proposal, the rule would expand registrants’ ability to use electronic delivery “to satisfy requirements to deliver required regulatory information” under securities laws. It would also provide “requirements and conditions” that allow registrants to deliver regulatory information to investors electronically without first obtaining their consent.
In other words, the rule would flip the current standard for paper delivery by requiring an opt-in for electronic communications.
Under the proposal, registrants could satisfy their delivery obligations to investors via e-delivery when they’ve provided an electronic address, the firm has provided a “prominent disclosure” to investors that it will send information electronically, and the investor hasn’t opted out of e-delivery.
“Reg E-Delivery also would include general requirements for the method, timing and ability to opt out of e-delivery, the ability to receive a paper version of covered information free of charge upon request, as well as requirements for websites on which covered information is available,” the rule’s fact sheet read.
The rule would allow two versions of e-delivery. For deliveries not including personal financial information, a direct email to the investor would suffice; for deliveries including PFI, the registrant would have to provide a “statement of availability” of the information (for example, a link to a website where the investor can safely access the sensitive data).
The proposal follows extended lobbying from advocacy groups, including the American Securities Association. President and CEO Chris Iacovella said the new rule would “reduce the risk of fraud, and bring the SEC’s rules into the modern era.”
The proposal also follows last year’s Improving Disclosure for Investors Act, introduced in the House of Representatives by U.S. Reps. Bill Huizenga (D-Mich.), Brad Sherman (D-Calif.), Bryan Steil (R-Wisc.) and Jake Auchincloss (D-Mass.). The bill would direct the SEC to draft rules allowing registered companies to deliver obligatory documents to customers via e-delivery, but it never reached a vote.
The public comment period for the rule will last 60 days, according to the commission.
