[Federal Register Volume 91, Number 138 (Tuesday, July 21, 2026)]
[Proposed Rules]
[Pages 45884-45989]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2026-14679]
[[Page 45883]]
Vol. 91
Tuesday,
No. 138
July 21, 2026
Part II
Securities and Exchange Commission
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17 CFR Parts 240, 270, and 303
Electronic Delivery of Information Under the Federal Securities Laws;
Proposed Rule
Federal Register / Vol. 91, No. 138 / Tuesday, July 21, 2026 /
Proposed Rules
[[Page 45884]]
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SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 240, 270, and 303
[Release No. 33-11430; 34-105921; 39-2564; IA-6980; IC-36252; File No.
S7-2026-25]
RIN 3235-AN57
Electronic Delivery of Information Under the Federal Securities
Laws
AGENCY: Securities and Exchange Commission.
ACTION: Proposed rule.
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SUMMARY: The Securities and Exchange Commission (the ``SEC'' or the
``Commission'') is proposing Regulation E-Delivery. The proposed rule
sets forth conditions for covered entities to deliver covered
information to covered recipients electronically without first
obtaining their affirmative consent. The proposed rule further
establishes conditions under which the Commission would consider
delivery requirements under the Federal securities laws to be satisfied
by electronic delivery. The Commission also is proposing to rescind the
rule providing alternative means for registered investment companies to
satisfy shareholder report transmission requirements, and to amend
rules addressing the dissemination of proxy materials and tender offer
materials.
DATES: This proposal was published in the Federal Register on July 21,
2026. Comments should be received on or before September 21, 2026.
ADDRESSES: Comments may be submitted by any of the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/comments/s7-2026-25/electronic-delivery-information-under-federal-securities-laws); or
Send an email to [email protected]. Please include
File Number S7-2026-25 in the subject line;
Paper Comments
Send paper comments to Vanessa A. Countryman, Secretary,
Securities and Exchange Commission, 100 F Street NE, Washington, DC
20549-1090.
All submissions should refer to File Number S7-2026-25. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's website (https://www.sec.gov/rules-regulations/public-comments/s7-2026-25). Do not include personally identifiable
information in submissions; you should submit only information that you
wish to make available publicly. We may redact in part or withhold
entirely from publication submitted material that is obscene or subject
to copyright protection. Studies, memoranda, or other substantive items
may be added by the Commission or staff to the comment file during this
rulemaking. A notification of the inclusion in the comment file of any
such materials will be made available on the Commission's website. To
ensure direct electronic receipt of such notifications, sign up through
the ``Stay Connected'' option at www.sec.gov to receive notifications
by email.
A summary of the proposal of not more than 100 words is posted on
the Commission's website (https://www.sec.gov/rules-regulations/2026/07/s7-2026-25).
FOR FURTHER INFORMATION CONTACT: Andrew Deglin, Pamela Ellis, and Sam
Thomas, Senior Counsels; Ted Uliassi, Branch Chief; Amanda Hollander
Wagner, Senior Special Counsel; Brian McLaughlin Johnson and Robert
Holowka, Assistant Directors, Rulemaking Office, Division of Investment
Management, (202) 551-6792 or (202) 551-6787; Laura McKenzie, Special
Counsel, or Christina Chalk, Associate Chief, in the Office of Mergers
and Acquisitions, (202) 551-3440; Kasey Levit, Special Counsel, or
Heather Maples, Senior Special Counsel, in the Office of Chief Counsel,
(202) 551-3500, Division of Corporation Finance; Emily Hellman and Leah
Levi, Special Counsels; Meredith MacVicar, Senior Special Counsel;
Kelly Shoop, Branch Chief; Lourdes Gonzalez, Assistant Chief Counsel,
Office of Chief Counsel, Division of Trading and Markets, (202) 551-
5550; Kevin Schopp, Senior Special Counsel, Office of Clearance and
Settlement, Division of Trading and Markets, (202) 551-5550, Securities
and Exchange Commission, 100 F Street NE, Washington, DC, 20549.
SUPPLEMENTARY INFORMATION: The Commission is proposing to amend or add
the following rules and forms:
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Commission reference Name 17 CFR citation
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Securities Exchange Act of 1934. Rule 14a-1........ Sec. 240.14a-1.
Rule 14a-2........ Sec. 240.14a-2.
Rule 14a-3........ Sec. 240.14a-3.
Ruel 14a-5........ Sec. 240.14a-5.
Rule 14a-7........ Sec. 240.14a-7.
Rule 14a-13....... Sec. 240.14a-13.
Rule 14a-16....... Sec. 240.14a-16.
Rule 14a-101...... Sec. 240.14a-
101.
Rule 14b-1........ Sec. 240.14b-1.
Rule 14b-2........ Sec. 240.14b-2.
Rule 14c-1........ Sec. 240.14c-1.
Rule 14c-2........ Sec. 240.14c-2.
Rule 14c-3........ Sec. 240.14c-3.
Rule 14c-4........ Sec. 240.14c-4.
Rule 14c-7........ Sec. 240.14c-7.
Rule 14c-101...... Sec. 240.14c-
101.
Rule 14d-5........ Sec. 240.14d-5.
Rule 17a-3........ Sec. 240.17a-3.
Investment Company Act of 1940.. Rule 30e-3........ Sec. 270.30e-3.
Regulation E-Delivery (17 CFR Regulation E- Sec. Sec.
303.100 through 303.104). Delivery. 303.100 through
303.104.
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[[Page 45885]]
Table of Contents
I. Introduction and Background
A. Current Commission Approach Regarding the Use of Electronic
Media
B. Information About E-Delivery Preferences
C. Other Developments Informing the Commission's Approach to
Delivering Information
D. Overview of Proposed New E-Delivery Framework
II. Discussion
A. Considerations and Goals Informing Proposed E-Delivery
Approach
B. E-Delivery Methods and Requirements
1. General Use and Scope of Proposed Rule
2. Disclosure of E-Delivery
3. Delivery of Statement of Availability of Covered Information
to an Electronic Address
4. Direct Delivery of Covered Information that Does Not Include
Personal Financial Information to an Electronic Address
5. Delivery of Covered Information that Includes PFI
6. Timing, Form, and Manner of E-Delivery
7. Obligation of Covered Entities to Provide Paper Copies of
Covered Information and Permit Opting Out of E-Delivery
8. Updates to Electronic Address and Choice of Type of
Electronic Address
9. Identifying and Remediating E-Delivery Failures
C. Requirements for website Availability of Covered Information
D. Special Provision for Covered Recipients Receiving Paper:
Required Notices and Transition Process for Default Electronic
Delivery
1. Scope of Application and Transition Process for Default E-
Delivery
2. Required Notices During the Transition Process
E. E-SIGN Act
F. Amendments to Current Commission Rules to Facilitate Proposed
E-Delivery Approach
1. Rescission of Rule Addressing internet Availability of Fund
Shareholder Reports
2. Amendments to Requirements for the Dissemination of Proxy
Materials and Tender Offer Materials
G. Existing Commission Guidance
H. Compliance Period
III. Economic Analysis
A. Introduction
B. Baseline and Affected Parties
1. Guidance and Existing Regulations Governing Use of Electronic
Media
2. Affected Parties
3. External Studies
C. Benefits and Costs
1. Benefits
2. Costs
3. Monetized Benefits and Costs
D. Effects on Efficiency, Competition and Capital Formation
E. Reasonable Alternatives
1. Charging for Paper Delivery
2. Additional Paper Notices Following Transition to Default E-
Delivery
3. Access Equals Delivery Approach to E-Delivery
4. Alternative Notice and Access Approach To E-Delivery
(Permitting Paper Notice)
5. Alternatives to Proposed Definition of PFI and Requirements
Regarding E-Delivery of Covered Information Containing PFI
6. Alternatives to Proposed Transition Process
7. Alternatives for Smaller Covered Entities
F. Request for Comment
IV. Paperwork Reduction Act Analysis
A. Reg E-Delivery: Disclosure of Electronic Delivery
B. Reg E-Delivery: E-Delivery Methods
C. Reg E-Delivery: Delivery of Covered Information in Paper on
Request
D. Reg E-Delivery: Identifying and Remediating E-Delivery
Failures
E. Reg E-Delivery: Requirements for website Availability of
Covered Information
F. Reg E-Delivery: Initial and Follow-Up Notices
G. Reg E-Delivery: Aggregate Paperwork Reduction Act Burden
H. Rule 30e-3
I. Regulations 14A and 14C and Rule 14d-5
J. Request for Comment
V. Initial Regulatory Flexibility Analysis
A. Reasons for and Objectives of the Proposed Actions
B. Legal Basis
C. Small Entities Subject to the Proposed Rule
D. Projected Reporting, Recordkeeping, and Other Compliance
Requirements
E. Duplicative, Overlapping, or Conflicting Federal Rules
F. Significant Alternatives
G. General Request for Comment
VI. Congressional Review Act
VII. Other Matters
Statutory Authority
I. Introduction and Background
The Commission is proposing Regulation E-Delivery (``Reg E-
Delivery'' or the ``proposed rule''). If it is adopted, issuers and
market intermediaries, among others, that comply with the conditions of
Reg E-Delivery would be assured that they have satisfied, through the
use of electronic delivery (``e-delivery''), applicable requirements to
deliver required disclosures, reports, and other regulatory materials
under the Federal securities laws.\1\ Reg E-Delivery would not require
obtaining affirmative consent from investors and others before using e-
delivery. Currently, many required regulatory disclosures and reports
under the Federal securities laws typically are delivered in paper,
unless the person with a right to receive these disclosures and reports
affirmatively elects otherwise. If adopted as proposed, Reg E-Delivery
generally would supersede the Commission's current approach in its E-
Delivery Guidance, which is based largely on an ``opt-in'' approach to
e-delivery.\2\
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\1\ Reg E-Delivery, if it is adopted, would be codified at 17
CFR 303.100-104. This release generally uses the term ``e-delivery''
unless the context would more appropriately require ``electronic
delivery'' (in particular, referencing specific provisions of
proposed Reg E-Delivery that use the term ``electronic delivery'').
Reg E-Delivery would address only the procedural aspects under the
Federal securities laws of electronic delivery, and, except as
provided in the proposed rule, would not otherwise affect the rights
and responsibilities of any party under the Federal securities laws.
See 1995 Guidance, infra footnote 3, at text accompanying n.11.
\2\ If adopted as proposed, Reg E-Delivery would supersede the
1995 Guidance and 1996 Guidance in their entirety, with certain
principles from these releases reaffirmed in any release adopting
Reg E-Delivery. We anticipate that we would retain the majority of
the 2000 Guidance, and only certain sections and examples would be
superseded by Reg E-Delivery. See infra footnote 3 and section II.G.
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The Commission has long appreciated that using electronic media to
deliver regulatory information may enhance a recipient's ability to
access, research, and analyze this information as well as provide
issuers, market intermediaries, and others with a rapid, cost-
efficient, widespread, and secure delivery method.\3\ Our proposal
draws on the Commission's experience of more than 30 years with the use
of electronic media to provide investors and others with information.
Our proposal also reflects the significant advances in electronic
communication technologies and the increased adoption of those
technologies, particularly following the COVID-19 pandemic, that have
occurred since the Commission's initial publication of guidance on the
use of electronic media to deliver required regulatory documents and
reports.\4\ These advances and adoptions include, among others, the
breadth of means through which individuals can now access data, such as
through smartphones and tablets; and the growth of cloud storage of
data (in turn increasing the data that is available online). More
recently, particularly in the financial industry, these advances and
potential technological breakthroughs also include, among others, the
use of artificial intelligence (``AI''); the use of blockchain
technology
[[Page 45886]]
in connection with securities offerings and the transfer of shares; and
the issuance, custody and trading of assets that are issued or
transferred using distributed ledger technology.
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\3\ See, e.g., Use of Electronic Media for Delivery Purposes,
Investment Company Act Release No. 21399 (Oct. 6, 1995) [60 FR 53458
(Oct. 13, 1995)] (``1995 Guidance'') (stating that the Commission
believes that the use of electronic media should be at least an
equal alternative to the use of paper-based media, and accordingly,
issuer or third-party information that can be delivered in paper
under the Federal securities laws may be delivered in electronic
format); Use of Electronic Media by Broker-Dealers, Transfer Agents,
and Investment Advisers for Delivery of Information, Investment
Company Act Release No. 21945 (May 9, 1996) [61 FR 24644 (May 15,
1996)] (``1996 Guidance''); Use of Electronic Media, Investment
Company Act Release No. 24426 (Apr. 28, 2000) [65 FR 25843 (May 4,
2000)] (``2000 Guidance'') (1995 Guidance, 1996 Guidance, and 2000
Guidance, collectively ``E-Delivery Guidance''); see also infra
section I.B.
\4\ See infra section I.B.
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In light of these developments, diverse financial industry
stakeholders have suggested through multiple channels, including in
response to Commission rulemakings, that the Commission consider
updating the current e-delivery framework.\5\ After considering their
suggestions, which we discuss in more detail below, we are proposing a
new rule that reflects the preferences of many individuals and other
recipients of information. Proposed Reg E-Delivery would set forth
conditions for delivering information electronically without first
obtaining recipients' affirmative consent, while providing the ability
to ``opt out'' of e-delivery and promptly receive regulatory
disclosures and reports in paper, free of charge.
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\5\ See infra sections I.B and I.C.
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Proposed Reg E-Delivery also would establish conditions under which
the Commission would consider delivery requirements under the Federal
securities laws to have been satisfied by e-delivery. These conditions
reflect our understanding of common e-delivery practices, while
providing flexibility to accommodate others that may arise. They are
also designed to help ensure that materials are delivered in a user-
friendly format while also protecting personal financial
information.\6\ The proposed conditions furthermore are designed to
provide relevant and consistent information about the process to opt
out of e-delivery, receive paper copies of covered information upon
request, and update one's electronic address (all free of charge). This
would help ensure that investors and other recipients receive
information in their preferred format, particularly in view of the
default e-delivery approach under the proposed rule. We recognize that
these conditions may differ from how some firms currently deliver
materials electronically, the terms of which are often set forth in
account agreements or otherwise by contract.\7\ To the extent those
firms wish to rely on Reg E-Delivery to deliver information using e-
delivery, they will need to alter certain of their e-delivery practices
to align with the conditions imposed by Reg E-Delivery.
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\6\ See infra section I.B. We understand, for example, that some
current e-delivery methods may require the recipient to use multiple
``clicks'' to access information online, which may make it
challenging for that recipient to access information easily. We also
understand that investors and others may have concerns about the
security of regulatory disclosures and reports that contain personal
financial information being delivered using e-delivery. See infra
sections II.B.3 and II.B.5.
\7\ See infra section III.B.1 (comparing the proposed conditions
to the E-Delivery Guidance).
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The Commission also is proposing to rescind rule 30e-3 under the
Investment Company Act of 1940 (the ``Investment Company Act'') and to
amend certain rules in Regulations 14A and 14C and rule 14d-5 under the
Securities Exchange Act of 1934 (the ``Exchange Act'') to facilitate,
and promote consistency with, the proposed new e-delivery framework.
The proposal is expected to provide cost savings to issuers, market
intermediaries, and ultimately investors and others who receive
regulatory information, by permitting those who elect to rely on Reg E-
Delivery to provide required regulatory disclosures and reports by e-
delivery as the default delivery option. We anticipate that this aspect
of the proposal could be more cost-effective and efficient than
providing paper delivery to those who do not otherwise express a
preference for paper delivery. The proposal also is designed to
encourage the benefits that increased e-delivery would bring to
recipients of regulatory information, for example through increased
accessibility, security, and the opportunity for a more engaging
experience with disclosure.
A. Current Commission Approach Regarding the Use of Electronic Media
Recognizing that the Federal securities laws generally do not
prescribe the particular medium (i.e., in paper format) by which
regulatory disclosures and reports are to be delivered, the Commission
historically has addressed the use of e-delivery through interpretative
guidance.\8\ Through the Commission's E-Delivery Guidance, the
Commission discussed the three factors--notice, access, and evidence of
delivery--that issuers and certain market intermediaries using e-
delivery should consider as they assess their compliance with the
delivery requirements under the Federal securities laws.\9\
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\8\ See 1995 Guidance, supra footnote 3, at section I
(explaining that ``[t]he federal securities statutes do not
prescribe the medium to be used for providing information by or on
behalf of issuers, or by or on behalf of third parties with respect
to issuers''); 1996 Guidance, supra footnote 3, at section II
(providing guidance intended for broker-dealers, transfer agents,
and investment advisers in using electronic media to satisfy
delivery requirements under the Federal securities laws).
\9\ See E-Delivery Guidance, supra footnote 3.
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Notice: This factor reflects the extent to which an
electronic communication provides timely and adequate notice that
information is available electronically.
Access: This factor reflects the principle that the
recipient of regulatory information should be able to access
information electronically in a format that is comparable to what would
have been provided in paper format, and the means to access that
information should not be so burdensome that the intended recipient
cannot effectively access it.
Evidence of delivery: This factor reflects the principle
that the issuer or market intermediary should have reason to believe
that delivery of information electronically has resulted or would
result in satisfaction of the delivery requirements under the Federal
securities laws.
In each E-Delivery Guidance release, the Commission provided a non-
exclusive and non-exhaustive series of examples to illustrate how these
concepts apply to specific facts and circumstances. These examples were
designed in part to apply the notice, access, and evidence of delivery
framework to different types of communications and methods of e-
delivery, and in the context of different relationships between the
individual receiving the communication and the issuer or market
intermediary sending the communication. In each release, the Commission
also expressed its views on the use of informed consent as a way to
satisfy the ``evidence of delivery'' factor, including when procedures
incorporating informed consent would be necessary to satisfy evidence
of delivery, and what actions an issuer or intermediary would need to
take to obtain informed consent.\10\ Because of the guidance regarding
informed consent, issuers and market intermediaries generally deliver
regulatory documents and reports in paper format unless the recipient
consents or ``opts in'' to e-delivery.
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\10\ Informed consent generally requires that the investor
agrees, given notice and access, to accept delivery of a regulatory
disclosure or report electronically, instead of by paper. See,
e.g.,1995 Guidance, supra footnote 3, at n.29 and accompanying text;
2000 Guidance, supra footnote 3, at section II.A.1 (providing
guidance regarding informed consent obtained telephonically).
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In the E-Delivery Guidance, the Commission stated that an issuer or
market intermediary that structures its delivery in accordance with the
principles and examples set forth in those releases could be assured
that it was satisfying its delivery obligations under the Federal
securities laws. Nevertheless, the Commission recognized that an issuer
or market intermediary could develop a method of e-delivery that
differs from the principles and examples that also could
[[Page 45887]]
satisfy delivery obligations under the Federal securities laws.\11\
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\11\ See 1995 Guidance, supra footnote 3, at section II.B.
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Since the publication of the E-Delivery Guidance, the Commission
has continued to explore how e-delivery could be used by issuers and
market intermediaries to improve their ability to communicate with
investors and others, as well as how electronic media could be used to
enhance required disclosure.\12\ Over the past twenty-plus years, the
Commission also has addressed disclosure approaches involving
electronic media in discrete contexts involving standardized
documents--including the development of concise, layered disclosure and
overlays to that disclosure, such as calculators, hover-over or pop-up
information, and interactive features to customize disclosure--without
changing the general framework discussed in the E-Delivery
Guidance.\13\ The adoption of these disclosure approaches reflected the
Commission's acknowledgement of the potential benefits of using
electronic media to deliver regulatory information, as well as interest
in harnessing the power of technological advances to provide better
access to information.\14\ Further, in releases recognizing that many
Americans have demonstrated a growing preference for consuming
information through electronic media as the use of the internet has
grown, the Commission has sought information about the use of the
internet to communicate and find information about fund
investments.\15\ In addition, cognizant of the experiences of
investors, issuers, intermediaries, and other entities during the
COVID-19 pandemic that illustrated some disadvantages and risks of
reliance on delivery of regulatory disclosure documents and reports
solely in paper, the Commission and its staff provided temporary
emergency relief to market participants from various requirements under
the Federal securities laws, including paper delivery requirements.\16\
We understand that disclosure approaches involving e-delivery have
provided cost savings to issuers, market intermediaries, and ultimately
to investors and other recipients of regulatory information.\17\
Meanwhile, the Commission, as well as the current Chairman of the
Commission, have signaled their interest in initiatives that would
foster and harness the benefits of electronic media, and other
innovative new technologies for investors.\18\
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\12\ Meanwhile, staff has observed that, in the decades
following the publication of the E-Delivery Guidance, a number of
examples in the guidance have become technologically outdated. See,
e.g., 1995 Guidance, supra footnote 3, at Example 4 (discussing, in
part, consent to delivery using a floppy disk).
\13\ See, e.g., Securities Offering Reform, Securities Act
Release No. 8591 (July 19, 2005) [70 FR 44721 (Aug. 3, 2005)] (in
part, adopting an ``access equals delivery'' model for the delivery
of final prospectuses, subject to certain conditions) (``Securities
Offering Reform Adopting Release''); internet Availability of Proxy
Materials, Securities Exchange Act Release No. 55146 (Jan. 22, 2007)
[72 FR 4148 (Jan. 29, 2007)] (``E-Proxy Adopting Release'');
Enhanced Disclosure and New Prospectus Delivery Option for
Registered Open-End Management Investment Companies, Investment
Company Act Release No. 28584 (Jan. 13, 2009) [74 FR 4545 (Jan. 26,
2009)] (``2009 Summary Prospectus Adopting Release''); Updated
Disclosure Requirements and Summary Prospectus for Variable Annuity
and Variable Life Insurance Contracts, Investment Company Act
Release No. 33814 (Mar. 11, 2020) [85 FR 29614 (May 18, 2020)]
(``VASP Adopting Release''); Tailored Shareholder Reports for Mutual
Funds and Exchange-Traded Funds; Fee Information in Investment
Company Advertisements, Investment Company Act Release No. 34731
(Oct. 26, 2022) [87 FR 72758 (Nov. 25, 2022)] (``Tailored
Shareholder Reports Adopting Release'') at section II (discussing,
in part, how funds have incentives to present more interactive,
dynamic disclosure on their websites and that funds are encouraged
to use online tools such as expense calculators to enhance an
investor's understanding of material in annual reports); Regulation
S-P: Privacy of Consumer Financial Information and Safeguarding
Personal Information, Securities Exchange Act Release No. 100155
(May 16, 2024) [89 FR 47688 (June 3, 2024)] (``Regulation S-P
Adopting Release'') at n.200 (addressing circumstances under which
certain required notices under Regulation S-P may be provided
electronically).
\14\ See, e.g., 2009 Summary Prospectus Adopting Release, supra
footnote 13, at paragraph accompanying nn.24-29.
\15\ See, e.g., Request for Comment on Fund Retail Investor
Experience and Disclosure, Investment Company Act Release No. 33113
(June 5, 2018) [83 FR 26891 (June 11, 2018)].
\16\ See, e.g., Letter from Fidelity Investments, The Charles
Schwab Corporation, and BlackRock, Inc. to SEC Chairman Jay Clayton
(Sept. 8, 2020) (``the work of print vendors and suppliers relied
upon by the financial services industry has been hindered by the
pandemic crisis and related Federal, State and local orders and
ordinances''), available at https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/about-fidelity/digital-delivery-letter.pdf; Order Under Section 36 of the Securities Exchange Act of
1934 Modifying Exemptions from the Reporting and Proxy Delivery
Requirements for Public Companies, Securities Exchange Act Release
No. 88465 (Mar. 25, 2020) (among other relief, suspending the
requirement to furnish proxy statements, annual reports, and other
soliciting materials, as applicable, through the U.S. mail, subject
to certain conditions); Order under Section 6(c) and Section 38(a)
of the Investment Company Act of 1940 Granting Exemptions from
Specified Provisions of the Investment Company Act and Certain Rules
Thereunder; Commission Statement Regarding Prospectus Delivery,
Investment Company Act Release No. 33824 (Mar. 25, 2020) (in part,
temporarily exempting registered management investment companies
from the requirement to transmit annual and semi-annual reports to
investors); Staff Guidance for Conducting Shareholder Meetings in
Light of COVID-19 Concerns (last updated Apr. 7, 2020), available at
https://www.sec.gov/ocr/staff-guidance-conducting-annual-meetings-light-covid-19-concerns (in part, permitting issuers to furnish
proxy materials through the ``notice-only'' e-delivery option,
without meeting all aspects of the notice and timing requirements of
rule 14a-16, because of delays in printing and mailing of the full
set of their materials due to the impact of COVID-19); Staff
Statement Regarding Temporary International Mail Service Suspensions
to Certain Jurisdictions Related to the COVID-19 Pandemic (June 24,
2020), available at https://www.sec.gov/tm/temporary-international-mail-service-suspension. By contrast, the Commission is not aware of
similar delivery challenges with regulatory documents and reports
that were electronically delivered during that period.
\17\ See, e.g., Letter from Broadridge Financial Solutions, Inc.
to FINRA (July 14, 2025) (``Broadridge Letter'') available at
https://www.finra.org/sites/default/files/NoticeComment/Broadridge%20Comment%20Letter%20to%20FINRA%20-%2007-14-2025.pdf
(stating, for example, that broker-dealers save an average of $0.75
on paper and postage when a typical account statement is e-delivered
instead of mailed and that equity operating companies save several
dollars on each proxy statement that is e-delivered instead of
mailed); Letters from Investment Company Institute to Chairman Paul
S. Atkins (Nov. 18, 2025 and Apr. 11, 2025), available at https://www.ici.org/system/files/2025-11/25-cl-edelivery-framework-recommendations.pdf and https://www.ici.org/system/files/2025-04/25-cl-chair-atkins-investor-priorities.pdf (``Nov. 2025 ICI Letter''
and ``Apr. 2025 ICI Letter,'' respectively, and collectively, ``ICI
Letters'') (suggesting, in part, that default e-delivery would save
funds and their shareholders annual savings of between $589 million
to $797 million and projected cumulative savings of $3 billion to $4
billion over five years, and stating that funds are operationally
ready to implement e-delivery as a default delivery method).
\18\ See, e.g., SEC Chair Atkins on Protecting Investors,
Promoting Markets, Powering Growth--A Conversation at SIFMA's 2025
Annual Meeting (Nov. 5, 2025) (discussing the SEC's agenda and
priorities, including e-delivery), available at https://www.sifma.org/news/blog/sec-chair-atkins-on-protecting-investors-promoting-markets-powering-growth; Chairman Paul Atkins, American
Leadership in the Digital Finance Revolution, Securities and
Exchange Commission (July 31, 2025) available at https://www.sec.gov/newsroom/speeches-statements/atkins-digital-finance-revolution-073125 (discussing the launch of Project Crypto);
Commissioner Hester Peirce, Misery Loves [Investment] Company:
Remarks at the 2026 Investment Company Institute Investment
Management Conference (Mar. 24, 2026), available at https://www.sec.gov/newsroom/speeches-statements/peirce-remarks-investment-company-institute-032426 (``We should consider a proposal either to
make electronic delivery the default or even to allow firms to offer
disclosure in whatever form they prefer''); see also Tailored
Shareholder Reports Adopting Release, supra footnote 13
(acknowledging the concerns raised by commenters about the method of
delivery of fund regulatory materials and stating, in part, that
``reconsidering the Commission's e-delivery regime for fund
materials, however, merits further consideration'').
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B. Information About E-Delivery Preferences
Our understanding about preferences for electronic media is
informed by many sources, including studies and data about Americans'
access to and use of the internet and recently-conducted investor
testing surveys, as well as past disclosure reform initiatives. Since
the decades-old E-Delivery Guidance releases were published, there have
[[Page 45888]]
been significant advances in electronic communications technologies as
well as in the way Americans use those technologies. For example,
access to the internet in the United States (``U.S.'') has expanded to
the point where the Federal Communications Commission now reports that
nearly all areas of the U.S., whether rural or urban, have access to
advanced telecommunications capability through high-speed broadband or
satellite services.\19\
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\19\ See Federal Communications Commission, Fourteenth Broadband
Deployment Report (Jan. 13, 2021), p. 19 and Appendix H, available
at https://docs.fcc.gov/public/attachments/FCC-21-18A1.pdf
(``Broadband Deployment Report''). The term ``advanced
telecommunications capability'' is defined, without regard to any
transmission media or technology, as high-speed, switched, broadband
telecommunications capability that enables users to originate and
receive high-quality voice, data, graphics, and video
telecommunications using any technology. 47 U.S.C. 1302(d)(1); see
also Broadband Deployment Report at n.5.
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Consistent with their nearly universal access to advanced
telecommunications capability, Americans' use of the internet has
evolved over time. For example, based on surveys on this topic
conducted on behalf of the Pew Research Center (``2025 Pew Survey''), a
not-for-profit research organization, the percentage of U.S. adults who
use the internet has almost doubled from approximately 50% in 2000 to
approximately 96% in 2025.\20\ Moreover, 16% of U.S. adults responding
to the 2025 Pew Survey reported that they are ``smartphone-only''
internet users, meaning they own a smartphone, but do not subscribe to
a home broadband service.\21\ Use of the internet has grown to the
point to where, in response to an Internal Revenue Service (``IRS'')
paperless processing initiative, over 90% of all individual tax returns
for fiscal year 2024 were filed electronically.\22\
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\20\ See Pew Research Center, internet, Broadband Fact Sheet
(Nov. 20, 2025) available at https://www.pewresearch.org/internet/fact-sheet/internet-broadband/ (``2025 Pew internet Fact Sheet'')
(also reporting that subscription to a broadband service has become
so widespread that 54% of households with less than $30,000 annual
income subscribe to home broadband); R. Gelles-Watnick, Americans'
Use of Mobile Technology and Home Broadband (Jan. 31, 2024)
available at https://www.pewresearch.org/internet/2024/01/31/americans-use-of-mobile-technology-and-home-broadband/.
\21\ See 2025 Pew internet Fact Sheet, supra footnote 20.
\22\ See Internal Revenue Service Data Book--October 1, 2023 to
September 30, 2024 at table 4 (reporting that 93.3% of all
individual tax returns for fiscal year 2024 were filed
electronically) available at https://www.irs.gov/statistics/returns-filed-taxes-collected-and-refunds-issued; Fact Sheet: Taxpayers will
have the option to go paperless for IRS correspondence by the 2024
filing season, IRS to achieve paperless processing for all tax
returns by filing season 2025, FS-2023-18, Aug. 2023 available at
https://www.irs.gov/newsroom/irs-launches-paperless-processing-initiative; Internal Revenue Service; Taxpayer Files Return on
Paper, Taxpayer Advocate Service, Internal Revenue Service (updated
Apr. 16, 2026) available at https://www.taxpayeradvocate.irs.gov/notices/taxpayer-files-return-on-paper/.
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In addition, available evidence suggests that investors and other
recipients of regulatory information not only increasingly expect, but
also prefer, that regulatory documents and reports under the Federal
securities laws be delivered electronically.\23\ In mid-2025, staff in
the Office of Investor Research (``OIR'') within the Commission's
Office of the Investor Advocate engaged in investor testing to explore
investor preferences for e-delivery of financial disclosures.\24\ In
analyzing the data from a nationally representative survey panel, OIR
found that the vast majority of U.S investors (nearly 80%) prefer some
form of e-delivery for financial disclosure documents that do not
include personal information, and also that a majority (approximately
63%) prefers some form of e-delivery even for documents that do include
personal information.
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\23\ See FINRA Investor Education Foundation, Investors in the
United States--A Report of the National Financial Capability Study
(4th Ed. Dec. 2025) available at https://www.finrafoundation.org/sites/finrafoundation/files/2025-11/NFCS_Investor_Survey_Report_White_Paper.pdf (``FINRA Foundation
National Financial Capability Study'') (based on two linked surveys
conducted in 2024 that included a state-by state online survey of
25,539 U.S. adults across all 50 states and Washington, DC and an
investor online survey of 2,861 U.S. adults who have investments
outside of retirement account, reporting, in part, that email
continues to be most popular method for receiving disclosures (39%)
followed by paper delivery (32%); Most Investors Want Electronic,
Not Paper, Delivery of Investor Documents (Summer 2022), FSG Global
YouGov survey commissioned by SIFMA (survey of 1300 individual
investors conducted nationwide between May 16-19, 2022 where the
investors surveyed held at least $5,000 across retirement accounts,
college-savings investments, stocks, bonds, mutual funds, or a
brokerage account, excluding property and cryptocurrency
investments) available at https://www.sifma.org/wp-content/uploads/2022/07/SIFMA-Survey-Results-for-SEC-July-2022.pdf (``SIFMA
Survey'') (finding, in part, that 81% of investors surveyed would
prefer at least one type of investor communication be sent via e-
delivery rather than physical mail, and that the majority of
investors surveyed (79%) have already opted in to receive investor
communications electronically, either through email, a financial
institution's website, or a mobile application).
\24\ See Exploring Investor Preferences for Electronic Delivery
of Financial Disclosures, U.S. Securities and Exchange Commission
Office of the Investor Advocate (May 2026), available at https://www.sec.gov/files/exploring-investor-preferences-electronic-delivery-financial-disclosures.pdf. That statement and any other
staff statements referenced in this release are not a rule,
regulation, guidance, or statement of the Commission, and the
Commission has neither approved nor disapproved their content. Staff
statements have no legal force or effect: they do not alter or amend
applicable law, and they create no new or additional obligations for
any person. The OIR investor testing included a survey of 5,497
participants. The questions about the e-delivery of investment
related disclosures were shown only to investors, leaving a total of
4,295 respondents. In response to the Commission's 2020 proposal on
tailored shareholder reports (Tailored Shareholder Reports,
Treatment of Annual Prospectus Updates for Existing Investors, and
Risk Disclosure for Mutual Funds and Exchange-Traded Funds; Fee
Information in Investment Company Advertisements, Investment Company
Act Release No. 33963 (Aug. 5, 2020) [85 FR 70716 (Nov. 5, 2020)]
(``Tailored Shareholder Reports Proposing Release''), comment file
available at https://www.sec.gov/comments/s7-09-20/s70920.htm), the
Consumer Federation of America submitted a letter stating that as
the Commission implements policy changes to promote e-delivery, the
Commission should continue to engage in testing to determine whether
it achieves the goal of promoting better investor engagement. See
Letter of Consumer Federation of America (Dec. 15, 2020) (``CFA 2020
Letter'').
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Other nationwide investor surveys have reported similar investor
preferences for e-delivery of investor communications.\25\ For example,
several recent nationwide financial industry surveys of investors,
including one conducted on behalf of the Investment Company Institute
(``ICI''), an asset management industry trade group, reported that e-
delivery has become so pervasive that over 80% of the U.S. individuals
surveyed, including older individuals, would be comfortable with e-
delivery as the default delivery method for investor communications, as
long as paper delivery still could be requested.\26\ In addition, the
ICI Survey reported that (1) 82% of U.S. individuals surveyed recalled
receiving communications about financial documents electronically (30%
of those respondents recalled receiving both electronic and paper
communications about financial documents) and (2) 79% of fund investors
who reported that they only received paper copies of financial
documents also supported e-delivery as a default delivery method.\27\
Further, the ICI Survey sought to better understand
[[Page 45889]]
why some investors are receiving paper documents. The survey found that
nearly one-third of fund investors receiving some of their financial
communications as paper documents wanted e-delivery and had signed up
for e-delivery but still received paper documents, and that 6% of fund
investors receiving some of their financial communications as paper
documents currently received those documents in paper because they
thought that signing up for e-delivery would take too much time.\28\
The ICI Survey suggested that an e-delivery default could overcome such
frictions.\29\
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\25\ See Holden, Schrass, Seligman, and Bogdan, Americans' Views
on E-Delivery of Financial Documents (2025) Washington, DC:
Investment Company Institute available at www.ici.org/system/files/2025-09/25-ici-paper-edelivery.pdf (survey designed by ICI staff and
administered by NORC at the University of Chicago using the
AmeriSpeak[supreg] probability-based panel in July 2025 of 1,132
U.S. individuals, including 400 mutual fund or ETF investors) (``ICI
Survey''); SIFMA Survey, supra footnote 23 (also finding that
comfort with e-delivery as the default was high regardless of age,
education level, income level, and the amount of assets held).
\26\ See ICI Survey, supra footnote 25 (finding that 84% of all
respondents and 88% of fund investors, including 87% of fund
investors age 65 and older, agreed with the statement ``As long as
people can still request paper at no cost, it's a good idea to make
e-delivery the default''); FINRA Foundation National Financial
Capability Study, supra footnote 23 (finding, in part, that most
popular method for receiving disclosures is by email (39%)); SIFMA
Survey, supra footnote 23 (finding 85% of U.S. investors surveyed
would be comfortable with e-delivery as the default for investor
communications).
\27\ See ICI Survey, supra footnote 25.
\28\ See id. (based on responses to the following question
``[w]hy do you currently receive some of your financial
communications as paper documents?''); see supra footnote 25
(discussing the challenges in obtaining email addresses from
investors); see infra footnote 41 (discussing surveys submitted by
commenters suggesting why investors are not receiving regulatory
documents and reports by e-delivery).
\29\ See ICI Survey, supra footnote 25 (suggesting that an e-
delivery default would benefit nearly four-in-ten fund investors
currently receiving at least some paper documents).
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Consistent with these findings, another recent nationwide financial
industry survey of investors conducted on behalf of Broadridge
Financial Solutions, Inc. (``Broadridge''), a financial technology
company, found that prospective new investors not only would prefer e-
delivery as the default method of communication but also trust email
over physical mail by over a three to one factor (57% to 18%).\30\ That
survey also found that deliveries by email and ``push notifications
from firms' apps'' currently comprise 71% of all account statement
deliveries, 83% of all trade confirmation deliveries, and 58% of the
tax forms sent to U.S. investors surveyed, and that most investors
surveyed, including investors age 55 and older, use a laptop or desktop
to access their accounts while over 60% use a mobile device.\31\
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\30\ See Survey of Investor Delivery Preferences for Required
Regulatory Communications (July 2025), Forrester Research survey
commissioned by Broadridge (survey conducted in November-December
2024 of over 5,000 individuals, consisting of 4,506 who are U.S.
investors with brokerage, investment, or non-workplace retirement
accounts and 501 individuals who do not currently have an account
but plan to open one within 6-12 months) (``Broadridge Survey'')
submitted as part of Broadridge Letter, supra footnote 17 (finding,
in part, that 76% of prospective new investors would prefer e-
delivery of account statements as the default method of
communication; 65% of prospective new investors would prefer e-
delivery of tax documents and other mandatory disclosures as the
default method of communication).
\31\ Id.
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Other nationwide surveys conducted several years ago found similar
results. For example, a 2022 nationwide survey conducted on behalf of
the Securities Industry and Financial Markets Association (``SIFMA''),
a securities industry trade group, found that 81% of the individual
investors surveyed reported that they would prefer that at least one
type of investment communication be sent via e-delivery.\32\ In
addition, two linked nationwide surveys conducted in 2021 on behalf of
the FINRA Investor Education Foundation found, in part, that investors
surveyed prefer email (39%) over paper (32%) for receiving
disclosures.\33\
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\32\ See SIFMA Survey, supra footnote 23.
\33\ See FINRA Foundation National Financial Capability Study,
supra footnote 23; see also, AARP Retirement Account Statements:
Paper or Electronic (May 2022) available at https://www.aarp.org/content/dam/aarp/research/surveys_statistics/econ/2022/retirement-accounts-statements-survey-report.doi.10.26419-2Fres.00529.001.pdf
(``2022 AARP Study'') (finding, in part, that 42% of adults would
prefer to receive electronic statements only from employer-sponsored
retirement plans; that 37% of adults would prefer to receive
electronic statements and mailed statements at least once a year
from employer-sponsored retirement plans; 20% of adults would prefer
to receive only paper statements from employer-sponsored retirement
plans; and that among adults receiving paper from their retirement
accounts, only three in ten actively chose this option while 58%
just accepted the default setting regarding paper statements). The
study was based on 1,228 adults age 25 or older who currently had
money in an employer-sponsored plan or who work/worked for an
employer that offers a traditional pension and expect to receive
pension income. The adults were interviewed by phone or online from
February 8-27, 2022.
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Other developments in the asset management industry similarly
reflect increasing use of electronic communications among investors. We
have observed growth in social sentiment investing tools offered by
financial services firms that seek to aggregate or analyze social media
data from various sources such as X and Facebook.\34\ Examples of
social sentiment investing tools include direct trading from social
media websites or mobile applications, social networking platforms,
social media data analysis, and crowdsourced research and analysis that
investors may use to inform their investment decisions.\35\ We believe
that the increased use of these tools suggests investor comfort with
electronic communications. We also have observed growth in financial
intermediary models, such as robo-advisers, and growth in the ability
to execute security trades through mobile applications.\36\ We
understand that these financial intermediary models and tools use
electronic communications and delivery as their primary mode of
communication with investors.
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\34\ See, e.g., Investor Bulletin: Social Sentiment Tools--Think
Twice Before Trading Based on Social Media (Apr. 3, 2019), available
at https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins-18; see
also, e.g., Securities and Exchange Commission, Division of
Examinations, Risk Alert: Observations from Examinations of Advisers
that Provide Electronic Advice (Nov. 9, 2021), available at https://www.sec.gov/files/exams-eia-risk-alert.pdf.
\35\ Id.
\36\ It has been estimated that the robo-advisory services
market size (in revenues) was $14.29 billion in 2025, and that the
robo-advisory services market is expected to reach $54.73 billion by
2030. See Robo-advisory Services Market Size, Competitive Landscape
2030, available at https://mordorintelligence.com/industry-reports/robo-advisory-services-market; see also FINRA Foundation National
Financial Capability Study, supra footnote 23 (reporting, in part,
that online trading through a website is the most commonly cited
method (62%) followed by a mobile application (46%) that survey
respondents reported using to execute trades). Further, the number
of internet advisers has grown from 57 in 2010 to 222 in 2024. See
Investment Adviser Statistics, Form ADV data for the reporting
period ending December 2024, U.S. Securities and Exchange
Commission, Division of Investment Management, Analytics Office,
Table 1.1, available at im-investment-adviser-statistics-
20250430.pdf.
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C. Other Developments Informing the Commission's Approach to Delivering
Information
In addition to evidence about preferences regarding the e-delivery
of required regulatory disclosures and reports, our proposal is
informed by various financial industry stakeholders and other
developments regarding e-delivery. Given the evolving preferences and
trends regarding the use of electronic media, diverse financial
industry stakeholders have advocated through multiple forums, including
Commission advisory committees, Commission rulemakings, and letters to
the Commission's Chairman, for the modernization of the Commission's e-
delivery framework.
