The federal government has a bipartisan opportunity to reduce costs and improve disclosures for investors, while in the process helping the environment, and eliminating expensive, unnecessary paper shuffling. Unfortunately, the Securities and Exchange Commission (SEC) struck out on an opportunity to get it done at its public meeting last month.
The SEC made this investor disclosure-cost-environment policy trifecta possible through a May 2015 proposal that would allow mutual funds to deliver shareholder reports electronically as the default option. SEC rules still require mutual funds to mail paper versions of shareholder reports-some 240 million reports each year-even as most of the American economy moves toward digital delivery for everything from medical records and utility bills to legal documents.
The current practice results in a waste of millions of dollars and an estimated 1.87 million trees annually, not to mention a complex, weighty end-product that is less user-friendly than an electronic document.
Under the SEC's proposal, funds would be required periodically to mail notices to all investors informing them of the change to electronic delivery and online availability of shareholder reports.
Opponents also have raised a straw man that investors, especially seniors, without Internet access would be harmed. In fact, with so many mutual funds available today, most investors have had to rely on the Internet for over a decade-ever since most daily newspapers stopped publishing weekday mutual fund prices-to obtain the fund information most important to investors.
Despite all the advantages that the new disclosure system could bring, the SEC whiffed by delaying consideration of this electronic delivery proposal. s time for the SEC to embrace needed regulatory changes to bring its disclosure regime out of the dark ages and into the modern era where we consume information on mobile phones rather than phone books, on microcomputers instead of microfiche.
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