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One of the most well-worn phrases in public policy is saying some proposal is a “common sense” reform. We’ve all seen the regulatory decree or floor speech where a policymaker tries to describe some horribly complex, controversial proposal as being saturated with “common sense.”
But the term is not always misused, and in some cases a reform idea really is simple, straightforward and, well, common sense.
Such is the case with Securities and Exchange Commission (SEC) proposed Rule 30e-3, referred to as the “e-delivery rule.” The rule is pretty simple: it would give mutual fund shareholders the option of accessing their shareholder reports and other relevant documents online instead of having to receive paper statements in the mail. E-delivery was first proposed in 2015 and is part of the SEC’s efforts to modernize reporting systems to meet the needs and preferences of today’s investors.
Many investors would prefer the option of viewing shareholder statements online as opposed to poring through hundreds of pages delivered to their mailbox. Many other industries have embraced paperless options in different contexts. For example, many homebuyers are able to close electronically, and receipts of everything from coffee to taxi rides can be emailed.
Other entities have also embraced electronic delivery and communication. According to the IRS, 92% of tax returns are now e-filed, and eight years ago the IRS said that it would no longer mail paper tax forms, preferring to make them available exclusively in online formats.
What’s more, when information is provided to an investor in an electronic format, it leads to better outcomes and increases investor engagement with their savings. Electronic access to information
- Allows participants to respond quickly to retirement plan information;
- Ensures information remains up-to-date and is accessed by participants in “real time;”
- Provides information that is more accessible and digestible; and
- Provides information that can be more readily customized.
Electronic delivery is also more frugal. Compared to distributing documents by mail, e-delivery has significantly lowered costs, with savings from printing, processing, and mailing. As economic research shows, these cost savings would ultimately be passed back to participants, translating to lower expenses – and higher net investment returns – for participants.
Additionally, it has been proven that exposure to online tools typically leads individuals to increase the amount they investor modify their investment strategy to achieve a secure retirement. (Participants with e-delivery have deferral rates 72% higher than those without, and are also three times more likely to be saving enough for their retirement.)
Despite all of this, the SEC’s proposal to enhance investor freedom has somehow become controversial. Opponents of the e-delivery rule say that investors who rely on paper statements will be left at a disadvantage and will not be able to access important information. But they are forgetting that investors can choose to continue to receive paper statements if they so wish. Leaving it up to shareholders themselves to choose how they want their statements is fully aligned with the SEC’s mandate to protect investors.
An August 2016 Wall Street Journal article stated “American mutual funds estimate they spend more than $300 million every year chewing up 2 million trees to print and send investors 440 million densely written reports...” Because of the opposition and attempts to prohibit the SEC from finalizing the e-delivery rule – including efforts in Congress – investors continue to receive 1,000 page reports through the mail rather than automatically receiving digital delivery.
American investors have enough complicated choices. The misguided opposition to the e-delivery rule is standing in the way of a simple one. Members of Congress should not stand in the way of the SEC moving forward with this common-sense initiative.