The Commission has advisory committees to provide diverse
perspectives and recommendations on a variety of regulatory priorities
and initiatives. One of these advisory committees, the Asset Management
Advisory Committee (``AMAC,'' currently inactive), was composed of a
group of outside experts on asset management, including individuals
representing the views of retail and institutional investors, small and
large funds, intermediaries, and other market participants. In 2020,
AMAC recommended that the Commission permit firms to use an investor's
``digital address,'' such as an email address or smartphone telephone
number, as the primary address when delivering regulatory documents, in
light of the operational challenges that arose at the onset of the
COVID-19 pandemic. The AMAC recommendation observed that the expanding
use of digital tools to
[[Page 45890]]
communicate with investors was essential for financial services
operations during the pandemic.\37\ Other Commission advisory
committees put forth similar recommendations over the past decade.\38\
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\37\ See Asset Management Advisory Committee, Preliminary
Recommendations of Operations Panel Regarding COVID-19 Operational
Issues (Nov. 5, 2020), available at https://www.sec.gov/spotlight/amac/operational-issues-amac-recommendations-final-110520.pdf
(adopted by full Committee at Nov. 5, 2020 meeting).
\38\ See, e.g., Investor Advisory Committee, Recommendation of
the Investor Advisory Committee Regarding Promotion of Electronic
Delivery and Development of a Summary Disclosure Document for
Delivery of Investment Company Shareholder Reports (Dec. 7, 2017),
available at https://www.sec.gov/spotlight/investor-advisory-committee-2012/recommendation-promotion-of-electronic-delivery-and-development.pdf (recommending that the Commission continue to
explore methods to encourage a transition to e-delivery that respect
investor preferences and that increase, rather than reduce, the
likelihood that investors will see and read important disclosure
documents).
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Outside of the Commission's advisory committees, financial industry
stakeholders have advocated in Commission rulemakings for the
modernization of the Commission's E-Delivery Guidance.\39\ For example,
in a recent disclosure-related rulemaking, commenters urged that the
Commission reevaluate its e-delivery approach to modernize its E-
Delivery Guidance.\40\ One such commenter suggested that, in its
experience, the requirement to affirmatively opt-in to receive
documents by e-delivery creates an element of inertia.\41\ Another
commenter suggested that the Commission reevaluate the delivery of fund
regulatory documents through a separate rulemaking.\42\ In addition,
another commenter, while agreeing that the time was right for the
Commission to reconsider its approach to disclosure in a digital age,
also suggested that e-delivery be part of a broader disclosure
modernization project driven by investor preferences and an analysis of
what works to improve investor engagement with disclosure.\43\
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\39\ See, e.g., VASP Adopting Release, supra footnote 13;
Tailored Shareholder Reports Adopting Release, supra footnote 13;
Investment Company Names, Investment Company Act Release No. 35000
(Sept. 20, 2023) [88 FR 70436 (Oct. 11, 2023), Investment Company
Names Correction, Investment Company Act Release No. 35000A (Oct.
24, 2023) [88 FR 73755 (Oct. 27, 2023)].
\40\ See, e.g., certain comments submitted in response to the
Tailored Shareholder Reports Proposing Release, available at https://www.sec.gov/comments/s7-09-20/s70920.htm: Letter of Investment
Company Institute (Dec. 21, 2020) (``ICI 2020 Comment Letter'') (in
part, expressing disappointment that the Commission did not propose
to modernize the 25-year old guidance that governs e-delivery);
Letter of Dechert LLP (Jan. 4, 2021) (``Dechert 2021 Comment
Letter'') (suggesting that the Commission make e-delivery of fund
documents to shareholders a default, with the option to opt in to
paper, as desired); and Letter of Federated Hermes (Jan. 4, 2021)
(``Federated Hermes 2021 Comment Letter'').
\41\ See certain comments submitted in response to the Tailored
Shareholder Reports Proposing Release, supra footnote 24: Letter of
T. Rowe Price (Jan. 5, 2021) (reporting that when investors were
asked why they do not receive financial communications
electronically, 11% reported that signing up for e-delivery is too
time consuming and 27% reported that they had signed up for e-
delivery but still receive paper copies); see also SIFMA survey,
supra footnote 23; see also Letter from the Committee of Annuity
Insurers (Feb. 14, 2019) (suggesting that the low election of e-
delivery of variable contract statutory prospectuses and underlying
funds is reflective of the outdated and cumbersome electronic
enrollment process) submitted in response to Updated Disclosure
Requirements and Summary Prospectus for Variable Annuity and
Variable Life Insurance Contracts, Investment Company Act Release
No. 33286 (Oct. 30, 2018) [83 FR 61730 (Nov. 30, 2018] (``VASP
Proposal'').
\42\ See, e.g., certain comments submitted in response to the
Tailored Shareholder Reports Proposing Release, supra footnote 24:
Federated Hermes 2021 Comment Letter (stating that the mutual fund
industry should adapt to the preferences of modern shareholders who
rely on electronic communication methods for many aspects of their
daily lives); Dechert 2021 Comment Letter; and ICI 2020 Comment
Letter.
\43\ See CFA 2020 Letter; see also Comment Letter of Federated
Hermes on S7-2026-01 (Mar. 12, 2026) (``Federated Hermes 2026
Comment Letter'') (expressing support for making electronic delivery
the default method for investor communications across the financial
services industry).
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Financial industry stakeholders also have advocated directly with
the Commission's current Chairman for modernization of the Commission's
E-Delivery Guidance. These stakeholders have suggested that the
modernization of the Commission's e-delivery framework should be a
priority, particularly because of the benefits that a more modern e-
delivery framework could bestow upon investors.\44\ While observing the
nearly universal use and availability of the internet, financial
industry stakeholders have suggested that the benefits of e-delivery
also include a faster and more secure shareholder experience; more
dynamic communications, including the use of pop-up messages from
firms' mobile phone applications; opportunities for layered disclosure;
enhanced abilities to access, read, and search material; ease of
storage and retrieval; enhanced investor protection security protocols;
and cost savings that would accrue to investors. These financial
industry stakeholders have urged the Commission to adopt a rule to make
e-delivery the default delivery method for regulatory disclosures and
reports while preserving an option to opt out of e-delivery.\45\
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\44\ See, e.g., ICI Letters, supra footnote 17; Letter from
Committee on Capital Markets Regulation to Chairman Paul Atkins
(Nov. 14, 2025) available at https://capmktsreg.org/wp-content/uploads/2025/11/CCMR-Letter-to-SEC-Re.-E-Delivery-11.14.25.pdf
(``CCMR Letter''); Letter from Securities Industry and Financial
Markets Association and its Asset Management Group to Chairman Paul
Atkins (Sept. 15, 2025), available at https://www.sifma.org/resources/submissions/letters/modernizing-delivery-requirements-under-the-federal-securities-laws-sifma-and-sifma-amg/ (``SIFMA
Letter''); Letter from Investment Advisers Association to Chairman
Paul S. Atkins (May 1, 2025), available at https://www.investmentadviser.org/resources/iaa-letter-to-sec-chairman-atkins/ (``IAA Letter''); see also Letter from The Capital Group
Companies, Inc. to Chairman Paul S. Atkins (Dec. 19, 2025) available
at https://www.linkedin.com/feed/update/urn:li:activity:7468725136398012416/ (``Capital Group Letter'').
\45\ Id.
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Certain other U.S. regulators whose authority involves consumer
financial services have transitioned to a framework that no longer
looks to paper as a default delivery method. For example, in 2020, the
Department of Labor adopted and implemented rules that create a safe
harbor for employee benefit plan administrators to use electronic media
as the default to furnish documents and information to participants and
beneficiaries of ERISA plans, subject to certain conditions.\46\ In
addition, other self-regulatory organizations whose authority involves
consumer financial services are exploring and/or transitioning to a
framework that no longer looks to paper as a default delivery
method.\47\
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\46\ See Department of Labor, Default Electronic Disclosure by
Employee Pension Benefit Plans Under ERISA, 85 FR 31884 (May 27,
2020) (``Default E-Delivery DOL Adopting Release''). SECURE Act 2.0
amended ERISA section 105(a)(2) [Employee Retirement Income Security
Act of 1974, 29 U.S.C. 1001 et seq.] to add a new requirement
``Provision of Paper Statements.'' For plan years beginning after
December 31, 2025, it requires at least one pension benefit
statement furnished for a calendar year for an individual account
plan, and at least one pension benefit date furnished every three
years for a defined benefit plan unless the plan issues the
statement in compliance with Department of Labor's 2002 e-delivery
safe harbor or the plan permits participants or beneficiaries to
request e-delivery of pension benefit statements. See SECURE 2.0 Act
of 2022, Division T of the Consolidated Appropriations Act, 2023,
Public Law 117-328, 136 Stat. 4459 (2022). In addition, the
Commission is aware of certain bipartisan congressional support for
permitting default e-delivery of the Commission's required
regulatory disclosures and reports. See, e.g., Incentivizing New
Adventures and Economic Strength Through Capital Formation Act of
2025 (``INVEST Act of 2025''), H.R. 3383, 119th Congress, 1st Sess.
(2025) at Sec. 205. This bill has not been enacted.
\47\ See FINRA Regulatory Notice 25-07 (Apr. 14, 2025); MSRB
Notice 2024-15 (Dec. 11, 2024); see also MSRB Rule G-32 (permitting
dealers selling municipal debt securities in a primary offering to
rely on the MSRB's EMMA website as an alternative to physical
delivery of official statements).
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D. Overview of Proposed New E-Delivery Framework
Reg E-Delivery, if adopted, would be the Commission's primary rule
addressing e-delivery, and would generally supersede the Commission's
current guidance-based e-delivery
[[Page 45891]]
framework. If adopted, issuers and market intermediaries, among others,
that comply with the conditions of Reg E-Delivery would be assured that
they have satisfied, through the use of e-delivery, applicable
requirements to deliver regulatory disclosures and reports under the
Federal securities laws. As described below, Reg E-Delivery would
permit the use of default e-delivery (that is, using e-delivery as the
default delivery method, with the ability to opt out of default e-
delivery, and also to receive paper copies of covered information on
request). In addition, regardless of whether an entity chooses to use
default e-delivery, Reg E-Delivery would establish conditions under
which the Commission would consider delivery requirements under the
Federal securities laws to have been satisfied by e-delivery.
The proposal includes the following principal elements:
Scope of proposed rule: Reg E-Delivery would address e-
delivery of ``covered information'' by ``covered entities'' to
``covered recipients.'' \48\ Covered information, in general, would be
defined as any information required to be delivered to a covered
recipient under the Federal securities laws.\49\ Covered entities would
include any person that has an obligation to deliver covered
information to a covered recipient under the Federal securities laws.
Covered recipients would include any current or prospective customer,
client, investor, security holder, counterparty, or similar recipient
of information.
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\48\ See infra section II.A for additional information about the
principal elements of the proposal.
\49\ As used in this context, the term ``require'' means
required to: comply with or rely on a regulation; or, satisfy a
condition for reliance on a regulatory safe harbor or a regulatory
exception. For the avoidance of doubt, Reg E-Delivery would not
affect the ability of a covered entity to rely on regulatory
provisions that permit compliance with document delivery conditions
through the inclusion in an electronic communication of an active
hyperlink to the document required to be delivered. See, e.g.,
Securities Act rule 134(f) and Note 1 to Securities Act rule
433(b)(2)(i).
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E-delivery permitted to be the default delivery method for
covered information: Reg E-Delivery would permit (but not require)
covered entities to use e-delivery as the default method of delivery
for covered information, subject to certain conditions.
General e-delivery requirements: Regardless of whether a
covered entity chooses to default covered recipients to e-delivery, or
continues to require covered recipients to affirmatively consent to e-
delivery, a covered entity would be able to rely on the proposed rule
to satisfy its delivery obligation for covered information
electronically 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 also would
include general requirements for the method, timing, and ability to opt
out of e-delivery, as well as requirements for websites on which
covered information is available. These would include:
Permissible methods of e-delivery: Under proposed Reg E-
Delivery, a covered entity would be able to use two methods of e-
delivery, depending on the type of information being provided: direct
delivery and a statement of availability. The permissible delivery
method would depend on whether the covered information includes
personal financial information (``PFI''), which the proposal would
define--similar to the 1996 Guidance--as information specific to a
covered recipient's personal financial matters. For covered information
that does not include PFI, a covered entity could electronically
deliver covered information directly to a covered recipient's
electronic address (e.g., attached to or included in the body of an
email). For covered information that includes PFI, a covered entity
would not be permitted to deliver this information directly to an
electronic address, but instead would be required to deliver a
statement of availability 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). The statement of
availability would be required to include, among other items, a website
address that would require the use of a process reasonably designed to
safeguard the PFI, and that would lead the covered recipient directly
to the covered information immediately after the covered recipient
completes such process. A covered entity also would be permitted to use
this e-delivery method for covered information that does not include
PFI.
Statement regarding the process to receive paper, opt out
of e-delivery, and update electronic address: Regardless of the e-
delivery method, the delivery of covered information would need to
include a prominent statement explaining the process to: (1) obtain a
paper version of covered information, upon request, as well as the
covered entity's obligation to provide a paper copy of covered
information in paper format free of charge; (2) opt out of e-delivery
at any time and receive delivery in paper format with respect to all or
a subset of covered information, free of charge, following an opt-out
election; and (3) update one's electronic address, free of charge. This
statement also would, at a minimum, direct a covered recipient to a
website through which one can make these requests and updates.
Timing requirements for e-delivery: Regardless of the e-
delivery method used--statement of availability or direct delivery of
covered information--the covered entity must deliver the covered
information no later than the date by which the covered information is
required to be delivered under the Federal securities laws.
Requirements for website availability of required
disclosures and reports: If a covered entity uses the statement of
availability method for e-delivery, Reg E-Delivery would require that
the covered entity ensure there is a website (which could include
another internet or electronic-based information repository, such as a
mobile application) where a covered recipient would be able to access
the covered information. Proposed Reg E-Delivery includes minimum
requirements for: (1) the length of time the covered information must
be made available on the website; and (2) the format for presenting
covered information on the website. A covered recipient only would be
able to access covered information that includes PFI on the website
through the use of a process reasonably designed to safeguard the
covered information.
Identifying and mitigating failed e-delivery: Covered
entities would be required to adopt and implement written policies and
procedures reasonably designed to identify and remediate failed e-
delivery (which, as discussed below, would include detecting an invalid
or inoperable electronic address via bounce-backs or other means). If
any failed e-delivery is identified, the covered entity must promptly
take reasonable remediation steps, including obtaining a new electronic
address or delivering the covered information in paper format until the
covered recipient provides a new electronic address.
Required notices and transition process for default e-
delivery for covered recipients currently receiving information in
paper format. Reg E-Delivery would include a special provision for
covered recipients who, at the time of the rule's effectiveness, are
currently receiving any covered information in paper format, where the
covered entity wishes to transition such
[[Page 45892]]
covered recipients to default e-delivery under the rule. Under this
provision, a covered entity that wishes to transition current covered
recipients receiving paper to default e-delivery would generally be
required to provide a covered recipient currently receiving any covered
information in paper format (and for whom the covered entity has an
electronic address) with a paper initial notice at least 180 days
before the transition to default e-delivery, and a paper follow-up
notice 30 days before the transition. The notices would alert the
covered recipient about the upcoming transition to e-delivery, specify
the electronic address where covered information would be provided, and
include a prominent statement describing the ability to: opt out of e-
delivery and receive paper copies at any time, free of charge; the
ability to update or confirm one's electronic address; and the process
by which a covered recipient could opt out of e-delivery and/or update
or confirm one's electronic address. This transition requirement would
not apply to: (1) covered recipients who already receive e-delivery for
all covered information; or (2) covered entities that do not wish to
transition their e-delivery processes to default e-delivery for
existing covered recipients.
Application of the E-SIGN Act: To the extent that any
covered information delivered under proposed Reg E-Delivery otherwise
would have been subject to the consumer consent requirements of the
Electronic Signatures in Global and National Commerce Act, Public Law
106-229 (114 Stat. 464) (2000) (the ``E-SIGN Act''), we are proposing
that such covered information would be exempt from these
requirements.\50\
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\50\ See infra section II.E.
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Amendments to current Commission rules to facilitate
proposed Reg E-Delivery: To facilitate the proposed e-delivery rule and
to take a modernized approach to the use of electronic media in
Commission rules and forms, we are proposing amendments to current
Commission rules to, among other things, rescind rule 30e-3 under the
Investment Company Act and amend certain rules in Regulations 14A and
14C and rule 14d-5 under the Exchange Act.\51\
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\51\ 17 CFR 270.30e-3; see infra section II.F.
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Current e-delivery guidance: If the proposed rule is adopted, it
would be the Commission's primary rule addressing e-delivery, providing
conditions whereby a covered entity would be deemed to have satisfied
applicable delivery requirements under the Federal securities laws
using e-delivery (with limited exception). As described in more detail
below, much of the 1995 Guidance and 1996 Guidance provides a framework
for analyzing whether an electronic communication is delivered or
transmitted for purposes of the Federal securities laws that is
different in some respects from the framework in proposed Reg E-
Delivery. Therefore, if adopted, Reg E-Delivery would supersede the
1995 Guidance and 1996 Guidance in their entirety, with certain
principles from these releases reaffirmed in any release adopting Reg
E-Delivery.\52\ We anticipate that we would retain the majority of the
2000 Guidance, and only certain sections and examples would be
superseded by Reg E-Delivery.
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\52\ See infra section II.G.
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II. Discussion
A. Considerations and Goals Informing Proposed E-Delivery Approach
The proposed new e-delivery approach is designed to address the
concern that issuers, market intermediaries and ultimately, investors
and other recipients of information required under the Federal
securities laws may be bearing unnecessary costs and expenses
associated with a default delivery method that no longer reflects the
preference of most covered recipients.\53\ Over the past decades, our
E-Delivery Guidance has provided a useful lens through which to
evaluate whether the Federal securities laws' delivery obligations have
been satisfied. We continue to believe, as stated in the E-Delivery
Guidance, that the use of electronic media should be at least an equal
alternative to the use of paper-based media, and accordingly, issuer or
third-party information that can be delivered in paper under the
Federal securities laws may be delivered in electronic form.\54\
Nevertheless, some aspects of the E-Delivery Guidance have not kept
pace with the evolution in technology and the ways that investors and
other recipients of covered information have come to use technology in
the decades since the Commission published the E-Delivery Guidance.\55\
Requiring recipients to receive regulatory disclosures and reports in
paper format unless they opt in to e-delivery is outdated in today's
world where it is common to communicate electronically, and investor
testing and other evidence have shown that many investors currently
receive, and prefer to receive, at least some regulatory disclosures
and reports electronically. Paper, printing, and mailing costs
associated with the delivery of regulatory disclosures and reports can
be significant, and those costs routinely exceed the costs of e-
delivery.\56\ While we continue to believe that preferences for
delivery in paper format should be honored, we also believe it is
difficult to justify the costs and expenses associated with paper
delivery as a required default delivery method when an investor or
other recipient of covered information who has an electronic address
does not affirmatively express a preference for delivery in paper
format.
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\53\ Multiple surveys, including one conducted by Commission
staff, have suggested that investors prefer e-delivery of at least
some regulatory documents. The results of those surveys are
discussed above. See supra section I.B; see also ICI 2020 Comment
Letter, supra footnote 40 (suggesting that the e-delivery of
disclosure documents will better satisfy investor preferences and
reduce costs to fund shareholders). Certain commenters to Commission
rulemaking proposals, however, have suggested otherwise. See CFA
2020 Letter, supra footnote 24.
\54\ See supra footnote 3.
\55\ See Prepared Remarks Before SEC Speaks, Paul S. Atkins,
Chairman (Mar. 19, 2026), available at https://www.sec.gov/newsroom/speeches-statements/atkins-remarks-sec-speaks-031926-prepared-remarks-sec-speaks (discussing, as ``an example of the gulf between
regulation and reality,'' that ``our rules still default to paper
delivery for shareholder communications,'' and stating that ``[i]n
an age of algorithmic trading and artificial intelligence, I believe
that requirement ought to be a relic, not a standard'').
\56\ For example, Broadridge has stated that based on its
processing of positions/accounts held in street name in the 2025
proxy season (Jan.-June 2025), the actual postage alone was $3.05
for a full set of proxy materials. This excludes the costs of
printing that can vary. Broadridge estimates that digital proxy
communications, which accounted for 90% of all positions processed
by Broadridge in the 2025 proxy season, resulted in approximately $5
billion in savings in comparison to the use of full packages for all
proxy communications in the first six months of 2025. See Broadridge
Letter, supra footnote 17. See also infra section III.
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In addition, the current e-delivery framework, by generally
defaulting covered recipients to receive delivery in paper format if no
delivery preference is affirmatively expressed or otherwise agreed to,
may be unduly restricting the use and therefore the overall benefits
that e-delivery could provide to disclosure. Covered entities may have
less of an incentive to develop tools that use electronic media to
foster more engaging covered information.\57\ E-delivery offers the
opportunity to provide recipients of covered information with a
potentially more personalized, interactive, and efficient experience
with disclosure than
[[Page 45893]]
delivering paper. For example, a delivery method other than static
paper permits the inclusion of overlays in regulatory disclosure and
reports, such as calculators, hover-overs, or pop-up information, which
have the potential to enhance engagement. In addition, e-delivered
documents are better suited than paper documents for AI tools that
could help covered recipients digest and analyze disclosures. E-
delivery also has accessibility and retention benefits, in that it
allows for, among other things, font size adjustment and other
accessibility tools such as translation tools, the use of search tools,
and the ability to retain disclosure in convenient electronic formats.
Further, e-delivered documents can be more rapidly delivered than paper
documents delivered through U.S. mail, which can be a particular
benefit for investors and others in non-U.S. locations who may not be
able to receive documents in a timely fashion or without significant
expense incurred by the sender.\58\
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\57\ See 1995 Guidance, supra footnote 3 (``The Commission
believes that, given the numerous benefits of electronic
distribution of information and the fact that in many respects it
may be more useful to investors than paper, its use should not be
disfavored.'').
\58\ Moreover, we understand that the U.S. Postal Service may
temporarily suspend international mail acceptance for certain
destinations due to inadequate transportation options or service
disruptions within the country. See, e.g., U.S. Postal Service,
Service Alerts: International Service Disruptions (last updated Jan.
30, 2026), https://about.usps.com/newsroom/service-alerts/international/.
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We believe, however, that our e-delivery approach should
appropriately account for those individuals and other recipients of
information who currently receive all or some required regulatory
disclosures and reports in paper format--both by notifying them
meaningfully of any upcoming transition to default e-delivery and by
honoring the preferences of those covered recipients who prefer paper
to express this preference and continue receiving paper promptly at no
cost. We recognize that there are a variety of reasons why individuals
and other recipients of information required under the Federal
securities laws may prefer delivery in a paper format. Some may prefer
to view certain information in paper (for example, some covered
recipients may prefer the ease with which paper documents can be shared
with accounting or tax service providers), while electing to have other
documents delivered electronically. Further, some may prefer the
physical reminder and convenience that paper delivery may bring, and
some may have limited or no access to a printer. Our proposal would
require covered entities to provide meaningful notifications if they
decide to transition current covered recipients who receive required
regulatory disclosures and reports in paper format to e-delivery, to
provide similar disclosures to new covered recipients prior to using e-
delivery, and would permit all covered recipients to opt out from e-
delivery at any time.\59\
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\59\ See infra sections II.B and II.C.
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We also recognize that e-delivery may present certain risks. Among
those risks are risks associated with missed or misdirected e-delivery
of PFI, in particular; privacy and cybersecurity risks associated with
delivering PFI by e-delivery; and website communication system
outages.\60\ Our proposal, as discussed in more detail below, contains
safeguards that are designed to address these risks.\61\
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\60\ We recognize that financial industry stakeholders may
utilize a combination of security messages, back-end surveillance
reports, and multifactor authentication that are designed to detect
and combat security risks. See Nov. 2025 ICI Letter, supra footnote
17. Further, we recognize that electronic media may have limitations
that make them less effective at communicating information than
paper and that electronic delivery and paper delivery are not fully
interchangeable. For example, there can be some burdens on users
associated with accessing materials online, including having to use
a password to access various platforms or being required to have
internet availability to access these materials, which may create
disincentives and/or barriers to these materials. Also, for some,
digesting complex material may be more challenging on, for example,
a smartphone or computer screen than using a paper document. We also
recognize that paper delivery also presents certain risks. See supra
footnote 16 and accompanying text.
\61\ See infra sections II.B and II.C.
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In addition, we recognize that there is a risk that covered
recipients may not read and/or respond to the covered information.\62\
Although there may be numerous reasons why a covered recipient may not
read and/or be responsive to covered information delivered
electronically (including delivery into a spam or similar folder), one
reason may be the volume of electronically delivered covered
information. Elements of our proposal may help to ameliorate these
risks. By delivering covered information electronically, the covered
entity would have the opportunity to make the covered information more
engaging through the use of various online tools, such as calculators
or hover-overs, as well as through the flexibility of formats that
could be used for information delivered electronically. In turn, the
more engaging disclosure delivered by e-delivery may improve the
potential that the covered information would be read.
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\62\ See, e.g., SIFMA, SIFMA Asset Management Group, Financial
Services Institute, Investment Adviser Association, E-Delivery:
Modernizing the Regulatory Communications Framework to Meet Investor
Needs for the 21st Century (Sept. 2020), available at https://higherlogicdownload.s3.amazonaws.com/INVESTMENTADVISER/aa03843e-7981-46b2-aa49-c572f2ddb7e8/UploadedImages/publications/Electronic-Delivery-with-SIFMA-9-15-2020.pdf (recognizing that there has been a
correlation between the use of the internet access approach for the
delivery of proxy materials permitted by rule 14a-16 and reduced
investor voting rates, but suggesting that an improved investor
experience, particularly with the flexibility afforded by electronic
formats--such as online access, email or a firm's mobile
application--would result in greater and more meaningful investor
participation).
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It is important for a covered recipient to be able to access the
covered information, especially time-sensitive covered information, in
an efficient manner. Therefore, our proposal includes certain elements
that are designed to reduce barriers to a covered recipient accessing
covered information electronically.\63\ The proposed conditions in Reg
E-Delivery, which we designed to help ensure that materials are
delivered in a user-friendly format and provide relevant and consistent
information about investors' ability to express delivery preferences
(free of charge), reflect our understanding of common e-delivery
practices but may differ from how some covered entities currently
deliver information electronically under the E-Delivery Guidance. We
address the anticipated benefits of these proposed conditions, as well
as their costs, in more detail below.
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\63\ See infra sections II.B.3, II.B.4, and II.C.; see proposed
Reg E-Delivery Sec. Sec. 303.102(c)(1) and 303.102(c)(2) (proposed
e-delivery methods which, in part, require a website address for
covered information that does not include PFI that leads the covered
recipient directly to the covered information). Our proposal,
however, would require a process reasonably designed to safeguard
covered information that includes PFI delivered electronically (for
example, use of passwords) which could present some barriers to
viewing information that are absent with paper delivery. See
proposed Reg E-Delivery Sec. 303.102(c)(1)(iii)(B).
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Alternatives Considered
Under the proposed e-delivery approach, allowable e-delivery
methods would include either: (1) delivery of a statement of
availability of covered information to an electronic address, or (2)
direct delivery of covered information that does not include PFI to an
electronic address.
As an alternative to the proposed approach, we considered proposing
an ``access equals delivery'' model or a modified version of that model
for e-delivery. Under an access equals delivery approach, an issuer or
intermediary would post some or all of its regulatory disclosures and
reports online, rather than delivering them directly (or a notice of
availability directly) to investors and other recipients of information
required under the Federal securities laws by electronic means or in
paper format. For example, an alternative could include an access
equals delivery approach for all covered
[[Page 45894]]
information that does not include PFI and for routine updates, and
delivery of a statement of availability for covered information that
includes PFI or that includes material changes. A covered recipient
would be informed at the time of purchase (or at the start of a client/
customer relationship) that covered information would be made available
electronically online. This approach would require covered recipients
to access a website to ``pull'' covered information for their
investments, and would place the burden on covered recipients to seek
out information without providing them any contemporaneous notification
that updated disclosures are electronically available.
An access equals delivery approach is appropriate in certain
contexts.\64\ However, in circumstances where the Federal securities
laws currently require direct delivery of disclosure, we continue to
believe, as reflected in the proposed requirements of Reg E-Delivery,
that a contemporaneous notification that disclosures are electronically
available is necessary. Furthermore, while we appreciate that many
investors and other covered recipients increasingly prefer electronic
communications over paper mailings, we have no reason to believe that
most covered recipients would prefer an approach where they would not
receive contemporaneous notification that covered information is
available online.
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\64\ See, e.g., rule 172 under the Securities Act, which allows
issuers, brokers, and dealers to satisfy some final prospectus
delivery obligations if a final prospectus is or will be on file
with the Commission within the time required by the rules and other
conditions are satisfied (rule 172 does not apply to offerings by
registered open-end investment companies). 17 CFR 230.172; see also
Examples 14 and 15, 1995 Guidance, supra footnote 3 (discussing how
the requirement that supplemental sales literature be preceded or
accompanied by a prospectus could be met by having the final
prospectus appear in close proximity on a website or through a
hyperlink to the supplemental sales literature); Securities Offering
Reform Adopting Release, supra footnote 13.
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In addition, we considered the appropriateness of a ``notice and
access'' approach whereby covered recipients could receive a paper
notice, such as a postcard, that information is available online. Under
this approach, a covered entity would be permitted to provide a paper
notice to covered recipients who have not provided an electronic
address, which would include a legend as well as other information
designed to alert the recipient about the type and importance of the
information that is available and the website address where the
information could be found. There is a limited Commission rule that
currently permits this approach for certain registrants for certain
communications.\65\ However, the approach in that rule was designed for
investors who did not elect to receive disclosures through e-
delivery.\66\ We anticipate that most covered recipients who provide an
electronic address would be transitioned to e-delivery under the
proposed rule if adopted (unless they opt out), and a covered recipient
who has declined to provide an electronic address may be more likely to
prefer to receive covered information in paper format. Moreover, as
described below, we have concerns that such an approach would entail
barriers to accessing covered information.\67\
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\65\ See 17 CFR 270.30e-3 (``rule 30e-3''); see infra section
II.F.1 (discussing how rule 30e-3 applies only to delivery
obligations of registered closed-end funds and certain insurance
company separate accounts, and even as to those entities applies
only to their obligations to deliver shareholder reports); see also
17 CFR 240.14a-16.
\66\ See infra section II.F.1.
\67\ See infra footnote 87 and accompanying paragraph.
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We also considered whether to include as part of this proposal
additional measures intended to update the Commission's disclosure
regime more broadly to enhance disclosure quality, including engagement
with and understanding of disclosure. In recent rulemakings, the
Commission has adopted approaches designed to encourage investor
engagement and understanding of disclosure.\68\ We determined, however,
that such an undertaking, while important, would merit separate
consideration, particularly in light of the scope of parties and
information that this proposal covers.
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\68\ See supra footnote 13.
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We request general comment on the proposed e-delivery approach
(with more specific questions in the sections below about particular
aspects of this approach and particular provisions of proposed Reg E-
Delivery):
1. Are there risks presented by paper delivery, other than the
risks identified above, that would be ameliorated by a default e-
delivery system? Conversely, are there risks presented by electronic
delivery that would be aggravated by a default e-delivery system?
2. What are the risks, costs, and benefits for covered recipients
associated with the current standards for e-delivery? Has the balance
between these costs, risks, and benefits changed with advances in
technology? If so, what protections should be available to covered
recipients who do not want to receive electronic communications?
3. Is our proposed general approach to e-delivery appropriate?
Should we instead have proposed another approach to e-delivery, and why
would that approach be preferable? If another approach would be
preferable, would commenters recommend this approach universally for
all covered information and for all covered entities, or only for
certain categories of covered information or covered entities, and, if
so, for which categories?
4. More specifically, some financial industry stakeholders have
suggested that the Commission permit an access equals delivery approach
for institutional investors.\69\ Those stakeholders have stated that
institutional investors may have hundreds of accounts, and as a result,
may receive multiple duplicative communications. Would an access equals
delivery approach be appropriate for certain categories of covered
recipients, such as institutional investors, but not for other covered
recipients? If the proposed rule were to include different requirements
based on the type of covered recipient, what should those requirements
be and why? Further, if a different approach is recommended for
institutional investors, how should institutional investors be defined
and why? Should institutional investors be defined consistent with
Financial Industry Regulatory Authority, Inc. (``FINRA'') rules, which
define an institutional account as an account of entities such as a
bank, registered investment company, or investment adviser registered
with the Commission or with a state securities commission, or some
other standard? \70\
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\69\ See SIFMA Letter, supra footnote 44.
\70\ See, e.g., FINRA Rule 4512(c); see also, e.g., Markets in
Financial Instruments Directive Annex II Part I of Directive 2014/
65/EU (MiFID II), available at https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX:32014L0065#anx_II (defining ``professional
client,'' another possible definition to leverage for purposes the
request for comment discusses).
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5. Further, some financial industry stakeholders have suggested
that the Commission adopt an access equals delivery approach based on
the type of covered information as opposed to (or in addition to) the
type of covered recipient.\71\ For example, should there be an access
equals delivery approach for certain regulatory documents, such as fund
prospectuses and shareholder reports, but not for other documents, such
as documents that contain PFI? If so, what regulatory documents should
be included in an access equals delivery approach? Would such an
approach be
[[Page 45895]]
preferable to an access equals delivery approach based on the covered
recipient?
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\71\ See, e.g., Capital Group Letter, supra footnote 44.
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6. Would a ``notice and access'' approach, as described above, be
preferable to the approach in proposed Reg E-Delivery, particularly for
those covered recipients who have not provided an electronic address?
Why or why not?
7. Many of the policy choices in the proposal are framed in terms
of our understanding of investor preferences, and shifting the burdens
associated with the default method of delivering covered information
based on shifts in these preferences over time. How, if at all, should
our consideration of a shift in the default delivery method address
other primary factors, such as information comprehension or retention
when covered information is received in paper versus electronically,
and should we consider factors such as the device to which the covered
information is delivered?
8. Are there special considerations that the Commission should
address related to electronically delivering regulatory materials
associated with assets that are issued or transferred using distributed
ledger technology, and if so, what are these? \72\ To what extent could
blockchain and similar technologies be used to deliver the covered
information to covered recipients?
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\72\ In section II.B.1 below, we ask questions about whether the
proposed definitions of ``electronic address'' and ``electronic
delivery'' appropriately account for the delivery of covered
information using blockchain or other similar technologies.
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9. Are there particular international access considerations
regarding e-delivery that our proposal should address, and would the
proposed e-delivery rule enhance access of covered information for
investors and others in non-U.S. locations? Are there concerns that our
proposal would raise for non-U.S. resident covered recipients?
10. Should Reg E-Delivery also allow for any electronic delivery
method agreed to between a covered entity and a covered recipient? See,
for example, the scenarios discussed in Request for Comment #81 in
section II.B.7 below.
11. Our proposed e-delivery rule is designed not only to provide
covered recipients with covered information in the format that they
prefer, efficiently and cost-effectively, but also to improve
engagement with disclosures for covered recipients who currently
receive covered information in paper format. Are there other aspects of
the Commission's disclosure requirements that should be considered that
would improve engagement with regulatory disclosures?
12. Greater use of electronic media to deliver covered information
could have benefits that include the enhanced ability for covered
entities to provide AI tools to help covered recipients access,
understand, and use covered information. We request general information
and feedback about the use of AI tools to inform our understanding of
what opportunities and challenges could be associated with the use of
these tools to enhance covered entities' disclosure, covered
recipients' ability to access and use this disclosure, and related
policy considerations.
B. E-Delivery Methods and Requirements
1. General Use and Scope of Proposed Rule
Proposed Reg E-Delivery sets forth the conditions and circumstances
under which covered entities would be permitted to use e-delivery to
deliver covered information to covered recipients without first
obtaining their affirmative consent. In addition, Reg E-Delivery would
establish conditions under which the Commission would consider delivery
requirements under the Federal securities laws to have been satisfied
through e-delivery.\73\ Reg E-Delivery, however, would permit covered
entities to choose when and whether to use electronic delivery to meet
their delivery obligations. For example, a covered entity could choose
to limit its use of e-delivery under Reg E-Delivery to certain covered
information, such as covered information that does not contain PFI, and
to certain covered recipients, such as to institutional investors.
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\73\ The ultimate responsibility for satisfying applicable
delivery requirements under the Federal securities laws would remain
with the covered entity to which the law assigns the responsibility
to deliver covered information. Further, covered entities are
reminded that the substantive requirements and liability provisions
of the Federal securities laws apply equally to electronic and
paper-based media. See 1995 Guidance, supra footnote 3, at n.11;
1996 Guidance, supra footnote 3, at n.4. The proposed conditions are
designed to reflect the principles that an electronic medium would
not provide an adequate means for the delivery of required
disclosure if the medium does not permit effective communication to
investors or is practically unavailable, and that the use of a
particular medium should not be so burdensome that intended
recipients cannot effectively access the information provided. See
1995 Guidance, supra footnote 3, at n.24 and accompanying text.
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Further, the delivery methods that we are proposing under Reg E-
Delivery would not be the exclusive delivery methods that a covered
entity could use to deliver covered information electronically to a
covered recipient, unless a rule or statute provides otherwise.\74\ If
a covered entity develops a method of e-delivery that differs from
those contemplated in Reg E-Delivery but provides assurance comparable
to paper delivery that the required information will be delivered, that
method could be used to satisfy the covered entity's delivery or
transmission requirements under the Federal securities laws.\75\ The
use of Reg E-Delivery, however, would provide assurances that, if a
covered entity satisfies its conditions when using e-delivery, the
covered entity will have satisfied applicable requirements to deliver
covered information under the Federal securities laws.
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\74\ See, e.g., proposed rule 14a-16(1)(i)-(ii), discussed in
section II.F.2 below.
\75\ The Commission included similar ``assurance comparable to
paper delivery'' language in discussing the role of the E-Delivery
Guidance relative to a determination that delivery or transmission
requirements are satisfied. See 1995 Guidance, supra footnote 3, at
section II.B (stating that the factors discussed in the guidance are
not the only factors relevant to determining whether the legal
requirements pertaining to delivery or transmission of documents
have been satisfied, and that if an issuer or third party develops a
method of electronic delivery that differs from those discussed in
the guidance, but provides assurance comparable to paper delivery
that the required information will be delivered, that method may
satisfy delivery or transmission obligations).
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Proposed Reg E-Delivery includes two operative provisions. The
first, section 303.102, includes the electronic delivery methods and
requirements that a covered entity must satisfy for a covered entity to
use e-delivery to deliver covered information under the rule. The
second, section 303.104, is a transition rule that would address the
delivery of covered information to covered recipients who are receiving
any covered information in paper format at the time of the effective
date of Reg E-Delivery. This section provides additional conditions
that must be satisfied before a covered entity would be permitted to
transition those covered recipients from default paper delivery to
default e-delivery, recognizing that these covered recipients--unlike
covered recipients who begin receiving information by e-delivery after
any adoption of Reg E-Delivery--would be experiencing a change in the
way they receive covered information. We discuss section 303.102 in
section II.B of the release below, and we discuss section 303.104 in
section II.D.
Definition of ``Electronic Delivery'' and ``Electronic Address''
The proposed rule would define ``electronic delivery'' to mean the
delivery of covered information to a
[[Page 45896]]
covered recipient's electronic address.\76\ The requirements for e-
delivery under the proposal would entail delivery to an electronic
address that a covered recipient provides (or, for example in the case
of electronic addresses that are mobile applications, accepts to use)
to receive covered information. Under the proposal, an electronic
address would mean an identifier used to communicate with a covered
recipient electronically, including: an email address; a mobile phone
number; or any other means of electronic communication capable of
receiving electronic delivery pursuant to an electronic delivery method
that the rule sets forth and alerting a covered recipient that covered
information is available.\77\ Other means of communication could mean,
for example, a social media or electronic messaging platform username
or other identifier, as well as an inbox available in a covered
entity's web portal, as long as each of these is capable of receiving
and alerting the covered recipient about the delivery of covered
information.\78\ Our proposed definition of the term ``electronic
address'' is designed to be technologically neutral to encompass
current and future forms of electronic communications that meet the
rule's requirements. For example, such forms of electronic
communication could include blockchain messaging to the extent that it
otherwise meets the requirements of the proposed definition and can
satisfy the other requirements of the proposed rule.
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\76\ See proposed Reg E-Delivery Sec. 303.101.
\77\ See proposed Reg E-Delivery Sec. 303.101.
\78\ See infra section II.B.8 for a discussion about the choice
of e-delivery method when the issuer or market intermediary has
multiple electronic addresses for the covered recipient.
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The proposed definition of ``electronic address'' would require
that the means of electronic communication used alert the covered
recipient each time that covered information is available. Such an
alert could be, for example, an email, a text, a notification from an
electronic application, or some other form of notification that the
covered information has been delivered. This proposed requirement would
help ensure that covered recipients are aware that covered information
is available for them to review. The proposed requirement also
recognizes that some covered information may be time sensitive and/or
important to a covered recipient in making an upcoming investment-
related decision or taking other action.\79\ For example, if an
investor must promptly report any inaccuracies or discrepancies
regarding a trade confirmation, being alerted that a trade confirmation
is available electronically would help facilitate the completion of
this time-sensitive task.\80\
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\79\ See also infra section II.B.3 for discussion about the
proposed requirement that the statement of availability identify
whether the covered information may require action by the covered
recipient within a fixed time frame to exercise certain rights.
\80\ Broker-dealers often require as a term of their customer
account agreements that customers review and promptly report any
discrepancies.
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If a covered entity does not have an electronic address for a
covered recipient (either provided by or accepted for use by the
covered recipient), the covered entity would not be able to rely on the
proposed rule to deliver covered information electronically to that
recipient.\81\ Therefore, the proposed rule does not, for example,
include as a method of e-delivery an approach where, for a covered
recipient who has not provided an electronic address, the covered
entity could send a paper postcard with instructions about how to
access information electronically (such as by including a QR code or a
URL where information is available online).\82\ A covered recipient who
has declined even to provide an electronic address may be relatively
more likely to prefer to receive covered information in paper format
and may be less likely to act on a postcard or other paper delivery
informing the covered recipient that covered information is available
online. Further, where an individual is relatively less technologically
savvy, even if such person is generally comfortable using electronic
media to access information, there could be barriers to accessing this
information. These barriers could occur, for example, because the
individual may encounter obstacles in using a QR code or URL that is
included in a paper notice, or because the individual misplaces the
paper notice before accessing the information electronically.
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\81\ To default a covered recipient currently receiving paper
into e-delivery under the proposed transition process, a covered
entity must have an electronic address for the covered recipient.
See infra section II.D.1; see also proposed Reg E-Delivery Sec.
303.101 (definition of ``covered recipient receiving paper'').
Similarly, outside of the transition process, a covered entity may
deliver covered information to a covered recipient who has not opted
out of e-delivery by delivering that information to an electronic
address that a covered recipient provided (or accepts to use) to
receive covered information if the covered entity satisfies certain
requirements. See proposed Reg E-Delivery Sec. 303.102(a).
\82\ See also infra section II.F.1 (proposing to rescind rule
30e-3 under the Investment Company Act).
