Why the SEC Should Default to E-Delivery
Technology advancements in recent years have helped shorten the process of completing securities transactions, and the SEC is working to transition to move the industry from two-day to one-day (T+1) settlement for investor trades. In this new paradigm, paper delivery is simply too slow and impractical. E-delivery is imperative to ensure individual investors receive their required disclosures within the SEC’s new timeframes.
Almost a quarter way through the 21st century, we should not have to debate the merits of providing information to clients in channels that are preferred, digestible, easier to maintain, and secure. Our clients get their news, entertainment, shopping, travel, and nearly every other service delivered through online channels because they are more efficient, safe, and an overall better experience. Why shouldn’t they have the same experience in financial services?
Going Green
The SEC’s antiquated mandate isn’t just slow, inconvenient, and widely unpopular; it’s also harmful to the environment. More than 830 million pages of paper are used every year for just two of the many documents subject to the SEC’s default paper delivery rules — more than 100,000 trees are cut down on a yearly basis to meet this requirement.
By promoting more efficient paper usage, e-delivery reduces major contributors to climate change, including greenhouse gas emissions, landfill waste, deforestation, water and air pollution, and water, wood, and energy consumption.
The SEC has already acknowledged the benefit of online delivery, opening the door in 2019 for investment companies to deliver shareholder reports in this manner. Today, the SEC has the opportunity to lead the expansion of e-delivery adoption. The commission can modernize its disclosure rules by following a five-point action plan:
Notify and prepare individual investors over a one-year transition period;
No change for current e-delivery clients;
Transition clients with existing e-delivery capabilities;
No change for clients without e-delivery capabilities; and
Inform new clients that they will be enrolled in e-delivery unless they opt-out.
It’s time to leave behind the old paper-default rules. The data is clear; modernizing the disclosure rules for these documents is all-around good for individual investors while also good for the environment.
Lisa Hunt is head of international services at Schwab.
