This month, the leader of the U.S Chamber of Commerce, via their Center for Capital Markets Competitiveness, told SEC Chair Mary Jo White that they are “extremely dismayed” regarding the August announcement that the SEC has “abandoned proposed Rule 30e- 3, which would permit mutual funds to deliver reports to shareholders by making them available on the internet.” This reversal is reported to be a result of lobbyists for the paper industry.
From Tom Quaadman, executive vice president of the Chamber’s Center for Capital Markets:
“We believe that the SEC should move away from a 1930’s paper based model and embrace the information delivery systems used by the general public, including investors and the businesses they invest in. Backing away from the Proposed Rule, which would further support the ability of investors to choose between paper-based or electronic delivery of shareholder reports, is a major step backwards. In fact, we believe that this decision runs counter to the Commission’s tripartite mission of protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation and ignores the significant demand for electronic access to such documents.”
Juxtapose this with what the WSJ reported last month when they first wrote on the SEC backtrack:
“It’s easy to think the world has gone digital,” said John Runyan, a former lobbyist for International Paper Co. who now runs Consumers for Paper Options. “The trend lines are in that direction, but why do we want to disadvantage the people who are least likely to manage that transition?”
Mutual funds depicted themselves as progressives countering Luddites, and as ardent environmentalists. Paper mailings are a vestige of “a bygone era” when people used to go to stores to rent VHS tapes, David Blass, general counsel for the Investment Company Institute, an industry group, said in a March speech. “Count all the harmful compounds emitted during paper manufacturing—along with the massive amounts of waste that discarded paper produces,” he said, “and we’re absolutely crushing the environment here.”
Consumer groups warned the SEC proposal would reduce readership of important documents. “We simply have not yet reached the point in this country where a sufficient percentage of investors prefer to receive disclosures electronically to justify a default to electronic delivery,” Barbara Roper, the head of investor protection at the Consumer Federation of America, told the SEC.
Confused? What they are talking about is bringing Notice and Access into the Mutual Funds’ communications environment.
There is a VERY APPROPRIATE historical precedent here. Don’t ANY of these people own equities?
As most all know in the equities markets, Notice and Access was adopted in 2008 by corporate issuers for their annual report and proxy materials. It’s the formal regulatory defined 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.
Currently, Mutual Fund fulfillment is still the opposite. Prospectuses and reports are printed and mailed by default and e-delivery is the opt-in. FYI: Our Mutual Funds teams support both media – for equities and funds. The front-end (detailed) work is exactly the same.
Now, if I were not such an optimistic person, regardless of the pundits above, I’d possibly imply that the battle over Rule 30e- 3 is not about shareholder transparency nor saving trees. The equities markets shaved millions off their IR budget… and (ignoring the detail that we are a top-thee EDGAR filer and financial printer) certainly and quite literally tons of 10-Ks and proxy books went directly into trash cans. That is undeniable.
One last point. Per the pundit above, I don’t know what is defined as a “sufficient percentage of investors,” but as you can read in our How are Investors Consuming your Investor Relations Content study, only 39% of Wall Street investors and 32% of Main Street investor prefer printed annual reports.