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Definition of ``Covered Entity''
The e-delivery framework under proposed Reg E-Delivery would be
available to any person required to deliver covered information to a
covered recipient, defined collectively in the proposed rule as
``covered entities.'' \83\ The proposed definition of a ``covered
entity'' therefore would include persons registered with the Commission
under the Exchange Act, the Investment Advisers Act of 1940 (the
``Advisers Act''), and the Investment Company Act, as well as persons
with a class of securities registered under the Exchange Act, persons
conducting securities offerings registered or exempt from the
registration requirements under the Securities Act of 1933 (the
``Securities Act''), persons subject to the requirements of the Trust
Indenture Act of 1939 (the ``Trust Indenture Act'') and other persons
required by the Federal securities laws to deliver covered information
to covered recipients. It also includes third parties that are required
to deliver covered information to covered recipients, including, for
example, bidders for third-party tender offers and dissidents in
contested proxy solicitations.\84\ Examples of ``covered entities''
under Reg E-Delivery, which we anticipate would be the primary entities
who would rely on the proposed rule, would include:
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\83\ See proposed Reg E-Delivery Sec. 303.101.
\84\ The proposed rule only includes third parties expressly
required to deliver covered information to covered recipients under
the Federal securities law. If a covered entity chooses to use an
agent or other third party to deliver information on its behalf, the
covered entity that is responsible for delivering the information
under the Federal securities laws would ultimately be responsible
for compliance with Reg E-Delivery.
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An issuer that is conducting a registered securities
offering under the Securities Act or other parties with delivery
obligations in connection with a registered securities offering;
An issuer that is conducting a securities offering exempt
from the registration requirements under the Securities Act;
An issuer that has a class of securities registered under
section 12 of the Exchange Act or that is required to file reports
under section 15(d) of the Exchange Act;
An obligor or trustee under an indenture subject to the
qualification requirements of the Trust Indenture Act;
An investment company that is registered under the
Investment Company Act, including an insurance company separate account
that is a management investment company offering a variable annuity or
variable life insurance contract;
A business development company (as defined in section
2(a)(48) of the Investment Company Act);
[[Page 45897]]
A registered index-linked annuity or registered market
value adjustment annuity contract that offers securities under the
Securities Act;
A broker or dealer that is registered under the Exchange
Act;
A municipal securities dealer that is registered under the
Exchange Act;
A government securities broker or government securities
dealer that is registered under the Exchange Act; \85\
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\85\ Government securities brokers or dealers must comply with
rules adopted by the U.S. Department of the Treasury under Title I
of the Government Securities Act (``GSA''). See 17 CFR 400.1(b). In
1997, Treasury issued a letter stating its view that government
securities brokers or dealers registered under Section 15C of the
Exchange Act (``15C firms'') may use electronic delivery for
confirmations pursuant to applicable Treasury rules provided they
adhere to the guidelines established in the Commission's 1995
Guidance and 1996 Guidance. See letter dated October 27, 1997 from
Treasury to Michael A. Macchiaroli, Division of Market Regulation,
Securities and Exchange Commission, available at https://www.treasurydirect.gov/laws-and-regulations/gsa/regulatory-cites/cite-10-27-1997-2/. This proposal does not address any obligations
of government securities brokers or dealers pursuant to rules
promulgated by Treasury under the GSA.
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A security-based swap dealer, a major security-based swap
participant, a security-based swap execution facility, and a security-
based swap data repository that is registered under the Exchange Act;
A funding portal that is registered under rule 400 of
Regulation Crowdfunding and pursuant to section 4A(a)(1) of the
Securities Act;
An investment adviser that is registered with the
Commission under the Advisers Act;
A transfer agent that is registered with the Commission
under the Exchange Act or another appropriate regulatory agency as
defined in section 3(a)(34)(B) of the Exchange Act; and
Any person, including any third party, required to deliver
covered information to a covered recipient pursuant to Regulation 14A,
Regulation 14C, Regulation 14D, Regulation 14E, rule 13e-3 or rule 13e-
4 of the Exchange Act.
The proposed definition of ``covered entity'' is designed to help
ensure that all persons that are required to deliver covered
information under the Federal securities laws have available to them
the same e-delivery framework under the proposed rule. However, persons
that have delivery obligations to covered recipients pursuant only to
the rules of self-regulatory organizations as defined in section
3(a)(26) of the Exchange Act (``SROs'')--such as municipal advisors
registered with the Commission--are not included within the scope of
Reg E-Delivery, because these delivery obligations are imposed solely
by SRO rules.\86\ The proposed definition of a covered entity is
designed to remain evergreen by allowing for any future persons that
may be required to deliver covered information. Additionally, the
proposed scope of covered entities that would be permitted to rely on
the proposed rule builds on the scope of persons covered by the current
E-Delivery Guidance.\87\
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\86\ Under section 19 of the Exchange Act, the Commission may
approve an SRO's proposed rule change only if it finds that the
proposed rule change is consistent with the requirements of the
Exchange Act, including the public interest and the protection of
investors.
\87\ See supra footnote 3. The scope of entities that would be
permitted to rely on the proposed rule is also consistent with the
scope of covered entities in the e-delivery bills currently being
considered by Congress. See supra footnote 46; see also infra
section II.G.
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The proposed definition of ``covered entity'' would include an
obligor or trustee that is required to deliver covered information to a
covered recipient under the Trust Indenture Act. The Trust Indenture
Act regulates debt offerings, including transactions that are
registered under the Securities Act and certain transactions that are
exempt from Securities Act registration. Accordingly, including the
Trust Indenture Act within the scope of Reg E-Delivery would help to
provide a consistent e-delivery framework for Federal securities laws
that frequently operate together.
Unlike most delivery requirements under the Federal securities
laws, the Trust Indenture Act requires certain information to be
provided to indenture security holders ``by mail.'' \88\ In addition,
the Commission's E-Delivery Guidance releases did not address delivery
obligations under the Trust Indenture Act. As a result, there is no
existing guidance available to indenture obligors or trustees that
would provide assurance that they may satisfy delivery requirements
under the Trust Indenture Act using e-delivery. Nonetheless, since the
Commission's publication of the E-Delivery Guidance, staff has received
few, if any, inquiries regarding the availability of e-delivery for
delivery obligations under the Trust Indenture Act and has limited
visibility into current delivery practices relating to these
obligations. Accordingly, we solicit comment below on whether delivery
obligations arising under the Trust Indenture Act should be included
within the scope of Reg E-Delivery.
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\88\ See, e.g., section 313(c) of the Trust Indenture Act
(requiring reports to be ``transmitted by mail'' to indenture
security holders).
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Definition of ``Covered Information''
The proposed rule would use the defined term ``covered
information'' to denote the information that is eligible to be
delivered using e-delivery.\89\ ``Covered information'' would be
defined to mean any information required to be delivered to a covered
recipient under the Securities Act, the Exchange Act, the Trust
Indenture Act, the Investment Company Act, the Advisers Act, or any
other of the Federal securities laws, but excludes information required
to be delivered under 17 CFR part 227 (Regulation Crowdfunding), 17 CFR
240.15c2-11, or 17 CFR 240.15Fi-2 (Acknowledgment and verification of
security-based swap transactions (``trade acknowledgment rule'')).\90\
The terms ``deliver'' or ``delivery'' would be defined broadly to
encompass any term used to describe the delivery of information under
the Federal securities laws. Specifically, the term ``deliver'' or
``delivery'' would be defined to mean, as applicable, deliver, furnish,
transmit, send, give, mail, provide, forward, make available, or
disseminate information, as described under the Federal securities
laws.\91\ Covered information therefore would include, for example:
(for investment companies) fund prospectuses, fund annual and semi-
annual shareholder reports, notices under Investment Company Act rule
19a-1, proxy statements and information statements; \92\ (for issuers,
other soliciting persons, and/or certain third parties) issuer
prospectuses, issuer annual reports to security holders, proxy
statements and information statements, tender offer statements and
solicitation/recommendation statements, and offering circulars; \93\
(for
[[Page 45898]]
obligors and indenture trustees) bondholders' lists and reports to
security holders; \94\ (for broker-dealers) trade confirmations,
disclosures pursuant to Form CRS, and Reg S-AM disclosures; \95\ and
(for investment advisers) Form ADV Part 2 Brochures, marketing and
testimonial disclosures, agency cross transaction disclosures, and
custody rule account statement notices.\96\ This list is non-
exhaustive; the proposed definition of ``covered information'' includes
disclosures not listed here but that may be required under, for
example, Regulation Best Interest,\97\ as well as disclosures that
would be required of covered entities in the future under applicable
laws and regulations. Covered information, however, would not include
information that is required to be filed with the Commission or
otherwise made available generally to the public but not delivered to
particular recipients.\98\ Consistent with the approach taken with the
current E-Delivery Guidance, covered information would also not include
disclosures made pursuant to any applicable state laws or SRO rules,
including FINRA and the Municipal Securities Rulemaking Board
(``MSRB'').\99\
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\89\ See proposed Reg E-Delivery Sec. 303.101.
\90\ Id. Covered entities may at times choose to voluntarily
deliver additional information electronically to covered recipients
or their designees beyond that which is legally required under the
Federal securities laws. For such non-required information, it would
not be necessary to conform the e-delivery of such information to
the standards of proposed Reg E-Delivery, although we anticipate
that covered entities may wish to adopt these e-delivery standards
for consistency with how covered information is delivered.
\91\ Id.
\92\ Statutes and Commission rules that may involve a
requirement for an investment company to deliver covered information
include, for example: 15 U.S.C. 80a-7(e); 15 U.S.C. 80a-27(e); 17
CFR 270.3a-4(a)(2)(iii); 17 CFR 270.23c-1(a)(5).
\93\ Statutes and Commission rules that may involve a
requirement for an issuer, other soliciting person, and/or a third
party to deliver covered information include, for example: 15 U.S.C.
77d(d)(3); 15 U.S.C. 77e (b)(2); 15 U.S.C. 77lll(a); 15 U.S.C.
77nnn; 17 CFR 230.134; 17 CFR 230.144A(d)(4); 17 CFR 230.147(f)(3);
17 CFR 230.147A(f)(3); 17 CFR 230.153a; 17 CFR 230.153b; 17 CFR
230.173; 17 CFR 230.251(d)(2)(i)(B); 17 CFR 230.251(d)(2)(ii); 17
CFR 230.428; 17 CFR 230.433; 17 CFR 230.502(b); 17 CFR
230.502(d)(2); 17 CFR 230.605(a); 17 CFR 230.701(e); 17 CFR 240.13e-
3(f); 17 CFR 240.13e-4; 17 CFR 240.14a-3(b); 17 CFR 240.14a-16; 17
CFR 240.14c-2; 17 CFR 240.14c-3(a); 17 CFR 240.14d-4; 17 CFR
240.14e-2; 17 CFR 240.14f-1.
\94\ Statutes that may involve a requirement for obligors and
indenture trustees to deliver covered information include, for
example: 15 U.S.C. 77lll; 15 U.S.C. 77mmm; 15 U.S.C. 77nnn; 15
U.S.C. 77ooo(b).
\95\ Statutes and Commissions rules that may involve a
requirement for broker-dealers to deliver covered information
include, for example: 17 CFR 248.1-248.30; 17 CFR 248.202(c); 17 CFR
240.10b-16; 17 CFR 240.9b-1(d); 17 CFR 240.14b-1.
\96\ Statutes and Commission rules that may involve a
requirement for an investment adviser to deliver covered information
include, for example: 15 U.S.C. 80b-5(a)(3); 17 CFR 275.204-3; 17
CFR 275.206(4)-6.
\97\ Regulation Best Interest: The Broker-Dealer Standard of
Conduct, Securities Exchange Act Release No. 86031 (June 5, 2019)
[84 FR 33318] (July 12, 2019)].
\98\ For example, covered information would not include
disclosures required to be made public under Regulation FD either
through filing or furnishing a Form 8-K or by disseminating the
information through another method, or combination of methods, of
disclosure that is reasonably designed to provide broad, non-
exclusionary distribution of the information to the public.
Similarly, covered information would not include a code of ethics
posted to an issuer's website in order to satisfy Item 406(c) of
Regulation S-K or Form ADV Part 1 filed by an investment adviser on
the Investment Adviser Registration Depository (IARD).
\99\ See 1995 Guidance, supra footnote 3, at n.11. Other broker-
dealer disclosures may be governed by SRO rules. For example, Reg E-
Delivery may apply indirectly to the extent an SRO rule provides
that members may deliver information electronically so long as it is
compliant with Commission E-Delivery Guidance. See, e.g., FINRA Rule
2231.03 (governing the delivery of customer account statements). In
addition, certain delivery requirements relevant to securities
accounts would not be covered as they are governed by other
agencies' rules (e.g., IRS rules for Form 1099s).
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Reg E-Delivery is designed to provide a framework for using e-
delivery to satisfy all delivery requirements under the Federal
securities laws, except to the extent Federal securities laws otherwise
already explicitly permit or require e-delivery. Therefore, defining
``covered information'' broadly in terms of obligations under the
Federal securities laws is designed to create a more consistent
approach for all covered entities and help to clarify that this e-
delivery framework will be available for new disclosure requirements in
the future.
As stated above, ``covered information'' excludes information
required to be delivered under Regulation Crowdfunding, rule 15c2-11,
and the trade acknowledgment rule for security-based swap
transactions.\100\ Each of these rules, adopted by the Commission well
after the E-Delivery Guidance was issued, reflects a policy choice to
require or permit an e-delivery framework tailored to these specific
situations. First, with respect to Regulation Crowdfunding, the
Commission determined not to require issuers to provide physical copies
of information to investors, because of the unique, online-only nature
of crowdfunding platforms and the fact that issuers may not have email
addresses for investors.\101\ The Commission stated that ``Congress
contemplated that crowdfunding would, by its very nature, occur over
the internet or other similar electronic media that is accessible to
the public.'' \102\ Second, the disclosures pursuant to Rule 15c2-
11(b)(5)(ii), amendments to which were adopted by the Commission in
2020, require broker-dealers to make available to certain investors,
upon request, specified information that is already publicly available,
and permits--but does not require--the broker-dealer to provide that
information electronically.\103\ In adopting this amendment, the
Commission intended to ``alleviate the concern that issuer information
may be difficult for investors to locate on their own'' and was
designed to ``make such information easier to find while providing a
cost-effective means for broker-dealers to distribute'' such
information.\104\ Finally, with respect to the trade acknowledgment
rule, the Commission imposed an electronic delivery requirement to
promote the objectives of Exchange Act section 15F(i)(1) for timely and
accurate confirmation and documentation of security-based swaps.\105\
In adopting the electronic delivery requirement, the Commission took
into account its understanding that electronic delivery was the norm
for security-based swap transactions, and timely delivery was
particularly important to ``reduce operational risk by decreasing the
amount of time within which a counterparty may recognize and work to
resolve any potential discrepancies in the trade documentation.'' \106\
The Commission believes that the costs that would be imposed by
changing these rules would far outweigh any perceived increased
investor protection benefits, particularly in light of the fact that we
are not aware of any issues in the implementation of the e-delivery
framework in those rules that would merit reconsideration of the
approach to e-delivery set forth therein.
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\100\ See 17 CFR 227.302(a), 17 CFR 240.15c2-11(b), and 17 CFR
240.15Fi-2(c).
\101\ See Regulation Crowdfunding, Securities Exchange Act
Release No. 76324 (Oct. 30, 2015) [80 FR 71388] (Nov. 16, 2015) at
71406-17407.
\102\ Id. at 71424.
\103\ See Publication or Submission of Quotations Without
Specified Information, Securities Exchange Act Release No. 89891
(Sept. 16, 2020) [85 FR 68124] (Oct. 27, 2020) at 68135.
\104\ See id.
\105\ See Trade Acknowledgment and Verification of Security-
Based Swap Transactions, Securities Exchange Act Release No. 78011
(June 8, 2016) [81 FR 39808 (June 17, 2016)], at 39817.
\106\ Id.
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Definition of ``Covered Recipient''
The proposed rule would use the defined term ``covered recipient''
to mean any current or prospective customer, client, investor, security
holder (including an indenture security holder), counterparty, or
similar recipient to whom a covered entity is required to deliver
covered information.\107\ This term is designed to include those
persons to whom covered entities have delivery obligations under the
Federal securities laws and rules. As there already are regulatory
requirements for registered entities that provide for delivery of
appropriate information to government entities, the proposed definition
of ``covered recipient'' does not include the Commission, another
Federal or state regulator, or SRO.\108\
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\107\ Proposed Reg E-Delivery Sec. 303.101. As discussed below,
Reg E-Delivery as proposed includes requirements for covered
recipients who, as of the rule's effective date, are currently
receiving any covered information in paper, where the covered entity
wishes to transition to using e-delivery as the default method of
delivery. See infra section II.D.
\108\ See supra footnote 99 and accompanying text.
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[[Page 45899]]
The ``similar recipient of information'' language in the proposed
definition of ``covered recipient'' is designed to include any legal
representative of a covered recipient or any other person whom the
covered recipient has designated to receive covered information on the
recipient's behalf. Covered recipients may in certain circumstances
need to designate other persons or entities to receive covered
information in addition to or instead of the covered recipient. This
may be the case, for example, for financial professionals assisting
investors, family members monitoring the finances of elderly relatives
or legal representatives of a covered recipient (e.g., trustees who
represent the assets of a natural person, executors, conservators, and
persons holding a power of attorney for the covered recipient). The
``similar recipient of information'' also would include any person who
is no longer a current customer (or similar) but to whom a covered
entity is required to deliver certain covered information based on a
prior obligation to deliver information. For example, covered entities
may be required to send notifications regarding the unauthorized access
or use of a former customer's information under Regulation S-P.\109\
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\109\ See 17 CFR 248.30(a)(4), (d)(1)(i)(B).
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We request comment on the general use and scope of proposed Reg E-
Delivery:
13. Is the proposed definition of ``electronic delivery''
appropriate? The proposed definition of the term ``deliver'' or
``delivery'' is designed to encompass all terms under the Federal
securities laws that refer to delivery. Are there other terms that
should be included? Would an alternative approach to the definition of
``deliver'' or ``delivery'' be preferred? Should the proposed rule
instead incorporate a broader definition, such as including a provision
like ``an electronic method reasonably designed to ensure receipt of
such regulatory document by the investor,'' similar to what is included
in currently unenacted Congressional legislation? \110\
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\110\ See supra footnote 46.
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14. Is the proposed definition of ``electronic address''
appropriate? The proposed rule would permit a covered entity to deliver
covered information to a covered recipient's electronic address that is
capable of receiving covered information and alerting the covered
recipient that covered information is available. Are these conditions
appropriate, and would these conditions be able to be satisfied for all
types of electronic addresses that covered entities and covered
recipients may wish to use (for instance, web-based portals and mobile
applications)? Would it be readily understood that these could be
included in the definition as ``any other means of electronic
communication capable of receiving electronic delivery pursuant to an
electronic delivery method as set forth in section 303.102(c) and
alerting a covered recipient that covered information is available''?
Would the ``capable of . . . alerting'' condition raise questions in
the context of mobile applications to the extent that a mobile
application can be ``offloaded'' (generally meaning core installation
files are removed but certain user-specific information, such as log-in
information, is saved), and the mobile application no longer provides
``push'' notifications that information is available? Similarly, would
this condition raise questions in the context of mobile applications to
the extent that app notifications can be limited or disabled by the
user? Are there other conditions regarding an electronic address that
the proposed rule should impose? Are there additional forms of
electronic addresses that we should include as examples of an
electronic address in the rule's definition?
15. We designed our proposed definitions of ``electronic address''
and ``electronic delivery'' to be technologically neutral. As such, our
proposed definitions of ``electronic address'' and ``electronic
delivery'' would include the use of blockchain or similar technology to
deliver covered information, to the extent blockchain messaging
otherwise meets the requirements of the proposed definitions and can
satisfy the other requirements of the proposed rule. Do the proposed
definitions of ``electronic address'' and ``electronic delivery''
achieve the goal of being technologically neutral, and are these
definitions appropriately evergreen to account for future technological
advancements?
16. Are there broader concerns associated with the use of
particular types of electronic addresses for e-delivery, such as
concerns regarding the sufficiency or reliability of notice provided to
covered recipients? If so, please describe the nature of these
concerns, including any specific address types (e.g., email, mobile
phone number, web portal, or app-based notifications) that may present
challenges in ensuring timely and effective notice. Are there
additional safeguards or requirements the Commission should consider to
address these concerns?
17. The Commission acknowledges that there is a risk that covered
information could be delivered to a spam or similar folder associated
with an electronic address or that the covered information could be
mistaken for a phishing attempt. Are there guardrails that the
Commission should impose on covered entities to address the risk of
misdirected or mistaken e-delivery?
18. In addition, the Commission acknowledges that there is risk, as
there is with paper delivery, that the covered information may not be
opened. This could occur for multiple reasons, including because the
covered recipient may have a paper delivery preference, but did not
express that delivery preference, or because of the volume of
electronic communications that the covered recipient receives. Even
though there are no required regulatory guardrails to address this risk
in the context of paper delivery, are there any requirements we should
include in Reg E-Delivery? For example, would requiring read receipts
on emails help address these concerns in the context of e-delivery, and
if so, why? Relatedly, could these concerns be addressed by tools, such
as AI tools, that could alert the covered recipient that there is
covered information available to review?
19. When a covered recipient provides an electronic address, the
covered recipient may expect to view covered information through that
address or through the website of the covered entity. For example, a
covered recipient may provide an electronic address that is an email,
but the covered entity may require the covered recipient to download a
mobile application or log into a website portal to view the covered
information, such as covered information that contains PFI. Should Reg
E-Delivery include limits on the use of an electronic address such as a
mobile application or a website portal to view covered information if
the steps to access the covered information are overly burdensome (and
if so, how should this be defined)? \111\
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\111\ We discuss a related point below relating to ``reasonable
access'' to covered information available on a website. See infra
footnote 135 and accompanying text.
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20. Rather than requiring a covered entity to have an electronic
address for a covered recipient, as proposed, we considered proposing
an approach whereby, if a covered entity does not have a covered
recipient's electronic address, the covered entity could instead send a
paper notification alerting such covered recipient that covered
information is available online.
[[Page 45900]]
Do commenters agree with our rationale, discussed above, for not
proposing this approach? Is it appropriate that, as proposed, we
require that a covered entity deliver covered information to a covered
recipient's electronic address for a covered entity to rely on Reg E-
Delivery to deliver covered information electronically to the covered
recipient? Would the use of a paper notification alerting the covered
recipient that covered information is available be a viable alternative
to requiring that the covered entity have an electronic address for the
covered recipient? If so, should this alternative be limited to
publicly available covered information (e.g., prospectuses, investment
adviser brochures, Regulation Best Interest disclosures, Form CRS) or
to covered information not containing PFI? Should such an approach be
prohibited where the covered information is time-sensitive and requires
the covered recipient to act within a set time frame? How would
commenters respond to the Commission's concerns about recipients
encountering barriers to accessing information electronically, as
described above?
21. To what extent do covered entities anticipate relying on
proposed Reg E-Delivery if adopted? Are some categories of covered
entities more likely to rely on it than others? And are there certain
types of covered information currently delivered in paper that would be
particularly more likely to be delivered electronically under proposed
Reg E-Delivery? If so, which?
22. Should the definition of ``covered entity'' include an obligor
or trustee under an indenture subject to the qualification requirements
of the Trust Indenture Act? If not, why? Are there any entities with
delivery obligations under the Trust Indenture Act that should be
excluded from the definition of ``covered entity''? Are there are any
specific delivery obligations or types of information required to be
provided pursuant to the Trust Indenture Act that should be excluded
from the definition of ``covered information''? If so, why? How do
obligors and trustees currently deliver information required to be
provided pursuant to the Trust Indenture Act? How do they provide such
information ``by mail''? Would it be more efficient for obligors and
trustees to deliver such information electronically, or are the current
method(s) of delivery sufficient? If available, please provide data to
support your views on any of the foregoing.
23. Should government securities brokers or dealers registered with
the Commission under Section 15C of the Exchange Act be excluded from
the definition of ``covered entity''?
24. Are there entities that have delivery obligations under the
Federal securities laws (other than those expressly excluded from the
proposed rule) that the proposed definition of ``covered entity'' would
not capture? If so, what are they and should they be eligible to use
the Reg E-Delivery framework?
25. Should the definition of ``covered information'' include
information delivered pursuant to SRO delivery requirements, including,
at a minimum, information that requires delivery to consumers in
writing and that may need an exemption from the E--SIGN Act to allow
for default e-delivery?
26. Is the proposed definition of ``covered information''
appropriate? If not, why? What would be an appropriate definition of
``covered information''? Is there another term that would be more
appropriate to use to designate information that is eligible to be
delivered using e-delivery under the proposed rule than ``covered
information''? Should the Commission define specific types of
information that would be ``covered information'' under Reg E-Delivery?
Are there any types of information that should be excluded from the
definition of ``covered information'' under Reg E-Delivery? Under the
proposal, ``covered information'' only captures information ``required
to be delivered,'' and therefore disclosures that are provided in
connection with covered entities' anti-fraud or fiduciary obligations
are not included as ``covered information,'' because specific
disclosures are not required to be delivered in connection with anti-
fraud or fiduciary obligations. Should these disclosures, however, be
included in the definition of ``covered information''?
27. Are there types of information included in the proposed
definition of ``covered information'' that could be problematic or even
unsuitable for e-delivery generally, or unsuitable for e-delivery under
the proposed framework? If so, what are they and why would they be
problematic or unsuitable? Are the proposed exclusions from ``covered
information'' (i.e., information required under Regulation
Crowdfunding, the trade acknowledgement rule, and rule 15c2-11)
appropriate? Should the Commission revise those separate rules
accordingly so that delivery of the information pursuant to each of
those rules would be covered under Reg E-Delivery?
28. Instead of, or in addition to, the principles-based definition
of covered information, should we provide in the rule a non-exhaustive
list of the disclosures for which covered entities may rely on Reg E-
Delivery? Are there certain covered entities for which greater
specificity of what constitutes covered information would be helpful?
What are those entities and why would additional specificity be helpful
or needed?
29. Would the proposed definition of ``covered information'' risk
disruption to any types of offerings where offering participants may
currently satisfy delivery obligations (including those imposed as a
condition to reliance on any Commission rule or safe harbor from
registration) using e-delivery? For example, the Commission has little
visibility into how issuers and others comply with delivery conditions
of the Regulation S and rule 144A safe harbors. To the extent offering
participants in these markets currently rely on e-delivery, would
including these delivery conditions within the scope of the proposed
rule potentially disrupt those markets or create unnecessary burdens?
What would be the nature, extent, costs and benefits of any such
disruptions or burdens?
30. Is the proposed definition of ``covered recipient''
appropriate? Why or why not? The term ``similar recipient to whom a
covered entity is required to deliver covered information'' is designed
to include, for example, any person who is no longer a current customer
(or similar) but to whom a covered entity is required to deliver
certain covered information based on a prior obligation to deliver
information, such as under Regulation S-P. Should the definition
instead more specifically address persons with whom a covered entity
formerly had a customer, client, or similar relationship?
31. Should legal representatives of covered recipients or others
whom the covered recipient has designated to receive covered
information be specifically included in the definition of ``covered
recipient''? Please explain.
32. Are there any other types of relationships or groups of
individuals that should be included in the proposed definition of
``covered recipient''? If so, why? Are any of the types of persons
included in the proposed definition of ``covered recipient'' not
appropriate? If so, why?
2. Disclosure of E-Delivery
Under the proposed rule, a covered entity may deliver covered
information to a covered recipient who has not opted out of e-delivery
by delivering that information to an electronic address that a covered
recipient provided (or
[[Page 45901]]
accepted to use) to receive covered information if the covered entity
satisfies certain requirements.\112\ The covered entity generally must
provide certain disclosures to such covered recipients before using e-
delivery.\113\
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\112\ See proposed Reg E-Delivery Sec. 303.102(a).
\113\ See proposed Reg E-Delivery Sec. 303.102(b); see also
infra section II.D (describing a special provision requiring certain
notices to be provided to covered recipients receiving any covered
information in paper form as of the effective date of Reg E-
Delivery).
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To rely on proposed Reg E-Delivery, a covered entity that intends
to e-deliver covered information by default would need to provide a
clear and conspicuous disclosure to the covered recipient that
describes the types of covered information that will be delivered
electronically to the electronic address the covered recipient provides
(or accepts to use) to receive covered information, unless the covered
recipient opts out of e-delivery.\114\ If applicable, this disclosure
must state whether a covered recipient's request for paper or to opt
out of e-delivery could result in restrictions on or termination of the
covered recipient's relationship with the covered entity.
Alternatively, for a covered entity that intends only to use e-delivery
where a covered recipient affirmatively elects to receive covered
information electronically,\115\ the required disclosure would need to
state that the covered recipient may opt to have covered information
delivered electronically to the electronic address the covered
recipient provides or accepts to use to receive covered
information.\116\ For new covered recipients, covered entities, whether
they are pursuing default e-delivery or an opt-in approach, could
incorporate these required disclosures into their onboarding or account
opening processes.
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\114\ See proposed Reg E-Delivery Sec. 303.102(b)(1)(i); see
also infra section II.B.3 (discussing the rule's applicability in
circumstances where a covered recipient's request for paper or to
opt out of e-delivery could result in potential restrictions on or
termination of the covered recipient's relationship with the covered
entity).
\115\ Reg E-Delivery would not preclude a covered entity from
continuing to obtain affirmative consent from covered recipients,
instead of using e-delivery as the default method of delivery, if
the covered entity prefers this approach. See proposed Reg E-
Delivery Sec. 303.102(b)(1)(ii). Section II.H infra addresses
scenarios relating to the transition from the E-Delivery Guidance to
Reg E-Delivery, including for covered entities that have obtained
affirmative consent to e-delivery from certain covered recipients in
the past in reliance on past guidance and may wish to continue
obtaining affirmative consent going forward. Such affirmative
consent could be obtained, for example, by electronic means, and
also could be obtained telephonically as long as a record of that
consent (containing as much detail as any written or electronic
consent including whether the consent obtained is global and what
electronic media will be used) is retained. As discussed below in
section II.E, we are proposing in Reg E-Delivery an exemption from
the consumer consent requirements of the E-SIGN Act (which includes
the means by which such consent must be provided under the E-SIGN
Act).
\116\ See proposed Reg E-Delivery Sec. 303.102(b)(1)(ii).
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The proposed disclosure requirement is designed to help ensure that
covered recipients who provide an electronic address to receive covered
information are aware of how the covered entity intends to use the
electronic address in communicating with the covered recipient and to
inform the covered recipient of the specific items of covered
information that will be electronically delivered using the covered
recipient's electronic address. For the covered recipients of covered
entities that do not intend to pursue the default e-delivery model
under Reg E-Delivery, the disclosure would inform such covered
recipients that they need to affirmatively elect to receive covered
information electronically if that is their preference.\117\
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\117\ As discussed below, we are proposing that covered
information delivered under proposed Reg E-Delivery would be exempt
from the consumer consent requirements of the E-SIGN Act (to the
extent it otherwise would have been subject to such requirements),
including the related consumer disclosure requirements. See infra
section II.E.
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Under the proposed rule, covered information may be delivered to an
electronic address that a covered recipient provides to receive covered
information, such as an email address or mobile phone number that the
covered recipient provides to the covered entity, or to an electronic
address that the covered recipient ``accepts to use'' to receive
covered information, such as an inbox in a mobile application or in a
covered entity's web portal that a covered recipient agrees to use. For
example, a covered recipient that provides an email address to a
covered entity in the process of onboarding with that entity would be
assumed to be comfortable with receiving communications from the
covered entity about a variety of matters and thus would be deemed to
have ``provided'' that email address ``to receive covered information''
within the meaning of the proposed rule. Similarly, when a covered
recipient, for example, uses a mobile application or an online account
to access covered information, a covered recipient has ``accepted to
use'' that mobile application or online account as an electronic
address to receive covered information under the proposal by taking
steps that indicate a willingness to receive covered information at
that electronic address.\118\ However, a covered recipient has not
provided or accepted to use an electronic address to receive covered
information if the covered recipient provided the address only for a
purpose other than to receive covered information, for example, in a
request for technical support. It also would not be appropriate for a
covered entity to use an electronic address that a covered recipient
has provided solely in circumstances that indicate that the recipient
may not wish to receive covered information electronically (such as
requesting paper copies of proxy materials in the context of rule 14a-
16 under the Exchange Act). In addition to the other content the
previous paragraph describes, the disclosure also must describe the
methods of electronic delivery that may be used (i.e., a statement of
availability or direct delivery of covered information, as described in
more detail below).\119\
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\118\ By contrast, a covered entity may receive an electronic
address for a covered recipient from an affiliated entity or from a
third party. In such a case, receipt by the covered entity of the
covered recipient's electronic address from a person other than a
covered recipient generally would not meet the requirement that the
electronic address be provided by a covered recipient to receive
covered information, and the proposed rule would not permit this
covered entity to commence e-delivery to this covered recipient by
providing a disclosure of e-delivery to this electronic address. But
see infra requests for comment in this section II.B.2 (requesting
comment on whether covered entities should be permitted to use an
electronic address provided by affiliates or other third parties
under some circumstances).
\119\ See proposed Reg E-Delivery Sec. 303.102(b)(2).
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A covered entity would not be required to provide the disclosure of
e-delivery to a covered recipient who received e-delivery of all
covered information by or on behalf of the covered entity as of the
effective date of the rule, because those covered recipients already
are receiving regulatory communications at the electronic address they
have provided.\120\ Similarly, a covered entity would not be required
to provide this disclosure to a covered recipient who received an
initial notice, as described below, because such a recipient would be
subject to a special provision that requires covered entities to
provide separate specific disclosures to them about the upcoming
transition to default e-delivery.\121\
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\120\ See proposed Reg E-Delivery Sec. 303.102(b)(3).
\121\ Id.; see also infra section II.D.
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We request comment on the proposed requirement to provide
disclosure of e-delivery:
33. Is the requirement that covered entities provide a clear and
conspicuous disclosure before using e-delivery to deliver covered
information to a covered
[[Page 45902]]
recipient necessary? Why or why not? Do commenters agree that this
disclosure would help ensure that covered recipients who provide an
electronic address are aware of how the covered entity intends to use
the electronic address in communicating with the covered recipient?
34. Is allowing covered entities to e-deliver covered information
to an electronic address that the covered recipient provides (or
accepts to use) to receive covered information appropriate? Why or why
not? Is there another way we could specify the type of electronic
address that can be used for electronic delivery to address the goal
that covered entities would not use electronic addresses that covered
recipients would not expect to be used for such a purpose?
35. Should Reg E-Delivery, as proposed, require that the electronic
address to which a covered entity may e-deliver covered information be
one that the covered recipient ``provides'' or ``accepts to use'' to
receive covered information? Would it be difficult for a covered entity
to determine whether a covered recipient has provided or accepted to
use an electronic address to receive covered information, particularly
when the electronic address is an online account or mobile app that a
covered recipient may use for multiple purposes aside from viewing
covered information, such as placing orders or monitoring investment
values? How would covered entities implement this requirement?
36. Are there circumstances under which Reg E-Delivery should
permit a covered entity to use an electronic address for a covered
recipient that the covered entity receives from an affiliate or from a
third party, rather than directly from the covered recipient? If so,
what are those circumstances and how would permitting such use be
consistent with the goal of ensuring that covered recipients who
provide an electronic address are aware of how the electronic address
will be used and what types of covered information will be
electronically delivered to that electronic address? For example, are
there circumstances under which an underwriter of a securities offering
should be permitted to use an electronic address provided to the issuer
in the offering, or vice versa? Or, if a covered recipient is onboarded
though one covered entity but will receive products or services from
another, affiliated covered entity that is part of the same enterprise,
should the latter covered entity be permitted to use the electronic
address that the covered recipient provided to the former covered
entity? Or if a covered recipient is onboarded through one covered
entity that contracts with another, unaffiliated covered entity to
provide services for the covered recipient (e.g., an introducing
broker-dealer contracting with a clearing broker-dealer, or a
separately managed account program sponsor contracting with an
investment adviser managing accounts in the program), should the latter
covered entity be permitted to use the electronic address that the
covered recipient provided to the former covered entity?
37. Should the requirement to disclose e-delivery, as proposed,
exclude covered recipients who received e-delivery of all covered
information as of the effective date of Reg E-Delivery, as well as
covered recipients who received an initial notice under Reg E-Delivery
as described below in section II.D? Why or why not?
38. Should covered entities be required to describe the methods
through which covered information may be delivered in the disclosure of
e-delivery, as proposed, or would an alternative approach be more
appropriate? \122\ For example, should covered entities be required to
specify how each individual item of covered information will be
delivered? If so, would this have the effect of ``locking in'' covered
entities to a particular e-delivery method or preventing them from
changing to the other method (if permissible under the proposed rule)?
\123\ If the disclosure of e-delivery requires the delivery method for
each item of covered information to be specified, should covered
entities be required to notify covered recipients before changing the
method? If so, how? Or should the disclosure of e-delivery itself
indicate the specified method is subject to change?
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\122\ See also infra section II.D.2 (posing a similar question
in the context of the transition period for default e-delivery).
\123\ See infra section II.B.5 (describing the proposed
requirements for the delivery of covered information that contains
PFI).
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39. We understand that covered entities generally maintain records
of covered recipients' consent to receive covered information via e-
delivery both to operationalize and implement e-delivery to these
recipients and to document compliance with delivery requirements under
the Federal securities laws, the entity's policies and procedures, and
any applicable recordkeeping requirements under the Federal securities
laws.\124\ We anticipate that similar practices would continue
following any adoption of proposed Reg E-Delivery and are therefore not
proposing an express recordkeeping provision regarding the disclosure
of e-delivery. Should we instead include a direct, dedicated
recordkeeping provision in Reg E-Delivery that would require covered
entities to maintain records regarding the provision of the disclosure
of e-delivery? Or should such a provision be included in the books and
records rules of the respective categories of covered entities (as
applicable)?
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\124\ See 1995 Guidance, supra footnote 3, at n.22 (``Issuers
and other persons required to satisfy delivery requirements should
consider establishing record-keeping or other procedures to evidence
satisfaction of applicable requirements through electronic means.
Presumably, such procedures would be analogous to comparable
procedures followed when a paper document is delivered.'').
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3. Delivery of Statement of Availability of Covered Information to an
Electronic Address
Under the proposed rule, a covered entity could choose to deliver
covered information by delivering a statement of availability of
covered information to a covered recipient's electronic address, which
would alert the covered recipient that the covered information is
available at a website address that the statement of availability
provides. The proposed rule would require this method for covered
information that includes PFI, as described in more detail below, and
would permit this method for all other covered information.\125\ The
statement of availability of covered information would be subject to
certain timing, format, content, and manner of delivery requirements,
as described below.\126\ We understand that many covered entities
already employ comparable methods to alert covered recipients of the
online availability of investor materials, statements, account changes,
or payments.\127\
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\125\ See discussion of the delivery of covered information that
includes PFI at infra section II.B.5.
\126\ The proposed content requirements for statements of
availability do not address the content requirements of the covered
information that is delivered via a statement of availability.
Electronically delivered documents must be prepared, updated, and
delivered consistent with the provisions of the Federal securities
laws in the same manner as paper documents.
\127\ See ICI Survey, supra footnote 25, at 6 and 15 (stating
that asset managers often deliver a notice or electronic
communication to investors, alerting them to the availability of
materials such as annual reports or prospectuses on the fund's
website); see also SIFMA Letter, supra footnote 44 (stating that
firms already use mobile phone applications, text, and email alerts
to provide important notifications to customers).
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First, the statement of availability would be required to include a
prominent statement identifying the covered entity and the type of
covered information that is available.\128\
[[Page 45903]]
Identifying the covered information being delivered via the statement
of availability and the covered entity delivering the information would
help ensure that covered recipients understand the information
available to them. Second, the statement of availability must include a
brief description of the covered information that, as applicable,
identifies whether the covered information may require action by the
covered recipient within a fixed time frame to exercise certain rights,
and whether the covered information is delivered by a person delivering
on behalf of the covered entity.\129\ Brief descriptions of the covered
information would inform covered recipients of the information
available and could increase the likelihood that they click through and
review the information.\130\ For some types of covered information, it
would be appropriate for the brief description to simply explain the
content of the covered information in a few words (e.g., that a trade
confirmation provides information about recent securities transactions
in the customer's account). In other cases, it would be appropriate for
the brief description to include additional detail, for instance to
clarify for the covered recipient the time frame within which an action
must be taken or the party sending the covered information to the
covered recipient (e.g., situations where the covered recipient
receives competing statements from the issuer and a third party, such
as third-party tender offers and contested proxy solicitations). We
would encourage covered entities to design their statements of
availability so as to increase their salience, user-friendliness, and
enhance covered recipients' understanding of the required regulatory
disclosures delivered.\131\
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\128\ See proposed Reg E-Delivery Sec. 303.102(c)(1)(i).
\129\ See proposed Reg E-Delivery Sec. 303.102(c)(1)(ii). For
example, shareholders voting by proxy must do so by the deadline
specified in proxy materials, and shareholders tendering shares into
an offer must do so by the deadline specified in tender offer
materials.
\130\ See Form CRS Relationship Summary; Amendments to Form ADV,
Investment Advisers Act Release No. 5247 (June 5, 2019) [84 FR 33492
at 33507 and 33527-28] (July 12, 2019)] (``CRS Release'')
(discussing the use of text features to make information more
engaging, accessible, and effective while providing hyperlinks or
other means to facilitate access to additional information); see
also Form CRS, pp. 3-5 (describing the use of references and
hyperlinks or other means of facilitating access to additional
information); Broadridge Letter, supra footnote 17 (stating that in
Broadridge's operational data on e-delivery open- and click-through
rates show that descriptive and engaging user-friendly notifications
increased engagement).
\131\ See Broadridge Letter, supra footnote 17 (stating that
Broadridge's operational data on e-delivery open and click-through
rates show that for 17.9 million statements e-delivered in March
2025, click-through rates were four times greater (at 17%) for email
deliveries that provided direct notification each time a new
disclosure document was available, along with user-friendly summary
information, than for e-deliveries of the plain vanilla variety (at
4%)).
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Third, the statement of availability would be required to include a
link to the website address where the covered information is
available.\132\ The rule would define ``website'' as ``an internet
website or other internet- or electronic-based location where
information is stored or presented, such as a mobile application, to
which a covered recipient has been provided reasonable access.'' \133\
The purpose of this definition is to capture the standard websites and
mobile applications that covered entities use today to provide
information to covered recipients while remaining flexible enough to
evolve with e-delivery practices and other technological advances that
may impact those practices.\134\ Other internet or electronic-based
locations where information is stored or presented could include, for
example, smartphone apps or other mobile platforms. The ``reasonable
access'' requirement of the definition is meant to ensure that such
electronic locations are easily accessible to covered recipients and do
not involve overly burdensome restrictions on access including fee
requirements or the collection of nonessential information (for
instance, related to marketing) or otherwise that may inhibit expedient
navigation to covered information.\135\
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\132\ See proposed Reg E-Delivery Sec. 303.101(c)(1)(iii).
