You Don't Call; You Don't Write

Six major financial trade associations urged the SEC to finalize its proposed Regulation E-Delivery, which would let firms make electronic delivery the default for investor communications. State securities regulators asked the agency to require an opt-in approach for existing paper customers instead.

The proposal would let covered entities default to electronic delivery while preserving investors' ability to opt for paper (see prior coverage). SIFMA, the Investment Adviser Association, the Financial Services Institute ("FSI"), the Investment Company Institute ("ICI"), the Insured Retirement Institute, and the Alternative Investment Management Association filed comment letters supporting the rule but seeking implementation changes.

The associations said the change would better match how investors access information, improve disclosure timeliness, and generate cost savings that firms could redirect to investors. ICI said the realized savings are likely to exceed the SEC's own estimate of $196.5 million for funds. Additionally, ICI urged the SEC to scrap or overhaul the NYSE processing fee schedule, which the trade group said drains $119 million to $151 million a year from funds and shareholders.

To avoid offsetting these benefits with new compliance costs, the groups asked the SEC to (i) give firms more flexibility in using electronic addresses and delivering information, (ii) align SEC requirements with self-regulatory organization rules, (iii) preserve existing householding and document-delivery practices, (iv) protect investors' electronic contact information from third-party disclosure, an ask from SIFMA and FSI that ICI opposes, (v) tailor paper-delivery and opt-out requirements to retail customers only, which SIFMA requested, (vi) avoid duplicative policies and recordkeeping obligations, and (vii) let institutional investors and their providers set their own electronic delivery arrangements, given their different needs from retail customers.

By contrast, the North American Securities Administrators Association ("NASAA") warned that the proposed transition process could disrupt existing customer accounts. NASAA recommended an opt-in standard for migrating existing paper customers, rather than the proposed opt-out approach. It also asked the SEC to give firms five years instead of two to complete the migration of their systems and customer base.