A new controversial proposed rule by the U.S. Securities and Exchange Commission (SEC) would seem to make the delivery of sensitive financial documents easier. Right now, the process requires paper delivery unless the recipient affirmatively declares otherwise. The problem with the proposed rule is that the delivery option should be the choice of the consumer to get those documents via electronic or postal delivery. This is a regulation that would impact investors right to choose how to access important financial documents.
Although the SEC’s justification for the change sounds reasonable, defaulting investors into a new process to receive information may cause more friction and create hurdles for Main Street investors. According to the SEC, “regulation E-Delivery would make information more readily accessible and useful for investors and others while preserving the ability to receive delivery in paper format on request.” The current system allows a consumer to make that choice, not government bureaucrats. The process that has been used for years seems more reasonable to part-time investors who are not overly focused on these investments.
For the average family investing who does not spend much time dealing with investments, they will have this change imposed on them without their input. Once you rely on the paper delivery of documents, one would think the burden should be on the provider to give the investor and opportunity to decide on how to get information. Having a dramatic change in how one gets information about investment imposed by bureaucrats appears very problematic.
Saving money for large issuers, broker-dealers, investment advisers, and other entities in the space should not be the primary goal of the SEC when it comes to protecting investors from a lack of information about third parties with control over their money. One of the features is that this rule will, again according to the SEC, “provide savings to issuers, market intermediaries, and, ultimately, investors, in paper, printing, and postage costs.” That feature comes at a cost for many consumers who will lose meaningful consumer choice about how they receive information. When government changes the rules, many Main Street investors will suffer.
This is not a change that is unique to the SEC. Other government agencies are considering similar changes. As government agencies, financial institutions, and other private-sector companies accelerate the shift from paper to electronic communications, millions of Americans will be impacted. The burden will disproportionally impact seniors, low-income households, and rural residents, who continue to rely on, and prefer, physical mail for important bills, statements, and financial documents. They, not the institutional investors, will pay the price for a proposed change.
Senior investors will be disadvantaged the most, because they are the least likely to successfully navigate an online opt-out workflow. In addition, many investors, particularly those in rural areas with unreliable internet, individuals with disabilities, and those who intentionally keep financial documents separate from their primary email, will simply miss the window or not know it exists. Professional investors will adapt quickly, but many who are not focused on an hourly basis in investments will be unhappy with the change.
This proposed rule may create a more opportunities for fraud and identity thieves because of the way an individual will click through an email to get information. Anybody who has an email gets hit with fraudulent emails daily with links that allow bad actors to steal information. The very act of clicking on a link in an email should be something that a consumer should have to opt-in, instead of opting out of the that method of delivery.
The proposal sounds like a commonsense reform, but the problem with it is that it is a proposal is intended to save money – not protect consumers and investors of these products. Letting investors op-in to this system may cost issuers, broker-dealers, investment advisers, and other entities in the field resources, but it is a far better system then having government change the rules without significant consumer consent.
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