\133\ See proposed Reg E-Delivery Sec. 303.101.
\134\ We note that the CRS Release discussed the use of
evergreen concepts to expand the types of technology referenced in
the instructions to keep them relevant as new technologies continue
to be developed. See supra footnote 125, at 84 FR 33507.
\135\ Processes reasonably designed to safeguard covered
information (e.g., passwords, multifactor authentication) would not
be considered as negating the provision of reasonable access.
However, as an example, predicating account access on the completion
of surveys to collect nonessential data, such as data on covered
recipient preferences that the covered entity would use to market
additional products or services to the covered recipient, would
negate the provision of reasonable access. A covered entity would
not be deemed to have provided a covered recipient with reasonable
access to a mobile application merely by making the application
generally available to download.
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The website address in the statement of availability would need to
meet the proposed rule's requirements for website availability of
covered information.\136\ As described in more detail below, these
website availability requirements are designed to help ensure that
covered information is available for an appropriate time period and
presented in a convenient format for covered recipients to review and
retain.\137\ The statement of availability would also have to state
that covered information made available on a website may be superseded
by subsequent versions of the covered information.\138\ This is
intended to put covered recipients on notice that covered information
will not be available indefinitely and therefore that they may need to
download or print such documents should they need them for their
personal records.\139\
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\136\ See proposed Reg E-Delivery Sec. 303.102(c)(1)(iii)(C).
\137\ See discussion at infra section II.C.
\138\ See proposed Reg E-Delivery Sec. Sec. 303.102(c)(1)(iv)
and 303.103.
\139\ See infra section II.C (discussing requirements for
availability period of covered information to remain on the website
address that the statement of availability includes).
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With respect to covered information that does not include PFI, the
website address would need to lead directly to the covered information
that is described in the statement of availability.\140\ In many
circumstances, these disclosures may already be posted on the covered
entity's public-facing website pursuant to applicable Commission rules
or otherwise and the statement of availability could link directly to
the specific covered information it delivers. Investors and other
covered recipients are more likely to review information that they can
access directly. They are less likely to review information if they
must click through multiple pages to access it or if they are directed
to a landing page where they have to sort through a large number of
documents that are not the subject of the statement of availability
received by the covered recipient (e.g., a landing page with covered
information for funds not held by the covered recipient).\141\ This
proposed requirement is consistent with other Commission disclosure
requirements that rely on hyperlinks.\142\
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\140\ See proposed Reg E-Delivery Sec. 303.102(c)(1)(iii)(A);
see also infra section II.B.5 (discussing the delivery of covered
information that includes PFI). While covered information that does
not contain PFI would not require the use of a process reasonably
designed to safeguard PFI, it could be accessible within a
personalized electronic portal (such as a covered recipient's online
account or app).
\141\ For example, Broadridge notes that it can take one step or
upward of a dozen steps to review disclosures on an application
creating significant ``friction'' and ``fall-off'' rates that impair
effective disclosure. Broadridge Letter, supra footnote 17.
\142\ See CRS Release, supra footnote 125; see also Form CRS pp.
4-5; see also Tailored Shareholder Reports Adopting Release, supra
footnote 13, at text accompanying nn.441-443 (describing
requirements for the website address where required information is
available, appearing on the cover page of a fund shareholder report,
which website must permit an investor to navigate to required
documents with a single click or tap).
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[[Page 45904]]
Finally, the statement of availability would also be required to
include a prominent statement describing the following topics:
The covered entity's obligation to provide a paper copy of
the covered information free of charge, upon request;
The ability to opt out of e-delivery at any time and
receive all or a subset of covered information provided after the opt-
out in paper format, free of charge;
The ability to update one's electronic address free of
charge (including, if applicable, an explanation of how to change the
type of electronic address that will be used for delivery, such as
email or mobile phone number); and
The process for a covered recipient to request paper
copies, opt out of e-delivery, and update one's electronic address,
which at a minimum must direct a covered recipient to a website through
which one can make these requests and updates. If applicable, a covered
entity must disclose whether a covered recipient's request for paper or
to opt out of e-delivery could result in restrictions on or termination
of the covered recipient's relationship with the covered entity.\143\
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\143\ See proposed Reg E-Delivery Sec. 303.102(c)(1)(v).
As discussed in more detail in sections II.B.7 and II.B.8 below,
covered entities would be obligated, under the proposed rule, to
provide paper copies of covered information on request and to permit
covered recipients to opt out of e-delivery going forward and to update
their electronic addresses, all free of charge. The proposed rule
requires covered entities to describe these obligations of covered
entities and the process for a covered recipient to make these requests
in statements of availability to help ensure that covered recipients
are aware of these options and are able to easily act upon them if they
choose to do so. We understand that there are certain firms with e-
delivery business models that currently reserve the right, when a
person establishes a customer or client relationship with such firm or
otherwise through contract, to restrict or close the account of a
person who requests paper.\144\ In such circumstances, under the
proposed rule, if the covered entity could restrict or terminate a
customer account or relationship after a covered recipient requested
paper or opted out of e-delivery, it must describe this approach in
response to the rule's requirement to explain the process for
requesting paper and opting out of e-delivery and disclose any relevant
restrictions associated with a covered recipient's request for paper or
to opt out of e-delivery. This requirement is designed to inform
covered recipients of the potential consequences that may result from
requesting a paper copy of covered information or opting out of e-
delivery under these circumstances.
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\144\ See requests for comment in infra section II.B.7; see also
1995 Guidance, supra footnote 3, at text accompanying n.16 (stating
that the Commission recognized that various offerings might now be
made exclusively through electronic means).
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We request comment on the proposed requirements associated with the
proposed statement of availability of covered information as a method
of e-delivery under the rule:
40. Is it appropriate that the proposed rule permits delivery of a
statement of availability of covered information to a covered
recipient's electronic address as an e-delivery method? Are there other
methods of e-delivery we should consider?
41. Do covered recipients have certain preferences in how
statements of availability are presented? Would covered recipients
favor a statement of availability as opposed to direct delivery of
information in certain circumstances over others?
42. Are the proposed content requirements for a statement of
availability reasonable? Should we require, as proposed, the prominent
statement alerting the covered recipient that covered information is
available and identifying the covered information and the covered
entity?
43. The proposed content requirements for statements of
availability do not address the content requirements of covered
information, and do not change the requirements for covered information
under the provisions of the Federal securities laws. In addition to the
proposed requirements of Reg E-Delivery, should we include a
requirement reflecting the principle that covered information delivered
through e-delivery must present information in substantially the same
order as would otherwise be required when the same covered information
is delivered in paper format? \145\ Would this unduly constrain the
format or effectiveness of electronically delivered covered information
or curtail covered entities' ability to develop a more personalized,
interactive, and efficient experience with regulatory disclosure
through e-delivery?
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\145\ See 1995 Guidance, supra footnote 3, at n.20; 1996
Guidance, supra footnote 3, at section II.A.
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44. Should the brief description of the covered information
provided by the covered entity be optional instead of mandatory as
proposed? Do the proposed mandatory brief descriptions have the
potential to be overly burdensome or unnecessary? If they were
optional, for which types of covered information do commenters expect
covered entities to provide a brief description on an optional basis,
and what content would they include in the brief description? We are
aware that certain email functionality exists that provides
``previews'' of documents to give covered recipients a portion of the
information in the document being made available and the ability to
click into the document on the covered entity's website. How would such
functionality interact with the statement of availability and direct
delivery requirements outlined in the proposed rule?
45. Should covered recipients be required to indicate how long each
item of covered information would be available on the website in the
statement of availability rather than only being required to state that
covered information made available on a website may be superseded by
subsequent versions of the covered information, as proposed?
46. Is the proposed definition of ``website'' as an internet
website or other internet or electronic-based location where
information is stored or presented, such as a mobile application, to
which a covered recipient has been provided reasonable access,
appropriate? Would this definition remain evergreen as technologies
develop? Would another term be more descriptive and broadly
encompassing of the range of potentially applicable technologies that
could serve to make covered information available?
47. Is the proposed requirement that the website address included
in the statement of availability lead the covered recipient directly to
the covered information appropriate? Are there instances in which a
small number of ``clicks'' to navigate to the covered information would
not be burdensome or confusing for covered recipients?
48. Should we require the inclusion of the website address where
the covered information is available as proposed, or should we provide
flexibility on this requirement? Are there potential cybersecurity or
fraud concerns with providing links to websites where covered
recipients provide passwords or other similar credentials to access
covered information?
[[Page 45905]]
49. Is covered information provided electronically pursuant to the
current E-Delivery Guidance generally available on websites? Is the
covered information made available through the use of a password or
other credentials? When is information available on a secure website
that requires a password or other credentials versus on the public-
facing portion of a website? To facilitate easy access to covered
information that does not contain PFI, should we expressly prohibit
log-ins or similar processes that precede a covered recipient's access
to covered information that is delivered through a statement of
availability, or is requiring the website address where the covered
information is available that is included in the statement of
availability to lead the covered recipient ``directly'' to the covered
information, as proposed, sufficient? Would such an express prohibition
interfere with covered entities' ability to provide links to online
account inboxes or similar personalized portals in statements of
availability?
50. Should we include the reasonable access provision in the
website definition? Should we define ``reasonable access'' in the
proposed rule? If so, how should we define it? Should ``reasonable
access'' mean that a covered recipient can access an internet website
or other internet or electronic-based location without undue burden or
complexity, fees or charges, or surveys or other unnecessary
prerequisites? In addition to requiring the payment of additional fees,
the submission of additional customer or investor information, or an
excessive number of ``clicks'' to access covered information, are there
any other practices that would prevent reasonable access? As an
alternative to the proposal, should the rule explicitly permit covered
entities to require covered recipients to download mobile applications
or another similar means of facilitating access to view covered
information, or should the rule prohibit this practice as an
unreasonable limitation?
51. Should we require, as proposed, that statements of availability
include a prominent statement describing the covered entity's
obligation to provide a paper copy of covered information upon request,
the covered recipient's ability to opt out of e-delivery and update the
covered recipient's electronic address, and the processes for covered
recipients to make these choices? Do commenters have different
suggestions for the content of the prominent statement in statements of
availability? In addition, should we require, as proposed, that
statements of availability, if applicable, must disclose whether a
covered recipient's request for paper or to opt out of e-delivery could
result in restrictions on or termination of the covered recipient's
relationship with the covered entity? Should we also, as proposed,
require a similar disclosure to be included in the disclosure of e-
delivery and the initial transition notice? \146\
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\146\ See supra section II.B.2; infra section II.D.2.
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52. We are not proposing an express recordkeeping provision in
proposed Reg E-Delivery relating to the statement of availability.
Should we instead include a direct, dedicated recordkeeping provision
in Reg E-Delivery that would require covered entities to maintain a
record of the statement of availability? Or should such a provision be
included in the books and records rules of the respective categories of
covered entities (as applicable)?
4. Direct Delivery of Covered Information That Does Not Include
Personal Financial Information to an Electronic Address
The proposed rule also provides an option for covered entities to
deliver covered information directly to an electronic address.\147\
Under this approach, the covered entity must include all of the covered
information being delivered either in the body of the communication or
as an attachment. This method would not be permitted for covered
information that includes PFI, but would be permitted for all other
covered information, based on the assumption that some documents are
not suitable for direct delivery. This would provide covered entities
flexibility in how they communicate with covered recipients and reflect
that covered recipients may have different preferences about how they
receive and access covered information delivered electronically. There
also may be circumstances where direct delivery of covered information
may facilitate ease of access to covered information, increasing the
likelihood that a covered recipient would review the disclosure by
minimizing the clicks necessary to access the covered information.
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\147\ See proposed Reg E-Delivery Sec. 303.102(c)(2).
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A message directly delivering covered information would include
substantially the same information that we propose to require for
statements of availability regarding the nature of the information
being delivered and the covered entity's obligation to provide paper
copies upon request or permit covered recipients to update their
electronic address.\148\ These disclosures would be equally relevant to
covered recipients regardless of whether they receive information
directly or via a statement of availability, and are designed to
provide covered recipients with prominent disclosures about covered
entities' obligations and processes associated with providing covered
information in the format covered recipients prefer.\149\ In addition,
the proposed rule would require direct delivery to include all of the
covered information being delivered either in the body of the
communication or as an attachment \150\ (in either case presented in a
widely available format that is convenient for reading in electronic
format, being printed on paper, and permanently retaining in an
electronic format).\151\ These requirements are designed to help ensure
that a covered recipient receives complete covered information through
direct delivery and is able to easily
[[Page 45906]]
review and preserve that covered information.
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\148\ In addition, direct deliveries of covered information
would be subject to the same prominence requirements as described in
proposed Reg E-Delivery Sec. 303.102(c)(1). See proposed Reg E-
Delivery Sec. 303.102(c)(2). We discuss the application of the
proposed rule to covered entities that reserve the right, when a
person establishes a customer or client relationship with such firm
or otherwise through contract, to restrict or close the account of a
person who requests paper at supra footnote 144 and accompanying
text.
\149\ Proposed Reg E-Delivery Sec. 303.102(c)(2) states that
``the direct delivery of the covered information must include the
information described in paragraphs (c)(1)(i), (c)(1)(ii), and
(c)(1)(v) [pertaining to the statement of availability].''
\150\ Covered recipients would be permitted to include some of
the information in the body of the communication and some as an
attachment to the same communication as long as all of the covered
information is included in the delivery.
\151\ Id. Additionally, we note that other Commission rules
include similar ``convenient for reading and printing'' requirements
regarding the electronic presentation of covered information. See,
e.g., 17 CFR 230.498 Summary Prospectuses for open-end management
investment companies (stating that materials must be on the website
in a format, or formats, that are convenient for both reading online
and printing on paper), 17 CFR 240.14a-16 internet availability of
proxy materials (stating that the materials ``must be presented on
the website in a format, or formats, convenient for both reading
online and printing on paper''), 17 CFR 270.30e-3 (stating that the
materials ``must be presented on the website in a format, or
formats, that are convenient for both reading online and printing on
paper''), and Form CRS Release supra footnote 130 at text
accompanying nn.144-168 (stating that firms may use various tools to
facilitate access to electronic media). The proposed ``convenient
for reading . . . being printed . . . and permanently retaining''
requirements in Reg E-Delivery also reflect the principle that there
should be an opportunity to retain a permanent record of information
delivered electronically. See 1995 Guidance, supra footnote 3, at
text following n.22; 1996 Guidance, supra footnote 3, at n.22; see
also proposed Reg E-Delivery Sec. 303.103(c) and infra section
II.C.
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We request comment on the proposed requirements for the direct
delivery of covered information to an electronic address:
53. Should we allow for the direct delivery of covered information
to electronic addresses?
54. Would covered recipients prefer the direct delivery of covered
information when possible as opposed to a statement of availability
format? Should we require the direct delivery of information for
certain types of covered information or in certain circumstances?
55. Are there unique cybersecurity or fraud risks associated with
the direct delivery of covered information, as opposed to other types
of information that covered entities deliver to investors, customers,
clients, or other recipients?
56. Are there any difficulties in providing direct disclosure to a
covered recipient's electronic address? For example, are there problems
delivering large file sizes, formatting documents, or operational
difficulties in providing information directly for any particular
categories of covered information? If so, for which categories, and
should we modify the proposed rule as a result, or are these factors
that covered entities should consider in determining how and whether to
deliver covered information directly?
57. Should we be less prescriptive with regard to any of the
proposed requirements for direct delivery to facilitate evolving
technology or types of disclosure? For example, would the proposed
requirement that covered information be presented in a widely available
format that is convenient for reading in electronic format, being
printed on paper, and permanently retaining in an electronic format,
limit the ability to include electronic tools or overlays in
electronically presented covered information? Are there any particular
requirements in the proposed rule we should remove or modify so as to
make the rule more evergreen over time or to enable covered recipients
to develop more interactive or engaging user experiences with
electronically delivered covered information?
58. Should we provide additional detail regarding what would
constitute delivering information in a widely available format that is
convenient for reading in electronic format? For example, should we
specify whether this requires optimization for mobile devices? Do
covered entities currently e-deliver covered information in a format
that optimizes for or permits reading on mobile devices?
5. Delivery of Covered Information That Includes PFI
The proposed rule defines PFI and includes conditions for the e-
delivery and website availability \152\ of covered information
containing PFI that are designed to provide enhanced protections for
this sensitive information. We are proposing to define PFI as
information specific to a covered recipient's personal financial
matters, such as an account number or details regarding a specific
securities transaction.\153\ The examples in the proposed definition
are non-exclusive. The proposed definition is consistent with the
definition of PFI used in the 1996 Guidance, where the Commission
recognized the ``need to maintain the confidentiality and security'' of
PFI.\154\ The Commission recognizes the need to protect the
confidentiality and security of this information has only grown as the
use of technology has become more pervasive and threats have
increased.\155\
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\152\ See infra section II.C.
\153\ Proposed Reg E-Delivery Sec. 303.101. PFI would include
information related to non-natural persons, such as the account
numbers or details regarding specific securities transactions of an
institution or business entity.
\154\ 1996 Guidance, supra footnote 3, at section II.B.
\155\ Internet crime has increased as the use of the internet
has risen. See Federal Bureau of Investigation, 2024 internet Crime
Report (Apr. 23, 2025) at 3, available at https://www.ic3.gov/AnnualReport/Reports/2024_IC3Report.pdf (stating that during its
infancy 25 years ago, the FBI Crime Complaint Center received
roughly 2,000 complaints every month, whereas, over the past five
years the Center has averaged 2,000 complaints a day). For instance,
in 2024, individuals reported 64,882 complaints regarding Personal
Data Breach and 21,403 complaints regarding Identity Theft to
internet Crime Complaint Center, a significant increase over the
FBI's reported 2019 statistic. See id. at 9; see also Federal Bureau
of Investigation, 2019 internet Crime Report (Feb. 11, 2020) at 15,
available at https://www.ic3.gov/AnnualReport/Reports/2019_ic3Report.pdf; see also 2025 FINRA Annual Regulatory Oversight
Report (Jan. 2025) at 3, available at https://www.finra.org/sites/default/files/2025-01/2025-annual-regulatory-oversight-report.pdf
(``describing increasing cybersecurity and cyber-enabled fraud
risks'').
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The proposed rule would not permit the e-delivery of covered
information containing PFI through the direct delivery method described
above.\156\ In 1996, the Commission stated that information specific to
personal financial matters required intermediaries to take reasonable
precautions to ensure the integrity, confidentiality, and security of
that information. As discussed in the 1996 Guidance, PFI can be found
in a variety of materials. For example, the information reported to
customers in trade confirmations under Exchange Act rule 10b-10 relates
to specific securities transactions and includes the identity and
number of shares bought or sold and the net dollar price for the
shares. Under Exchange Act rule 10b-16, a broker-dealer that imposes
finance charges on a customer's account during a quarterly period must
deliver a quarterly statement disclosing, among other things, the
account's beginning and closing balances as well as debits and credits
entered during the period. Similarly, under Advisers Act rule 206(3)-2,
investment advisers engaging in agency cross transactions involving
clients are required to send the clients disclosure about those
transactions. Additionally, under Exchange Act rule 17a-3(a)(17), a
broker-dealer must furnish each customer within 30 days of opening an
account and thereafter at intervals no greater than 36 months, a copy
of the account record, which may include PFI.
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\156\ See supra section II.B.4.
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We recognize that certain covered information, such as trade
confirmations, can be consequential because of their importance in
identifying potential discrepancies or fraud. For example,
confirmations of transactions that brokers-dealers send to their
customers pursuant to Exchange Act rule 10b-10 may contain information
requiring prompt action by the recipient (such as an apparent error or
an indication of possible fraudulent activity) and are commonly
retained by customers as personal financial records, including for tax
purposes. Moreover, if an unauthorized person accesses this PFI, it
puts a covered recipient at risk of substantial harm. For instance,
someone may use the information to improperly access the covered
recipient's financial accounts. For these reasons, it is appropriate to
require covered entities to take reasonable precautions to ensure the
integrity, confidentiality, and security of PFI in covered information
delivered to covered recipients electronically.
Many covered entities already have obligations to protect the
security of such information. For example, under Regulation S-P,
broker-dealers, investment companies, registered investment advisers,
and transfer agents are required to develop, implement and maintain
written policies and procedures that address administrative, technical,
and physical safeguards for the protection of customer
information.\157\ These policies and procedures must include an
incident response program that is reasonably designed to detect,
respond to, and recover from unauthorized access to or use of customer
information, including
[[Page 45907]]
customer notification procedures.\158\ Under Regulation S-P, the
response program must include procedures for the covered institution to
notify each affected individual whose sensitive customer information
was, or is reasonably likely to have been, used without authorization,
unless the covered institution determines, after a reasonable
investigation of the facts and circumstances of the incident of
unauthorized access to or use of sensitive customer information, that
the sensitive customer information \159\ has not been, and is not
reasonably likely to be used in a manner that would result in
substantial harm or inconvenience. Covered institutions that hold
transactional accounts for consumers may also be subject to Regulation
S-ID.\160\ Such entities must develop and implement a written identity
theft program that includes policies and procedures to identify
relevant types of identity theft red flags, detect the occurrence of
those red flags, and respond appropriately to the detected red flags.
Other statutes and regulations beyond the Federal securities laws may
also require similar protections of PFI.\161\
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\157\ See 17 CFR 248.30.
\158\ See Regulation S-P Adopting Release, supra footnote 13.
Large entities were required to comply with amended Regulation S-P
by December 3, 2025, and smaller entities are required to comply by
June 3, 2026. All 50 states and the District of Columbia impose some
form of data breach notification requirement under state law. See
id.
\159\ See 17 CFR 248.30(d)(9). Sensitive customer information is
defined as any component of customer information alone or in
conjunction with any other information, the compromise of which
could create a reasonably likely risk of substantial harm or
inconvenience to an individual identified with the information.
\160\ Regulation S-ID applies to ``financial institutions'' or
``creditors'' that offer or maintain ``covered accounts.'' Entities
that are likely to qualify as financial institutions or creditors
and maintain covered accounts include most registered brokers,
dealers, funding portals, investment companies, and some registered
investment advisers. See 17 CFR 248.201; see also Identity Theft Red
Flag Rules, Investment Advisers Act Release No. 3582 (Apr. 10, 2013)
[78 FR 23637 (Apr. 19, 2013)]; see also 17 CFR 227.403(b).
\161\ See, e.g., 16 CFR 314 (Federal Trade Commission Standards
for Safeguarding Customer Information).
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Many covered entities have already chosen to use an approach akin
to the proposal's statement of availability, instead of direct
delivery, to address confidentiality and security concerns that arise
in connection with the e-delivery of covered information containing PFI
or other non-public information. Covered entities commonly will deliver
an electronic notification informing a recipient that information is
available, while providing access to the document via a link to a
secure website such as an online portal.\162\ The website offers
enhanced security measures, including encryption and multi-factor
authentication.\163\ Additionally, covered entities may utilize back-
end surveillance protocols designed to detect suspicious online
activity patterns.\164\ This method of delivery provides greater
security than if the information were delivered directly to a covered
recipient's email account, which may not implement the same degree of
security precautions. Generally, we are concerned that direct delivery
would not sufficiently ensure the integrity, confidentiality, and
security of covered information containing PFI.\165\
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\162\ See ICI Survey, supra footnote 25, at n.13 (``For
investor-specific forms that contain non-public information, the
notice informs investors their statement or tax form is available.
Investors are then free to log into their account, using pre-
existing authentication credentials (often multi-factor), to
retrieve their personalized content.''); see also Nov. 2025 ICI
Letter, supra footnote 17, at 6 and 13. This commonly appears in
guidance to customers regarding e-delivery. See e.g., LPL Financial
at https://www.lpl.com/investors/lpl-account-view/going-paperless.html (``While email is used to notify you when you have
new documents available, any documents that contain sensitive
personal or financial information must be protected by a secure
login process.''), J.P. Morgan at https://am.jpmorgan.com/us/en/asset-management/adv/shareholder-account-access/edelivery/edelivery-faqs/ (``No personal information regarding your account will be sent
via email. Instead you will be emailed a notification that new
regulatory materials are available and the email will include a link
to the document that you are required to receive.''), and Fidelity
Investments at https://digital.fidelityinvestments.com/edelivery
(``Fidelity will send you an email notification as soon as your
documents are available for viewing online. The email includes a
convenient direct link to the documents area within NetBenefits.com.
To protect your security, log in is required.'').
\163\ See SIFMA Letter, supra footnote 44, at 8-9; see also CCMR
Letter, supra footnote 44, at 4-5; Nov. 2025 ICI Letter, supra
footnote 17, at 6; ICI Survey, supra footnote 25, at 6.
\164\ See Nov. 2025 ICI Letter, supra footnote 17, at 6.
\165\ But see infra requests for comment in this section II.B.5
(asking whether direct delivery of covered information containing
PFI should be permitted in some circumstances).
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Accordingly, the proposed rule would require covered entities to
deliver covered information containing PFI solely via a statement of
availability and would require that such information be protected by a
process reasonably designed to safeguard the PFI.\166\ As noted above,
the Commission understands that many covered entities already e-deliver
documents containing PFI via a statement of availability or secure
means, and do not directly deliver those documents to a covered
recipient's email address.\167\ This requirement is designed to reduce
the likelihood that non-authorized persons can access the covered
recipient's PFI and to help ensure that the PFI is protected in a
secure environment provided by the covered entity or its service
providers so that the PFI is reasonably safe from potential inadvertent
disclosure or misuse.\168\ A process reasonably designed to safeguard
PFI could include the use of passwords (currently the most common means
of securing sensitive information), but also could include other
processes reasonably designed to safeguard information.\169\ Such
processes could include, for example and where appropriate, two-factor
authentication, biometrics, cryptography or other technologies that
have not yet been developed. These other processes may provide enhanced
security, be easier for covered recipients to use, or provide other
benefits over the use of passwords.
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\166\ Proposed Reg E-Delivery Sec. 303.102(c)(1).
\167\ See supra footnote 162 and accompanying text.
\168\ See discussion of requirements for website availability at
infra section II.C.
\169\ See discussion and accompanying text at supra footnote
135.
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In addition, the proposed rule would require that the website
address included in the statement of availability lead directly to the
covered information immediately after the covered recipient completes
the process reasonably designed to safeguard the PFI.\170\ This
requirement is designed to facilitate easy access to the covered
information after the completion of the safeguarding process and
maximize the likelihood that covered recipients review the covered
information.
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\170\ Proposed Reg E-Delivery Sec. 303.102(c)(1)(iii).
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We request comment on the proposed requirements associated with the
delivery of covered information that includes PFI:
59. Does the rule, as proposed, contain sufficient protections for
e-delivery of covered information containing PFI? If not, what
additional requirements should the Commission impose? Are there other
methods of securely delivering covered information containing PFI,
aside from those we have proposed, that we should specify?
60. Does the rule, as proposed, contain unnecessary restrictions on
the e-delivery of covered information containing PFI? If so, should we
instead permit more flexible or principles-based alternatives? Do
existing laws or regulations (e.g., Regulation S-P) already provide
sufficient protections for the e-delivery of covered information
containing PFI?
61. What safeguards do covered entities now use to protect e-
delivery of covered information containing PFI? Is
[[Page 45908]]
the proposed rule largely consistent with current industry practices?
If not, how is it different? How are covered entities currently
delivering this information electronically? How do the proposed
requirements regarding the delivery of covered information containing
PFI compare to privacy laws or other regulations regarding the delivery
of materials containing personal information that may be applicable in
non-U.S. jurisdictions where covered entities operate or have covered
recipients? How do covered entities currently handle delivering
materials containing personal information across multiple jurisdictions
with potentially different regimes, and how would the proposed
requirements interact with them?
62. Should we prohibit the direct delivery of covered information
containing PFI to a covered recipient's electronic addresses, as
proposed? Are there circumstances where prohibiting the delivery of
covered information containing PFI to a covered recipient's electronic
address creates problems for the necessary communication of information
to covered recipients (for example, situations where a covered
recipient asks for their trade confirmations to be sent directly to
their email)? Are there current practices whereby covered information
containing PFI can potentially be directly delivered in a secure
manner, or are such practices reasonably anticipated, such that we
should provide exceptions for the direct delivery of covered
information containing PFI to electronic addresses? \171\ If so, what
should be the parameters for such an exception? What would the costs of
the proposal be for covered entities that currently deliver PFI in a
secure manner and their recipients?
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\171\ For example, we understand that some covered entities may
be able to directly deliver materials with embedded multifactor
authentication. ICI Survey, supra footnote 25, at 6.
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63. Instead of providing the option of direct delivery, should the
rule require covered entities to deliver a statement of availability of
covered information for all covered information under the rule, and not
just covered information including PFI? What would be the costs and
benefits of such a requirement? To what extent would restrictions such
as requiring user ID and password affect the speed with which
recipients access such information and the likelihood they would access
it at all?
64. Does the proposed definition of the term ``personal financial
information'' appropriately capture the type of information that should
be subject to heightened protections? If not, how should the definition
be changed? Are there other terms, such as ``sensitive customer
information'' as used in Regulation S-P,\172\ that would be more
appropriate here because they capture additional pieces of information
that are included in existing covered information delivery requirements
and should be subject to heightened protections beyond those already
provided by existing privacy law? Are there other terms that would
capture less information, to the extent commenters believe this would
be appropriate? If so, what are they and why would those terms be more
appropriate?
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\172\ See 17 CFR 248.30(d)(9); see also Regulation S-P Adopting
Release, supra footnote 13.
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65. Should we require covered information that contains PFI to be
accessed only through the use of a process reasonably designed to
safeguard the covered information, as proposed? Are there other
conditions that we should require for accessing covered information
that contains PFI? If so, what are they?
66. Is the language we use to describe a secure log-in method as a
``process reasonably designed to safeguard the personal financial
information'' reasonably clear? Will such language remain evergreen as
secure electronic systems that safeguard PFI evolve with technology
over time?
6. Timing, Form, and Manner of E-Delivery
The proposed rule provides that the e-delivery (whether statement
of availability or the direct delivery of covered information) must be
delivered \173\ no later than the date by which the covered information
is required to be delivered under the Federal securities laws.\174\
This provision is designed to ensure that covered entities provide
covered information within the same time frame as they would provide
paper documents. This proposed requirement also is consistent with the
Commission's E-Delivery Guidance stating that documents delivered using
e-delivery should be prepared, updated, and delivered consistent with
the provisions of the Federal securities laws in the same manner as
paper documents.\175\ Moreover, requiring e-delivery of covered
information no later than specified in the Federal securities laws
would help ensure that covered recipients can take appropriate actions
in response to the receipt of covered information, including actions
that require a prompt response or a decision by the covered recipient
within a certain time frame. For example, for covered information
containing PFI, untimely delivery could cause a covered recipient to
fail to identify problematic or fraudulent activity in their account as
promptly as would be desirable.
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\173\ See proposed Reg E-Delivery Sec. 303.101 (defining
``deliver'' or ``delivery'' to mean, as applicable, to deliver,
furnish, transmit, send, give, mail, provide, forward, make
available, or disseminate information, as described in the Federal
securities laws).
\174\ See proposed Reg E-Delivery Sec. 303.102(d). We recognize
that there may be circumstances where there are e-delivery failures
including bounce-backs. See discussion at infra section II.B.9
regarding identifying and mitigating e-delivery failures.
\175\ See 1995 Guidance, supra footnote 3. The 1995 Guidance
also provides that the Federal securities laws do not preclude the
delivery of a document through different media.
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The proposed rule states that a statement of availability may
provide that multiple items of covered information are available for
review in a single statement, and similarly, a direct delivery may
include multiple items of covered information.\176\ This provision
provides flexibility to covered entities to place more than one item of
covered information in a single delivery if, for example, it reduces
the logistical and operational burdens of e-delivery. It also
recognizes that delivering items of covered information that relate to
the same investment or relationship together can improve the covered
recipient's ability to contextualize and understand the covered
information, as well as the fact that delivering certain items of
covered information together (where not prohibited under the Federal
securities laws) is currently a common business practice and, in some
cases, a practical necessity to comply with the requirements of the
Federal securities laws.\177\ Under the proposed rule, a covered entity
delivering multiple pieces of covered information may also choose to
combine the two methods of delivery in a single delivery, for example,
by sending a statement of availability for one piece of covered
information to the covered recipient's electronic address and attaching
another related piece of covered information as a direct delivery,
provided that all of the requirements of the proposed rule are
[[Page 45909]]
met for each piece of covered information.
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\176\ See proposed Reg E-Delivery Sec. 303.102(e).
\177\ For example, a covered recipient may purchase shares of an
investment company through a broker-dealer. In such circumstances,
the proposed rule would permit the broker-dealer to send a statement
of availability of a trade confirmation and a statutory prospectus
together. See also section 5(b)(2) of the Securities Act (making it
unlawful to deliver a security for the purpose of sale or for
delivery after sale unless the security is accompanied or preceded
by a prospectus).
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In addition, the proposed rule provides that a statement of
availability or direct delivery of covered information must be
delivered separately from communications that are not covered
information, except as otherwise provided under the Federal securities
laws. Additionally, the statement of availability or direct delivery
would need to contain only the content required by the proposed rule,
except that it also may include any content expressly required under
the Federal securities laws, and pictures, logos, or similar design or
text elements that are not misleading and do not make the covered
information unclear. This would allow a covered entity to include, for
example, contact information for questions about the covered
information or technical support for the covered recipient's account,
as such information would not make the covered information unclear.
These requirements for form and manner of e-delivery are designed
to help ensure that the e-delivery is not lost or buried in other
communications or marketing materials so that covered recipients are
more likely to see the e-delivery and review the covered information.
Specifically, the separate delivery requirement is meant to ensure that
other documents do not obscure the regulatorily required covered
information. For example, certain marketing materials that are not
regulatory disclosures required under the Federal securities laws, or
other mail from affiliates of the covered entity, should not obscure
the covered information that is required to be delivered. The proposed
requirements would also help ensure that the e-delivery contains only
the content required by the rule with no superfluous information,
clearly describes the available information, outlines the process to
review the items in the case of statements of availability, and (as
described in more detail below) discusses how to change delivery
preferences.
We request comment on the proposed timing, form, and manner of
delivery requirements:
67. Should we include the timing of electronic delivery
requirements in the proposed rule? Or, is this provision duplicative of
existing timing requirements imposed by the Federal securities laws?
68. Should we require that covered information be delivered
electronically no later than the date by which the covered information
is required to be delivered under the Federal securities laws, as
proposed?
69. Are there any delivery requirements under the Federal
securities laws that raise unique timing requirements that this
provision would affect? If so, what are they and how should we modify
the timing requirements in these cases?
70. Should we change the timing of when a statement of availability
must be delivered or direct delivery made to a covered recipient's
electronic address and, if so, how? Explain how such changes would
enhance the likelihood that the covered recipient would pay attention
to the disclosure or disclosures or otherwise would improve the
disclosure experience.
71. Should the proposed rule generally require the statement of
availability or the direct delivery of covered information to be
delivered separately from other communications that are not covered
information, as proposed? Would this increase the likelihood that
covered information is noticed and reviewed? Are there circumstances
where they should be permitted to be included with other types of
communications? Or, would the separate delivery requirement result in
an excessive number of electronic deliveries that could deter
recipients from noticing and reviewing covered information? Should the
statements of availability and direct deliveries, as proposed, only
contain the content required under the rule with exceptions for
including any content expressly required under the Federal securities
laws, and pictures, logos, or similar design or text elements that are
not misleading and do not make the covered information unclear? Is this
formulation sufficiently principles-based to ensure that the
disclosures are prominent and clear while providing covered entities
appropriate flexibility in the design of their electronic deliveries?
Should we provide covered entities greater flexibility in the
information they include?
72. Should we require separate communications for each item of
covered information or allow statements of availability and direct
deliveries to include multiple items of covered information, as
proposed?
73. Should we adopt any other form and manner requirements for e-
delivery? For example, should we specifically incorporate plain English
concepts? Should we adopt any particular font, headings, white space,
or formatting requirements to make disclosures easier to read? Should
the Commission consider factors other than design, delivery, and
content?
7. Obligation of Covered Entities To Provide Paper Copies of Covered
Information and Permit Opting Out of E-Delivery
The proposed rule provides that a covered entity must send, free of
charge, one paper format copy of any of the covered information that
the covered entity has delivered through e-delivery to a covered
recipient during the period the covered entity is required to retain
the covered information under the Federal securities laws (or during
the preceding two years if there is no such requirement), to any such
covered recipient requesting such a copy. The covered entity must send
the copy of the covered information by U.S. first class mail or another
reasonably prompt means within three business days after receiving a
request, unless otherwise specified in the Federal securities
laws.\178\
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\178\ See proposed Reg E-Delivery Sec. 303.102(f)(1); see also
infra text accompanying footnote 195 (discussing that the proposed
requirements for a covered entity to comply with covered recipients'
elections to receive paper, as a practical matter, would entail
relevant operations and compliance systems, as well as related
recordkeeping).
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The delivery of paper versions of covered information upon request
would facilitate ease of access to and review of covered information by
covered recipients through their preferred method. Requiring covered
entities to send a paper copy of covered information electronically
delivered during the applicable record retention period would provide a
reasonable amount of time for covered recipients to request current and
historical covered information in paper format.\179\ In addition,
limiting the obligation to provide copies in paper format to the time
period covered entities are already required to maintain the item of
covered information as a record would help ensure that covered entities
are able to accommodate requests for paper copies and help control the
operational and logistical costs imposed on covered entities to do so.
If there is no applicable record retention requirement under the
Federal securities laws,\180\ the proposed
[[Page 45910]]
rule provides that a covered entity must send, upon request, one paper
copy of any item of covered information delivered through e-delivery to
a covered recipient in the two years preceding the date of the covered
recipient's request. This provision imposes a requirement on covered
entities as to how long they must provide free copies in paper format
to covered recipients in the absence of a specific record retention
requirement for the requested item of covered information. The proposed
two-year retention period would align with the two-year period
referenced in the E-Delivery Guidance,\181\ and provides a reasonable
period of time for covered recipients to request a paper copy of
covered information given that this covered information was previously
delivered electronically.
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\179\ For example, Exchange Act rule 17a-4 requires broker-
dealers to retain certain records for six years; rule 31a-2 under
the Investment Company Act requires funds to maintain records for a
period of not less than six years; and rule 204-2 under the Advisers
Act requires advisers to maintain records for a period of not less
than five years. Covered entities may, as permitted by these or
similar recordkeeping rules, maintain these records electronically
and print them to facilitate requests for paper documents.
\180\ For example, there is no record retention requirement for
proxy statements or annual reports required to be furnished to
security holders under Regulation 14A. Proxy statements and annual
reports are, however, filed and submitted, respectively, on EDGAR.
\181\ See 1996 Guidance, supra footnote 3, at n.17 (``the
Commission believes it is reasonable to expect that broker-dealers
would provide customers with information in paper form upon request
for a period of two years'').
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The requirement to send a copy of covered information by U.S. first
class mail or another reasonably prompt means within three business
days of receiving the request (unless a shorter or longer period is
specified in the Federal securities laws) is designed to ensure that
covered recipients promptly receive their covered information in their
preferred format but also balances the fact that printing and mailing
paper documents are operational processes that may take time to
complete.\182\ The ``unless otherwise specified in the Federal
securities laws'' exception acknowledges that in some cases the Federal
securities laws provide different time frames or processes for
responding to covered recipient requests for covered information and is
designed to avoid disrupting these existing requirements and
practices.\183\ This proposed provision also is intended to prevent
fees from discouraging covered recipients if they wish to review a
paper copy of covered information that has been provided and, if
delivered via a statement of availability, may no longer be available
on the covered entity's website.
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\182\ We note that in some circumstances the Commission has
required information to be sent in three business days. See 17 CFR
230.498(f) (stating that ``the Fund (or a financial intermediary
through which shares of the Fund may be purchased or sold) must
send, at no cost to the requestor and by U.S. first class mail or
other reasonably prompt means, a paper copy of the Fund's Statutory
Prospectus, Statement of Additional Information, and most recent
annual and semi-annual reports to shareholders to any person
requesting such a copy within three business days after receiving a
request for a paper copy''); see also 17 CFR 270.30e-3(e) (stating
``[a] paper copy of any of the materials specified in paragraph
(b)(1) of this section must be transmitted to any person requesting
such a copy, at no cost to the requestor and by U.S. first class
mail or other reasonably prompt means, within three business days
after a request for a paper copy is received''); 17 CFR 270.30e-
1(b)(3) (requiring the delivery upon request of paper copies of
disclosures required by Items 7 through 11 of Form N-CSR, which
open-end funds must make available online, within three business
days).
\183\ For example, beneficial owners of shares of a corporate
issuer are entitled to receive paper copies of proxy materials upon
request, but the time periods specified in the rules governing the
time a broker has to request a copy from the issuer after receiving
the beneficial owner's request (i.e., three business days), the time
the issuer then has to send a paper copy to the broker after
receiving the broker's request (i.e., three business days), and the
time the broker then has to send the paper copy to the beneficial
owner after receiving the proxy materials from the issuer (i.e.,
three business days) allow for up to a total of nine business days
for delivery of a paper copy to a beneficial owner following the
beneficial owner's request to the broker. See 17 CFR 240.14a-
16(j)(1) (requiring issuers or other soliciting persons to send a
paper copy of proxy materials to any record holder requesting such a
copy within three business days after receiving such request); 17
CFR 240.14b-1(d)(4)(i) (requiring a broker or dealer to request a
copy of proxy materials from the issuer or other soliciting person
within three business days after receiving a request for a copy from
a beneficial owner); 17 CFR 240.14b-1(d)(4)(ii) (requiring a broker
or dealer to forward a copy of proxy materials to a beneficial owner
within three business days after receiving the materials from the
issuer or other soliciting person).
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The proposed rule also requires a covered entity to permit a
covered recipient to opt out of e-delivery at any time and receive
delivery only in paper format, free of charge, with respect to any or
all covered information after opting out and requires that the covered
entity promptly comply with such an election.\184\ This proposed
provision is designed to allow covered recipients to opt out easily
from any or all forms of e-delivery should they wish to do so--without
a charge or fee impeding this choice--and have the covered entity
implement that change in a reasonable period of time after the opt-out
request so that covered recipients receive the information in their
preferred format. The requirement for free paper delivery of covered
information is appropriate in light of the proposed rule's opt-out
framework for e-delivery, whereby covered recipients could be defaulted
into e-delivery unless they elect otherwise, to help ensure that
covered recipients who prefer or require paper delivery of covered
information are not deterred from electing paper delivery by the
imposition of a fee.\185\ The requirement to promptly comply with a
covered recipient's opt-out election is designed to ensure that covered
entities do not take a protracted period to respond to opt-out requests
so that covered recipients receive covered information in their
preferred format in a timely manner while also avoiding the imposition
of a prescriptive time period that might not be feasible for covered
entities in all cases. As a practical matter, the proposed requirements
for a covered entity to permit a covered recipient to opt out of e-
delivery, and for a covered entity to comply with covered recipients'
elections, would entail relevant operations and compliance systems, as
well as related recordkeeping associated with covered recipients'
elections.\186\
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\184\ See proposed Reg E-Delivery Sec. 303.102(f)(2).
