SEC paperless mandate a bad deal for rural, elderly investors

SEC paperless mandate a bad deal for rural, elderly investors
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It’s not shocking that politics in Washington D.C. are often detached from the needs of Americans outside the Beltway. One example is the Securities and Exchange Commission’s (SEC) efforts to quietly give the financial industry more power over how Americans receive information about their investments.

When the SEC proposed and approved Rule 30e-3, which would allow mutual funds to switch investors to electronic delivery of shareholder reports without ever receiving permission, the agency likely didn’t expect the public outcry that ensued.

Nearly 1,000 Americans submitted comments to the SEC opposing Rule 30e-3, and since then, even more have told members of Congress that they don’t want it.

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The material in these reports isn’t just boilerplate disclosures; it includes fund performance results, details on holdings and fees and other information that is critical to many investors. The SEC is charged with protecting investors, and information disclosure is critical to that process.

 

As a result, the Senate Appropriations Committee has moved to block Rule 30e-3, but now it’s up to the House Appropriations Committee — specifically Rep. Rodney FrelinghuysenRodney Procter Frelinghuysen'Minibus' spending conference committee abruptly canceled GOP runs into Trump tax law in New Jersey Fortenberry named chairman of legislative appropriations subcommittee in House MORE (R-N.J.), chairman of the Appropriations Committee, and Rep. Tom GravesJohn (Tom) Thomas GravesHouse committee approves spending bill that would boost IRS funding House panel advances financial services spending bill Georgia governor vetoes controversial hacking legislation MORE (R-Ga.), chairman of the Financial Services and General Government Subcommittee — to stop Rule 30e-3 from becoming a reality.

It might sound innocuous, but the reality is that Rule 30e-3 ignores the needs and preferences of many Americans who are already marginalized. Investors can already choose to receive shareholder reports online (and almost 50 percent of investors have!), but those who prefer paper should not be forced into electronic delivery.

Although opponents of Rule 30e-3 are often painted as luddites, the National Grange, as well as other consumer groups like Consumer Action, which testified before the SEC Investor Advisory Committee on this matter, are fully supportive of efforts to streamline the investment company reports so that they don’t use as much paper and are more easily understood. 

What we don’t want is for yet another government agency to embrace the concept of implied consent — transitioning people to electronic delivery faster than the investing public wants it or can manage it — and in doing so disproportionately impacting rural Americans.

Analysis by the Pew Research Center shows that one-third of all American households don’t have internet access at home. What’s more, 40 percent of seniors, some 34 percent of whom are mutual fund investors, don’t even use a computer. 

Moreover, the digital divide in rural and small town America is real. Over 23 million rural and small-town citizens lack broadband access, which means they are deprived of the educational and economic opportunities enjoyed by their urban neighbors. How will the financial industry reach these investors?

The digital transition of our economy will not be reversed, yet we need to ensure that government facilitates it without forcing it on millions of Americans who may not be equipped to manage it and who should retain the choice of managing their investments in a way that makes sense for them. 

We all need the SEC to make good on its mission to protect investors and make it as easy as possible for investors to receive the information they need to make good investments. Streamlining investment company reporting is a good idea, which is another reason Congress should say no to SEC Rule30e-3.

Burton Eller is policy and legislative director for the National Grange, the nation's oldest general farm and rural public interest organization with more than 2,000 affiliated local, county and state Grange chapters across the U.S.