SEC proposes electronic delivery as default for investor disclosures

The Securities and Exchange Commission has proposed a rule that would make electronic delivery the default channel for a wide range of required investor communications. Regulation E-Delivery would apply to issuers, broker-dealers, investment advisers and other market participants, while preserving investors’ ability to request paper documents.

The proposal would change a long-standing delivery model under which regulatory materials are generally sent on paper unless a recipient has affirmatively chosen electronic delivery. The SEC said the new approach would set conditions for electronic delivery without first obtaining that affirmative consent, replacing its older guidance-based framework for e-delivery.

Under the proposal, firms could satisfy federal securities law information-delivery obligations by providing materials electronically, subject to the rule’s requirements. The SEC said the measure could reduce paper, printing and postage costs for issuers and intermediaries, with savings ultimately extending to investors.

SEC Chairman Paul S. Atkins said in a statement that the agency had taken a step toward allowing financial firms to use technology in communications with everyday American investors. “In an age of artificial intelligence and blockchain technology, a default to paper delivery should be a relic, not a standard,” Atkins said.

What the rule would cover

The SEC said the range of documents eligible for electronic delivery would be broad. It would include prospectuses for funds and other issuers, annual and semi-annual shareholder reports for funds, proxy statements, trade confirmations, disclosures under Form CRS and Form ADV Part 2 brochures.

For investors, the mechanics would shift the presumption from paper to digital access. Instead of requiring an investor or other recipient to opt in before electronic delivery can be used, a covered firm could deliver required materials electronically if it complies with the rule’s conditions. Recipients would retain the right to receive paper delivery on request.

The commission said electronic delivery may allow disclosure to be more personalized, interactive, timely and efficient than paper delivery. It also pointed to potential benefits for accessibility and document retention, reflecting the way issuers, intermediaries and investors already use digital media to provide and obtain information.

Transition for paper recipients

The proposal includes a transition process for people and entities that currently receive regulatory information in paper form. According to the SEC, recipients who would be moved to electronic delivery would first receive two paper notices explaining the coming change and their ability to opt out.

That transition structure is designed to keep paper available for recipients who prefer it or need it, while allowing firms to move other communications to electronic channels. The SEC did not state that paper delivery would be eliminated.

The public comment period will remain open for 60 days after the proposing release is published in the Federal Register. After reviewing comments, the commission may decide whether to adopt a final rule, revise the proposal or take no further action.

This story draws on original reporting from Finextra Research.