A group of financial industry associations on Tuesday urged the Securities and Exchange Commission to allow default electronic delivery for investor communications.
The associations are proposing that the SEC amend its relevant investor communications rules to permit firms to shift the default delivery method from postal delivery to delivery through email, website, mobile app or text messaging, which they say is faster and more timely, according to a discussion paper from the Securities Industry and Financial Markets Association, the SIFMA's asset management group, the Financial Services Institute, the Investment Adviser Association, the Committee of Annuity Insurers, the Insured Retirement Institute and the American Council of Life Insurers.
In the paper, the associations suggested a one-year transition period during which firms could begin delivering required investor communications electronically to existing clients for whom the firms have email addresses or other means to notify them electronically that documents are available. The firms would be able to do so with "appropriate notice" but without the need to obtain affirmative consent.
New clients would be informed when they open an account that they will be enrolled in e-delivery if they provide an email or other e-delivery address, even if they complete a paper application, unless they elect otherwise, the associations said.
But those who would like to continue to receive paper delivery can elect to do so and investors who do not provide a means for receiving required disclosures via e-delivery would continue to receive paper delivery, the associations said.
While testifying in June before the House Financial Services Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets, SEC Chairman Jay Clayton was asked about electronic delivery. He said his "view on this has been further shaped by the work we have done in this COVID environment. It is clear that we live in an electronic communication world. Let me say that I am of the view that anyone who wants paper should be able to get paper, but what this period has shown us is the importance of electronic delivery and the effectiveness of electronic delivery."
The default delivery change in investor communications by broker-dealers, mutual funds, investment advisers, public companies and business development companies should include prospectuses and other important investor communications, like customer account statements, customer confirmations of sale, and investment adviser brochures, the associations said.
"The industry has long supported the commonsense and environmentally friendly move to digital delivery, which is consistent with the way Americans want to receive information," said Kenneth E. Bentsen Jr., SIFMA president and CEO, in a statement. "Not only is e-delivery faster, safer and more timely than physical delivery, it also allows investors to review documents in more user-friendly formats, when and where they choose, leveraging modern communications technology to create deeper and more productive investor engagement. It's a logical next step for the SEC to take, and even more so in the time of the COVID-19 pandemic."
Similarly, a Labor Department rule that permits default electronic delivery of retirement plan disclosures went into effect in July.