With a surprisingly analog mentality, the SEC backtracked on its 2015 Proposed Rule 30e-3 which would allow Mutual Funds to move to a “Notice and Access” online model for the fulfillment and distribution of their semi-annual shareholder reports and quarterly portfolio holdings. This would save the Mutual Fund industry millions of dollars.
Currently, Mutual Fund document delivery is “Access THEN Notice.”
Here’s the difference:
Notice and Access, which was adopted in 2008 by corporate issuers for their annual report and proxy materials, is a process under which issuers and other soliciting entities can meet their proxy delivery requirements by posting proxy materials on a website, notifying shareholders of the availability of such materials and sending paper or email copies of such materials upon request.
- Digital documents and internet distribution is the default. Paper documents and hardcopy-mail distribution is the opt-in.
Access THEN Notice is the status quo for Mutual Funds as well as the exact opposite of the equities’ process.
- Paper documents and hardcopy-mail distribution is the default. Digital documents and internet distribution is the opt-in.
According to the Wall Street Journal, Mutual Funds annually print and mail 440 million shareholder reports at a cost of $308 million. The SEC emphasized data from a 2011 survey in which 59.5% of [Mutual Fund investors] respondents said they would read their Mutual Fund’s annual report online. 24.5% reported they prefer a mailed hardcopy report.
Apples learning from oranges
Much has been written of the initial trial and tribulations of Notice and Access for corporate issuers. Broadridge reports are the most detailed.
What most antagonists of Notice and Access commented about in 2008 and 2009 was the obvious drop in proxy voting by individual investors. Certainly, concerns about voting does not apply for Mutual Funds, but what DOES apply is the “speedbump” of poor communications to investors of this dramatic process change. Corporate investor relations and their corporate secretary have since corrected this – a tangible manifestation being the evolution to highly designed online proxy materials a.k.a. our interactive proxy materials documents.
In regard to Mutual Funds and Rule 30e3, Consumers for Paper Options, a lobbyist group funded by the paper industry’s largest tradegroup and several of North America’s biggest paper manufacturers, have taken the stance that “Notice and Access would impede access for many investors, especially the elderly, those with disabilities and minority Americans — all demographics that are less likely to have regular Internet access.’’
Per the WSJ: “In the end, big paper scissored big Mutual Funds.”
Beholden to our promise of intelligent value, Vintage is agnostic regarding analog or digital.
Our strengths lie in our omnichannel, flexible approach to document production and the subsequent transparent shareholder communications. Specifically for Mutual Funds, is our June 2016 launch of Vintage WorkStream – the concierge service for Investment Advisors / Fund Administrators to produce, SEC file and distribute Mutual Fund prospectus, shareholder reports and marketing materials.
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Capable of both traditional and automated publishing, Vintage Workstream is an agile document management platform that allows clients to access the best method of execution based upon the production requirements for each and every job.
The end documents easily and equally flow both online and onto a printing press.
Workstream traditional publishing:
- Simple workflow, lighter client responsibility and à la carte fees
- Each document managed and created individually by Vintage
- Favored stream for small complexes with limited series and Shareholder reports
Workstream automated publishing with DocuBuilder:
- Component content management workflow for large complexes with multiple funds
- All documents generated automatically from dynamic pool of approved content and data feeds
- Reduces redundancies and assures content integrity and design continuity across all funds’ documents
- Enterprise SaaS platform: shared resource across compliance and marketing teams
- Generate prospectuses and marketing materials from the same content pool
- Favored stream for large complexes with multiple series and classes of funds as well as aggressively growing complexes
PS: I totally made up the phrase “Access THEN Notice.”