\185\ Because Reg E-Delivery differs in approach from the E-SIGN
Act in that it would permit use of e-delivery by covered entities
without first obtaining affirmative consent from covered recipients,
proposed Reg E-Delivery would include different requirements from
the consumer disclosure requirements associated with the E-SIGN Act,
including those that address the possibility of fees being charged
for paper.
\186\ See supra footnotes 124, 178; see also infra footnote 195.
As relevant, such systems also would entail relevant supervision to
prevent violations. See, e.g., 1996 Guidance, supra footnote 3
(stating that, regardless of whether information is delivered in
paper or electronic form, broker-dealers and investment advisers
must reasonably supervise firm personnel with a view to preventing
violations, and therefore should consider the need for systems and
procedures to deter or detect misconduct by firm personnel in
connection with the delivery of information, whether by electronic
or paper means).
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The proposed requirements would allow covered recipients to choose
which types of covered information are provided in paper format or
electronically on a document-by-document basis.\187\ It is our
understanding that covered recipients may prefer to receive certain
categories of covered information in paper format and only have other
types of information available to them electronically.\188\ We
understand that many covered entities currently maintain the
operational flexibility to meet covered recipients' preferences to
receive certain covered information electronically while delivering
other covered information in paper format. However, we understand that
tracking covered recipients' preferences to receive some items of
covered information in paper format and others electronically, and
delivering covered information accordingly, might be costly for some
covered entities, particularly smaller covered entities, or those who
[[Page 45911]]
do not use certain customer or investor management vendors or software.
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\187\ See proposed Reg E-Delivery Sec. 303.102(f)(2) (requiring
a covered entity to permit a covered recipient to opt out of
electronic delivery for ``any or all'' covered information).
\188\ For example, the ICI report on Americans' Views on E-
Delivery of Financial Documents indicates that more shareholders
prefer to receive fund shareholder reports (20%) versus fund
prospectus (17%) and trade confirmations (17%) in paper. Nov. 2025
ICI Letter, supra footnote 17.
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Accordingly, we solicit comment below on whether covered entities
should be allowed to offer e-delivery on an all-or-nothing or a
document-by-document basis. The proposed requirement that a covered
entity permit a covered recipient to opt to receive paper delivery free
of charge would mean that the covered entity could not directly or
indirectly impose a charge on a covered recipient who opts to receive
paper delivery, such as by imposing a separate charge for paper
delivery or imposing a charge that is waived only for covered
recipients who receive disclosures electronically.
We understand that some firms, by account agreement or otherwise by
contract, may limit or restrict a covered recipient's ability to revoke
consent to e-delivery, receive paper delivery, or charge a fee for
paper delivery. If those firms intend to rely on Reg E-Delivery for
assurance that their delivery requirements are satisfied by using e-
delivery, and currently do not provide paper versions of covered
information to covered recipients, they may need to alter certain of
their current delivery practices to align with Reg E-Delivery's
requirement to permit a covered recipient to opt out of e-delivery at
any time and receive delivery only in paper format, free of
charge.\189\ We understand that certain firms reserve the right to
restrict or close the account of a person who requests paper. These
firms would be required to disclose whether a covered recipient's
request for paper or to opt out of e-delivery could result in
restrictions on or termination of the covered recipient's relationship
with the covered entity, as discussed above.\190\ If a covered
recipient were to request paper copies of covered information that had
previously been delivered electronically, the covered entity would be
required to provide these copies, and then could exercise, as
permissible by law, any disclosed right to restrict or terminate the
covered recipient's relationship if the covered recipient requests
paper. Similarly, if a covered recipient were to request to opt out of
e-delivery, the covered entity could exercise, as permissible by law,
any disclosed right to restrict or terminate the covered recipient's
relationship. While this covered entity must comply with all
requirements of Reg E-Delivery so long as a person is a covered
recipient, Reg E-Delivery does not affect a covered entity's disclosed
right to restrict or terminate a relationship.
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\189\ Above we discuss the application of the disclosure
requirements in proposed Reg E-Delivery in the context of firms'
pre-existing contracts that may permit firms to restrict or close
accounts that request paper copies or opt out of e-delivery. See
supra footnote 144 and accompanying text.
\190\ See supra text accompanying footnotes 143-144.
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We request comment on the proposed requirements for covered
entities to provide paper copies of covered information on request and
to permit covered recipients to opt out of e-delivery:
74. Generally, should the Commission require covered entities to
provide paper delivery of covered information? If so, should paper
delivery be required to be provided at no cost to the covered
recipient, as proposed? Should we instead allow covered entities to
charge for providing covered information in paper format? If covered
entities could charge covered recipients for paper delivery, would this
act as a significant impediment to covered recipients' receiving
covered information in their preferred format? To what extent do
covered entities currently charge for the delivery of covered
information? If covered entities charge for paper delivery, how is it
done in practice and what are the typical charges? If the Commission
permitted covered entities to charge for providing paper documents,
should Reg E-Delivery incorporate limitations to address what a
reasonable fee would be (e.g., no more than the paper, printing, and
postage cost of providing the materials, or no fees that materially
exceed underlying costs of delivery)?
75. Is it appropriate that the proposed rule requires covered
entities to allow covered recipients to receive certain covered
information in paper on a document-by-document basis, or would an
alternative, where covered entities would offer only all-or-nothing
paper delivery for those who elect paper be preferable? If so, why?
Should there be an alternative that combines these approaches in some
way, and if so, how? For example, instead of providing document-by-
document optionality should the rule require covered entities to give
covered recipients a choice between, at a minimum, receiving
personalized disclosures, like account statements or tax documents that
include PFI one way (e.g., paper), and more generalized disclosures
like prospectuses another way (e.g., electronically)? Do covered
recipients already enrolled in e-delivery programs utilize document-by-
document requests for paper? Are there operational difficulties
associated with partial opt-outs from e-delivery that we should
consider if covered recipients only want certain document types in
paper format? Should we permit all-or-nothing global opt-outs from e-
delivery for certain types of covered entities or smaller entities?
76. We understand that multiple clicks or perceived friction may
lead to covered recipients abandoning attempts to follow through in
selecting their actual delivery preferences. Accordingly, should we
require that covered entities must provide a direct link, or similar,
for covered recipients to opt out of e-delivery?
77. Should we require covered entities to provide paper copies of
covered information previously delivered electronically upon a covered
recipient's request, as proposed? What are the operational burdens and
costs involved in responding to individual requests for covered
information? How would covered entities evidence that they have
complied with this proposed rule if a customer orally requests to
receive covered information through paper delivery? We understand that
covered entities generally maintain records regarding covered
recipients' electronic or paper delivery elections and requests for
paper copies, both to operationalize and implement delivery through the
method requested by the recipient and to document compliance with
delivery requirements under the Federal securities laws, the entity's
policies and procedures, and any applicable recordkeeping requirements
under the Federal securities laws.\191\ We anticipate that similar
practices would continue following any adoption of proposed Reg E-
Delivery. Should we include a direct, dedicated recordkeeping provision
in proposed Reg E-Delivery that would require covered entities to
maintain records regarding requests for paper copies and elections to
opt out of e-delivery for any or all covered information? Or should
such a provision be included in the books and records rules of the
respective categories of covered entities (as applicable)?
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\191\ See supra footnote 124.
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78. Should the proposed rule obligate covered entities to send a
free copy of covered information delivered electronically in paper
format during the period the covered entity is required to retain the
covered information under the Federal securities laws, or during the
preceding two years if there is no such requirement, as proposed? Does
aligning this provision with existing recordkeeping retention
requirements strike the appropriate balance between providing a
reasonable period of time to accommodate covered recipient requests for
covered information in paper format and avoiding the imposition of
undue
[[Page 45912]]
burdens on covered entities? If there is no specific record retention
period under the Federal securities laws, should the rule require
covered entities to send free paper copies of covered information that
has been delivered through e-delivery during the preceding two years?
Is the proposed two-year time period appropriate, or should it be more
or less? Should the rule use a time period based on the amount of time
a record must be kept in a ``easily accessible place'' \192\ (or
similar requirements) under existing recordkeeping rules? Should we
instead provide a single, fixed time period for a copy of all covered
information to be delivered in paper format upon request? If so, how
long should this fixed period be? Should we provide one period during
which a covered entity would be required to provide a paper copy of
covered information and another, shorter period during which the
covered entity would be required to provide a copy free of charge? Why
or why not?
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\192\ See, e.g., 17 CFR 270.31a-2(a).
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79. Would the proposed requirement to deliver requested information
within three business days provide a reasonable period for covered
entities to provide paper copies of covered information to covered
recipients upon request? While other Commission rules require certain
information that is available electronically to be sent within three
business days of a request for a paper copy, is the context different
in the case of requests for paper copies of previously delivered
covered information under Reg E-Delivery, such that a longer time
period might be appropriate? For example, is a longer period warranted
since such requests can relate to a variety of different types of
covered information dating back several years, including the covered
recipient's personal or account information as opposed to generic
disclosures about assets or investments held by the covered recipient?
\193\ Would covered entities be able to send paper copies within three
business days in light of the request intake, record retrieval,
printing, and mailing processes that would be involved? Does three
business days provide sufficient time given that some circumstances
(e.g., weather events or natural disasters that cause office closures,
or circumstances where a covered recipient requests a relatively large
volume of covered information) might delay a covered entity's ability
to respond? If we were to provide a longer time period to respond to
requests for paper copies, what time period would be appropriate? Five
business days? One week? Or, would a principles-based time period, such
as ``promptly,'' appropriately provide flexibility, given potential
delays in a covered entity's ability to respond to requests for covered
information and that some types of covered information may not require
immediate action by the covered recipient? As another alternative,
should we provide a different time frame for certain types of covered
entities, such as small entities, to respond to requests for paper
copies of covered information?
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\193\ See supra footnotes 179, 182 and accompanying text.
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80. If a covered recipient opts out of electronic delivery for any
or all covered information, the rule requires that a covered entity
must ``promptly'' comply with the covered recipient's opt-out election.
Instead of ``promptly,'' should we impose a requirement that a covered
recipient must comply with the election within a specific time frame?
If so, how long should that time frame be? Three business days after
receiving the covered recipient's request? Five business days? One
week? Two weeks?
81. Should we exclude any types of covered entities from the
requirements to permit covered recipients to opt out of e-delivery, and
to deliver paper copies of covered information, free of charge upon
request? We understand that there are certain firms that would be
covered entities under the proposed rule that currently reserve the
right to charge a reasonable fee, restrict the account, or close the
account of covered recipients who request paper. To what extent do
covered entities currently restrict, by account agreement or otherwise,
a covered recipient's ability to revoke consent to e-delivery or
otherwise restrict paper delivery of covered information? How should
Reg E- Delivery apply to such covered entities? Should such covered
entities be excluded from any of the requirements of the proposed rule,
such as the requirements to deliver paper copies of covered information
to covered recipients upon request, to allow covered recipients to opt
out of e-delivery, or to include statements regarding obtaining paper
copies or opting out of e-delivery in statements of availability or
direct deliveries of covered information? Would specific disclosure of
such practices by covered entities at account opening or otherwise be
sufficient to protect covered recipients and ensure that they receive
covered information? Would excluding these covered entities from these
requirements be appropriate because covered recipients engaging the
services of such covered entities reasonably would expect to receive
covered information electronically?
82. Should we exclude any types of covered information from the
requirement to deliver paper copies of covered information, free of
charge upon request? For example, should covered entities be permitted
to charge for the paper format delivery of covered information that
does not contain PFI?
83. Should covered entities be permitted to charge covered
recipients who request paper copies of previously e-delivered covered
information, but not covered recipients who opt out of e-delivery going
forward?
84. Should there be a limit on the number of free paper copies that
a covered recipient receives, and if so, under what circumstances? Is
there the potential for covered recipients to abuse their ability to
request free paper copies or scenarios where such requests are
particularly burdensome or costly for covered entities? Should Reg E-
Delivery permit any other limits on the ability of covered recipients
to request paper or opt out of e-delivery, such as limiting paper
requests or the ability to opt out of e-delivery to certain types of
covered information or restricting the ability to opt out to a certain
point in time rather than permitting opt outs at any time?
8. Updates to Electronic Address and Choice of Type of Electronic
Address
Under the proposed rule covered entities providing e-delivery must
permit a covered recipient, free of charge, to update their electronic
address upon request.\194\ If the covered entity offers a choice as to
the type of electronic address to be used for e-delivery (for example,
email or mobile phone number), the covered entity must also permit the
covered recipient to select a preference free of charge.\195\ This
provision is necessary to ensure that covered recipients are able to
update and change their preferred electronic address if the need arises
so that they may continue to receive covered information. It also would
allow--in circumstances where the covered entity offers e-delivery
using multiple types of electronic addresses--for covered recipients to
choose the best means of delivery for them at any given time. For
example, covered recipients
[[Page 45913]]
could change their delivery preference from email to text message, if
the covered entity offers e-delivery using both of these types of
electronic address. Additionally, this provision would allow covered
recipients to elect to use new forms of electronic communications not
necessarily available when they selected their initial means of
delivery. The proposed rule would require covered entities to permit
covered recipients to update or change their electronic addresses at
any time, free of charge, so that they are not deterred from making
these choices and receiving covered information at their preferred
electronic address, by fees or other charges.
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\194\ See proposed Reg E-Delivery Sec. Sec. 303.102(g).
\195\ Id. The proposed requirements that obligate covered
entities to permit covered recipients to update and choose the type
of electronic address (like the proposed requirements for a covered
entity to comply with covered recipients' elections to receive
paper) would, as a practical matter, entail a need for relevant
operations and compliance systems, as well as related recordkeeping.
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We request comment on the proposed requirements regarding updating
and choosing the type of electronic address for e-delivery:
85. Should covered entities be required to permit covered
recipients to update or change their electronic address for e-delivery,
as proposed? Should updating electronic addresses be free of charge, as
proposed? Are fees charged for changing electronic addresses currently?
86. Do covered entities offer delivery to multiple electronic
address types or are there certain types of electronic addresses (for
example email, text, or mobile applications) that are primarily used?
Should the rule require covered entities to deliver to multiple
electronic address types?
9. Identifying and Remediating E-Delivery Failures
Under the proposed rule, covered entities would be required to
adopt and implement written policies and procedures reasonably designed
to identify and remediate failed e-delivery.\196\ If a covered entity
identifies an e-delivery failure it would be required promptly to take
reasonable remediation steps, including obtaining a new electronic
address or delivering the covered information in paper format until the
covered recipient provides a new electronic address.\197\ This
provision is designed to ensure that covered entities actually deliver
the required covered information and that covered entities have a
program to identify circumstances where covered recipients are not
receiving required covered information and take appropriate steps to
remediate the issue. For example, if a covered entity identifies an
individual e-delivery failure, such as an automated response that the
covered recipient's electronic address is invalid received in
connection with the delivery of an item of covered information (a
``bounce-back''), the covered entity's delivery obligation with respect
to that covered information would not be met and the covered entity
would need to take further steps to deliver it. Rather than immediately
transitioning the covered recipient to paper delivery on a global
basis, however, the covered entity could send the covered information
in paper while attempting to re-establish a valid or functional
electronic address for future deliveries. On the other hand, persistent
e-delivery failures would need to be addressed by reverting the covered
recipient globally to paper delivery unless the covered recipient can
provide an alternative electronic address. Extended delays in resolving
these issues and finding valid or functional electronic addresses do
not exempt covered entities from their obligations under Federal
securities laws to deliver covered information.
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\196\ See proposed Reg E-Delivery Sec. 303.102(h).
\197\ Id.
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It is our understanding that many covered entities currently
maintain operations and systems capable of detecting invalid or
inoperable email addresses via bounce-backs or other means. Some
covered entities are able to halt e-delivery to such addresses and send
paper notifications of failed delivery or switch to physical mailings
of covered information.\198\ Additionally, some covered entities'
current compliance programs generally require remediation efforts in
their policies and procedures.\199\ Depending on the covered entities'
business models, technologies, and communication types involved,
covered entities may have significant visibility into whether certain
electronic addresses are valid, whether recipients have clicked on
certain links, or whether or when recipients have accessed the covered
entity's electronic platform.\200\ As communications technology
continues to evolve, covered entities will likely have even more
visibility into whether and when there are delivery failures or covered
recipients are engaging with their communications. Though such
capabilities may exist now or in the future, the proposed remediation
provisions are not intended to require covered entities to monitor
account engagement, clickthrough rates, whether a message was opened,
or reviewed; instead, the proposed requirements aim to address whether
there was an actual failure to deliver. It is our understanding that
the proposed rule's principles-based remediation provisions in the case
of failed e-deliveries or bounce-backs are generally consistent with
existing industry practices and would continue to help ensure that
covered recipients receive the covered information to which they are
entitled.
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\198\ See SIFMA Letter, supra footnote 44 (stating firms
typically have a process to monitor and remediate e-delivery
failures, including email bounce-backs, such as to notify a customer
by postal delivery of an e-delivery failure and to switch a customer
to postal delivery after successive e-delivery failures).
\199\ For example, investment advisers and investment companies
are required to adopt policies and procedures reasonably designed to
prevent violations of the Advisers Act and the rules thereunder for
advisers and the Federal securities laws for investment companies.
See Advisers Act rule 206(4)-7 (17 CFR 275.206(4)-7) and Investment
Company Act rule 38a-1 (17 CFR 270.38a-1). Failure to deliver
covered information could result in a violation of such laws and
rules. We also note in the paper mailing context that Exchange Act
rule 17Ad-17 requires that when mail is returned as undeliverable,
transfer agents must use ``reasonable care'' to find the account
holder's correct address. State escheatment laws may also require
some covered entities to monitor accounts for inactivity.
\200\ We understand that some entities or their service
providers systematically collect points of contact and account
activity. See, e.g., Nov. 2025 ICI Letter, supra footnote 17
(stating funds have mechanisms built into their websites or online
investor accounts to periodically prompt shareholders to confirm or
update their contact information and/or to provide back-up contact
information).
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We request comment on the proposed requirements for identifying and
remediating failed e-delivery:
87. Should we require that the covered entities adopt and implement
written policies and procedures that are reasonably designed to
identify and remediate e-delivery failures, as proposed? What types of
policies and procedures currently exist under the various regulatory
regimes for the respective types of covered entities contemplated by
the proposed rule? Do covered entities generally recognize the concept
of e-delivery failures and have the ability reasonably to determine
whether or not a failure to deliver to a covered recipient has
occurred? What systems are involved in identifying and mitigating e-
delivery failures, and what are the costs associated with such efforts?
88. Should the rule, as proposed, require the covered entity to
promptly take ``reasonable remediation steps'' to obtain a new
electronic address or deliver a paper version of covered information
when it identifies an e-delivery failure? What steps do covered
entities take to obtain a new electronic address for covered recipients
currently? What do covered entities view as a reasonable period of time
to attempt to obtain a new electronic address before reverting to paper
delivery? If a covered entity identifies a
[[Page 45914]]
failed e-delivery to an electronic address and its reasonable steps to
obtain a new electronic address fail, should the covered recipient be
deemed to have opted out of e-delivery?
89. Delivery failures may be used as evidence to consider an
account abandoned for state escheatment purposes. State escheatment
laws typically require financial services firms to identify abandoned
property and attempt to notify the owner that the property is at risk
of transfer to the state. How does this proposed rule intersect with
covered entities' current obligations under state escheatment laws?
What practices do covered entities use today to comply with such
requirements? Can these existing practices be leveraged to facilitate
e-delivery of covered information and/or identify and remediate e-
delivery failures? Would the proposed rule's requirement for covered
entities to adopt and implement written policies and procedures
reasonably designed to identify and remediate failed electronic
delivery, any other of the proposed requirements, or the use of e-
delivery under Reg E-Delivery reduce the frequency of accounts being
deemed to be abandoned under state escheatment laws? Should the
Commission consider any requirements related to electronic contact or
otherwise to help covered entities evidence that covered persons'
accounts are not abandoned property?
90. In addition to or as an alternative to the proposed
requirements for identifying and remediating e-delivery failures,
should covered entities be required to verify that covered information
was successfully transmitted to a valid or current electronic address
(and, in the case of covered information delivered through a statement
of availability, that covered information is available on the website
that the covered entity provided) in the required time period? Do
covered entities already confirm the validity of electronic addresses
by sending activation links or other similar means during onboarding
processes or otherwise?
91. As an alternative, should we require covered entities to
include a notice of the failed e-delivery to the covered recipient in
paper format as part of the mitigation process?
C. Requirements for Website Availability of Covered Information
As discussed in section II.B.3, one of the ways in which covered
entities would be permitted to electronically deliver covered
information to covered recipients under proposed Reg E-Delivery would
be to deliver a statement that covered information is available on a
website. We are proposing certain requirements for the website where
covered information is made available, relating to: (1) timing; (2)
availability period; (3) format and retainability; (4) accessing
covered information that contains PFI; and (5) continuous availability
and periods of temporary unavailability.\201\ The proposed rule also
specifies that the website may not be the address of any Commission
electronic filing system.
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\201\ Proposed Reg E-Delivery Sec. Sec. 303.102(c)(1)(iii)
through (iv) and 303.103(a) through (e).
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We are proposing to require the covered information to be available
on the applicable website no later than the date by which the covered
information must be delivered under the Federal securities laws or
rules, and no later than the date by which the statement of
availability of covered information is delivered.\202\ E-delivery does
not change or negate the fundamental obligations under the law to
deliver required information. Therefore, availability on a website
after the required date of delivery or the date of delivery of the
statement of availability would not satisfy a covered entity's delivery
obligations.\203\
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\202\ Proposed Reg E-Delivery Sec. 303.103(a).
\203\ See 17 CFR 230.498A(h)(1) and 17 CFR 230.498(e)(1)
([prospectus] must be accessible on the website ``on or before the
time that the [prospectus] is sent or given'').
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Similarly, we are proposing to require that the covered information
must remain available for covered recipients to access on the website
for a certain period of time, so that covered recipients have time both
to review the information on the website and to download it or
otherwise save it for their future use if desired. For covered
information that already has a website availability period provided for
under the Federal securities laws, the availability period would be
provided by those time periods.\204\ If no website availability period
is provided in law or regulation, we are proposing to require that
covered information that contains PFI would need to be available on the
website for at least three years after posting, and covered information
that does not include PFI would need to be available for at least one
year. Where a website availability period for a specific type of
information is provided by existing laws, the particular uses and needs
for that information have been considered and that period specified
under existing laws (whether it is longer, shorter or different from
the proposed period under Reg E-Delivery) would be more appropriate.
For example, a fund annual report must be available 60 days after the
end of the fiscal half-year or fiscal year of the company until 60 days
after the end of the next fiscal half-year or fiscal year of the
company to match the schedules for the distribution of the shareholder
reports.\205\ Similarly, the time period for proxy materials to remain
online under Exchange Act rule 14a-16 is tied to the timing of the
related meeting of security holders, which is tailored for the
informational purposes of these materials.\206\
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\204\ Proposed Reg E-Delivery Sec. 303.103(b).
\205\ See 17 CFR 270.30e-1(b)(2); see also, e.g., 17 CFR
230.498(e); 17 CFR 230.498A(h 17 CFR 240.14a-16(b)(1) (examples of
availability periods provided by existing regulations).
\206\ See 17 CFR 240.14a-16(b)(1).
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We are proposing three years as an appropriate online availability
period for covered information that contains PFI. This information
often relates to an individual's specific financial records. The three-
year availability period is designed to balance the potential need for
covered recipients to access this information from recent years (it
would cover, for example, routine tax filings and most standard IRS
audits) with the costs of maintaining this information online for
longer time periods. For covered information that does not contain PFI,
we are proposing one year as an appropriate default availability
period, as such general disclosure does not contain the personalized
data that individuals may require for an extended period of time for
their financial records and accounting.
We are also proposing to require that covered information be
presented in a format that is convenient for both reading online and
printing on paper.\207\ Persons accessing the covered information would
need to be able to retain the covered information permanently, free of
charge, in an electronic format that meets these requirements. As
information posted to a website would not be required to be available
indefinitely, covered recipients should have the ability to
[[Page 45915]]
retain this information permanently for their records if they choose.
Information posted to a website that is not capable of being printed on
paper in an easily readable format or otherwise savable could be
difficult or impossible to retain. The Commission has imposed similar
format and retainability requirements in other rules where website
posting is required in connection with satisfying delivery
obligations.\208\ These requirements are designed to be technology-
neutral.
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\207\ Proposed Reg E-Delivery Sec. 303.103(c); see also supra
footnote 151 (addressing the ``convenient for reading and printing''
requirements in other Commission rules for information available on
a website); E-Proxy Adopting Release, supra footnote 13, at text
accompanying n.82 (``require[s] the electronically posted proxy
materials to be presented on the internet website in a format, or
formats, convenient for both printing and viewing online''); VASP
Adopting Release, supra footnote 13, at text accompanying n.460. In
addition to complying with the proposed presentation and format
requirements under Reg E-Delivery if adopted, covered entities are
required to comply with all applicable accessibility-related
requirements under the Americans with Disabilities Act or otherwise.
See, e.g., Americans with Disabilities Act of 1990, Public Law 101-
336, 104 Stat. 328 (1990).
\208\ See, e.g., 17 CFR 230.498(e)(2)(i) and 17 CFR
230.498A(h)(2)(i) (requiring that information on the internet be
presented in a format that is human-readable and capable of being
printed on paper in human-readable format for open-end management
investment companies and separate accounts offering annuity and life
insurance contracts); 17 CFR 240.14a-16(c) (requiring materials to
be presented in a format convenient for both reading online and
printing in paper when delivering proxy materials electronically).
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As discussed above, where covered information that includes PFI
appears on a website, the proposed rule would require that such
information be delivered only through statement of availability, and be
accessible only through the use of a process reasonably designed to
safeguard the covered information.\209\ This proposed requirement would
reflect that covered information that contains PFI may contain highly
sensitive information that could result in fraud, identify theft or
other malfeasance if posted to a publicly available website (that is, a
website that could be accessed other than through the use of a process
reasonably designed to safeguard the covered information).\210\
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\209\ See proposed Reg E-Delivery Sec. Sec. 303.102(c)(1) and
303.103(d); see also supra section II.B.5.
\210\ Id.
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In circumstances where a covered entity's website and covered
information become temporarily unavailable, we are proposing two
additional protections. First, the covered entity must adopt and
implement written policies and procedures reasonably designed to ensure
that the covered information is made available and remains available in
the manner required by the rule.\211\ These could include, for example,
the covered entity (or a service provider) monitoring the website where
covered information is available to ensure that it becomes aware of any
temporary unavailability in a timely manner. Second, once such an
unavailability occurs, the covered entity would be required to take
prompt action to ensure that the covered information becomes available
in the manner required by Reg E-Delivery as soon as practicable
following the earlier of the time at which the covered entity knows or
reasonably should have known that the covered information is
temporarily unavailable.\212\ The Commission has previously included
similar provisions for temporary noncompliance with online availability
obligations in conjunction with other rules.\213\
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\211\ Proposed Reg E-Delivery Sec. 303.103(e)(1).
\212\ Proposed Reg E-Delivery Sec. 303.103(e)(2).
\213\ See, e.g., 17 CFR 270.30e-1(b)(2)(vi); 17 CFR 270.30e-
3(b)(5); 17 CFR 230.498(e)(4); 17 CFR 230.498A(h)(4); see also VASP
Adopting Release, supra footnote 13, at section II.A.5.f; 2009
Summary Prospectus Adopting Release, supra footnote 13, at section
III.B.3.e; Tailored Shareholder Reports Adopting Release, supra
footnote 13, at text accompanying n.449; Optional internet
Availability of Investment Company Shareholder Reports, Investment
Company Act Release No. 33115 (June 22, 2018) [83 FR 29158] (``Rule
30e-3 Adopting Release'') at text accompanying nn.113-135.
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We are proposing to provide that the website address relied upon
for compliance with Reg E-Delivery may not be the address of a
Commission electronic filing system.\214\ This proposed approach is
consistent with certain other Commission rules addressing the online
availability of information.\215\ A primary example of a Commission
electronic filing system is the Commission's Electronic Data Gathering,
Analysis, and Retrieval System (``EDGAR''), which is used by
registrants and other entities to submit many filings that are subject
to review by staff.\216\ Disclosure through posting on a website other
than a Commission electronic filing system allows for the overlay of
interactive graphics or other tools that covered entities may choose to
use to assist covered recipients in viewing and understanding the
information presented in various disclosures.\217\
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\214\ Proposed Reg E-Delivery Sec. 303.103.
\215\ See, e.g., E-Proxy Adopting Release, supra footnote 13, at
text accompanying n.81. Other Commission rules similarly provide
that EDGAR cannot be used to satisfy certain website posting
requirements. See, e.g., 17 CFR 240.14a-16(b)(3); 17 CFR 270.30e-
1(b)(2)(iii); 17 CFR 17 CFR 230.498(b)(1)(v)(A).
\216\ See 17 CFR 232.100.
\217\ See Tailored Shareholder Reports Adopting Release, supra
footnote 13, at section II.A.4.
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We request comment on the following:
92. Are the proposed requirements for website availability of
covered information appropriate?
93. Should the required availability period for covered information
containing PFI be different than for covered information not containing
PFI? Is one year an appropriate availability period for covered
information that does not contain PFI? Is three years an appropriate
availability period for covered information that contains PFI? Should
the availability period be longer or shorter? Should the availability
period for covered information that contains PFI match a specific
period during which covered information may be needed, such as time
frames for IRS audits? Would an availability period of 1, 2, 4, or 5
years be more appropriate than 3 years? If so, why? Is it appropriate
to require availability of covered information for a period consistent
with applicable website availability periods under the Federal
securities laws, or the proposed periods of one or three years if no
such website availability periods apply? Are there circumstances where
covered information should be available on a website after the customer
relationship (or similar relationship) with the covered entity has
ended? If so, describe the circumstances where this would be
appropriate and how long such an availability period should last.
94. For covered information on a website that is required to be
available for a certain period of time, should we require any specific
disclosure on the website regarding how long the covered information
will be available there and when it may disappear or be superseded?
95. Should we be less prescriptive with regard to any of the
formatting, readability, printability, and retainability requirements
for covered information posted to a website? If so, why? Would any of
these proposed requirements limit the ability of a covered entity to
use electronic tools or overlays when providing electronically
presented information to provide better quality disclosure, or
otherwise impede disclosure innovation? Are there additional
requirements or greater specificity that would be beneficial to include
in the proposed rule's requirements for website availability?
96. Do the proposed formatting, readability, printability, and
retainability requirements sufficiently address challenges covered
recipients may encounter using different devices to review material
(e.g., reading disclosures on smartphones)?
97. Should we, as proposed, impose restrictions on covered
entities' use of a safeguarding process such as a password or
biometrics to access a website that contains covered information that
does not contain PFI? Could this create barriers to the ability of
covered recipients to view covered information that is legally required
to be delivered to them? Are there certain circumstances in which
passwords or similar processes should be allowed to access covered
information that does not contain PFI? If so, what are they?
[[Page 45916]]
98. Is it appropriate to allow covered entities to be considered to
have met the proposed website availability requirements during periods
of temporary unavailability of a website, as proposed? Should we be
more specific regarding how long a period of time for which the site
may be unavailable or the events that may lead to such unavailability?
Should we specify what written policies and procedures a covered entity
must adopt and implement that are reasonably designed to ensure the
covered information is made and remains available? Should we require
written policies and procedures requiring monitoring for website
unavailability or other website issues? If so, what should those
policies and procedures contain? Is it appropriate to require a covered
entity to take ``prompt action'' during a period of temporary
unavailability? Should we instead require the covered entity to take
action within a specific period of time? If so, how much time? Would 24
hours, 48 hours, 72 hours, 1 week, or some other period of time be
appropriate? Should we be more specific regarding how a covered entity
can reasonably know that the covered information is temporarily
unavailable? If so, how?
99. Do commenters agree that the website for accessing covered
information under Reg E-Delivery should not be permitted to be a
Commission electronic filing system? Are there certain Commission
electronic filings systems that should be permitted to be used for
accessing covered information? Alternatively, should covered entities
be allowed to use covered information posted to the Commission's filing
system to satisfy their obligations to deliver any covered information,
or certain types of covered information? If so, which types of covered
information and why?
100. Are there any additional requirements for website availability
of covered information that we should adopt? For example, with respect
to covered information that does not include PFI, would covered
recipients value a requirement that covered information must be
maintained on a website that does not employ tracking technologies such
as cookies to access such website, and if so why?
101. Well-designed websites or internet-connected apps may benefit
covered recipients by effectively communicating covered information,
including by adopting features not possible with paper, such as
interactive videos, calculators, and layered design. What common
features have covered entities adopted in their websites or apps that
are effective in communicating covered information to covered
recipients and attracting covered recipients to engage in activity with
their accounts online? What are the benefits and drawbacks of these
features? Should any such features be required beyond this rulemaking?
Would such features be consistent with the proposed requirement to
provide covered information in paper on demand?
D. Special Provision for Covered Recipients Receiving Paper: Required
Notices and Transition Process for Default Electronic Delivery
1. Scope of Application and Transition Process for Default E-Delivery
The transition requirements of the proposed rule apply to a covered
entity's e-delivery to covered recipients receiving paper, that is,
covered recipients who, as of the effective date of Reg E-Delivery,
receive any covered information in paper from or on behalf of the
entity, and for whom such covered entity has an electronic
address.\218\ Section 303.104 of proposed Reg E-Delivery provides
covered entities with an opportunity to transition this specific group
of covered recipients to default e-delivery through the provision of
certain paper notices (described below) to these recipients. Covered
entities would not be permitted to use the transition process under
this provision to impose default e-delivery on covered recipients who
elect to continue to receive delivery of covered information in paper
after the effective date of Reg E-Delivery. Therefore, once a covered
entity has used this transition process with respect to covered
recipients receiving paper, it cannot again use the transition process
with respect to those covered recipients who elect to receive paper in
response to the notices they received during the process.
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\218\ See proposed Reg E-Delivery Sec. 303.104(a). ``Covered
recipient receiving paper'' includes a covered recipient receiving
some or all covered information in paper format as of the effective
date of Reg E-Delivery whether by default (as a result of not opting
in to e-delivery pursuant to the E-Delivery Guidance) or preference
(such as selecting paper delivery in the onboarding process or
withdrawing a prior consent to e-delivery) and for whom such covered
entity has an electronic address.
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As discussed above, this approach would allow covered entities to
use e-delivery to deliver covered information to covered recipients
receiving paper without first obtaining their affirmative consent, but
also would honor the preferences of recipients who favor paper
delivery.\219\ For covered recipients that become entitled to covered
information after the effective date of the rule (e.g., new investors
in a registered investment company or new clients of an investment
adviser), a covered entity relying on Reg E-Delivery to e-deliver
covered information to such recipients would be subject to the general
requirements of the proposed rule (i.e., in proposed Reg E-Delivery
Sec. 303.102-103),\220\ but would not be subject to the transition
provisions (in proposed Reg E-Delivery Sec. 303.104) and so would not
need to send the initial and follow-up notices to such recipients.
After covered recipients receiving paper are shifted to e-delivery
pursuant to the transition provisions, a covered entity would generally
be required to e-deliver covered information to such recipients
pursuant to the other provisions of Reg E-Delivery (i.e., in proposed
Reg E-Delivery Sec. 303.102-103),\221\ but would not be required to
provide the disclosure of e-delivery (in proposed Reg E-Delivery Sec.
303.102(b)).\222\ This disclosure would be unnecessary for covered
recipients who were provided with the paper notices during the
transition process because they serve largely the same function as the
disclosure of e-delivery by notifying covered recipients that covered
information will be delivered electronically.
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\219\ See supra sections I, II.A.
\220\ See proposed Reg E-Delivery Sec. 303.102-103; supra
sections II.B-II.C.
\221\ See id.
\222\ See proposed Reg E-Delivery Sec. 303.102(b); supra
sections II.B.2.
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The proposed rule applies the transition process's notice
requirements only to covered recipients receiving paper because
providing notice to those that already receive e-delivery during the
transition process would be unnecessary, as those covered recipients
have already expressed a preference for e-delivery and would not be
experiencing a change in delivery method of covered information.\223\
This would make the transition notices potentially duplicative of past
efforts and confusing for covered recipients already receiving e-
delivery. Similarly, recipients for whom covered entities have delivery
obligations that commence after the effective date would not be
experiencing a change in how they receive covered information from the
covered entity. Accordingly, covered
[[Page 45917]]
entities would provide these covered recipients with a disclosure of e-
delivery at the initiation of their relationship with the covered
entity and would not be required to send transition notices to such
covered recipients.\224\ Additional information related to e-delivery
under the proposed rule for these covered recipients--like covered
recipients' ability to request paper delivery free of charge under the
proposal--would be provided to them in connection with the delivery of
covered information under the proposed rule as discussed above.
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\223\ We recognize, however, that a covered recipient that
currently receives electronic delivery of covered information
containing PFI from a covered entity that does not deliver such
covered information in a manner that conforms with the requirements
of the proposed rule would experience a change in e-delivery method.
See proposed Reg E-Delivery Sec. 303.102(c) and supra section
II.B.5.
\224\ See proposed Reg E-Delivery Sec. 303.102(b); supra
section II.B.2.
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Covered recipients receiving paper for whom the covered entity has
an electronic address, however, could begin receiving information
electronically under the proposed rule--under the time frame that the
proposed rule provides--unless they elect to continue to receive
covered information in paper. The notice requirements are designed to
alert such covered recipients receiving paper to the upcoming change in
delivery method and provide them an opportunity to elect to continue to
receive paper delivery or to update an electronic address they have on
file with the covered entity.\225\ Limiting the scope of the transition
requirements to covered recipients receiving paper for whom the covered
entity has an electronic address, as opposed to requiring covered
entities to send a transition notice to all covered recipients,
reflects a balance between the costs of sending these notices with the
benefits of putting covered recipients who will be experiencing a
change in delivery methods on notice of that upcoming change. Providing
paper notices to covered recipients who already receive e-delivery
would be a significant burden and expense with limited if any benefit,
given that those recipients have already made the choice to receive
regulatory documents by e-delivery and would not be affected by the
implementation of default e-delivery.\226\ This proposed approach
allows firms to continue to provide covered information electronically
to those who have already opted in to e-delivery, which both reduces
costs and respects the choices that the covered recipients made prior
to the proposed rule's effective date. Similarly, a requirement to send
notices to covered recipients for whom the covered entity does not have
an electronic address could be confusing to these covered recipients,
as they would not be experiencing a transition to e-delivery if they
have not provided an electronic address.\227\
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\225\ See supra section II.A (discussing the importance of
notice in a transition period). Industry participants support a
transition period that includes notices of the switch to e-delivery.
See SIFMA Letter, supra footnote 44 (stating that after a transition
period that includes notice to customers about the switch from
postal to e-delivery, firms should be permitted to designate e-
delivery as the default method of delivery for required customer
communications, and to deliver customer communications
electronically to an e-delivery address that the firm has on file
for the customer) and Nov. 2025 ICI Letter, supra footnote 17
(recommending a mandatory transition period of no more than one year
to notify investors who currently receive paper delivery of the
change to e-delivery).
\226\ For example, the ICI notes that 84% of fund investors
receive at least some of their financial documents electronically.
Nov. 2025 ICI Letter, supra footnote 17. A 2022 survey commissioned
by SIFMA found that 79% of broker-dealer customers have already
opted to receive customer communications electronically through
email, a financial institution's website, or a mobile application.
SIFMA, Most Investors Want Electronic, Not Paper, Delivery of
Investor Documents (Summer 2022), available at https://www.sifma.org/wp-content/uploads/2022/07/SIFMA-Survey-Results-for-SEC-July-2022.pdf.
\227\ Reg E-Delivery would not prevent a covered entity from
contacting a covered recipient and requesting that covered
recipient's electronic address to receive covered information. If,
through this outreach, the covered entity obtains an electronic
address for a covered recipient that receives any covered
information in paper format as of the effective date of Reg E-
Delivery, the covered entity could rely on Reg E-Delivery to deliver
all covered information to this covered recipient electronically
after providing the disclosure of e-delivery required by proposed
Reg E-Delivery Sec. 303.102(b). See also infra footnote 440.
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The proposed transition process would include certain timing
requirements. The proposed rule provides that a covered entity may use
e-delivery as the default delivery method for any covered recipients
receiving paper beginning 180 days after the covered entity provides a
prescribed initial notice to the covered recipient receiving paper
(which we describe in more detail below), if the covered recipient
receiving paper does not opt out of e-delivery after receiving such
notice. Some covered recipients receive e-delivery of only a subset of
covered information. If a covered entity intends to default the covered
recipient into e-delivery for the remainder of the covered information
it provides, it must comply with the transition period's requirements
with respect to that remainder. The proposed 180-day period is designed
to provide sufficient time for covered recipients receiving paper to
receive and respond to notices of upcoming default e-delivery and opt
out, either in whole or in part.\228\ In addition, the proposed rule
allows covered entities to decide when to provide the initial notice
and, if they choose, to take more than 180 days to begin e-delivery of
covered information to covered recipients receiving paper.\229\ This
flexibility is designed to help covered entities manage the transition
to default e-delivery, providing them with time to operationalize any
necessary changes to their processes and systems.
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\228\ Industry participants similarly have suggested a six to
twelve month transition period. See SIFMA Letter, supra footnote 44.
Though it relates to Form 144 filings with the Commission, six
months has been considered a reasonable period to transition from
paper to electronic formats in another context. See Updating EDGAR
Filing Requirements and Form 144 Filings, Securities Act Release No.
11070 (June 2, 2022) [87 FR 35393 (June 10, 2022)].
\229\ We would interpret the ``provision'' of the notice, and
the beginning of the 180-day period under the proposed rule, to be
the day the covered entity mailed the notices.
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We request comment on the proposed requirement for a transition
process and its scope and timing requirements:
102. Should certain types of covered recipients, covered entities,
or covered information not be subject to the transition process and its
notice provisions? For example, should the proposed rule exclude from
the group of covered recipients who could be transitioned to e-delivery
under the rule individuals over a certain age, either as of a certain
date or at the time the covered entity starts the transition process?
\230\
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\230\ See Federated Hermes 2026 Comment Letter, supra footnote
43 (suggesting that ``[c]oncerns about the impact of e-delivery on
senior citizens could potentially be addressed by ``grandfathering''
investors over the age of seventy-five without an affirmative opt
out.'').
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103. Should the transition process only apply to covered recipients
receiving paper, as proposed, which is limited under the proposed
definition to covered recipients for whom the covered entity has an
electronic address? Should we also require that covered entities must
have an electronic address ``provided by'' the covered recipient in
order to be able to use the transition process with respect to that
covered recipient, or would it be unnecessarily burdensome for covered
entities to establish that a covered recipient has provided an
electronic address in the case of covered recipients receiving paper
(as they are defined in the proposed rule) as opposed to other covered
recipients? Should the paper notices be sent to all covered recipients
regardless of whether they currently receive paper or e-delivery?
