With more than 90% of adults in the United States using the internet, nearly 89% filing federal taxes electronically—nearly 77% for individual returns—and most clients of financial firms choosing electronic delivery for investment-related communications, the time has come – and arguably is overdue – to implement electronic delivery as the primary means for delivering investor communications. For this to happen, the Securities and Exchange Commission (SEC) needs to update its rules and related guidance to reflect current reality.

In a newly published discussion paper, SIFMA and SIFMA AMG along with several other financial services trades outline how and why the SEC should amend relevant investor communications rules to permit firms to shift the default delivery method from postal delivery to e-delivery (through email, via a firm’s mobile application or website, or by other means of electronic transmission as may be available today or developed in the future).

SEC Chairman Jay Clayton recently acknowledged the shift in the preferred means of communication and heightened attention to e-delivery during the COVID-19 pandemic in his testimony before the House Financial Services Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets, stating:

[My] view on this has been further shaped by the work we have done in this COVID environment. It is clear that we live in an electronic communication world. Let me say that I am of the view that anyone who wants paper should be able to get paper, but what this period has shown us is the importance of electronic delivery and the effectiveness of electronic delivery.

E-delivery with notifications via email, website, mobile app, or text messaging is faster, safer and more timely than physical, hard-copy delivery. As the SEC has acknowledged, e-delivery allows investors to review documents in more user-friendly formats, when and where they choose, leveraging modern communications technology to create deeper and more productive investor engagement.

A recent FINRA Investor Education Foundation report shows “the percentage of investors who prefer paper documents has decreased considerably relative to 2015, while preference for all other methods has increased.” The preference for paper fell from 49% in 2015 to 36% in 2018, while the percentage of respondents expressing a preference for documents delivered by email rose from 27% to 33%.

The Pew Research Center has published a fact sheet  which shows that 73% of adults aged 65 and older use the Internet regularly.  The figure rises to 88% for those aged 50-64, and while Internet usage is near ubiquitous for those under 50 years old.  A separate Pew Research report from 2017 notes “Although seniors consistently have lower rates of technology adoption than the general public, this group is more digitally connected than ever. In fact, some groups of seniors–such as those who are younger, more affluent and more highly educated–report owning and using various technologies at rates similar to adults under the age of 65.”

The COVID-19 pandemic has demonstrated the effectiveness of new communications technology for uses ranging from routine personal tasks to functions vital to our economy and our financial markets – from virtual annual shareholder meetings and investor conferences to initial public offering roadshows and meetings between clients and financial professionals. These developments highlight the need for major changes to our existing delivery framework for investor communications.

The process is straight forward – following a one-year transition period, firms could begin delivering required investor communications electronically to existing clients for whom the firms have email addresses or other means to provide notice electronically that documents are available. New clients would be informed that they will be enrolled in e-delivery if they provide an email or other e-delivery address at account opening, even if they complete a paper application, unless they elect otherwise. In all circumstances, investors who do not provide a means for receiving required disclosures via e-delivery would continue to receive paper delivery, and any investor could elect to receive paper delivery at any time.

When the SEC opened the door to electronic delivery 25 years ago, it unleashed an evolutionary process driven by technological development that created a new paradigm in investor communications. If the SEC lifts today’s regulatory barriers, it similarly will foster the next evolution in the quality of investor communications and engagement. The logical and natural next step is for the SEC to review its rules on the delivery of investor communications and foster an e-delivery framework suitable for the 21st century.

Kenneth E. Bentsen, Jr. is president and CEO of SIFMA.