A recent rule adopted by the Securities and Exchange Commission, Rule 30e-3, would allow certain investment companies to use electronic delivery as the default delivery method for annual and semiannual reports, putting many Americans at a disadvantage.
Twin Rivers Paper Company has challenged the agency in federal court, urging a review of the rule’s potential negative effects. Rule 30e-3, which goes into effect in January 2019 with some exceptions, would require investors to opt in for paper statements. This means that unless investors proactively ask for paper statements, they will receive electronic files by default.
We, along with the Envelope Manufacturers Association trade group, the National Association of Letter Carriers, paper manufacturers Boise Paper and Monadnock Paper Mills, and others, have filed an amicus brief in support of Twin Rivers’ position on Rule 30e-3 and continued paper delivery unless recipients actively opt out.
“We are advocates for those who still prefer important communications to be printed on paper,” says Tom Howard, Domtar’s vice president of government relations. “We believe a citizen’s right to choose to receive essential information on paper should be protected, and we believe in protecting the interests of our industry.”
Though e-documents may seem ideal, making the switch away from paper, as would be driven by Rule 30e-3, has several pitfalls:
It’s too easy to click and forget.
Research shows that receiving paper statements by mail makes recipients more likely to read them. Investors and others prefer paper reports by a substantial margin. The SEC’s own research has shown that more than 70 percent of respondents want investor information on paper.
The World Wide Web isn’t worldwide, or even North America-wide.
Rule 30e-3 would have a disproportionate impact on population segments without access to broadband internet connections. Large swaths of the United States lack dependable broadband access and many Americans — senior citizens, rural Americans and low-income families, to name a few — depend on the United States Postal Service to deliver vital information concerning their investments. The latest data from the Pew Research Center showed that in 2018, only 50 percent of seniors (65 years and older) had broadband internet access at home. That is a substantial number of senior citizens whose only meaningful access to annual reports is through paper reports delivered by mail.
Not all internet access is equal.
Younger people, who may be more internet-savvy, are more often using the internet on a smart device, typically a smartphone. In our filing, we argue that reading and comprehending such detailed and complex information as is contained in a mutual fund report is not ideal on a 5-inch screen.
The internet isn’t secure.
A recent Paper and Packaging Board study found that many people think paper is a more secure mode of record keeping because it alleviates the fear of digital hacking. Seventy-two percent of respondents said that storing information on paper is valuable, and 79 percent said that paper still plays an important role in their lives even as technology becomes more advanced. This is especially true for important information like investment statements and other estate-planning documents.
The case against Rule 30e-3 is before the U.S. Court of Appeals in Washington, D.C. A date for oral arguments has not yet been set.