104. As proposed, the transition process (including the initial
paper notice regarding the upcoming change to default e-delivery) would
be limited to covered recipients who receive any information in paper
format as of the effective date of Reg E-Delivery and
[[Page 45918]]
cannot be applied to covered recipients who request paper delivery
after the effective date. Do commenters agree with this approach?
Without this requirement, would there be a risk that covered entities
could use the transition process with respect to covered recipients who
elect to receive paper delivery, including by sending another initial
notice to covered recipients who already received one and opted out of
e-delivery? Is there another way to tailor the transition process to
the appropriate group of covered recipients and prohibit the repeat
provision of the initial notice to a covered recipient (aside from
limiting the transition process to covered recipients receiving paper
as of the effective date, as proposed)?
105. As discussed below, the initial notice as proposed would
require covered entities to include the electronic address that would
be used to deliver covered information to the covered recipient
receiving paper, which, by definition, means that the covered entity
has an electronic address for such covered recipient. Instead of the
proposed approach, should we require that the initial notice also be
provided to covered recipients currently receiving paper for whom the
covered entity does not have an electronic address and include an
explanation that the covered recipient will not be transitioned to e-
delivery and will continue to receive covered information in paper free
of charge unless the covered recipient provides their electronic
address? Would this alternative enable covered entities to transition
more covered recipients into e-delivery, or would this alternative be
unnecessary as is this an exercise that covered entities could
undertake on their own initiative should they wish to obtain the
electronic addresses necessary to transition such covered recipients to
e-delivery?
106. Should a covered entity have to comply with the timing and
notice requirements of the proposed transition provision for covered
recipients who receive some, but not all, documents electronically? For
example, if covered recipients receive some documents electronically,
should they still have the benefit of the full transition process and
notices if they are already familiar with the covered entity's e-
delivery processes?
107. Should covered recipients who have already affirmatively
elected to receive paper versions of covered information as of the
effective date receive the initial notice (as proposed, this group of
covered recipients would be included in the definition of ``covered
recipients receiving paper'')? Is it appropriate to require notices of
the upcoming change to e-delivery to such covered recipients given that
they have already expressed a choice to receive paper? Could doing so
cause confusion? For covered recipients that have provided electronic
addresses and have already elected prior to the effective date of Reg
E-Delivery to receive certain documents in paper on a document-by-
document basis, does receiving a transition notice to transition all of
their covered information to electronic delivery raise any particular
issues, or is it sufficient that this notice would describe each type
of covered information that would be transitioned to e-delivery and
provide an opportunity to select paper delivery for any or all of this
covered information? \231\ Are covered entities able to identify and
distinguish those covered recipients receiving paper based on an
affirmative choice, such as withdrawing their previous consent to e-
delivery, from those receiving paper by default? Would doing so be
burdensome?
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\231\ See proposed Reg E-Delivery Sec. 303.104(c)(1)(i)(A) and
infra section II.D.2.
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108. Instead of the proposed approach, should all covered
recipients (even those who have already opted in to e-delivery under
the E-Delivery Guidance) receive notices? More specifically, should any
notices be required to be sent to those covered recipients that have
already affirmatively elected to receive e-delivery as of the effective
date? If so, should those recipients receive their notices
electronically, or should all notices under this approach be in paper
format? Would delivering notices to covered recipients that had opted
in to e-delivery prior to the effective date of the proposed rule
potentially create confusion given they have already made a choice?
109. Is it appropriate, as proposed, to provide a transition
process that gives covered entities flexibility to choose when they
provide the initial notice for default to e-delivery and begin the 180-
day notice process?
110. Is 180 days, as proposed, an appropriate amount of time for
the transition process? Should we instead require a longer or shorter
period? Should the transition process be 90 days, for example, or a
year?
111. Should the proposed rule incorporate any special
considerations for security-based swap dealers, major security-based
swap data participants, and security-based swap data repositories that
currently rely on standardized disclosures used by the majority of
market participants?
2. Required Notices During the Transition Process
The transition process would require covered entities to provide
two separate notices in paper to covered recipients receiving paper,
namely the initial notice and a follow-up notice. First, the proposed
rule would require covered entities to provide a clear and conspicuous
initial notice in paper format meeting certain content requirements to
each covered recipient receiving paper.\232\ Covered entities would be
required to provide the initial notice in paper format to the covered
recipient's last known physical address of record, as this method
corresponds to how covered recipients receiving paper receive covered
information and would help ensure that these recipients receive notice
of the upcoming transition to default e-delivery. The initial notice
requirement is designed to provide a clear and conspicuous announcement
of the transition to e-delivery as a default and the covered entity's
approach to the transition so that covered recipients can make informed
decisions regarding their preferred delivery method for covered
information.
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\232\ See proposed Reg E-Delivery Sec. 303.104(c).
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The proposed rule would impose certain content requirements so that
the notices cover key information regarding the transition to e-
delivery under the proposed rule.\233\ The initial notice would include
a prominent statement that alerts the covered recipient receiving paper
about the upcoming transition to e-delivery of covered
information.\234\ Such a prominent statement would need to clearly
stand out within the notice (e.g., by use of bold font, size,
formatting, etc.). The purpose of this proposed requirement is to help
ensure that covered recipients receiving paper recognize the importance
of the transition and to encourage them to read further to understand
the transition to e-delivery in greater detail. This prominent
statement would also be required to include a brief description of each
type of covered information that the covered entity would deliver
electronically.\235\
[[Page 45919]]
The brief description would also identify which covered information may
require action by the covered recipient within a fixed time frame to
exercise certain rights, and which covered information may be delivered
by someone other than the covered entity providing the notice or a
person delivering on behalf of the covered entity.\236\ For example,
these would include proxy statements or tender offer statements giving
shareholders a limited time period to vote their shares at a
shareholder meeting or tender their shares into an offer, respectively.
These also would include proxy statements delivered by dissidents in
contested director elections and tender offer statements delivered by
third-party bidders. As another example, this would also include trade
confirmations, as broker-dealers often require as a term of their
customer account agreements that investors review and promptly report
any discrepancies. The information required in the brief description
would help covered recipients make an informed decision about how they
wish to receive required information under the Federal securities laws,
including whether to request paper delivery for some or all of the
covered information that otherwise would be delivered electronically
under the proposed rule. If applicable, the prominent statement would
also need to include a statement disclosing whether a covered
recipient's request for paper or to opt out of e-delivery could result
in restrictions on or termination of the covered recipient's
relationship with the covered entity.\237\ This requirement is designed
to inform covered recipients about any potential consequences that may
result from requesting a paper copy or opting out of e-delivery under
these circumstances.
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\233\ See proposed Reg E-Delivery Sec. 303.104(c)(1).
\234\ See proposed Reg E-Delivery Sec. 303.104(c)(1)(i).
\235\ See proposed Reg E-Delivery Sec. 303.104(c)(1)(i)(A). For
covered recipients receiving paper that receive some covered
information in paper and some electronically, the covered entity
would need only to list the covered information that the covered
recipient is currently receiving in paper that would be shifted to
e-delivery and not a full enumeration of all covered information
(including covered information that the recipient is currently
receiving electronically).
\236\ Id.
\237\ See supra section II.B.3 (discussing the rule's
applicability in circumstances where a covered recipient's request
for paper or to opt out of e-delivery could result in potential
restrictions on or termination of the covered recipient's
relationship with the covered entity).
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The initial notice would be required to provide a description of
the methods of e-delivery that may be used (e.g., an email providing a
link to the covered information that is being delivered), but would not
require covered entities to specify how each individual item of covered
information will be delivered.\238\ Describing the proposed rule's two
methods of delivery would inform covered recipients of how covered
information will generally be delivered following the transition to e-
delivery and where covered recipients can access that covered
information. This information would also allow covered recipients to
make a choice regarding whether e-delivery or opting-out to paper
delivery under such circumstances would best fit their needs. Moreover,
this approach would allow covered entities to proceed with the
transition process notices without the burden of having to identify the
delivery method for each item of covered information in advance and
would provide flexibility for covered entities to change delivery
methods to the extent permitted by the proposed rule.\239\
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\238\ See proposed Reg E-Delivery Sec. 303.104(c)(1)(i)(B).
\239\ See proposed Reg E-Delivery Sec. 303.102(c)(1) (requiring
that covered information including PFI be delivered through delivery
of a statement of availability and that the website where the
covered information is available must require the use of a process
reasonably designed to safeguard the PFI).
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The initial notice would also be required to include the electronic
address that the covered entity would use to deliver covered
information electronically to the covered recipient.\240\ The proposed
requirement to personalize the notices to identify the electronic
address the covered entity would use is designed to help ensure that
covered recipients are on notice of where the covered information would
be provided electronically if they do not opt out of e-delivery.\241\
This would allow covered recipients to review the electronic address on
file with the covered entity and potentially amend it if it is wrong or
outdated. If the covered recipient has never provided an electronic
address and receives covered information in paper format, the covered
entity would not include the covered recipient in the transition or
send an initial notice.\242\ We anticipate that for some long-dated
accounts--for example, those established prior to the widespread use of
electronic addresses--an electronic address may never have been
collected or provided. These covered recipients would be outside of the
scope of the transition--as under the rule they could not receive e-
delivery if an electronic address is not available--and would continue
to receive covered information in paper free of charge.\243\
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\240\ See proposed Reg E-Delivery Sec. 303.104(c)(1)(ii).
\241\ Electronic addresses available to receive covered
information and the preferences of covered recipients can vary. We
understand that common types of electronic addresses include email
addresses, phone numbers, online accounts, web-based portals, mobile
applications, or other means developed to deliver communications
electronically. See SIFMA Letter, supra footnote 44. The Department
of Labor also required plan administrators to identify the specific
electronic address that will be used for e-delivery. See Default E-
Delivery DOL Adopting Release, supra footnote 46, at 31901 (stating
that ``the additional burden, if any, of including this personalized
information will be more than offset by the benefit to both the plan
administrator and covered individuals of stating, up front, the
electronic address that will be used'').
\242\ See supra footnote 218 (the proposed definition of
``covered recipient receiving paper'' (who are the covered
recipients included in the scope of proposed Reg E-Delivery Sec.
303.104) specifies that the covered entity has such covered
recipient's electronic address).
\243\ For example, there are circumstances where certain
securities or products were sold prior to the widespread adoption of
email. Such circumstances would typically involve paper applications
where only physical addresses and telephone numbers were collected.
Covered entities that service ``set it and forget it'' products or
assets purchased decades ago by covered recipients are more likely
to have covered recipients that have not provided an electronic
address.
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The proposed notice would also be required to include the date when
the default to e-delivery would begin, which must be no earlier than
180 days after the date of the provision of the initial notice (unless,
as discussed below, the covered recipient updates or confirms an
electronic address after receiving the initial notice).\244\ This
notice would give covered recipients a sense of the transition's timing
and allow them to take the necessary steps to prepare. In addition,
requiring a minimum of 180 days, but permitting covered entities to
take additional time before the transition to e-delivery, would provide
flexibility to covered entities to manage the transition and implement
any necessary changes within time frames that meet their business
needs.
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\244\ See proposed Reg E-Delivery Sec. 303.104(c)(1)(iii); see
also infra footnote 255 and accompanying and following text. The
transition period would begin on the date the initial notice is
provided pursuant to proposed Reg E-Delivery Sec. 303.104(b). See
supra footnote 229.
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The proposed notice would also be required to include a prominent
statement describing the ability of the covered recipient to opt out of
e-delivery at any time and receive all or a subset of covered
information in paper format, free of charge, following an opt-out
election.\245\ As discussed above, the proposed rule is designed to
honor covered recipient preferences for paper delivery, and requiring
the notice to include information about how to opt out of e-delivery
would facilitate this goal.\246\ Moreover, the requirement to permit
opting out of e-delivery for a subset of covered information would
allow covered recipients to select which
[[Page 45920]]
types of information they would receive in paper format.\247\ For
example, customers of a broker-dealer may wish to receive trade
confirmations in paper to keep in their physical records while
receiving lengthier issuer prospectuses electronically.
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\245\ See proposed Reg E-Delivery Sec. 303.104(c)(1)(iv)(A);
see also supra section II.B.7 (discussing ``free of charge''
requirements).
\246\ See supra footnote 144 and accompanying and following text
for discussion of circumstances, under the proposed rule, where the
covered entity could potentially restrict or terminate a customer
account or relationship after a covered recipient requested paper or
opted out of e-delivery.
\247\ See supra footnote 188 and accompanying paragraph.
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The required prominent statement would also have to describe the
ability of covered recipients to update or confirm an electronic
address free of charge including, if applicable, an explanation of how
to change the type of electronic address that will be used for
delivery, such as email or mobile phone number.\248\ Requiring the
notice to include a description of the process for a covered recipient
to update or confirm their electronic address would help ensure that
the covered entity has a current electronic address on file for the
covered recipient. In addition, a covered entity may choose to deliver
covered information through several different types of electronic
addresses (e.g., email, mobile application, etc.) and if it does so, we
propose that covered entities must describe the ability to select or
change the type of electronic media through which to receive e-
delivery. Providing a process for covered recipients to change the type
of electronic address that will be used for delivery would enhance
their ability to receive and digest covered information in their
preferred manner.
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\248\ See proposed Reg E-Delivery Sec. 303.104(c)(1)(iv)(B).
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The prominent statement would also describe the process for a
covered recipient to opt out of e-delivery and/or update or confirm the
covered recipient's electronic address, which at a minimum must include
a toll-free telephone number and a website provided by the covered
entity.\249\ This description is necessary so covered recipients can
understand the process for initiating these choices and can easily
implement their preferences using the covered entities' systems.
Furthermore, requiring the covered entity to provide a toll-free number
and a website would help ensure that covered recipients are able to
easily contact the covered entity to make these choices. It is also our
understanding that most covered entities and their service providers
already provide toll-free numbers and websites for various investor,
customer, and client inquiries.\250\
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\249\ See proposed Reg E-Delivery Sec. 303.104(c)(1)(iv)(C).
\250\ See SIFMA Letter, supra footnote 44. We anticipate in many
circumstances that the toll-free number could be an existing number
that the covered entity already provides to covered recipients for
customer service or similar inquiries.
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The prominent statement would also have to state whether the
covered entity intends to begin e-delivery of covered information
earlier than 180 days after the date of the provision of the initial
notice if the covered recipient updates or confirms an electronic
address following the delivery of initial notice.\251\ This would
facilitate the proposed approach, described in more detail below, of
permitting a covered entity to begin using e-delivery for any covered
recipient receiving paper who updates or confirms an electronic address
at any time after receiving the initial notice.\252\ Requiring covered
entities to state whether they intend to promptly begin using e-
delivery under these circumstances would also help covered recipients
understand the implications of updating or confirming their electronic
address on the timing of the transition to receiving covered
information electronically.
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\251\ See proposed Reg E-Delivery Sec. 303.104(c)(1)(iv)(D).
\252\ Id.; see also infra paragraph accompanying footnote 255.
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Lastly, the proposed rule requires that the initial notice be
provided separately from other types of communications and contain only
the information required by the rule, except that it also may include
pictures, logos, or similar design elements so long as they are not
misleading and do not make the notice unclear.\253\ This separate
delivery requirement is designed to help avoid the risk of the notice
being overlooked and increase the likelihood that covered recipients
see and review the notice. Additionally, the proposed requirement would
help ensure that the initial notice includes clear and essential
information related to e-delivery that is not obscured by other
content.
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\253\ See proposed Reg E-Delivery Sec. 303.104(c)(2).
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After the covered entity provides the initial notice, the proposed
rule would require the covered entity to provide a clear and
conspicuous follow-up notice in paper format to each covered recipient
receiving paper, at their last known physical address of record.\254\
The follow-up notice must be provided 30 days prior to the date for
transitioning to default e-delivery identified in the initial notice
and would need to comply with the content and other requirements of the
initial notice. The proposed requirement for a second, follow-up notice
is designed to increase the likelihood that covered recipients
receiving paper would see and review the notice and (if they wish) make
an election to opt out of e-delivery or update their current electronic
address. A second notice would also remind covered recipients of the
upcoming changes if they forgot or failed to make an election after the
initial notice. The required timing of 30 days prior to the date the
covered entity transitions to default e-delivery would provide covered
recipients with enough time to opt out of e-delivery if they choose and
would also limit how soon after the initial notice the follow up notice
could be sent to help ensure that the follow up notice functions as a
separate reminder to covered recipients regarding the upcoming
transition to default e-delivery. Similar to the initial notice, the
follow-up notice would need to be ``clear and conspicuous'' and
generally include all content that is required in the initial notice to
help ensure covered recipients receive the same important information
and explanation of their delivery options in a manner that would assist
them in navigating the upcoming transition to e-delivery so their
preferences are met.
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\254\ See proposed Reg E-Delivery Sec. 303.104(d).
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The proposed rule would not require the covered entity to provide a
follow-up notice if a covered recipient receiving paper updates or
confirms an electronic address in response to receiving the initial
notice, and the covered recipient has not opted out of e-delivery.\255\
A covered entity may begin using e-delivery for such covered recipients
receiving paper at any time after the covered recipient updates or
confirms an electronic address in response to the initial or follow-up
notice. Covered recipients receiving paper who have updated or
confirmed an electronic address after receiving one of these notices
have indicated that they are ready to receive covered information
electronically at the electronic address they have updated or confirmed
without the need for an additional notice or for additional time to
prepare for the transition. For these reasons, it is not necessary to
require covered entities to send a follow-up notice since the covered
recipient has already indicated that she is on notice of the transition
to e-delivery and has not opted out. Furthermore, this exception would
avoid any added costs and operational burdens associated with the
follow-up notice for covered recipients who have demonstrated their
willingness to receive information electronically.
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\255\ See proposed Reg E-Delivery Sec. 303.104(e).
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Similarly, the proposed rule would provide that a covered entity
need not provide the follow-up notice if a covered recipient, at any
time after receiving the initial notice, opts out of electronic
delivery and elects to receive
[[Page 45921]]
all or a subset of covered information in paper format.\256\ Covered
recipients who opt out of e-delivery after receiving the initial notice
have indicated their preference for paper format and therefore do not
require the follow-up notice. It would be misleading to send these
covered recipients the follow-up notice for an upcoming transition to
electronic delivery that they will not be experiencing.
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\256\ See proposed Reg E-Delivery Sec. 303.104(f).
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We request comment on the proposed requirements for the initial and
follow-up notices of the default to e-delivery:
112. In lieu of the proposed initial and follow-up notices, should
we take a different approach to informing covered recipients of a
default to e-delivery? Should we require additional notices or remove
any of the proposed notices? Should covered recipients receiving paper
receive only one paper notice before a covered entity can default the
covered recipient into e-delivery, rather than the initial notice and
follow-up notice, as proposed? Should we adjust the timing of the
notices? Should we limit how soon the follow-up notice could be
provided after the initial notice by requiring the follow-up notice to
be provided 30 days prior to the date the covered entity transitions to
default e-delivery, as proposed? Do commenters have other suggestions
on when the follow-up notice should be required to be provided (for
example, 60 days prior to the date the covered recipient transitions to
default e-delivery or some other number of days)?
113. In addition to the proposed initial and follow-up notices,
should covered recipients receiving paper be provided with one paper
notice at any time after they are defaulted into e-delivery (e.g., 180
days afterwards, one year afterwards, or in each of the two years
afterwards) reminding them of the ability to opt out and receive
covered information in paper format, and to update their contact
information? Would the additional costs of issuing a subsequent notice
be warranted if it serves to inform covered recipients of the
transition, especially those who may have missed the initial and
follow-up notices and are unaware that they were defaulted to
electronic delivery?
114. Does the rule, as proposed, provide covered entities with
enough flexibility to determine, based on their own circumstances, how
to notify covered recipients receiving paper of the upcoming change to
the delivery method? If not, what else might be necessary?
115. Should we prescribe specific language to be included in the
prominent statements that are required in the notices? For example,
should we provide a template notice with prescribed headings concerning
the transition to e-delivery, the option to opt out of e-delivery and
receive paper versions of covered information, and the process for
updating an electronic address? Should we not prescribe language and
make the notice's content requirements more principles-based? Should we
require the proposed brief statement to identify the electronic address
of the covered recipient that the covered entity has on file (if
available) that it intends to use to satisfy its delivery obligations
to the covered recipient? Would it be operationally difficult or
burdensome to personalize the notices in this manner? Are there
potential privacy or cybersecurity concerns in providing personal
electronic addresses in mailings? If so, should we require that the
electronic address be partially anonymized (e.g., Jo*******[email protected])
to address these concerns? Should we instead only require the statement
to specify the electronic method for delivering to the covered
recipient, such as the email address on file, a mobile phone number on
file or an inbox available in a covered entity's website?
116. Should the notices contain any additional required contents,
and if so, what should that content be?
117. Should the notices require covered entities to state the e-
delivery methods that may be used, as proposed, or would an alternative
approach be more appropriate? \257\ For example, should covered
entities be required to specify how each individual item of covered
information will be delivered in all or any of the notices? If so,
would this have the effect of ``locking in'' covered entities to a
particular e-delivery method or preventing them from changing to the
other method (if permissible under the rule)? If all or any of the
notices require the delivery method for each item of covered
information to be specified, should covered entities be required to
notify covered recipients before changing the method? If so, how? Or
should the notice itself indicate the specified method is subject to
change?
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\257\ See also supra section II.B.2 (posing a similar question
in the context of the disclosure of e-delivery).
---------------------------------------------------------------------------
118. Are covered entities able to operationalize a means of
updating or confirming a covered recipient's electronic address in the
paper notice (for example, through a QR code, website, mobile
application, mail, or toll-free telephone number)?
119. Should we require the separate delivery of the initial notice
from other types of covered recipient communications, as proposed?
120. Should the transition process include, as proposed, an
exception from the follow-up notice, if a covered recipient receiving
paper updates or confirms an electronic address in response to
receiving the initial notice? Similarly, if a covered recipient opts
out of e-delivery at any time after receiving the initial notice,
should the rule, as proposed, state that a covered entity is not
required to provide the follow-up notice? Alternatively, should we
prohibit providing additional notices once a covered recipient opts out
of e-delivery? Is there potential for harm or abuse of the transition
provisions if covered entities send follow-up notices to covered
recipients who have already opted out of e-delivery?
121. We are not proposing an express recordkeeping provision in
proposed Reg E-Delivery relating to the provision of the initial and
follow-up notices. Should we instead include a direct, dedicated
recordkeeping provision in proposed Reg E-Delivery that would require
covered entities to maintain records regarding these notices? \258\ Or
should such a provision be included in the books and records rules of
the respective categories of covered entities (as applicable)?
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\258\ See discussion supra footnote 124.
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E. E-SIGN Act
For the reasons discussed below, to the extent that any covered
information delivered under proposed Reg E-Delivery otherwise is
subject to the consumer consent requirements of the E-SIGN Act, we are
proposing an exemption from these consent requirements.\259\
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\259\ See proposed Reg E-Delivery Sec. 303.100 (providing that,
notwithstanding 15 U.S.C. 7001(c), a covered entity may rely on
Regulation E-Delivery to use electronic delivery to deliver covered
information to covered recipients, provided that the requirements in
Sec. Sec. 303.102-104 are satisfied, as applicable).
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Section 101(c) of the E-SIGN Act sets forth special provisions that
apply when a statute, regulation, or other rule of law requires that
information relating to a transaction be provided or made available to
a consumer in writing. Specifically, section 101(c) of the E-SIGN Act
provides that such written information may be provided to a consumer
electronically as long as the consumer has affirmatively consented to
e-delivery and addresses how a consumer may consent to receiving such
[[Page 45922]]
information electronically.\260\ We understand that covered entities
have interpreted section 101(c) of the E-SIGN Act as requiring that a
covered entity seek to obtain or confirm the covered recipient's
affirmative consent to e-delivery via email or other electronic means
and that the covered recipient respond in kind.\261\ While most
information defined as ``covered information'' for purposes of proposed
Reg E-Delivery is not required to be delivered ``in writing,'' some is.
For example, prospectuses as defined in section 2(a)(10) of the
Securities Act,\262\ confirmations of transactions under Exchange Act
rule 10b-10, certain notifications under Regulation S-P, certain
distribution notices under section 19(a) of the Investment Company Act,
and certain information under Schedule 14C are all required or defined
to be ``in writing,'' such that the affirmative consent requirement in
section 101(c) of the E-SIGN Act could apply to the extent such
information is provided to consumers.\263\
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\260\ Section 106(1) of the E-SIGN Act defines ``consumer'' as
``an individual who obtains, through a transaction, products or
services which are primarily for personal, family, or household
purposes, and also means the legal representative of such an
individual.''
\261\ See, e.g., SIFMA Letter, supra footnote 44, at n.17
(``Applying E-Sign's requirements results in a cumbersome, multiple-
step process for collecting consents, and, in the experience of
financial services firms, many customers become confused, believing
that they have already signed up for electronic delivery. Not
infrequently, customers overlook or ignore the confirming email from
the firm or call their representatives to clear up their confusion.
In a 2022 survey commissioned by SIFMA, over a quarter of customers
surveyed who do not receive electronic delivery currently say they
have signed up but still receive paper documents.'').
\262\ Section 2(a)(10) of the Securities Act defines the term
``prospectus'' to include certain communications that are ``written
or by radio or television.'' See 15 U.S.C. 77b(a)(10) (defining the
term ``prospectus,'' in relevant part, to mean ``any prospectus,
notice, circular, advertisement, letter, or communication, written
or by radio or television, which offers any security for sale or
confirms the sale of any security'').
\263\ Statutes and Commission rules that may involve a
requirement for a covered entity to deliver information to consumers
in writing include: (for broker-dealers) 17 CFR 240.15l-1(a)(2)(i),
17 CFR 248.1-248.30, 17 CFR 240.10b-10, 17 CFR 240.10b-16, 17 CFR
240.8c-1 and 17 CFR 240.15c2-1, 17 CFR 240.15c1-5 and 17 CFR
240.15c1-6, 17 CFR 240.15c2-5, 17 CFR 240.15c3-3(b)(3)(iv), 17 CFR
240.15c3-3(b)(4)(i)(B) through (C) and (b)(4)(iv), 17 CFR 240.15c3-
3(j), 17 CFR 240.15c3-3(o)(2) and (o)(3)(ii), 17 CFR 240.15g-2
through 17 CFR 240.15g-6, 17 CFR 240.15g-9(a)(2)(ii)(A), 17 CFR
240.15g-9(b)(1), (b)(3) and (b)(4), 17 CFR 242.606(b)(2), 17 CFR
242.607(a), 17 CFR 240.15c3-1d, 17 CFR 240.15Ba1-1, 15 U.S.C.
78k(d)(2), and 15 U.S.C. 78o(b)(13); (for funding portals) 17 CFR
248.1-248.30, 17 CFR 240.17Ad-15(g), 17 CFR 240.17Ad-17(c), 17 CFR
248.30; (for security-based swap dealers and major security-based
swap participants) 17 CFR 240.15Fh-3 and 17 CFR 240.15Fh-5, 17 CFR
240.18a-4, 17 CFR 240.18a-7 and 17 CFR 240.18a-10; (for security-
based swap data repositories) 17 CFR 240.13n-10; (for security-based
swap execution facilities) 17 CFR 242.812; (for registered
investment advisers) 15 U.S.C. 80b-6(3) and rules 17 CFR 275.206(3)-
2, 17 CFR 275.206(4)-2(a)(2) and (a)(5), 17 CFR 248.1-248.30; (for
investment companies and entities excluded from the definition of
``investment company'') 17 CFR 270.3a-4(a)(2)(iii), 15 U.S.C. 80a-
7(e), 15 U.S.C. 80a-16(c), 15 U.S.C. 80a-19(a)(2), 17 CFR 270.19a-1,
17 CFR 270.23c-1(a)(5), 15 U.S.C. 80a-27(e), 17 CFR 270.30e-1(f), 17
CFR 270.30e-3, 15 U.S.C. 80a-29(i), 15 U.S.C. 80a-63, 17 CFR 248.1-
248.30; (for issuers) 17 CFR 230.428 and Form S-8, 17 CFR 230.502(b)
and (d), 17 CFR 230.504(b)(3), 17 CFR 230.147(f)(3), 17 CFR
230.147A(f)(3); (for issuers and/or other soliciting parties) 17 CFR
240.14c-2.
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Under section 104(d)(1) of the E-SIGN Act, a Federal regulatory
agency may exempt, without condition, a specified category or type of
record from the consumer consent requirements in section 101(c) if the
exemption is necessary to eliminate a substantial burden on electronic
commerce and will not increase the material risk of harm to consumers.
Pursuant to the authority in section 104(d)(1) of the E-SIGN Act, the
Commission is proposing to exempt covered information from the consent
requirements of the E-SIGN Act, to the extent such requirements
otherwise would apply to the delivery of covered information under Reg
E-Delivery (because the covered information is required or defined to
be ``in writing,'' as described above), in order to eliminate a
substantial burden on electronic commerce.\264\ Specifically, we
understand that the consent requirements of E-SIGN may significantly
burden covered recipients' ability to receive covered information in
the format that meets their preference, for instance because they may
believe they have signed up for e-delivery when they have actually not
done so (where a multi-step consent process has not been met).\265\
Additionally, these requirements may burden covered entities and
covered recipients that prefer to provide affirmative consent in a
manner different from that specified in the E-SIGN Act, including
telephonic or other oral consent, consent on paper, or consent by other
electronic means. As described in detail in the sections above, the
provisions of Reg E-Delivery collectively would eliminate this burden
by permitting covered recipients to receive covered information in the
format that meets their preference and in a manner more consistent with
existing business relationships and practices.
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\264\ Provisions of proposed Reg E-Delivery that could be viewed
as involving consumer consent (although they do not require
information relating to a transaction be provided or made available
to a consumer in writing) include proposed Reg E-Delivery Sec.
303.102(b), Sec. 303.102(f), Sec. 303.102(g), Sec.
303.104(c)(1)(iv), Sec. 303.104(d), and Sec. 303.104(e).
\265\ See SIFMA Letter, supra footnote 44, at n.17; see also
discussion at supra section II.A.
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Furthermore, the proposal would not increase the material risk of
harm to consumers. As described above, we understand that most covered
recipients prefer receiving covered information electronically,
reflecting the evolution in technology and the ways that investors and
other recipients of covered information have come to use technology in
the decades since the Commission published the E-Delivery Guidance
Releases (and since the enactment of E-SIGN in 2000).\266\ Reg E-
Delivery as proposed includes safeguards to help ensure that the
preferences of covered recipients who prefer to continue receiving
covered information in paper format are honored, and that the process
for expressing these preferences is transparent and not overly
burdensome.\267\ The transition process for covered recipients
currently receiving paper would address these goals, as well as the
conditions under which the Commission would consider delivery
requirements under the Federal securities laws to have been satisfied
by electronic delivery (including, among others, the requirements for
disclosure of e-delivery, the content of e-delivery, the provision of
paper upon request, and the requirements for website availability, all
discussed above).
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\266\ See supra sections I.B and II.A.
\267\ See supra sections II.B.2, II.B.3, II.B.4, II.B.7, and
II.D.
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We request comment on the Commission's determination to propose a
regulatory exemption from the consent requirements of the E-SIGN Act:
122. Is the proposed regulatory exemption appropriate? Do
commenters agree that Reg E-Delivery as proposed is necessary to
eliminate a substantial burden on electronic commerce and would not
increase the material risk of harm to consumers? Are there any respects
in which covered entities would prefer to use other affirmative consent
processes in connection with any covered information that should be
included in the proposed exemption (including telephonic or other oral
consent, or consent on paper)?
123. In addition to the statutory and regulatory provisions
described above that may involve a requirement for covered entities to
deliver information to consumers in writing, are there any other such
requirements under the Federal securities laws that the Commission
should specifically include in any adoption of the proposed exemption?
[[Page 45923]]
F. Amendments to Current Commission Rules To Facilitate Proposed E-
Delivery Approach
1. Rescission of Rule Addressing Internet Availability of Fund
Shareholder Reports
We are proposing to rescind rule 30e-3. Subject to certain
conditions, rule 30e-3 under the Investment Company Act generally
permits investment companies to satisfy shareholder report delivery
requirements by making those reports available online and then
providing a notice of that availability through a paper notice, such as
a postcard, rather than directly mailing the report (or emailing an
electronic version of the report or a link to the report) to
shareholders.\268\ In 2022, the Commission amended the scope of rule
30e-3 to exclude investment companies registered under Form N-1A. Rule
30e-3 therefore currently only applies to shareholder reports delivered
by registered closed-end funds and insurance company separate accounts
that are management investment companies offering variable annuity and
variable life insurance contracts.
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\268\ See Rule 30e-3 Adopting Release, supra footnote 213.
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Rule 30e-3 was designed as a rule for investors who receive
disclosure through paper delivery as opposed to e-delivery. By
contrast, under the proposed rule, covered entities could use e-
delivery to deliver covered information to covered recipients who have
provided an electronic address--only those covered recipients who
either have declined to provide an electronic address, affirmatively
opted out of e-delivery, or who have never responded to a covered
entity's request to provide an electronic address would continue to
receive paper. To the extent that investors who currently receive
shareholder reports today under rule 30e-3 have provided an electronic
address, funds relying on Reg E-Delivery would be permitted to
transition these investors to e-delivery unless they affirmatively opt
out.\269\
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\269\ See infra footnote 615 and accompanying text (discussing
costs associated with proposed rescission of rule 30e-3).
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Rule 30e-3 would no longer be necessary if the Commission adopts
Reg E-Delivery. Rule 30e-3 already has a limited scope, in that it
applies only to delivery obligations of registered closed-end funds and
certain insurance company separate accounts, and even as to those
entities applies only to their obligations to deliver shareholder
reports. The rule's scope practically would be further limited by Reg
E-Delivery because, if that rule is adopted, we anticipate that covered
entities eligible to use rule 30e-3 would instead rely on Reg E-
Delivery where a covered recipient has provided an electronic address.
Further, as discussed above, under Reg E-Delivery, e-delivery would not
include the use of a paper postcard with a URL (or QR code or other
pathway) that would require a covered recipient to take an extra step
to access covered information electronically.\270\
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\270\ See supra section II.B.1.
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We request comment on the proposed recission of rule 30e-3:
124. Do commenters agree with the proposal to rescind rule 30e-3?
Do commenters agree that rule 30e-3 would no longer be necessary if the
Commission were to adopt Reg E-Delivery because of the current limited
scope of rule 30e-3, and because covered entities eligible to use rule
30e-3 would be more likely to instead rely on Reg E-Delivery where a
covered recipient has provided an electronic address? Why or why not?
125. Are there any difficulties that funds that currently rely on
rule 30e-3 (which includes certain funds registered on Forms N-2 and N-
3) would encounter with the proposed recission of rule 30e-3? What are
those difficulties, and is the one-year transition period that the
Commission is proposing for the new e-delivery framework, discussed
below in section II.I, sufficient to help mitigate those difficulties?
Would smaller funds require a longer compliance period to help mitigate
those difficulties?
2. Amendments to Requirements for the Dissemination of Proxy Materials
and Tender Offer Materials
(a) Background
Providing issuers and other soliciting persons with the flexibility
to furnish proxy materials to shareholders in an effective and cost-
efficient manner by taking advantage of technological developments in
electronic communications and the growth of the internet has been the
focus of Commission guidance \271\ and numerous rules.\272\ Recognizing
the expanded use of the internet to disseminate information in a
reliable and cost-effective way and the difficulties faced by issuers
in relying on affirmative consent to electronic delivery of proxy
materials, in January 2007, the Commission adopted a ``notice and
access'' model permitting issuers and other soliciting persons to
satisfy their obligations to deliver proxy materials by posting their
proxy materials on a website and providing shareholders with a notice
informing them that the materials are available at a specific website
address and explaining how to access those materials.\273\ To provide
shareholders with the ability to choose whether to access proxy
materials by paper, email, or the internet, the Commission subsequently
adopted amendments to the proxy rules in July 2007 requiring issuers
and other soliciting persons to post their proxy materials on a
website, regardless of whether the soliciting person elects to furnish
its proxy materials to shareholders by delivering only a notice of the
internet availability of the proxy materials (referred to as the
notice-only delivery option) or by delivering a full set of the proxy
materials (referred to as the full set delivery option).\274\ The
notice and access model for furnishing proxy materials to shareholders,
together with the universal requirement for internet availability of
proxy materials, was intended by the Commission to provide a lower cost
alternative for furnishing proxy materials to shareholders, improve the
efficiency of the proxy process, and facilitate shareholder
communication by allowing shareholders to choose how to access proxy
materials.\275\
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\271\ See, e.g., 1995 Guidance, supra footnote 3 (describing and
providing examples of appropriate electronic delivery practices for,
among other information, proxy solicitation materials); 1996
Guidance, supra footnote 3 (providing an example of electronic
delivery of proxy materials and processing of voting instructions);
2000 Guidance, supra footnote 3 (providing an example of appropriate
electronic delivery of proxy solicitation materials).
\272\ See, e.g., E-Proxy Adopting Release, supra footnote 13
(establishing an optional notice and access delivery method);
Shareholder Choice Regarding Proxy Materials, Release No. 34-56135
(July 26, 2007) [72 FR 42222 (Aug. 1, 2007)] (the ``Shareholder
Choice Adopting Release'') (requiring that proxy materials be posted
online and shareholders be notified of the electronic availability
of such materials); Internet Availability of Proxy Materials;
Regulation of Takeovers and Security Holder Communications; Cross-
Border Tender and Exchange Offers, Business Combinations and Rights
Offerings; Certain Other Related Rule Corrections, Release No. 34-
55146A (Mar. 17, 2008) [73 FR 17810 (Apr. 1, 2008)] (the ``Technical
Amendments Release'') (revising the rule text to explicitly exclude
all business combination transactions from the notice and access
method); and Amendments to Rules Requiring Internet Availability of
Proxy Materials, Release No. 33-9108 (Feb. 22, 2010) [75 FR 9074
(Feb. 26, 2010)] (the ``Amendments Adopting Release'') (allowing
additional flexibility in the formatting and language to be used in
the notice of internet availability).
\273\ See E-Proxy Adopting Release, supra footnote 13.
\274\ See Shareholder Choice Adopting Release, supra footnote
272.
\275\ See id. at sections II, VI.A, and VI.C.1.
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As discussed above, under the current proxy rules, an issuer or
other soliciting person can satisfy its obligation to
[[Page 45924]]
furnish proxy materials to shareholders by posting its proxy materials
on a website and sending a notice of internet availability of proxy
materials (the ``notice of internet availability'') or providing a full
set of proxy materials (the ``full set'') to record holders.\276\ A
soliciting person does not have to choose one option or the other as
the exclusive means for providing proxy materials to shareholders.
Rather, a soliciting person may use the notice-only delivery option to
provide proxy materials to some shareholders and the full set delivery
option to provide proxy materials to other shareholders.\277\
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\276\ See 17 CFR 240.14a-3(a); 17 CFR 240.14a-16 (``rule 14a-
16''). The notice-only delivery option may not be used by an issuer
or other soliciting person in connection with a proxy solicitation
related to a business combination transaction. See 17 CFR 240.14a-
16(m). For purposes of this section only, the term ``proxy
materials'' includes: (1) with respect to issuers, proxy statements
on Schedule 14A, proxy cards, information statements on Schedule
14C, annual reports to security holders required by Exchange Act
rules 14a-3 and 14c-3; or (2) with respect to other soliciting
persons, proxy statements on Schedule 14A and proxy cards. Because
the focus of this section is information that is required to be
delivered to shareholders under the proxy rules, the term ``proxy
materials'' does not include soliciting material required to be
filed under Exchange Act rule 14a-12 or additional soliciting
material required to be filed under Exchange Act rule 14a-6(b). For
the avoidance of doubt, a full set of proxy materials for a
soliciting person other than the issuer would include a proxy
statement on Schedule 14A and proxy card.
\277\ See Shareholder Choice Adopting Release, supra footnote
272, at section II.A.
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If the issuer has obtained affirmative consent to electronic
delivery of proxy materials from a record holder, the issuer generally
would deliver the notice of internet availability or the full set to
the record holder electronically. As a practical matter, other
soliciting persons cannot rely on affirmative consents to electronic
delivery that the issuer has obtained from shareholders to deliver the
notice or full set to record holders electronically.\278\ However, if
the issuer elects to send the soliciting person's proxy materials, the
issuer may share the benefit of any affirmative consent to electronic
delivery of proxy materials that it has obtained from shareholders by
delivering the soliciting person's proxy materials electronically to
consenting shareholders. The current proxy rules permit issuers and
other soliciting persons to ``household'' the notice of internet
availability or full set, as applicable, by sending a single copy of
the notice of internet availability or a single copy of the full set to
more than one record holder at a shared address if the conditions for
householding are satisfied.\279\ The issuer or other soliciting person
must provide a paper or email copy of the proxy materials at no charge
to record holders requesting such copy.\280\
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\278\ See 17 CFR 240.14a-7 (``rule 14a-7''). Rule 14a-7 sets
forth the obligation of issuers either to provide a shareholder list
including names, addresses, and securities positions of its record
holders to a requesting shareholder or to send the shareholder's
proxy materials on the shareholder's behalf, except when the issuer
is soliciting proxies in connection with a going-private transaction
or a roll-up transaction. If the issuer is concerned about sharing
the shareholder list information with the requesting shareholder,
the issuer may choose to send the shareholder's proxy materials on
the shareholder's behalf.
\279\ See 17 CFR 240.14a-3(e), including the note to paragraph
(e)(1).
\280\ See 17 CFR 240.14a-16(j)(1) through (2).
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Brokers, banks, and similar intermediaries generally furnish proxy
materials to beneficial owners on behalf of issuers and other
soliciting persons.\281\ The Shareholder Communications Rules impose
obligations on issuers, other soliciting persons, and intermediaries to
ensure that beneficial owners receive proxy materials and are given the
opportunity to participate in the shareholder voting process.\282\
Generally, these rules require issuers and other soliciting persons to
send their proxy materials to intermediaries for forwarding to the
beneficial owners. Within five business days of receiving proxy
materials from the issuer or other soliciting person, the intermediary
must forward the materials to beneficial owners.\283\ Intermediaries
forward the proxy materials, other than the proxy card, to beneficial
owners along with a request for voting instructions that is similar to
the proxy card.\284\
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\281\ The discussion in this section of ``beneficial owners''
refers to beneficial owners whose names and addresses do not appear
directly in issuers' stock registers because they hold their
securities through a broker, bank, trustee, or similar intermediary.
\282\ 17 CFR 240.14a-13, 17 CFR 240.14b-1, 17 CFR 240.14b-2, and
17 CFR 240.14c-7 are referred to collectively as the ``Shareholder
Communications Rules.'' For additional discussion of the Shareholder
Communications Rules, see E-Proxy Adopting Release, supra footnote
13.
