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New Bill Requires SEC to Write E-Delivery Rule

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Reps. Bill Huizenga, R-Mich., and Jake Auchincloss, D-Mass., have introduced long-awaited bipartisan legislation requiring the Securities and Exchange Commission to write a rule allowing financial firms to deliver their documents in digital format.

The bill, H.R. 9570, the Improving Disclosures to Investors Act, was introduced late Thursday.

Fidelity said in a statement to ThinkAdvisor on Friday that the Boston-based firm “has long advocated for digital-first public policies, particularly the need for the Securities and Exchange Commission to transition the default method for sending regulatory documents from paper to digital.”

Fidelity commends Huizenga and Auchincloss’ “legislative proposal that acknowledges there is a more secure and efficient way to communicate with our customers, while ensuring they understand that paper delivery of their documents is always an option. We look forward to working with Congress to advance this innovative bill into law.”

A Fidelity spokesperson explained that before October of this year firms “used to be able to send open-ended mutual fund docs through notice and access mechanisms online, but [the SEC's] amendment to that 30e3 rule rolled back that function. Currently, all regulatory required SEC docs are paper default. This bill would apply to all outbound SEC documents.”

Eric Pan, president and CEO of the Investment Company Institute in Washington, added in another statement that the bill seeks to modernize the SEC’s regulatory framework and asks the agency to engage in rulemaking that permits “financial firms to provide disclosures to investors through electronic means.”

The Improving Disclosure for Investors Act “is an important step forward in modernizing delivery of investor disclosures,” Pan said. “The vast majority of investors have internet access. This bill reflects their strong preference to receive disclosure documents electronically, which also helps investors find the information that is most relevant to them.”

Key investor protection provisions, Pan continued, include “the ability for investors that prefer paper delivery to request it at any time.”

The bill applies to mutual funds, closed-end funds, exchange-traded funds, business development companies (BDCs), registered broker-dealers, registered investment advisors, registered transfer agents, and other SEC-regulated entities.

The bill also:

  • Requires the SEC to propose rules within 180 days of the bill’s enactment to allow for electronic delivery of all regulatory documents to investors and to issue final rules within 1 year after becoming law.
  • Provides for a 180-day transition period to move all customers to default electronic delivery for whom firms have an email address on file.
  • Mandates that self-regulatory organizations like FINRA and the MSRB amend their rules to conform to the default electronic delivery of documents to investors and customers.

Ken Bentsen, president and CEO of the Securities Industry and Financial Markets Association, added in another statement that “the time has come — and arguably is overdue — to implement electronic delivery as the default means for delivering investor communications, while giving investors the power to choose paper delivery if preferred.”

Bentsen cited a recent SIFMA survey, which found that “a large majority of retail investors regardless of income or age, want e-delivery for its environmental benefits, speed and convenience.”


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