SEC Promotes Electronic Delivery with Proposed Rule
Securities and Exchange Commission (SEC) on Thursday proposed The Electronic Delivery Regulation, a new law that would allow issuers, broker-dealers and investment advisers to use electronic delivery for information delivery requirements under federal securities law.
The proposed Electronic Delivery Regulation will affect how rrecipients receive a range of required information, including, but not limited to, prospectuses of funds and other issuers, annual and semi-annual reports of fund shareholders, proxy statements, transaction confirmations, disclosures under Form CRS and Form ADV Part 2 brochures, listed by the SEC.
According to the agency, the proposed legislation would expand access to electronic delivery options while allowing issuers to continue to honor paper delivery requests. It would also allow these groups to send the required information via electronic delivery without first obtaining approval from the recipients to save issuers and investors from paper, printing and postage costs.
Currently, recipients must choose electronic delivery of required regulatory information. Otherwise, paper formats are automatically distributed to recipients.
SEC Chairman Paul S. Atkins said the proposal comes at a time when investors are embracing digitization, including the rise of blockchain technology and the use of artificial intelligence (AI).
“Today, the Commission took an important step toward enabling the financial services industry to use technology to benefit everyday American investors. By proposing to allow electronic delivery to become the default method for issuers, market intermediaries and others to communicate with investors, we are taking another step toward a regulatory framework fit for the modern era, a key pillar of my agenda,” Atkins said in statement. “In the era of artificial intelligence and blockchain technology, default delivery should be a relic, not a standard.”
The SEC also claims that offering electronic delivery provides investors with a “more personalized, interactive, timely and efficient” experience compared to paper options.
“This rule will replace the SEC’s outdated paper-based disclosure system with an alternative that improves efficiency without compromising oversight or investor protection. researchshows that funds and their shareholders could save between $3 billion and $4 billion over five years from switching to electronic delivery,” shared ICI President and CEO Eric J. Peng, who applauded the proposal.
If the offer is accepted, recipients will receive two paper notices to switch to electronic delivery. These notices will also include information about the change and how recipients can opt out of electronic delivery if they prefer paper delivery.
The proposed rule will now be subject to a 60-day federal comment period following publication in the Federal Register.