\283\ See 17 CFR 240.14b-1(b)(2); 17 CFR 240.14b-2(b)(3). This
requirement does not apply where the issuer has notified the
intermediary pursuant to rule 14a-13(c) or rule 14c-7(c) that the
issuer will send the annual report to security holders to non-
objecting beneficial owners. See 17 CFR 240.14b-1(c)(2)(ii); 17 CFR
240.14b-2(c)(2)(ii). ``Non-objecting beneficial owners'' are
beneficial owners who do not object to having their names and
addresses provided to issuers, at their request.
\284\ A bank may include an executed proxy in lieu of a request
for voting instructions when forwarding proxy materials to
beneficial owners. See 17 CFR 240.14b-2(b)(3).
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An intermediary may satisfy its obligation to forward proxy
materials to beneficial owners by sending a notice of internet
availability only if the issuer or other soliciting person requests it
to do so and, in such cases, the intermediary must do so.\285\ The
intermediary may choose whether to direct beneficial owners to the
issuer's or other soliciting person's website or to its own website to
access the proxy materials.\286\ If the intermediary has obtained
affirmative consent to electronic delivery of proxy materials from a
beneficial owner, the intermediary generally would deliver the full set
of proxy materials to the beneficial owner electronically.
Intermediaries are permitted, but not required, to ``household'' the
notice of internet availability or full set, as applicable, by sending
a single copy of the notice of internet availability or a single copy
of the full set to more than one beneficial owner at a shared address
if the conditions for householding are satisfied by the
intermediary.\287\ The intermediary is required to provide a requesting
beneficial owner with a copy of the proxy materials, at no charge to
the beneficial owner.\288\ If a beneficial owner requests a copy of the
proxy materials from the intermediary, the intermediary must in turn
request such a copy from the issuer or other soliciting person within
three business days after receiving the request from the beneficial
owner and must forward the materials to the beneficial owner within
three business days after receiving the copy from the issuer or other
soliciting person.\289\
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\285\ See 17 CFR 240.14b-1(d)(1); 17 CFR 240.14b-2(d)(1). The
intermediary must prepare its own notice of internet availability
and deliver it to beneficial owners after receiving the information
required to be included in such notice from the issuer or other
soliciting person and tailoring it for beneficial owners. 17 CFR
240.14b-1(e); 17 CFR 14b-2(e).
\286\ See 17 CFR 240.14b-1(d)(2); 17 CFR 240.14b-2(d)(2).
\287\ See 17 CFR 240.14b-1, note to paragraph (b)(2); 17 CFR
240.14b-2, note to paragraph (b)(3).
\288\ See 17 CFR 240.14a-16(d)(4) (requiring the notice of
internet availability of proxy materials to provide instructions for
a security holder to request a paper or e-email copy of the proxy
materials, at no charge) (emphasis added); 17 CFR 240.14b-1(e)(1)
(requiring the broker or dealer's notice of internet availability to
include all information, as it relates to beneficial owners,
required in a registrant's notice of internet availability under 17
CFR 240.14a-16(d), provided that the broker or dealer provides its
own, or its agent's, toll-free telephone number, email address, and
a website to service requests for copies from beneficial owners); 17
CFR 240.14b-1(d)(4)(i) through (ii); 17 CFR 240.14b-2(e)(1)
(requiring the bank's notice of internet availability to include all
information, as it relates to beneficial owners, required in a
registrant's notice of internet availability under 17 CFR 240.14a-
16(d), provided that the bank provides its own, or its agent's,
toll-free telephone number, email address, and website to service
requests for copies from beneficial owners); 17 CFR 240.14b-
2(d)(4)(i) through (ii).
\289\ See 17 CFR 240.14b-1(d)(4)(i) through (ii); 17 CFR
240.14b-2(d)(4)(i) through (ii).
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[[Page 45925]]
(b) Proposed Amendments to Exchange Act Regulations 14A and 14C
During the Commission's nearly two decades of experience with the
notice and access model for delivering proxy materials,\290\ there have
been significant advances in electronic communication technologies and
individuals' use of those technologies. In light of proposed Reg E-
Delivery,\291\ we are proposing to further update the delivery
framework for proxy materials consistent with Reg E-Delivery to
facilitate e-delivery, improve engagement with proxy materials,
accommodate evolving delivery preferences of shareholders, and provide
cost savings to issuers, intermediaries, and ultimately to shareholders
by making e-delivery of proxy materials more efficient.\292\
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\290\ See supra footnotes 271 and 272.
\291\ See supra section I.D.
\292\ See infra section III.D.
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If adopted, covered entities that comply with the conditions of Reg
E-Delivery would be assured that they have satisfied, through the use
of e-delivery, applicable requirements to deliver covered information
under the Federal securities laws. Reg E-Delivery would also permit the
use of e-delivery as the default method of delivery, subject to certain
conditions.\293\ Regulations 14A and 14C prescribe specific methods for
issuers and other soliciting persons to furnish proxy materials and
information statements to shareholders. Therefore, when electing to
deliver these materials to shareholders electronically, issuers, other
soliciting persons, and intermediaries cannot exclusively rely on Reg
E-Delivery to satisfy their delivery obligations. Instead, they must
look to Regulations 14A and 14C, as applicable, for the requirements
they must comply with when delivering proxy materials and information
statements, whether electronically or in paper format. To facilitate e-
delivery of proxy materials and information statements, we are
proposing to expressly incorporate the requirements associated with the
permitted e-delivery methods and the requirements for website
availability of information under Reg E-Delivery into the delivery
framework for proxy materials. As proposed, issuers, other soliciting
persons, and intermediaries would not be required to implement a
default e-delivery system or use e-delivery to satisfy their
obligations to deliver proxy materials under Regulation 14A or
information statements under Regulation 14C. However, if an issuer,
other soliciting person, or intermediary elects to use e-delivery to
furnish proxy materials, the amendments we are proposing to Regulations
14A and 14C would require the issuer, other soliciting person, or
intermediary to comply with the requirements associated with the
permitted e-delivery methods and the requirements for website
availability of information under Reg E-Delivery, in addition to the
requirements in proposed amended Regulations 14A and 14C. We believe
that expressly incorporating these requirements into the delivery
framework for proxy materials would facilitate e-delivery, while
preserving important features of the current requirements under
Regulations 14A and 14C for shareholders,\294\ and would promote
consistent shareholder experiences through the uniform application of
e-delivery requirements across all information required to be delivered
under the Federal securities laws (with limited exception).\295\
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\293\ See proposed Reg E-Delivery Sec. 303.102.
\294\ For example, the procedural and timing requirements for
coordinating with intermediaries to deliver proxy materials to
shareholders and additional content and timing requirements to
facilitate proxy voting.
\295\ Information required to be delivered under Regulation
Crowdfunding, rule 15c2-11, and the trade acknowledgement rule for
security-based swap transactions is excluded from the definition of
``covered information.'' See supra section II.B.1
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Specifically, we are proposing amendments to the following rules:
Rules 14a-1 and 14c-1 to include the definition of
``address,'' as proposed to be amended, to apply it more broadly in
Regulations 14A and 14C;
Rule 14a-3 to: (1) remove the provision related to the
business combination exclusion in rule 14a-16; (2) revise certain other
provisions to align with the requirements under Reg E-Delivery and the
requirements in proposed amended rule 14a-16; (3) remove the definition
of ``address,'' which we are proposing to include, as revised, in rules
14a-1 and 14c-1 instead; (4) clarify that certain references to
``address'' refer to a ``mailing address'' and not an electronic
address; and (5) add a provision to clarify that when householding a
statement of availability of proxy materials, the registrant must
include for each shareholder at the shared address any control/
identification numbers that the shareholder needs to access its form of
proxy and instructions on how to access the form of proxy;
Rule 14a-7 to: (1) clarify that the obligation to mail the
requesting security holder's soliciting material to security holders is
not limited to mailing a paper copy of such material; (2) revise
certain other provisions to align with the requirements under Reg E-
Delivery and the requirements in proposed amended rule 14a-16; (3)
remove the requirement to provide names of shareholders who have made a
permanent election to receive paper copies of proxy materials because
we are proposing to remove this election from current rule 14a-16; (4)
clarify that a security holder list must include all addresses; (5)
clarify that providing a security holder list is not an option if the
issuer cannot provide all of the security holder list information; and
(6) remove the note providing that reasonably prompt methods of
distribution may be used instead of mailing, which we believe would be
unnecessary if proposed amendments to rule 14a-7 are adopted as
proposed;
Rule 14a-13 to: (1) update the means of conducting a
broker search and requesting a list of non-objecting beneficial owners
to remove reliance on first class mail; and (2) clarify that a list of
non-objecting (or consenting) beneficial owners must include all
addresses;
Rule 14a-16 to expressly incorporate the permitted e-
delivery methods, the requirements associated with those e-delivery
methods, and the requirements for website availability of information
under Reg E-Delivery into the delivery framework for proxy materials;
Rule 14a-101 to: (1) revise Items 5 and 22 to clarify that
certain references to ``address'' refer to a ``mailing address'' and
not an electronic address; (2) revise Item 23 to align with the e-
delivery methods under Reg E-Delivery and proposed amended rule 14a-16;
and (3) add a requirement in Item 1 to disclose the website address
where the proxy materials are available in the proxy statement itself;
Rules 14b-1 and 14b-2 to: (1) revise certain provisions to
align with the requirements of Reg E-Delivery and the requirements in
proposed amended rule 14a-16; (2) clarify that a list of non-objecting
(or consenting) beneficial owners must include all addresses; (3)
revise the deadline for intermediaries to send a statement of
availability of proxy materials to beneficial owners; (4) include a
note providing that intermediaries would be deemed to have met the
requirements for website availability of information under Reg E-
Delivery if they do not establish a separate website for beneficial
owners to access the proxy materials; and (5) remove the record keeping
and copy delivery requirements associated with the current permanent
election for paper copies, which we are proposing to remove from rule
14a-16 as unnecessary
[[Page 45926]]
if proposed Reg E-Delivery and amendments to rule 14a-16 are adopted as
proposed;
Rules 14c-2, 14c-3, 14c-7 and 14c-101 to reflect the
statement of availability method of e-delivery under Reg E-Delivery and
proposed amended rule 14a-16;
Certain rules under Regulations 14A and 14C to remove or
revise provisions that we believe are outdated or would be unnecessary
if Reg E-Delivery is adopted; and
Certain rules under Regulations 14A and 14C to make
changes that conform to the other amendments we are proposing to
Regulations 14A and 14C.
We request comment on the approach we are proposing:
126. Should we amend current rule 14a-16 to expressly incorporate
the permitted e-delivery methods, requirements associated with those e-
delivery methods, and requirements for website availability of
information under proposed Reg E-Delivery into the delivery framework
for proxy materials, as proposed? Why or why not?
127. Is there an alternative approach that would promote consistent
shareholder experiences across all information required to be delivered
under the Federal securities laws? Is promoting a consistent
shareholder experience an appropriate objective as we consider ways to
facilitate electronic delivery of proxy materials? If not, what should
be the primary objectives?
(c) Proposed Amendments to Exchange Act Rule 14a-16
We are proposing to amend rule 14a-16 to expressly incorporate the
permitted e-delivery methods, the requirements associated with those e-
delivery methods, and the requirements for website availability of
information under Reg E-Delivery into the delivery framework for proxy
materials.\296\ The proposed amendments also would streamline rule 14a-
16 to revise or remove requirements that are outdated or would be
unnecessary under the proposed Reg E-Delivery framework.
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\296\ These Reg E-Delivery requirements would be expressly
incorporated into proposed rule 14a-16, as well as proposed rules
14b-1 and 14b-2, through new defined terms that we propose to
include in rule 14a-1, including ``direct electronic delivery,''
``electronic delivery requirements,'' ``statement of availability,''
and ``website availability requirements.''
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As described above, rule 14a-16 currently requires an issuer or
other soliciting person to satisfy its obligation to furnish proxy
materials to shareholders by posting its proxy materials on a website
and sending a notice of internet availability or a full set of proxy
materials to record holders. Currently, whether the soliciting person
delivers a notice of internet availability or a full set electronically
generally depends on whether the soliciting person has obtained
affirmative consent to electronic delivery of proxy materials from the
record holder. We are proposing to amend rule 14a-16 to establish that
the e-delivery methods of Reg E-Delivery would constitute the only
permissible methods of delivering proxy materials electronically and to
require soliciting persons to comply with the applicable requirements
of Reg E-Delivery, in addition to the applicable requirements in
proposed amended rule 14a-16, when delivering proxy materials
electronically.\297\
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\297\ See proposed rule 14a-16(a)(1)(i) and (ii) (providing that
a registrant must use the following delivery methods when furnishing
proxy materials to a security holder: a statement of availability,
provided that the applicable requirements of Reg E-Delivery are
satisfied; direct e-delivery, provided that the applicable
requirements of Reg E-Delivery are satisfied; or paper format);
proposed rule 14a-16(f) (imposing the same requirements on
soliciting persons other than the registrant).
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Delivering a full set of proxy materials in paper would be the only
alternative to e-delivery under proposed amended rule 14a-16.\298\ That
is, we are proposing to amend current rule 14a-16 to remove an
alternative that is presently available--the option to send a notice of
internet availability in paper. Currently, the notice of internet
availability is delivered only to shareholders who have not consented
to receive proxy materials through electronic means, unless the issuer
elects to deliver a full set of proxy materials in paper format. Since
the Commission adopted the notice and access model, which implemented
the notice-only delivery option as an alternative to the full set
delivery option, the number of shareholders who receive physical
mailings of proxy materials has decreased significantly.\299\ Further,
we anticipate that additional shareholders would be transitioned to e-
delivery under proposed Reg E-Delivery, if adopted as proposed, and
that shareholders who have not consented to e-delivery of proxy
materials and have declined to provide an electronic address under Reg
E-Delivery may be more likely to continue to prefer receiving a full
set of proxy materials in paper, rather than a notice of internet
availability in paper. Therefore, the notice of internet availability
as an alternative to e-delivery would not be necessary if the
Commission adopts Reg E-Delivery and, if retained, could cause
shareholder confusion.
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\298\ See proposed rule 14a-16(a)(1)(iii).
\299\ Based on aggregated data provided by a proxy services
provider for processing of positions held beneficially in ``street
name,'' we understand that approximately 10% of deliveries of proxy
materials by issuers for uncontested meetings in calendar year 2025
were physical mailings (2% full set by mail and 8% notice by mail),
which represents a significant decrease from the 2008 proxy season
(following the Commission's adoption of the notice and access model
for proxy materials), during which 46% of deliveries of proxy
materials were physical mailings.
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We are proposing corresponding amendments to rule 14a-16 to remove
the current deadline for delivery of a notice of internet availability.
The deadline imposed by current rule 14a-16 was intended to provide
shareholders with sufficient time to receive the notice of internet
availability, access the proxy materials at the website address
specified in the notice, and request and receive a paper copy of the
proxy materials before the shareholder meeting.\300\ With the proposed
removal of the notice of internet availability as an alternative method
to furnish proxy materials to shareholders, the related deadline for
sending the notice would no longer be necessary. Because shareholders
would be able to access proxy materials more efficiently with direct e-
delivery or e-delivery of a statement of availability of proxy
materials, a similar deadline is unnecessary for e-delivery of proxy
materials under proposed amended rule 14a-16. If Reg E-Delivery is
adopted as proposed, regardless of the e-delivery method used, proxy
materials would be required to be delivered no later than the date on
which proxy materials are required to be delivered under the Federal
securities laws.\301\ The Federal securities laws generally do not
impose a deadline for mailing proxy materials for a routine annual
meeting of shareholders. Similarly, proposed amended rule 14a-16 would
not impose a deadline for mailing proxy materials in paper format,
which is the same approach taken under current rule 14a-16.
Accordingly, if Reg E-Delivery is adopted as proposed, the deadline for
delivering proxy materials for a routine annual meeting, whether
delivered electronically or in paper, would
[[Page 45927]]
generally be established by applicable state law.\302\
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\300\ E-Proxy Adopting Release, supra footnote 13 (adopting a
40-day deadline for sending the notice of internet availability to
shareholders in advance of the shareholder meeting date ``to provide
shareholders with sufficient time to receive the Notice, request
copies of the materials, if desired, and review the proxy materials
prior to executing a proxy'').
\301\ See proposed Reg E-Delivery Sec. 303.102(d); proposed
rule 14a-16(a)(1)(i) through (ii) (requiring compliance with
``electronic delivery requirements,'' which are defined in proposed
rule 14a-1 as the requirements in Sec. 303.102 of Reg E-Delivery,
for e-delivery of a statement of availability of proxy materials and
direct e-delivery of proxy materials).
\302\ State corporate law in the issuer's jurisdiction of
organization and the issuer's governing documents generally
establish the time period during which a notice of an annual or
special shareholders' meeting must be provided to shareholders.
Because the state law notice is typically included as part of the
proxy statement, the minimum time period established under state law
and the issuer's governing documents would operate as a deadline for
mailing the proxy statement. In practice, most issuers distribute
proxy materials far in advance of the minimum time period
established under state law.
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If Reg E-Delivery is adopted, the e-delivery of a statement of
availability of proxy materials under proposed amended rule 14a-16
would serve a similar function that the delivery of a notice of
internet availability serves today under current rule 14a-16.\303\
Although we are proposing to remove the notice of internet
availability, which is typically delivered in paper format, we would
retain, as revised for consistency with Reg E-Delivery, certain
requirements associated with the notice that should apply equally to a
statement of availability of proxy materials delivered electronically.
For example, we are proposing to retain the requirement in current rule
14a-16 that a soliciting person provide a record holder or respondent
bank with all the information required to be included in the notice of
internet availability in sufficient time for the record holder or
respondent bank to prepare and deliver the notice by the deadline, as
amended to incorporate the content requirements and deadline for a
statement of availability under sections 303.102(c)(1) and (d) of Reg
E-Delivery.\304\ Because sections 303.102(c)(2) and (d) of Reg E-
Delivery would similarly prescribe certain content requirements and a
deadline for direct e-delivery, we are proposing to amend rule 14a-16
to add a parallel requirement for direct e-delivery of proxy
materials.\305\
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\303\ While current rule 14a-16 would allow for electronic
delivery of a notice of internet availability, assuming the
shareholder consented to receive proxy materials electronically, we
understand this approach is not common for practical reasons.
\304\ See proposed rule 14a-16(e)(1).
\305\ See proposed rule 14a-16(e)(1).
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We are proposing a number of conforming changes throughout
Regulations 14A and 14C to reflect the permissible e-delivery methods
under Reg E-Delivery being incorporated into rule 14a-16 and the
removal of the notice of internet availability alternative from rule
14a-16.\306\
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\306\ See proposed rules 14a-3(e), 14a-7(a)(2)(i), 14a-101 (Item
23), 14b-1(b)(2) (note), 14b-1(e), 14b-2(b)(3) (note), 14c-2, 14c-3,
14c-7(a)(5), 14c-101 (Item 5).
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The requirement that a soliciting person make its proxy materials
available on a website, regardless of the method of delivery used,
would be retained in proposed amended rule 14a-16.\307\ We are
proposing to amend rule 14a-16 to require that the proxy materials be
made available on a website meeting the requirements in Reg E-Delivery
no later than the date on which the proxy statement or annual report,
as applicable, is sent to shareholders and, if applicable, no later
than the date on which the statement of availability is delivered to
shareholders.\308\ We are proposing to retain the current requirement
that proxy materials remain available on the website through the
shareholder meeting and the prohibition on the Commission's electronic
filing system being the website used for this purpose.\309\ Similarly,
we are proposing to retain the current requirement that additional
soliciting materials be made available on the website no later than the
day such materials are first sent to shareholders or made public and
remain on the website through conclusion of the shareholder
meeting.\310\ We are proposing to remove from current rule 14a-16 the
presentation and formatting requirements for proxy materials made
available on a website because the same requirements are included in
the website requirements in Reg E-Delivery, which would be incorporated
into rule 14a-16.\311\
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\307\ See proposed rule 14a-16(b)(1).
\308\ See proposed rule 14a-16(b)(1)(i) (requiring compliance
with ``website availability requirements,'' which are defined in
proposed rule 14a-1 as the requirements of Sec. 303.103 of Reg E-
Delivery).
\309\ See proposed rule 14a-16(b)(1)(i) and (ii).
\310\ See proposed rule 14a-16(b)(2).
\311\ See proposed Reg E-Delivery Sec. 303.103(c), which is
incorporated into proposed rule 14a-16(b)(1)(i) as ``website
availability requirements,'' as defined in proposed rule 14a-1.
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Under current rule 14a-16, soliciting persons may not use the
notice and access model to furnish proxy materials related to a
business combination transaction, which means soliciting persons must
use the full set delivery option for these transactions.\312\ This
exclusion was included in rule 14a-16 when initially adopted due to the
Commission's desire to gain more experience with the notice and access
model and the considerable length and complexity of typical proxy
statements for business combination transactions.\313\ After nearly two
decades of experience with the notice and access model and given the
significant advances in electronic communication technologies and
individuals' use of those technologies during this time, we propose to
amend rule 14a-16 to permit soliciting persons to choose between
delivering a full set in paper or using permissible e-delivery methods
under Reg E-Delivery, which allow notice and access (in the form of a
statement of availability), in connection with business combination
transactions.
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\312\ See 17 CFR 240.14a-16(m).
\313\ See E-Proxy Adopting Release, supra footnote 13, at
section II.D.
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Current rule 14a-16 sets forth content, delivery, and filing
requirements for the notice of internet availability.\314\ Because, as
proposed, Reg E-Delivery would include content requirements for the
statement of availability, which would be incorporated into proposed
amended rule 14a-16, we propose to amend rule 14a-16 to remove
duplicative content requirements. Specifically, we are proposing to
remove the following content requirements from the statement of
availability of proxy materials because the same or substantially
similar requirements would be included in Reg E-Delivery:
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\314\ See 17 CFR 240.14a-16.
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Website address where the proxy materials are available;
\315\
---------------------------------------------------------------------------
\315\ See 17 CFR 240.14a-16(d)(3); proposed Reg E-Delivery Sec.
102(c)(1)(iii).
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Instructions for requesting a paper or email copy of the
proxy materials at no charge; \316\
---------------------------------------------------------------------------
\316\ See 17 CFR 240.14a-16(d)(4); proposed Reg E-Delivery Sec.
303.102(c)(1)(v)(A) and (D). Although, as proposed, section
303.102(c)(1)(v)(D) of Reg E-Delivery would not require instructions
on how to request an email copy of proxy materials delivered
electronically. We believe that such a requirement would be
unnecessary given that the statement of availability would include a
direct link to the proxy materials in a format that is capable of
being retained permanently.
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List of materials being made available at the specified
website; \317\
---------------------------------------------------------------------------
\317\ See 17 CFR 240.14a-16(d)(7); proposed Reg E-Delivery Sec.
303.102(c)(1)(ii).
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Website and email address where shareholders can request a
copy of the current proxy materials; \318\ and
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\318\ See 17 CFR 240.14a-16(d)(8) (requirement to include in the
notice of internet availability a toll-free telephone number, an
email address, and an internet website where the shareholder can
request a copy of the proxy statement for the particular meeting);
proposed Reg E-Delivery Sec. Sec. 303.102(f) (requirement to
provide, upon request, paper copies of materials delivered
electronically); 303.102(c)(1)(v)(D) (requirement to include in a
statement of availability a description of the process to request
paper copies that provides, at a minimum, a website through which
the right to obtain a paper copy can be exercised).
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Requirements relating to pictures, logos, or similar
design elements.\319\
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\319\ See 17 CFR 240.14a-16(g)(3); proposed Reg E-Delivery Sec.
303.102(e).
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Similarly, we are proposing to amend rule 14a-16 to remove the
following
[[Page 45928]]
requirements, which are duplicative of substantially similar
requirements in Reg E-Delivery that would be incorporated into proposed
amended rule 14a-16:
Requirement that the proxy materials made available on the
website be in a format convenient for both reading online and printing
on paper; \320\
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\320\ See 17 CFR 240.14a-16(c); proposed Reg E-Delivery Sec.
303.103(c).
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Soliciting person's obligation to provide copies of the
proxy materials for one year after the conclusion of the meeting; \321\
and
---------------------------------------------------------------------------
\321\ See 17 CFR 240.14a-16(j)(3); proposed Reg E-Delivery Sec.
303.102(f)(1) (in the context of proxy materials, would require a
soliciting person to send, free of charge, one paper copy of the
proxy materials delivered electronically to a shareholder in the two
years preceding the date of the shareholder's request to any such
shareholder requesting such a copy).
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Obligation of soliciting persons other than registrants to
provide copies of their proxy materials only to those shareholders they
solicit.\322\
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\322\ See 17 CFR 240.14a-16(l); proposed Reg E-Delivery Sec.
303.102(f)(1) (in the context of proxy materials, would require a
soliciting person to deliver paper copies only to shareholders to
whom the soliciting person has delivered proxy materials
electronically).
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We are also proposing to remove certain content and other
requirements that were helpful at the time rule 14a-16 was initially
adopted due to the novelty of the notice and access model for
delivering proxy materials but we believe are no longer necessary after
nearly 20 years of experience with the notice and access model and
increased use of electronic communications technology to access proxy
materials. Specifically, we are proposing to remove the:
Requirement to indicate that the notice of internet
availability is not a form for voting and presents only an overview of
the more complete proxy materials and encourage shareholders to access
and review the proxy materials before voting; \323\
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\323\ See 17 CFR 240.14a-16(d)(2).
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Requirement to indicate in the notice of internet
availability that a paper or email copy of the proxy materials will not
be provided except upon request; \324\
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\324\ See 17 CFR 240.14a-16(d)(4).
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Requirement to identify each matter to be acted on and
state the soliciting person's recommendations in the notice of internet
availability; \325\
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\325\ See 17 CFR 240.14a-16(d)(6); 17 CFR 240.14a-16(l)(3)(i).
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Requirement to include information in the notice of
internet availability on how to obtain directions to attend the meeting
and vote in person; \326\
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\326\ See 17 CFR 240.14a-16(d)(11).
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Provisions permitting certain materials, such as a pre-
addressed, postage-paid reply card and an explanation of the reasons
for the use of the notice and access model, to accompany a notice of
internet availability; \327\ and
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\327\ See 17 CFR 240.14a-16(f)(2).
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Requirement that plain English principles be used in the
organization, language, and design of the notice of internet
availability; \328\
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\328\ See 17 CFR 240.14a-16(g).
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In addition, we are proposing to remove requirements that are
primarily relevant where notices of internet availability are delivered
in paper format. We believe these requirements would no longer be
necessary if the amendments to rule 14a-16 are adopted as proposed,
because these amendments would remove the option to send a notice of
internet availability in paper format, and if Reg E-Delivery is adopted
as proposed, because Reg E-Delivery would allow shareholders to make a
permanent election to receive proxy materials in paper format by opting
out of e-delivery.\329\ Specifically, we are proposing to remove the:
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\329\ See proposed Reg E-Delivery Sec. 303.102(f) (requirement
that covered recipients be able to request paper copies of the
covered information or opt out of electronic delivery effectively
provides the ability to make a permanent election to receive paper
copies and may be exercised pursuant to information required to be
included in a statement of availability under section 102(c)(1)(v)
of Reg E-Delivery and in direct delivery under section 102(c)(2) of
Reg E-Delivery).
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Requirement to include a toll-free telephone number where
shareholders can request a copy of the current proxy materials; \330\
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\330\ See 17 CFR 240.14a-16(d)(8) (requiring in the notice of
internet availability a toll-free telephone number, an email
address, and an internet website where the shareholder can request a
copy of the proxy statement for the particular meeting). Section
303.102(c)(1)(v)(D) of Reg E-Delivery, which would be incorporated
into proposed amended rule 14a-16, would require a statement of
availability to include a description of the process to request
paper copies that provides, at a minimum, a website through which
the right to obtain a paper copy can be exercised.
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Requirement to provide electronic copies of proxy
materials to requesting record holders; \331\
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\331\ See 17 CFR 240.14a-16(j)(2).
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Requirement to include in the notice of internet
availability instructions for a shareholder to make a permanent
election to receive paper or email copies of the proxy materials \332\
and the associated recordkeeping requirement; \333\
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\332\ See 17 CFR 240.14a-16(d)(8).
\333\ See 17 CFR 240.14a-16(j)(4).
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Requirement that the form of proxy is accompanied or
preceded by a copy, via the same medium, of the proxy statement and any
annual report to security holders; \334\
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\334\ See 17 CFR 240.14a-16(h)(2). 17 CFR 240.14a-4(f) imposes a
substantially similar requirement such that an issuer (or other
soliciting person) cannot deliver a form of proxy unless the
security holder concurrently receives, or has previously received, a
definitive proxy statement that has been filed with the Commission.
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Requirement for the notice of internet availability of a
soliciting person other than the registrant to indicate that there may
be additional agenda items of which the soliciting person is not aware
and whether execution of the soliciting person's form of proxy will
invalidate a prior vote on matters not presented on the soliciting
person's form of proxy; \335\ and
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\335\ See 17 CFR 240.14a-16(l)(3)(i) and (ii).
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Provisions regarding the delivery of a full set of proxy
materials as it relates to the notice of internet availability,\336\
including (i) the requirement to incorporate in the proxy statement all
the information required to appear in a notice of internet availability
if a notice is not delivered separately, and (ii) a provision regarding
instructions required in a notice of internet availability but not
required to be included in a proxy statement if a full set of proxy
materials is delivered.
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\336\ See 17 CFR 240.14a-16(n).
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Proposed amended rule 14a-16 would retain certain content and other
requirements that are specific to proxy materials and not otherwise
required under Reg E-Delivery. If Reg E-Delivery is adopted as
proposed, a statement of availability of proxy materials would include
the information required by section 303.102(c)(1) of Reg E-Delivery and
the following information:
A prominent legend that states ``Important Notice
Regarding the Availability of Proxy Materials for the Shareholder
Meeting To Be Held [insert meeting date, time, and location]'' \337\;
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\337\ See proposed rule 14a-16(c)(1)(i) (retaining requirement
in 17 CFR 240.14a-16(d)(1), without specifying that such legend must
be in bold-face type, supplemented with ``date, time, and location
of the meeting'' required by 17 CFR 240.14a-16(d)(5)).
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Any control/identification numbers \338\ that the
shareholder needs to access its form of proxy and instructions on how
to access the form of proxy; \339\ and
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\338\ We note that we do not view a control number for executing
a proxy or similar information necessary for executing a proxy or
accessing proxy materials as personal financial information and
inclusion thereof should not limit a covered entity's choice to use
direct electronic delivery pursuant to section 102(c)(2) of Reg E-
Delivery.
\339\ See proposed rule 14a-16(c)(1)(ii) (retaining requirements
in 17 CFR 240.14a-16(d)(9) and (10)).
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The date by which a shareholder should make a request to
obtain a paper copy of the proxy materials to facilitate
[[Page 45929]]
timely delivery before the shareholder meeting.\340\
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\340\ See proposed rule 14a-16(c)(1)(iii) (retaining part of the
requirement in 17 CFR 240.14a-16(d)(4)). This information would also
be required in the direct e-delivery of proxy materials under
proposed rule 14a-16(a)(1)(ii).
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The statement of availability of proxy materials would still be
required to be delivered separately from other communications, except
that, as is the case under current rule 14a-16, it may be combined
with, or accompanied by, a permitted state law shareholders' meeting
notice,\341\ and in the case of a registered investment company, it may
accompany a prospectus, summary prospectus, or report to
shareholders.\342\ While we are proposing to retain this requirement,
we are not proposing to retain the exception allowing a notice of
internet availability to be accompanied by a form of proxy if at least
10 calendar days have passed since the date the notice of internet
availability was first sent to shareholders.\343\ We believe this
exception would be unnecessary since a statement of availability of
proxy materials would only be delivered electronically and would
provide direct access to the proxy statement and form of proxy via a
direct link to a website that includes the proxy materials. We are also
proposing to retain the requirement that a notice of internet
availability be filed with the Commission no later than the date it is
first sent to shareholders, as amended to apply to statements of
availability instead of notices of internet availability.\344\
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\341\ See 17 CFR 240.14a-16(e)(1); 17 CFR 240.14a-16(f)(1); 17
CFR 240.14a-16(f)(2)(ii); proposed rule 14a-16(c)(3)(i).
\342\ See 17 CFR 240.14a-16(f)(2)(iii); proposed rule 14a-
16(c)(3)(ii).
\343\ See 17 CFR 240.14a-16(h)(1).
\344\ See 17 CFR 240.14a-16(i); proposed rule 14a-16(c)(4).
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Issuers would still be required to provide shareholders with a
means to execute a proxy as of the time a statement of availability is
first sent to shareholders.\345\ Additionally, issuers would still be
able to send a form of proxy only if accompanied or preceded by the
proxy statement.\346\
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\345\ See 17 CFR 240.14a-16(b)(4); proposed rule 14a-16(d).
\346\ See 17 CFR 240.14a-16(h)(2); 17 CFR 240.14a-4(f). While we
are not proposing to retain the requirement in 17 CFR 240.14a-
16(h)(2) in proposed amended rule 14a-16, 17 CFR 240.14a-4(f)
imposes a substantially similar requirement such that an issuer (or
other soliciting person) cannot deliver a form of proxy unless the
security holder concurrently receives, or has previously received, a
definitive proxy statement that has been filed with the Commission.
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Proposed amended rule 14a-16 would also retain the current
guidelines as to privacy of persons accessing a website used to post
proxy materials \347\ and the use of electronic addresses of
shareholders provided for the purpose of requesting copies of proxy
materials,\348\ as amended to include electronic addresses of
shareholders provided for the purpose of opting out of e-delivery under
Reg E-Delivery.\349\
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\347\ See 17 CFR 240.14a-16(k)(1); proposed rule 14a-16(g)(1).
\348\ See 17 CFR 240.14a-16(k)(2); proposed rule 14a-16(g)(2).
\349\ See proposed rule 14a-16(g)(2). The term ``opt out of
electronic delivery'' used in proposed rule 14a-16(g)(2) would be
defined in Rule 14a-1, as proposed to be amended, by referring to
section 303.102(f)(2) of Reg E-Delivery.
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We request comment on the proposed amendments to rule 14a-16:
128. Current rule 14a-16(a)(1) provides a 40-calendar-day deadline
for issuers to provide a notice of internet availability, which is
typically delivered in paper format. If Reg E-Delivery and the
amendments to rule 14a-16 are adopted as proposed, a statement of
availability of proxy materials would be required to be delivered no
later than the date by which the proxy materials are required to be
delivered under the Federal securities laws.\350\ Should we instead
retain the 40-calendar-day deadline for the statement of availability
of proxy materials, which would be required to be delivered
electronically? Should we adopt a different deadline? For example,
should we amend rule 14a-16 to implement a principles-based deadline
that requires the statement of availability to be sent to shareholders
by a date that would provide shareholders with a meaningful opportunity
to request and obtain paper copies of the proxy materials before the
shareholder meeting? Should we adopt a deadline that is a specific
number of days less than 40 (e.g., 5 or 10 calendar days prior to the
date by which the proxy materials are required to be delivered under
the Federal securities laws)? Why or why not? Are there certain state
laws that we should consider in developing a deadline for the statement
of availability to be sent to the shareholders?
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\350\ See proposed Reg E-Delivery Sec. 303.102(d).
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129. Should the Reg E-Delivery deadline for delivering covered
information (i.e., no later than the date on which the covered
information is required to be delivered under the Federal securities
laws) apply to proxy materials, as proposed? If not, why not?
130. Are there timing requirements for proxy materials that this
provision would affect? If so, how should we modify the timing
requirements in these cases?
131. Certain kinds of covered information, such as proxy
statements, request that shareholders act within a certain time frame
to exercise their rights. Are the provisions of proposed rule 14a-
16(c)(1)(i) and sections 303.102(c)(1)(i) and (ii) and 303.102(c)(2) of
Reg E-Delivery adequate to alert shareholders to these deadlines to
take action? \351\ Why or why not? Would a different method of
distinguishing such time-sensitive covered information be preferred?
Alternatively, is the prominent legend required by proposed rule 14a-
16(c)(1)(i) no longer necessary given the disclosure required by
sections 303.102(c)(1)(i) and (ii) and 303.102(c)(2) of Reg E-Delivery
such that we should remove the legend requirement from proposed rule
14a-16?
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\351\ See proposed rule 14a-16(c)(1)(i) (requiring the statement
of availability of proxy materials to include a prominent legend
that states ``Important Notice Regarding the Availability of Proxy
Materials for the Shareholder Meeting To Be Held [insert meeting
date, time, and location]''); proposed Reg E-Delivery Sec. Sec.
303.102(c)(1)(i) (which would require in a statement of availability
of proxy materials a prominent statement alerting the shareholder
that the proxy materials are available) and 303.102(c)(1)(ii) (which
would require in a statement of availability of proxy materials a
brief description of the proxy materials that indicates the proxy
materials may require action by the shareholder receiving the proxy
materials within a fixed time frame to exercise certain rights);
proposed Reg E-Delivery Sec. 303.102(c)(2) (requiring the same
description as section 303.102(c)(1)(i) and (ii) in direct
electronic deliveries of proxy materials).
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132. While we believe easy accessibility of electronically
delivered proxy materials warrants paring down requirements from the
notice of internet availability for the content that must be included
in the statement of availability of proxy materials, does the statement
of availability as proposed provide adequate information? Should any of
the requirements we propose to remove be retained? Should we retain the
requirement to include a toll-free telephone number and email address
where shareholders can request a copy of the proxy materials, or is a
website sufficient for this purpose given that, unlike notices of
internet availability, statements of availability would only be
delivered electronically with shareholders accessing the statement of
availability (and potentially the proxy materials) electronically
before determining to request a copy? Should the statement be required
to refer shareholders to the proxy statement for more information on
meeting details and agenda items? Would the proxy statement being one
click away sufficiently serve the same purpose that rule 14a-16(d)(6)
currently does to identify each matter intended to be acted on and the
soliciting person's
[[Page 45930]]
recommendations? Would other content requirements for the statement of
availability of proxy materials be appropriate?
133. Is the requirement in section 303.102(f)(1) of Reg E-Delivery
to provide, upon request, paper copies of materials delivered
electronically in the two years preceding the date of the shareholder's
request substantially more burdensome than the requirement under
current rule 14a-16(j)(3) to provide copies of proxy materials for one
year following conclusion of the relevant meeting or corporate action?
134. As proposed, rule 14a-16 would require any electronic delivery
of proxy materials to comply with Reg E-Delivery and its requirements.
Is there currently any beneficial flexibility that would be lost by not
having any method of electronic delivery other than under Reg E-
Delivery? If yes, should proposed rule 14a-16 be modified to allow for
such flexibility? What are the modifications that should be included to
retain any existing flexibility?
135. Are there any difficulties that issuers would encounter with
the proposed amendments to rule 14a-16? What are those difficulties and
is the two-year transition period that the Commission is proposing for
the new e-delivery framework and proposed amendments to rule 14a-16,
discussed below in section II.H., sufficient to help mitigate those
difficulties? Would smaller issuers require a longer compliance period
to help mitigate those difficulties?
(d) Proposed Amendments to Shareholder Communications Rules (Exchange
Act Rules 14a-13, 14b-1, 14b-2, and 14c-7)
Many shareholders hold their shares indirectly through a broker,
bank, or similar intermediary. Because these ``beneficial owners'' do
not hold their shares directly, their names and addresses do not appear
on issuers' stock registers and the issuers must deliver proxy
materials to the intermediaries, who are obligated to forward the
materials to beneficial owners. The Shareholder Communications Rules
\352\ set forth the obligations of issuers and intermediaries to ensure
proper and timely delivery of proxy materials to beneficial owners to
facilitate beneficial owners' participation in the voting process. The
amendments we are proposing to rule 14a-16 necessitate corresponding
amendments to the Shareholder Communications Rules to: (1) align with
the proposed Reg E-Delivery framework; (2) reflect our proposed
amendments to rule 14a-16; and (3) update the rules to reflect modern
practices and technological advancements, similar to the amendments we
are proposing to rule 14a-16. Specifically, we propose to amend the
Shareholder Communications Rules to:
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\352\ See 17 CFR 240.14a-13; 17 CFR 240.14b-1; 17 CFR 240.14b-2;
17 CFR 240.14c-7; supra footnote 282.
---------------------------------------------------------------------------
Revise the intermediary's obligation to forward proxy
materials to its customers who are beneficial owners of the issuer's
securities to specify that such materials may be delivered: (1) by
direct e-delivery, provided that the applicable requirements of Reg E-
Delivery are satisfied; or (2) in paper format.\353\
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\353\ See proposed rules 14b-1(b)(2)(i)(A) and (B) and 14b-
2(b)(3)(i)(A) and (B).
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As a result of the revision discussed immediately above,
amend the broker's or dealer's obligation to forward proxy materials to
its customers who are beneficial owners of the issuer's securities
\354\ to replicate the requirement under the current rules for the
broker's or dealer's notice of internet availability \355\ that the
broker's or dealer's request for voting instructions sent with the
proxy statement include a brief description, if applicable, of the
rules that permit the broker or dealer to vote the securities if the
beneficial owner does not return his or her voting instructions.\356\
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\354\ See 17 CFR 240.14b-1(b)(2).
\355\ See 17 CFR 240.14b-1(e)(2); 17 CFR 240.14b-1(d)(5)(i)(B).
\356\ See proposed rule 14b-1(b)(2)(ii).
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Revise certain references to ``addresses'' to refer to
``all addresses'' to clarify that a list of non-objecting (or
consenting) beneficial owners must include all addresses, which would
include both mailing and electronic addresses, if available; \357\
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\357\ See proposed rules 14a-13(b); 14b-1(b)(3)(i); 14b-
2(b)(4)(ii).
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Remove the 40-calendar day deadline for delivering a
notice of internet availability, which we propose to remove from rule
14a-16, as discussed above, and impose a different deadline for an
intermediary's delivery of a statement of availability of proxy
materials, which must be sent to beneficial owners no later than five
business days after receiving the information required to be included
in the statement from a soliciting person or such later date specified
by the soliciting person; \358\
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\358\ See proposed rules 14b-1(d)(1) and 14b-2(d)(1). This five-
business day period mirrors the time period that intermediaries have
for many of their obligations under rules 14b-1 and 14b-2, including
to forward proxy materials to beneficial owners after receipt from
the soliciting person. See supra footnote 283 and accompanying text.
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Add a note to clarify that when an intermediary does not
establish its own website to host proxy materials \359\ and instead
refers beneficial owners to the issuer or other soliciting person's
website for access to the proxy materials, the website availability
requirements of section 303.103 of Reg E-Delivery will be deemed to be
met as they relate to the intermediary's obligations under that
provision; \360\
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\359\ See 17 CFR 240.14b-1(d)(2) (providing that a broker or
dealer may opt to establish a website at which beneficial owners are
able to access the proxy materials); 17 CFR 240.14b-2(d)(2)
(providing that a bank may opt to establish a website at which
beneficial owners are able to access the proxy materials).
