Top Democrat opposes bill facilitating e-delivery of investment documents

Legislation that would make electronic delivery the default method for sending documents to investors is headed to the House floor but carries with it strong opposition from a top Democrat.

On Wednesday, the House Financial Services Committee approved the Improving Disclosure for Investors Act, which would require the Securities and Exchange Commission to write a rule that permits registered investment companies, broker-dealers, investment advisors and other financial entities to deliver investor communications — such as account statements, trade confirmations, prospectuses and Form CRS — automatically via email.

The SEC currently allows electronic delivery if investors opt in. The legislation would make the method opt out, with investors having to request paper documents in lieu of email.

Rep. Maxine Waters, D-Calif. and the ranking member of the committee, said the bill is unfair to seniors who aren't tech savvy.

The bill “would allow brokerages and investment advisors to force millions of Americans to access their investment statements and other materials online, even if they don’t have access to the internet,” Waters said during a committee markup of 15 bills. “It is elitism at best, and discriminatory at worst. We need to ensure investors have a real choice.”

She pressed the bill’s author, Rep. Bill Huizenga, R-Mich., on whether e-delivery would be unfair to Michigan seniors.

Huizenga noted that his parents have passed away, but he used them as an example in responding to Waters.

“I would never do that to my parents,” Huizenga said. “I would never do that to a senior in my district. I would never allow anyone else to do that — to put them at a disadvantage.”

Huizenga insisted that seniors would not be forced to receive electronic delivery if they don't have an email address or if they choose to receive paper. During the debate, the committee chair, Rep. Patrick McHenry, R-N.C., pointed to the page and section of the bill that contained the opt-out provision.

“The seniors I’m concerned about don’t know how to opt out,” Waters said.

She cited strong opposition to the bill from AARP, the muscular organization representing U.S. seniors, as well as other interest groups.

The committee wound up approving the bill by voice vote. McHenry told Waters and other Democrats who raised concerns that they can be addressed as the legislation makes its way to the House floor for a vote by the full chamber.

The bill has two Democratic co-authors, Reps. Wiley Nickel of North Carolina and Jake Auchincloss of Massachusetts. It also has backing from many other Democrats, according to a financial industry lobbyist.

The measure is a priority for financial firms and industry groups, which argue that e-delivery is a more efficient, less expensive and more environmentally friendly way to communicate with investors.

“The [legislation] would enable customers to receive critical investment documents in a more secure, accessible, engaging and less wasteful manner, while preserving choice and the option to receive paper for those who prefer it,” Jim Febeo, senior vice president of public policy at Fidelity Investments, said in a statement. “We look forward to seeing this bill continue to advance in Congress and become law.”

The Securities Industry and Financial Markets Association cited a 2022 survey that shows 85% of retail investors are comfortable with default e-delivery as long as they can opt out.

“This result holds across all age groups, including seniors,” Melissa MacGregor, SIFMA deputy general counsel, said in a statement. “The legislation currently under consideration in Congress strikes the right balance and represents a step toward implementing an e-delivery framework suitable for the 21^st century.”

But Waters said that the financial industry is aware of the low click-through rates on electronic documents.

“Wall Street knows very clearly that no one is reading their disclosures when they’re online,” she said.