Financial firms have long advocated for digital-first public policies. Now they are pushing Congress to mandate the U.S. Securities and Exchange Commission (SEC), the federal agency charged with protecting investors, to expand electronic delivery (e-delivery). They are lobbying for the passage of the Improving Disclosure for Investors Act of 2023 (H.R. 1807), which passed out of the House Financial Services Committee on April 26, 2023.
The SEC currently allows e-delivery if investors opt in. However, the legislation sponsored by Rep. Bill Huizenga (R-MI-4), would make e-delivery the default method. If investors request paper documents in lieu of email, they would be required to opt out of e-delivery.
PRINTING United Alliance opposes the legislation due to several significant concerns. First, it ignores investors who prefer paper communications and have chosen to receive their disclosures via mail. If the law passes, it will force investors who prefer paper to reaffirm a decision they have already made and communicated to their financial institution. They should not have to jump through hoops again, instead their choice should be respected.
The proposed legislation is disenfranchising millions of seniors and other Americans without access to technology. Rep. Maxine Waters (D-CA-43) and ranking member of the House Financial Services Committee said the bill is unfair to seniors who may be less tech savvy. She cited strong opposition to the bill from the American Association of Retired Persons (AARP). According to Rep. Waters, the bill “would allow brokerages and investment advisors to force millions of Americans to access their investment statements and other materials online, even if they don’t have access to the Internet.” Federal agencies, including the SEC, should not discriminate against those that lack access to technology or the skills to use such.
Second, rather than “improving” disclosure for investors, as the bill’s title suggests, it does just the opposite by diminishing protections for investors. Micah Hauptman, Director of Investor Protection for the Consumer Federation of America (CFA), said, “This bill would allow firms to default investors into e-delivery when there is no evidence that investors who prefer e-delivery face any difficulties in exercising that choice—it is a solution in search of a problem—and would do so without regard for extensive evidence that the change is likely to reduce investor readership of key disclosures.”
Hauptman adds that e-delivery often requires multiple steps and dissuades recipients from accessing and viewing disclosures. And he points to evidence showing that, on average, the email click-through rate for the financial services industry is very low, at about 1 percent.
Third, some investors prefer paper over electronic communications for reasons of security. Digital access to investment disclosures and account statements puts personal information at risk of being stolen and abused. Cybersecurity threats continue to evolve, and they are becoming increasingly sophisticated and complex. Moving from paper to digital increases the opportunity for an attacker to steal valuable investor data through a variety of schemes.
Fourth, financial firms are notorious for making claims that going digital is environmentally friendly with “go green—go paperless.” However, the anti-paper sentiment is misleading and considered “greenwashing,” a public relations tactic that portrays a company’s practices as being more sustainable. The intention behind promoting digital communications is not necessarily to help the environment, but rather to cut costs and provide an economic benefit to the financial firm.
Fifth and finally, this bill would require the SEC to pass rules within a year to implement the bill, but if the SEC fails to hit that deadline, the bill would be self-effectuating. This provision undermines the SEC’s ability to pass rules to implement the bill in a thoughtful manner.
Interestingly, the SEC’s Investor Advisory Committee recommended that paper delivery continue as the delivery default, stating, “We recommend that account statements continue to be delivered to investors by paper as the default delivery method.” But the bill does not heed that recommendation.
The push to go paperless is detrimental to our industry. “It's crucial to preserve paper-based options for Americans who need it to access information and services, regardless of whether they use digital technology. Investors should have the option to choose e-delivery, but e-delivery should not be the default method. Consumers should have a real choice,” said Ford Bowers, CEO, PRINTING United Alliance.
The bill moves to the House floor for a vote by the full chamber. Please consider sending a letter to your representative urging them to vote against H.R. 1807. Take Action Today!
The Alliance will continue to monitor H.R. 1807 and provide updates as it progresses.
In this article Stephanie Buka, Government Affairs Coordinator, PRINTING United Alliance, addresses proposed federal legislation that would switch the default method of investor disclosures from paper to e-delivery. More information can be found at Business Excellence-Legislation or reach out to Steph should you have additional questions specific to how these issues may affect your business: sbuka@printing.org.
To become a member of the Alliance and learn more about how our subject matter experts can assist your company with services and resources such as those mentioned in this article, please contact the Alliance membership team: 888-385-3588 / membership@printing.org.