SEC Proposes Rule Making E-Delivery the Default Option
The Securities and Exchange Commission has proposed a rule to make e-filing the default option for registrants (including broker/dealers and advisers) when communicating with the agency (and investors).
The rule has been long-awaited (and often discussed), and Chairman Paul Atkins said in a statement that the change “will significantly reduce paper, printing and postage costs for issuers, intermediaries and ultimately investors.”
“Default paper offerings would result in ongoing unnecessary costs to U.S. investors that would reduce their investment returns,” Atkins said. “In an age of artificial intelligence and blockchain technology, paper delivery should be the default, not the norm, but legacy.”
As proposed, the rule would expand the ability of registrants to use electronic filing “to meet the requirements for the delivery of required regulatory information” under the securities laws. It also provides for “terms and conditions” that would allow registrants to electronically deliver regulatory information to investors without obtaining their consent.
In other words, the rule replaces the current paper filing requirement by requiring an opt-in for electronic communications.
Under the proposal, registrants may fulfill their obligations to deliver to investors via e-mail when they provide an electronic address, the firm has made a “prominent statement” to investors that it will send information electronically, and the investor has not opted out of e-mail.
“Reg E-Delivery adds requirements to the system’s general requirements, timing and ability to opt out of e-delivery, the ability to receive a paper version of covered information upon request, and requirements for websites where covered information is available,” the rule’s fact sheet reads.
The regulation allows for two versions of e-mails. For submissions that do not include personal financial information, a direct email to the investor is sufficient. In order to deliver, including PFI, the Registrant must provide an “availability statement” of the information (eg a link to a website where the investor can access the Confidential Information).
The proposal follows extended lobbying from advocacy groups, including the American Securities Association. President and CEO Chris Iacovella said the new rule “reduces the risk of fraud and brings SEC regulations into the modern age.”
The proposal also follows last year’s Improving Investor Disclosure Act introduced in the House of Representatives by U.S. Reps. Bill Huizenga (D-Mich.), Brad Sherman (D-Calif.), Brian Steil (R-Wisc.) and Jake Auchincloss (D-Mass.). The bill would direct the SEC to issue a bill that would allow registered companies to provide mandatory filings to clients by electronic delivery, but it did not come up for a vote.
According to the commission, the public comment period of the regulation will last for 60 days.
