Washington, D.C., September 22, 2020 – The Securities Industry and Financial Markets Association, the SIFMA Asset Management Group, the Financial Services Institute, the Investment Advisers Association, the Committee of Annuity Insurers, the Insured Retirement Institute, and the American Council of Life Insurers today issued a discussion paper urging the Securities and Exchange Commission (SEC) to update its rules and related guidance to allow the implementation of a digital approach establishing electronic delivery as the primary means for delivering investor communications.  The Associations make clear that any investor wishing to receive paper communications can continue to do so.

“The industry has long supported the commonsense and environmentally friendly move to digital delivery, which is consistent with the way Americans want to receive information,” said Kenneth E. Bentsen, Jr., SIFMA president and CEO.  “Not only is e-delivery faster, safer, and more timely than physical delivery, it also 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.  It’s a logical next step for the SEC to take, and even more so in the time of the COVID-19 pandemic.”

With more than 90% of adults in the United States using the internet, nearly 89% filing federal taxes electronically, and most clients of financial firms choosing electronic delivery for investment-related communications, the Associations believe the time is ripe for the SEC to amend relevant investor communications rules to permit firms to shift the default delivery method to email, via a firm’s application or website, or by other means of electronic transmission, with appropriate notifications and safeguards.

The Associations propose a one-year transition period during which 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, but would have the option to elect physical delivery. Firms would not have to take follow-up steps to confirm electronic delivery. 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.

Changing the default to digital delivery for investor communications by broker-dealers, mutual funds, investment advisers, public companies, and business development companies should include prospectuses and other important investor communications, such as customer account statements, customer confirmations of sale, and investment adviser brochures, and accordingly will require amendments to various SEC, FINRA, and MSRB rules and related guidance.

Current rules impose obstacles to e-delivery because they may trigger the additional complicated consent requirements of the Electronic Signatures in Global and National Commerce Act (“E-Sign Act”).  As other government agencies have done, the Associations believe the SEC should clarify that its requirements are not intended to trigger the consent requirements of the E-Sign Act or take an affirmative step to clearly exempt appropriate rules from those requirements.

The Associations believe that allowing firms to utilize digital channels as the default means for communication, with protections to allow those clients who cannot (or decline to) accept electronic delivery to opt for physical delivery, will create a more positive experience for investors, as well as enhanced security and timeliness of information that can be accessed from anywhere, and urge the SEC to take timely action to modernize its framework for e-delivery.

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SIFMA is the leading trade association for broker-dealers, investment banks and asset managers operating in the U.S. and global capital markets. On behalf of our industry’s nearly 1 million employees, we advocate for legislation, regulation and business policy, affecting retail and institutional investors, equity and fixed income markets and related products and services. We serve as an industry coordinating body to promote fair and orderly markets, informed regulatory compliance, and efficient market operations and resiliency. We also provide a forum for industry policy and professional development. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA). For more information, visit http://www.sifma.org.