(NewsUSA) – From encyclopedias to microfiche, we’re surrounded by casualties of the digital age, relics of the era before the Internet revolutionized daily life. But even as technology has rendered many advancements, Americans still prefer — and need — important information on paper, especially when it comes to financial documents.
That’s why Consumer Action is calling on the Securities and Exchange Commission (SEC) to abandon its efforts to make e-delivery the default method for important mutual fund investment materials. While such a move would lower mutual funds’ operating costs, the true cost would likely be passed onto individual investors. We all need to tell Congress that this can’t happen.
Despite the fact that the SEC’s own study finds that 71 percent of American investors prefer to read shareholder reports in paper format, the agency approved and proposed Rule 30e-3, which would permit mutual funds to switch investors to electronic delivery of shareholder reports without ever receiving specific permission to do so.
Under the new rule, mutual funds would distribute a one-time notice, after which the burden would be shifted to investors to declare a continued preference for paper reports. If they don’t take explicit action to request paper delivery of these shareholder reports, investors will only be able to access them online.
Shareholder reports are critical tools containing the information investors need to make informed investment decisions, and many investors prefer and need to see that information on paper. In fact, of the more than 700 comments the SEC has received regarding Rule 30e-3, 94 percent of them express objection to the rule and urge the SEC to rescind it.
While Rule 30e-3 reflects the broader trend toward digitization, the reality is that most Americans prefer to receive financial information in paper form, and, for many Americans, viewing shareholder reports online is simply not an option. Even though e-delivery of shareholder reports has been available for years, only a small minority of investors have chosen that option. In fact, a Pershing survey conducted in 2013 shows that 30 percent of investors do not use the Internet for investment correspondence due to concerns about security. And according to the Pew Research Center, 41 percent of Americans over 65 years of age do not use the Internet at all, yet 34 percent of this population owns mutual funds.
Rule 30e-3 could also disenfranchise many small investors across the country, including those in rural areas without reliable Internet and those with smaller incomes. After all, analysis of census data commissioned by the advocacy group Consumers for Paper Options shows that households with incomes below the national average are 18 percent less likely to have Internet access.
Even more concerning is the fact that the SEC has tried this scheme before — with disastrous results. In 2006, the SEC shifted the mailing of proxy statements from paper to e-delivery, and from 2007 to 2009, proxy voting declined by 80 percent. E-delivery simply isn’t a preferred or
reliable method for important investment information.
Consumer Action is asking Congress to ensure that the SEC cannot implement Rule 30e-3, and we urge you to join us. Visit www.consumer-action.org and use our Take Action Center to quickly write your members of Congress. We need to tell lawmakers that the needs of individual Americans should come before the desires of the financial services industry.
Linda Sherry is the director of national priorities at Consumer Action, a national non-profit organization dedicated to empowering underrepresented consumers nationwide through multilingual financial education materials, community outreach and issue-focused advocacy.