SEC Proposes New E-Delivery Approach

Today, the U.S. Securities and Exchange Commission proposed Regulation E-Delivery, a new rule that would allow issuers, broker-dealers, investment advisers, and other market intermediaries to use electronic delivery as the default delivery method to satisfy information delivery requirements under the federal securities laws, provided that certain conditions are met. These entities would not be required to obtain affirmative consent from investors and other recipients, but investors still would be able to opt out of default e-delivery and receive paper copies of information upon request.

For issuers, the practical significance is the change in default: paper delivery would become opt-in rather than the norm, which could meaningfully reduce the printing and mailing burden tied to prospectuses, shareholder reports, and proxy materials.

Proposed Reg E-Delivery includes the following key elements:

• Reg E-Delivery would address the e-delivery of “covered information” by “covered entities” to “covered recipients.”
  • Covered information: Any information required to be delivered to a covered recipient under the federal securities laws.
  • Covered recipients: Any current or prospective customer, client, investor, security holder, counterparty, or similar recipient of information.
  • Covered entities: Any person that has an obligation to deliver covered information to a covered recipient under the federal securities laws, such as issuers, investment advisers, and broker-dealers.
• A covered entity could rely on Reg E-Delivery to satisfy its delivery obligations where:
  1. The covered recipient has provided an electronic address,
  2. The covered entity has provided a prominent disclosure to the covered recipient that it will send covered information to the electronic address provided, and
  3. The covered recipient has not opted out of e-delivery
• Reg E-Delivery would provide for two permissible methods of e-delivery:
  1. For covered information that does not include personal financial information (PFI), a covered entity could electronically deliver covered information directly to a covered recipient’s electronic address.
  2. For covered information that includes PFI, a covered entity would be required to deliver a statement of availability of covered information to the covered recipient’s electronic address (e.g., an email with a link to the website address where the covered recipient can access the transmitted information). A covered entity also would be permitted to use this e-delivery method for covered information that does not include PFI.

To facilitate the new approach under Regulation E-Delivery, the SEC also proposes to amend the current rules addressing the dissemination of proxy materials and tender offer materials.

The proposal (Release No. 33-11430) is subject to a 60-day public comment period that will run from its publication in the Federal Register.