\360\ See proposed rule 14b-1(d) (Note to paragraphs (d)(1) and
(d)(2)); proposed rule 14b-2(d) (Note to paragraphs (d)(1) and
(d)(2)).
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Remove requirements that are relevant only to notices of
internet availability delivered in paper format; \361\
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\361\ See 17 CFR 240.14b-1(d)(3); 17 CFR 240.14b-2(d)(3); 17 CFR
240.14b-1(d)(5); 17 CFR 240.14b-2(d)(5).
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Remove the record keeping and copy delivery requirements
associated with the current permanent election for paper or email
copies, which we are proposing to remove from rule 14a-16 as
unnecessary if proposed Reg E-Delivery and amendments to rule 14a-16
are adopted as proposed; \362\
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\362\ See 17 CFR 240.14b-1(d)(4)(iii); 17 CFR 240.14b-
2(d)(4)(iii).
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Revise the content requirements for an intermediary's
statement of availability of proxy materials to incorporate the content
requirements of section 303.102(c)(1) of Reg E-Delivery and add the
requirement to include the website address where beneficial owners are
able to access the intermediary's request for voting instructions;
\363\
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\363\ See proposed rules 14b-1(e)(1) and (3) and 14b-2(e)(1) and
(2).
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Revise references to ``Notice of internet Availability of
Proxy Materials'' throughout to refer to ``statement of availability of
proxy materials,'' where appropriate, to reflect the statement of
availability method of e-delivery under Reg E-Delivery and proposed
amended rule 14a-16; and
To reflect the increased use of electronic communications
as opposed to first class mail, particularly between issuers and
intermediaries, update requirements to respond or inquire by ``first
class mail or other equally prompt means'' to require only that such
responses or inquiries be made promptly.\364\
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\364\ See proposed rules 14a-13(a)(1), 14a-13(b)(1), 14b-
1(b)(1), 14b-2(b)(1)(i) and (ii), 14b-2(b)(4)(i), 14c-7(a)(1), 14c-
7(b)(1).
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[[Page 45931]]
We request comment on the proposed amendments to rules 14a-13, 14b-
1, 14b-2 and 14c-7:
136. Should issuers be required to indicate to record holders the
date by which proxy materials or statements of availability of proxy
materials should be sent to beneficial owners as part of the broker
search inquiry pursuant to rules 14a-13(a)(1)(ii) and 14c-7(a)(1)(ii)?
137. Brokers, dealers, and banks currently must forward proxy
materials to beneficial owners within five business days of receiving
the proxy materials from the issuer or other soliciting person.\365\ We
believe technological advancements have led to more efficient
coordination among soliciting persons and intermediaries since this
deadline was adopted. Is a five-business day period currently needed?
Why or why not? Should we shorten this deadline to three business days
to facilitate more timely delivery of proxy materials? If not, what is
the appropriate amount of time for forwarding proxy materials after
receipt of those materials? Considering there could be ``piggybacking''
of intermediaries (e.g., the beneficial owner holds shares through a
bank that in turn holds those shares through another bank or broker),
what is the appropriate amount of time to ensure timely delivery of
proxy materials to the ultimate beneficial owner where there are
multiple levels of intermediaries?
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\365\ See 17 CFR 240.14b-1(b)(2); 17 CFR 240.14b-2(b)(3).
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138. Brokers, dealers, and banks are currently required to transmit
a compiled list of non-objecting beneficial owners within five business
days after such list is compiled.\366\ Is a five-business day period
needed currently? Why or why not? Should we shorten this deadline to
three business days to facilitate more timely communication with these
beneficial owners? If not, what should the deadline be?
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\366\ See 17 CFR 240.14b-1(b)(3)(ii); 17 CFR 240.14b-
2(b)(4)(iii).
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139. Currently, an intermediary must compile a list of non-
objecting beneficial owners as of a date that is no earlier than five
business days after the issuer's request is received by the
intermediary.\367\ Is five business days needed to compile this list
currently? Should this required lead time be shortened to three
business days to facilitate more timely communication with these
beneficial owners? Why or why not?
---------------------------------------------------------------------------
\367\ See 17 CFR 240.14a-13(b)(2); 17 CFR 240.14b-1(b)(3)(i); 17
CFR 240.14b-2(b)(4)(ii); 17 CFR 240.14c-7(b)(2).
---------------------------------------------------------------------------
140. Currently, banks must execute and return an omnibus proxy to
the issuer and furnish corresponding notice to respondent banks within
five business days after the record date.\368\ Should this deadline be
shortened to three business days to facilitate more timely proxy
processing? Why or why not? If not, what is the appropriate deadline?
---------------------------------------------------------------------------
\368\ See 17 CFR 240.14b-2(b)(2).
---------------------------------------------------------------------------
141. Should the deadline for an intermediary to prepare and send a
statement of availability be no later than five business days after
receiving the information required to be included in the statement from
a soliciting person or such later date specified by the soliciting
person, as proposed? \369\ Why or why not? If not, what deadline would
be appropriate?
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\369\ See proposed rules 14b-1(d)(1) and 14b-2(d)(1).
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142. Brokers, dealers, and banks are currently required to request
a copy of proxy materials from a soliciting person within three
business days after receiving such request from a beneficial owner, and
to forward the copy to the requesting beneficial owner within three
business days after receipt of the copy from the soliciting
person.\370\ Should we shorten the period of time intermediaries have
to request and forward proxy materials to two business days to
facilitate more timely receipt of copies by beneficial owners? Why or
why not? If not, what deadline would be appropriate?
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\370\ See 17 CFR 240.14b-1(d)(4)(i) through (ii); 17 CFR
240.14b-2(d)(4)(i) through (ii).
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143. Do the provisions of current rule 14b-2 reflect current bank
procedures for proxy processing? Would any other changes be helpful to
better align the rule requirements with current bank proxy processing
procedures or to facilitate electronic delivery?
144. Current rule 17a-3(a)(9) generally requires broker-dealers to
create and keep current records of the beneficial owners of each cash,
margin, and security-based swap account they hold, and whether such
beneficial holders object to the disclosure to issuers of their
identity, address and securities positions. Broker-dealers use lists
compiled pursuant to current rule 17a-3(a)(9) in complying with their
obligations to provide beneficial ownership information and to
facilitate dissemination of proxy and other materials under rule 14b-
1(b). Should we amend current rule 17a-3 or another Commission rule to
facilitate electronic delivery by issuers and other soliciting persons
to non-objecting beneficial owners? If so, how?
(e) Proposed Amendments to Exchange Act Rule 14a-7
Soliciting persons other than the issuer rely on the issuer to
furnish proxy materials to the issuer's record holders. Rule 14a-7 sets
forth the obligation of issuers either to provide a shareholder list to
a requesting shareholder or to send the shareholder's proxy materials
on the shareholder's behalf. While note 1 to current rule 14a-7 permits
the use of ``reasonably prompt methods of distribution'' other than
mailing,\371\ we are proposing to amend rule 14a-7 to change references
to ``mail'' to ``send'' to clarify that both electronic and paper
delivery are acceptable under the rule. The changes we are proposing to
rules 14a-1, 14a-3, and 14c-1 would incorporate the definition of
``electronic address'' under Reg E-Delivery into the definition of
``address'' in current rule 14a-3 and relocate this amended definition
to proposed rules 14a-1 and 14c-1 so that term would apply more broadly
to Regulations 14A and 14C.\372\ We are also proposing to amend certain
references to ``address'' in current rule 14a-7 to refer to ``all
addresses'' to clarify that a shareholder list must include all
addresses.\373\ As a result, a shareholder list provided under proposed
amended rule 14a-7 would include both mailing and electronic addresses
of the record holders, if available, and the issuer would include both
addresses in a shareholder list delivered to a requesting shareholder.
The issuer would be required to identify security holders who receive
proxy materials in paper or have requested paper copies of the proxy
materials for the upcoming meeting, thereby identifying for a
requesting shareholder the preferred method of distribution of the
proxy materials for those shareholders.\374\
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\371\ See 17 CFR 240.14a-7 (Note 1). Because this note will no
longer be necessary if the amendments to rule 14a-7 are adopted as
proposed, we are proposing to delete it and add the provisions in
Note 2 to rule 14a-7 to a single note to that rule.
\372\ See infra footnotes 381 and 382 and accompanying text.
\373\ See proposed rule 14a-7(a)(2)(ii)(A) and (B).
\374\ See proposed rule 14a-7(a)(2)(ii)(D).
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Current rule 14a-7(c) restricts the use of shareholder list
information for any purpose other than to solicit a shareholder for the
upcoming meeting or action by consent and provides safeguards on the
use of any electronic address provided as part of a shareholder
list.\375\ We believe these provisions provide adequate protection
against the use of electronic addresses by third parties for purposes
other than delivery of proxy materials. However, where an issuer cannot
provide all of
[[Page 45932]]
the information required to be included in a shareholder list, such as
electronic addresses, proposed amended rule 14a-7 would clarify that
the issuer must then distribute the requesting shareholder's proxy
materials.\376\ For example, if the representations made by an issuer
when it obtains an electronic address or affirmative consent to
electronic delivery from a shareholder prevent it from sharing that
electronic address with third parties, the issuer would be obligated to
deliver the proxy materials on behalf of the third party.
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\375\ See 17 CFR 240.14a-7(c)(2)(i) and (ii); 17 CFR 240.14a-
7(d).
\376\ See proposed note to paragraph (b)(2) of rule 14a-7.
---------------------------------------------------------------------------
We are proposing to amend current rule 14a-7 to remove the
requirement to provide the names of shareholders who have made a
permanent election to receive paper copies of proxy materials because
we are proposing to remove this election from rule 14a-16 as
unnecessary if proposed Reg E-Delivery and amendments to rule 14a-16
are adopted as proposed.\377\ In addition, we are proposing to revise
certain other requirements in current rule 14a-7(a)(2)(i) to align with
the requirements under Reg E-Delivery and the requirements in proposed
amended rule 14a-16.\378\
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\377\ See 17 CFR 240.14a-7(a)(2)(ii)(D).
\378\ See proposed rule 14a-7(a)(2)(i). For example, the
requirement to deliver multiple copies of the notice of internet
availability in a single envelope to a shared address if the
requesting shareholder furnishes multiple copies for that address
would be removed as it is relevant only for paper notices of
internet availability, which we propose to eliminate.
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We request comment on the following:
145. Does providing electronic addresses to third-party soliciting
persons present additional privacy and other concerns not present with
mailing addresses?
146. Should issuers always be required to electronically deliver
proxy materials on behalf of third parties, rather than doing so at the
issuer's election?
147. Is there a concern that if proxy materials are delivered
electronically by soliciting persons other than the issuer,
shareholders may not receive or access those materials due to technical
issues or cybersecurity concerns?
148. Current rule 14a-7(a)(1) provides that an issuer must notify a
requesting shareholder within five business days following its receipt
of a request whether it intends to mail such shareholder's soliciting
materials or provide such shareholder with a shareholder list that
would allow the requesting shareholder to mail its soliciting materials
to the issuer's shareholders. Should we shorten this deadline from five
business days to three business days to facilitate more timely
dissemination of the requesting shareholder's proxy materials? Why or
why not?
149. Currently, issuers must respond within five business days to a
shareholder's request for a list of the names, addresses and security
positions of the record holders.\379\ If Reg E-Delivery is adopted,
should we increase the amount of time registrants have to respond to a
request by a shareholder, because issuers must comply with the
additional step of providing both mailing and electronic addresses, if
available,? Or should we decrease this time period, given advances in
technology and proxy processes?
---------------------------------------------------------------------------
\379\ See 17 CFR 240.14a-7(a)(2)(ii).
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(f) Proposed Amendments to Implement Conforming Changes (Exchange
Act Rules 14a-1, 14a-3, 14a-101, 14c-1, 14c-2, 14c-3, 14c-4, and 14c-
101)
The amendments we are proposing to incorporate the requirements
associated with permitted e-delivery methods and the requirements for
website availability of information under Reg E-Delivery into the
delivery framework for proxy materials would necessitate conforming
changes to certain other rules in Regulations 14A and 14C. To that end,
we are proposing to:
Move ``address,'' as a defined term, from current rule
14a-3(e)(1)(iv) to proposed amended rules 14a-1 and 14c-1 so that term
would apply more broadly to Regulations 14A and 14C; \380\
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\380\ To comply with the Federal Register Document Drafting
Handbook, we would also revise proposed amended rules 14a-1 and 14c-
1 to remove the numbering from the definitions in those rules. See
National Archives and Records Administration, Office of the Federal
Register, Federal Register Document Drafting Handbook, Chapter 8-15
(Oct. 1998 Revision) (``In sections or paragraphs containing only
definitions, we recommend that you do not use paragraph designations
if you list the terms in alphabetical order.''). We are also
proposing to make conforming changes to certain rules that reference
definition numbering, which we are proposing to eliminate. See,
e.g., 17 CFR 240.14a-2(b)(9); 17 CFR 240.14a-13(b)(3); 17 CFR
240.14c-7(a) (Note 1); 17 CFR 240.14c-7(b)(3); 17 CFR 240.17a-
3(a)(9)(ii). Moreover, we are proposing some non-substantial
technical changes to certain other rules. See, e.g., paragraph (2)
in the definition of ``Associate'' in 17 CFR 240.14c-1; 17 CFR
240.14c-7(b)(2); 17 CFR 240.14d-5(g)(1). Additionally, we recognize
that the current text of 17 CFR 240.14a-1(l) provides that the terms
``solicit'' and ``solicitation'' include certain ``proxy voting
advice that makes a recommendation to a security holder as to its
vote, consent, or authorization on a specific matter for which
security holder approval is solicited.'' 17 CFR 240.14a-
1(l)(1)(iii)(A). The Commission adopted that rule text, as well as
additional rule text in 17 CFR 240.14a-1(l)(2)(v) and 17 CFR
240.14a-2(b)(9), in 2020. See Exemptions From the Proxy Rules for
Proxy Voting Advice, Release No. 34-89372 (July 22, 2020) [85 FR
55082 (Sept. 3, 2020)] (``2020 Proxy Voting Advice Release''). On
July 1, 2025, the United States Court of Appeals for the District of
Columbia affirmed the United States District Court for the District
of Columbia's vacatur of the definitional amendment codified at 17
CFR 240.14a-1(l)(1)(iii)(A). See Institutional S'holder Servs., Inc.
v. SEC, 142 F.4th 757, 768 (D.C. Cir. 2025). That vacatur had the
legal effect of reverting 17 CFR 240.14a-1(l) to the form of the
rule that existed prior to Nov. 2, 2020, when the current form of
the rule became effective. See 2020 Proxy Voting Advice Release. We
will address the impact of the Court's vacatur in a subsequent
release.
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Due to the broader application of ``address,'' which is
currently defined to include electronic mail addresses \381\ and would
be defined to include electronic addresses, as that term is defined in
Reg E-Delivery,\382\ revise certain other rules in Regulations 14A and
14C to clarify the ``address'' referred to in those rules is a
``mailing'' address; \383\
---------------------------------------------------------------------------
\381\ See 17 CFR 240.14a-3(e)(1)(iv).
\382\ See proposed rule 14a-1; proposed rule 14c-1.
\383\ See proposed rule 14a-3(e)(1)(ii)(B)(1) and (2)(ii);
proposed rule 14a-3(e)(2)(ii); proposed rule 14a-101, Item
5(b)(1)(i) and (ii) and (ix) and Item 22(a)(3)(i), (b)(Table),
(c)(Instruction), (c)(2), (c)(3), and (c)(4).
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Revise ``mailing address'' to be ``address'' in certain
rules to permit the issuer to include an electronic address (in lieu of
or in addition to a mailing address) to receive a shareholder's request
for separate proxy materials where proxy materials are subject to
householding and being delivered to a shared address; \384\
---------------------------------------------------------------------------
\384\ See proposed rule 14a-101, Item 23(c); proposed rule 14c-
101(c), Item 5(c).
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Add defined terms to rule 14a-1 to expressly incorporate
certain Reg E-Delivery requirements into proposed rules 14a-16, 14b-1,
and 14b-2; \385\
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\385\ See supra notes 296 and 349.
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Revise the references to ``Notice of internet Availability
of Proxy Materials'' throughout to refer to ``statement of availability
of proxy materials,'' where appropriate, to reflect the statement of
availability method of e-delivery under Reg E-Delivery and proposed
amended rule 14a-16; \386\
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\386\ See proposed rule 14a-3(e), proposed rule 14a-101, Item
23; proposed rule 14c-2(d); proposed rule 14c-3(c), proposed rule
14c-7(a)(5); proposed rule 14c-101, Item 5.
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Remove provisions in current rule 14a-3(a)(3) related to
the business combination exclusion in current rule 14a-16(m), which we
are proposing to remove because such exclusion is no longer warranted
in light of experience with the notice and access delivery model and
increased use of electronic communication technologies; \387\
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\387\ See proposed rule 14a-3(a).
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Replace the legibility requirement for proxy statements,
annual reports, and information statements delivered through an
electronic medium in the
[[Page 45933]]
current rules \388\ with the e-delivery format requirements in Reg E-
Delivery to make format requirements for electronically delivered
documents more consistent; \389\
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\388\ See 17 CFR 240.14a-3(b)(2)(ii); 17 CFR 240.14a-5(d)(2); 17
CFR 240.14c-4(d).
\389\ See proposed Reg E-Delivery Sec. 303.102(c)(2) (providing
that direct e-delivery of covered information must be presented in a
``widely available format that is convenient for reading in
electronic format, being printed on paper, and permanently retaining
in an electronic format''); proposed rules 14a-3(b)(2)(ii), 14a-
5(d)(2), and 14c-4(d). We are similarly proposing this conforming
change to current rule 14a-5. See proposed rule 14a-5(d)(2).
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Add requirements with respect to the delivery of proxy
materials in the householding provisions in proposed amended rule 14a-
3(e)(1) to account for e-delivery of a statement of availability,
including the requirement that any control/identification number needed
to access the form of proxy be included for each shareholder at the
shared address to which the statement of availability of proxy
materials is householded; \390\
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\390\ See proposed rule 14a-3(e)(1)(i)(E).
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Revise the exception from delivery obligations under
current rule 14a-3(e)(2) to apply only to paper delivery to a physical
mailing address as the exception would appear inapplicable to
electronic delivery; \391\
---------------------------------------------------------------------------
\391\ See proposed rule 14a-3(e)(2)
---------------------------------------------------------------------------
Move the current requirement \392\ to include a unit
number for multi-unit buildings to the note to proposed amended rule
14a-3(e)(1)(ii)(B)(4) so the requirement remains in rule 14a-3(e)(1)
after ``address'' becomes a defined term in proposed amended 14a-1; and
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\392\ See proposed rule 14a-3(e)(1)(iv).
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Add an item to rule 14a-101 requiring disclosure of the
website address where proxy materials are available.\393\
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\393\ See proposed rule 14a-101 (Item 1(d)). The disclosure
required by Item 1(d) of Schedule 14A will be required in Schedule
14C pursuant to Item 1 of Schedule 14C, which states that a Schedule
14C must include the information called for by all of the items of
Schedule 14A, with limited exceptions, to the extent each item would
be applicable to any matter to be acted upon at a shareholder
meeting if proxies were to be solicited in connection with the
meeting.
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We request comment on the proposed amendments to implement
conforming changes to rules 14a-1, 14a-3, 14a-101, 14c-1, 14c-2, 14c-3,
14c-4, and 14c-101:
150. The definition of ``address'' in current rule 14a-3(e)(iv),
which we are proposing to move to rules 14a-1 and 14c-1, includes
``facsimile telephone number.'' Should this reference to fax numbers be
retained or is this technology outdated such that it is no longer
helpful to include it as a specific example?
151. Current rule 14a-3(a)(3)(ii) provides for circumstances where
state law would prevent a proxy statement from being furnished in
accordance with rule 14a-16. Because we are unaware of circumstances in
which state law would prevent a proxy statement from being furnished in
accordance with proposed amended rule 14a-16, we are proposing to
delete this provision. Are there circumstances where state law would
prevent a proxy statement from being furnished in accordance with
proposed amended rule 14a-16 such that we should retain this provision?
If so, please detail those circumstances.
152. Current rule 14a-3(e)(2) provides an exception to an issuer's
requirement to deliver proxy materials if certain deliveries to a
shareholder's address have been returned as undeliverable. We are
proposing to amend this provision to limit the exception to deliveries
to a shareholder's mailing address. Should this exception also apply to
deliveries to a shareholder's electronic address? Alternatively, should
this exception be eliminated entirely?
153. Current rule 14a-3(e) allows the practice of ``householding,''
whereby a soliciting person can send one copy of proxy materials to
multiple shareholders that share an address. Is it beneficial to
continue allowing householding for electronic mail addresses as the
current rules appear to contemplate? Do circumstances exist where
householding for shared email or other electronic addresses occurs? Is
allowing householding for electronic addresses impractical or harmful
such that householding should be allowed for only physical mailing
addresses?
154. Should references to ``a format readily communicated to
investors'' be changed in all rules under the Securities Act and the
Exchange Act \394\ to conform with the ``widely available format that
is convenient for reading in electronic format, being printed on paper,
and permanently retaining in an electronic format'' standard used in
Reg E-Delivery and our proposed changes to Regulations 14A and 14C?
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\394\ See, e.g., 17 CFR 230.253(d)(2); 17 CFR 230.420(b); 17 CFR
230.481(f); 17 CFR 230.605(c)(2); 17 CFR 240.12b-12; 17 CFR 240.14a-
5(d)(2); 17 CFR 240.14c-4.
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(g) Proposed Amendments to Exchange Act Rule 14d-5
Current tender offer rules provide some flexibility in the manner
in which tender offer materials are disseminated for both issuer and
third-party tender offers.\395\ While these rules expressly provide
that bidders may use reasonably prompt methods of distribution other
than mailing, we are proposing amendments to rule 14d-5 to clarify that
electronic delivery of tender offer materials is an acceptable method
of dissemination and to further facilitate electronic delivery of
tender offer materials.\396\
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\395\ See 17 CFR 240.13e-4(e); 17 CFR 240.14d-4.
\396\ We have not proposed changes to the corresponding rule
applicable to issuer tender offers (17 CFR 240.13e-4(e)), because we
believe the language of that rule is broad enough to encompass
electronic delivery of tender offer materials. In addition, we
believe that a bidder who is also the issuer has access to
stockholder lists and other information about its shareholders to
facilitate electronic delivery without additional rule changes.
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Specifically, we are proposing to amend:
Certain language throughout rule 14d-5 to clarify that the
permitted means for disseminating tender offer materials are not
limited to mailing or other types of delivery in paper format, by
substituting more general terms when describing the means of
dissemination; \397\
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\397\ See proposed rule 14d-5(a)(4)(ii); proposed rule 14d-5(b);
proposed rules 14d-5(b)(2) and (4) through (6); proposed rule 14d-
5(f)(3)(iii); proposed rule 14d-5(f)(4)(v). By contrast, rule 13e-4
already contemplates dissemination by mailing ``or otherwise
furnishing'' issuer tender offer materials. 17 CFR 240.13e-
4(e)(1)(ii)(A).
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Certain provisions in rule 14d-5 to clarify the
requirements that are only applicable for the mailing of tender offer
materials in paper format; \398\ and
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\398\ See proposed rule 14d-5(a)(4)(ii); proposed rule 14d-
5(b)(7); proposed rule 14d-5(g).
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The note to rule 14d-5 to confirm that electronic delivery
in accordance with section 303.102 of Reg E-Delivery is a reasonably
prompt method of dissemination that may be used instead of
mailing.\399\
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\399\ See proposed note to rule 14d-5.
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As discussed above, tender offer materials of third-party bidders
can be delivered electronically to the same extent as an issuer's
tender offer materials. Existing tender offer rules require an issuer
to facilitate the dissemination of a third-party bidder's tender offer
materials because the issuer has access to contact information for its
shareholders not available to third parties.\400\ This system will
continue if Reg E-Delivery is adopted as proposed, but with some
proposed changes specifically to facilitate electronic delivery. To
that end, we are proposing to revise certain references to
``addresses'' in current rule 14d-5 to refer to ``all addresses'' \401\
and add a
[[Page 45934]]
note to current rule 14d-5(c) to provide that for purposes of paragraph
(c), the term ``address'' means any mailing address or electronic
address. As a result, any stockholder list or security position listing
that an issuer provides to a third-party bidder under rule 14d-5(c)
must include all addresses, which would include both mailing and
electronic addresses, if available.\402\ Where the issuer cannot
provide all of the requisite stockholder list information, the proposed
note to current rule 14d-5(c) would require issuers to distribute the
third-party bidder's tender offer materials instead of providing the
stockholder list.\403\
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\400\ See 17 CFR.14d-5 (requiring the issuer to coordinate
dissemination of tender offer materials by providing a stockholder
list with contact information for record holders, or by
disseminating such materials on behalf of the third-party bidder).
\401\ See proposed rule 14d-5(c)(1) and (2).
\402\ See proposed note to rule 14d-5(c) (providing that the
term ``address'' as used in rule 14d-5(c) means any mailing address,
which would include a street address, a post office box, or other
similar destination to which paper documents are delivered,
facsimile telephone number, or electronic address, as defined in
Sec. 303.101 of Reg E-Delivery).
\403\ See proposed note to rule 14d-5(c) (providing that if the
subject company cannot provide all of the stockholder list
information specified in paragraph (c)(1), the subject company shall
send the bidder's tender offer materials in accordance with
paragraph (b)). We are proposing a substantially similar provision
for proxy materials. See proposed note to paragraph (b)(2) of rule
14a-7.
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We request comment on the following matters:
155. Are the proposed rule changes appropriate to address any
changes to the methods of disseminating tender offer materials if Reg
E-Delivery is adopted as proposed?
156. Are these rule changes needed? Are there additional changes
that are necessary or appropriate to facilitate the electronic delivery
of tender offer materials?
157. Current rule 14d-4(a)(2) \404\ permits the dissemination of
cash tender offers by publication of a summary advertisement in a
newspaper or newspapers, where the bidder furnishes the tender offer
materials in a reasonably prompt manner to any security holder who
requests them.\405\ Given changes in the way security holders access
news and other information and that these summary advertisements are
not always accessible online (including in a newspaper's digital
version), should we amend current rule 14d-4(a)(2) to expand or modify
the manner in which tender offer materials may be disseminated pursuant
to rule 14d-4(a)(2)? For example, would permitting dissemination by
means of a widely-distributed press release instead of a summary
advertisement (in addition to furnishing the tender offer materials
promptly upon request) be necessary or appropriate to facilitate
electronic delivery of tender offer materials?
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\404\ 17 CFR 240.14d-4(a)(2).
\405\ Current rule 14d-4(d) specifies the types of newspaper or
newspapers that may be used in order to adequately disseminate the
summary advertisement, as required by rule 14d-4(a)(2). See 17 CFR
240.14d-4(d).
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(h) Electronic Delivery of Covered Information by Third-Party Covered
Entities
As discussed above, the proposed definition of a ``covered entity''
would include third parties that are required to deliver covered
information to covered recipients who are not their own shareholders,
such as bidders in third-party tender offers and dissidents in
contested proxy solicitations.\406\ Third-party covered entities'
obligation to deliver covered information to covered recipients
generally arises in connection with a specific one-time transaction
involving the issuer (e.g., a tender offer or contested election of
directors).\407\ As a result, we do not expect that third-party covered
entities would seek to implement default electronic delivery systems
for the delivery of covered information relating to such
transactions.\408\ Following adoption of Reg E-Delivery and proposed
amended Regulations 14A and 14C and rule 14d-5, we expect these third
parties would be able to deliver covered information electronically to
the same extent the issuer itself could do so in connection with a
transaction. That is, if a covered recipient has provided the issuer
with affirmative consent to electronic delivery or the covered
recipient has been defaulted into e-delivery by the issuer in
accordance with Reg E-Delivery, the third party would be able to
deliver (or have the issuer deliver on its behalf) its covered
information to the covered recipient electronically, unless the covered
recipient has opted to receive paper for the type of covered
information that the third-party covered entity is required to
deliver.\409\
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\406\ See supra section II.B.1
\407\ See 17 CFR 240.14a-3;17 CFR 240.14d-4.
\408\ The discussion in this section relates to third-party
covered entities delivering covered information to covered
recipients on their own behalf and not intermediaries delivering the
third party's covered information to covered recipients that are the
intermediary's customers.
\409\ See supra section II.D.2
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The existing proxy and tender offer rules facilitate third parties'
ability to use electronic delivery to the same extent the issuer itself
is able do so by requiring coordination between issuers and third
parties for the delivery of tender offer or proxy materials to the
issuers' shareholders.\410\ As a general matter, issuers that are the
subject of third-party tender offers or proxy solicitations can elect
whether to send the third party's tender offer or proxy materials to
their shareholders or provide the third party with a shareholder list
that allows the third party to send its materials to the issuer's
shareholders.\411\ If the issuer sends its own materials to a
shareholder by electronic delivery because the shareholder has provided
the issuer with affirmative consent or the shareholder has been
defaulted into e-delivery by the issuer in accordance with Reg E-
Delivery, we would expect the issuer to send the third party's
materials to the shareholder electronically.
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\410\ See 17 CFR 2401.14a-7; 17 CFR 240.14d-5.
\411\ See 17 CFR 240.14a-7(a)(2); 17 CFR 240.14d-5(a)(3); 17 CFR
240.14d-5(b); 17 CFR 240.14d-5(c).
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If the issuer elects to provide the third party with its
shareholder list so that the third party can deliver its materials
itself, the shareholder list must include, among other things, the
names and addresses of the record holders and beneficial owners in the
issuer's possession.\412\ As discussed above,\413\ we are proposing to
incorporate the definition of ``electronic address'' under Reg E-
Delivery into the definition of ``address'' in current rule 14a-3 and
relocate this amended definition to proposed rule 14a-1 so that term
would apply more broadly to Regulation 14A. As a result, a shareholder
list provided under proposed amended rule 14a-7 would include
electronic addresses of the record holders, if available. If the issuer
cannot or will not provide electronic addresses on the shareholders
list due to, for example, the terms of any agreement between the issuer
and shareholder regarding electronic delivery or shareholder privacy
concerns, we would expect the issuer to send the third party's
materials to its shareholders. As discussed above,\414\ we are
proposing to add a clarifying note to current rule 14a-7(b)(2) and
current rule 14d-5(c) to confirm that the issuer cannot elect to
provide the third party with a shareholder list if the issuer cannot or
will not provide all the information required to be included on the
shareholder list.\415\
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\412\ See 17 CFR 240.14a-7(a)(2)(ii)(A) through (B); 17 CFR
240.14d-5(c)(1).
\413\ See supra section II.F.2.e.
\414\ See supra section II.F.2.f.
\415\ See proposed note to paragraph (b)(2) of rule 14a-7;
proposed note to paragraph (c) of rule 14d-5.
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We request comment on the electronic delivery of covered
information by third-party covered entities:
158. When the issuer delivers proxy or tender offer materials on
behalf of third parties in accordance with current
[[Page 45935]]
rule 14a-7(a)(2)(i) \416\ or current rule 14d-5(b),\417\ respectively,
the existing proxy and tender offer rules do not expressly require
issuers to use electronic delivery to the same extent the issuer itself
is able to when delivering its own materials. Are third parties
currently able to electronically deliver proxy and tender offer
materials to shareholders to the same extent the issuer itself can? Why
or why not? Should we amend our rules to expressly require issuers
delivering proxy or tender offer materials on behalf of third parties
to use electronic delivery to the same extent the issuer itself is able
to when delivering its own materials? Why or why not?
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\416\ 17 CFR 240.14a-7(a)(2)(i).
\417\ 17 CFR 240.14d-5(b).
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159. Are there meaningful concerns about shareholders' willingness
to receive or access electronically delivered covered information from
third parties versus from issuers? For example, if shareholders
received covered information from third parties, would they hesitate to
access such information due to security or other concerns?
160. Are additional rule changes necessary to accommodate or
facilitate electronic delivery of covered information by third parties?
For example, should we amend the proxy and tender offer rules to
eliminate the ability of issuers to elect to provide a shareholder list
to third parties and to specifically require issuers to disseminate
third parties' materials on behalf of third parties?
161. Do the proposed disclosure requirements in Reg E-Delivery
\418\ sufficiently alert shareholders about the possibility of
receiving covered information, such as proxy and tender offer
materials, electronically from third parties? If not, would additional
disclosure or other requirements be helpful?
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\418\ See proposed Reg E-Delivery Sec. 303.104(c)(1)(i)(A)
(requiring in the initial transition notice a brief description of
each type of covered information that will be delivered
electronically which must identify which covered information may be
delivered by someone other than the covered entity providing the
transition notice).
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162. Do the proposed disclosure requirements in Reg E-Delivery
\419\ sufficiently alert shareholders when covered information is being
delivered by (or on behalf of) a third party? If not, would additional
disclosure or other requirements be helpful?
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\419\ See proposed Reg E-Delivery Sec. 303.102(c)(1)(i)
(requiring in a statement of availability a prominent statement
identifying the covered entity, which would be the third-party
covered entity in the circumstances discussed in this section);
proposed Sec. 102(c)(2) (requiring the same for direct delivery of
covered information).
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163. Where an issuer delivers covered information through
electronic means other than an email or text message, such as a web
portal or mobile application, do our proposed rules adequately permit a
third party to electronically deliver its covered information in the
same manner?
164. For going private transactions that are not subject to either
the proxy or tender offer rules, would affiliates be able to access
required contact information for electronic delivery under current
rules,\420\ by virtue of their affiliation with the issuer? Or are
additional rule amendments needed to facilitate the exchange of that
information?
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\420\ See 17 CFR 240.13e-3(f)(1)(i).
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(i) Supplementing Electronic Delivery of Proxy Materials or Tender
Offer Materials With Delivery in Paper Format
When delivering proxy materials or tender offer materials
currently, we would expect issuers and third parties to generally use
the form of delivery preferred by the shareholders to the extent
shareholders have indicated a preference. For example, if the issuer
has obtained affirmative consent to electronic delivery of proxy
materials or tender offer materials from a record holder, we would
expect the issuer to generally deliver the proxy materials or tender
offer materials to the record holder electronically. We recognize there
are circumstances, however, where an issuer or third party may prefer
to deliver such materials in paper format even if the shareholders have
indicated a preference to receive or access such materials
electronically. For example, where an issuer or third party is
soliciting or seeking a response from shareholders within a specific
time frame, such as soliciting proxy authority from shareholders to
vote their shares at an upcoming shareholder meeting or asking
shareholders to tender their shares during an offer period, the issuer
or third party may determine that delivering the proxy materials or
tender offer materials in paper format would better serve this purpose.
While the proposed rules are designed to allow shareholders to receive
proxy materials and tender offer materials in the format they prefer,
nothing in the proposed rules would prevent an issuer or third party
from supplementing the electronic delivery of proxy materials or tender
offer materials with delivery of those materials in paper format.
We request comment on the ability of soliciting persons to also
deliver proxy materials and tender offer materials in paper format
following electronic delivery of such materials in accordance with
proposed Reg E-Delivery and proposed amendments to Regulations 14A and
14C and rule 14d-5:
165. Based on staff conversations with proxy service providers, we
understand that notice and access is generally not used by soliciting
persons in proxy contests because of lower response rates and expect
that soliciting persons may wish to maintain the option to not use e-
delivery in these and other circumstances. Should a soliciting person
be able to deliver proxy materials in paper format, as described in the
release, to shareholders who have consented to e-delivery or are
defaulted into e-delivery under Reg E-Delivery? If so, under what
circumstances? Should we impose additional requirements or restrictions
for soliciting persons that elect to also deliver proxy materials in
paper format following e-delivery of the proxy materials in accordance
with Reg E-Delivery and proposed amended rule 14a-16? Should soliciting
persons be able to deliver proxy materials in paper format without
regard to a shareholder's prior consent to e-delivery or a shareholder
having been defaulted into e-delivery under Reg E-Delivery?
G. Existing Commission Guidance
We anticipate that Reg E-Delivery, if adopted, would supersede the
1995 Guidance and 1996 Guidance in their entirety, with certain
principles from these releases reaffirmed in any release adopting Reg
E-Delivery. We anticipate that we would retain the majority of the 2000
Guidance, and only certain sections and examples would be superseded by
Reg E-Delivery. We describe in more detail and request comment below.
Much of the 1995 Guidance and 1996 Guidance provides a framework
for analyzing whether an electronic communication is delivered or
transmitted for purposes of the Federal securities laws that is
different in some respects from the framework in proposed Reg E-
Delivery. The 1995 Guidance and 1996 Guidance are generally based on a
three-part analysis--of whether the e-delivery satisfies requirements
for notice, access, and evidence to show delivery. For instance, these
releases identify the following examples of procedures evidencing
satisfaction of the delivery requirements, among others: (1) obtaining
informed consent from an investor to receive information through
electronic media; and (2) obtaining evidence that an investor actually
received information through electronic
[[Page 45936]]
media. The 2000 Guidance similarly includes some discussion and
examples that involve applications of the concepts of notice, access,
and evidence to show delivery.
Reg E-Delivery embodies similar general principles of notification
and disclosure, but subject to more specific requirements. The main
difference is the proposed move from the interpretive framework for
evidence to show delivery, to a rules-based framework providing for a
default e-delivery approach. Specifically, Reg E-Delivery sets forth
conditions for covered entities to deliver covered information to
covered recipients electronically without first obtaining covered
recipients' affirmative consent.\421\ Reg E-Delivery further
establishes specific conditions under which the Commission would
consider delivery requirements under the Federal securities laws to
have been satisfied by electronic delivery. These conditions reflect
our understanding of common e-delivery practices. They also are
designed to assist covered recipients in accessing covered information
in the format that they prefer, impose specific limits on access to
PFI, and provide relevant information about their option to opt out of
e-delivery, receive paper copies of covered information upon request,
and update one's electronic address (all free of charge), particularly
in view of the default e-delivery approach that would be permitted
under the proposed rule.\422\
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\421\ Section II.H infra addresses scenarios relating to the
transition from the E-Delivery Guidance to Reg E-Delivery, making
clear that to the extent covered entities have obtained affirmative
consent to e-delivery from certain covered recipients in the past in
reliance on past guidance, these covered entities may continue e-
delivery under Reg E-Delivery for these covered recipients, and no
particular transition process is necessary. (Covered entities that
elect to rely on Reg E-Delivery and that already have obtained
affirmative consent would, nevertheless, be subject to the
provisions of Reg E-Delivery addressing general disclosure, delivery
methods, right to free paper copies, and website availability).
Section II.I also discusses the hypothetical scenario of covered
recipients who have provided affirmative consent in the past and
then revoke affirmative consent following the adoption of Reg E-
Delivery. See also supra sections II.A and II.B.2, discussing
scenarios under which covered entities may choose to continue
obtaining consent to e-delivery under Reg E-Delivery from new
covered recipients in the future.
\422\ See proposed Reg E-Delivery Sec. Sec. 303.102(b) through
(h), and 303.103.
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Therefore, the discussion and examples in the E-Delivery Guidance
that are based on a framework of notice, access, and evidence to show
delivery (including the principle that informed consent may provide
evidence of delivery) reflect an approach to e-delivery that is
distinct in various specific respects from the approach in Reg E-
Delivery. The majority of the discussion in the 1995 Guidance and 1996
Guidance involves applications of these concepts.\423\ We therefore
anticipate that Reg E-Delivery, if adopted, would supersede these
releases in their entirety, with certain principles from these releases
reaffirmed in any release adopting Reg E-Delivery as discussed
below.\424\ The 2000 Guidance is not as heavily focused on these
concepts. Therefore, we anticipate that we would retain the majority of
the 2000 Guidance (and only certain sections and examples would be
superseded by Reg E-Delivery).\425\ Any retained 2000 Guidance would
need to be read and interpreted alongside any later modifying rules or
guidance.
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\423\ This includes the following sections and examples of the
1995 Guidance: Section II.B; section II.C; Examples 1, 2, 3, 4, 5,
6, 7, 8, 10, 11, 12, 23, 24, 25, 26, 28, 29, 31, 32, 33, 37, 42, 43,
45, 46, and 47 in section II.D. This also includes the following
sections and examples of the 1996 Guidance: section II.A.1; section
II.A.2; section II.A.3; section II.B.2; Examples 1, 2, 3, and 5 in
section IV.
\424\ To the extent a covered entity chooses to obtain consent
from covered recipients to use e-delivery under Reg E-Delivery, this
would be addressed in the required disclosure requirement under the
rule described above in section II.B.2, which addresses an opt-in
approach.
\425\ Specifically, Reg E-Delivery would supersede the following
sections and examples of the 2000 Guidance: section II.A.1
(``Electronic Delivery--Telephonic Consent''); section II.A.2
(``Electronic Delivery--Global Consent''); section II.A.3
(``Electronic Delivery--Use of Portable Document Format''); certain
examples in section II.E (``Examples'')--Examples 1, 2, 3, 4, and 5;
and section II.D. Section II.D in the 2000 Guidance is framed as a
request for comment, and some concepts in section II.D are
inconsistent with the proposed Reg E-Delivery approach. This section
is also unnecessary to retain because of these inconsistencies with
proposed Reg E-Delivery, and because the period for seeking public
input has passed. However, this release requests comment on certain
of the topics addressed in section II.D (e.g., section II.D.1
(``Access Equals Delivery,'' see supra section II.A) and section
II.D.4 (``Electronic-Only Offerings,'' see supra section II.B.7,
particularly, requests for comment on firms with an all-electronic
business model)).
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In addition, we are concerned that certain principles in the E-
Delivery Guidance, as discussed in this paragraph, may not result in
actual or meaningful delivery of covered information. We have these
concerns about consent-based approaches such as those discussed in
Examples 42, 43, 45, or 46 in the 1995 Guidance.\426\ These examples
rely on approaches where an individual gives consent to be informed via
a paper-based notice that updated versions of prospectuses or other
information are available online. Where an individual has not provided
an electronic address, delivery of paper mail that includes a URL, QR
code, or that otherwise informs the individual that information is
available online may not result in actual or meaningful delivery of
covered information.\427\ Moreover, Example 46 discusses the provision
of a notice of availability of a semi-annual fund shareholder report
significantly before the report is made available online (e.g., a
fiscal quarter before the information is made available). A notice that
is provided multiple months before information is made available online
may not result in actual or meaningful delivery of covered information,
because a recipient could have misplaced the notice or forgotten about
the notice prior to the time the information is made available
online.\428\ For these reasons, none of the approaches discussed in
Examples 42, 43, 45, or 46 in the 1995 Guidance would provide assurance
comparable to paper delivery that the required information will be
delivered in a way that is meaningful to the recipient's ability to
access the information online.
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\426\ See supra footnote 423.
\427\ See supra section II.A; see also supra section II.F.1
(discussing proposed rescission of rule 30e-3 under the Investment
Company Act).
\428\ The proposed timing approach provided in Reg E-Delivery,
whereby the e-delivery must be delivered no later than the date by
which covered information is required to be delivered under the
Federal securities laws (and must either be a direct delivery of
covered information, or a statement of availability that includes a
website address where covered information is available), does not
entail these same concerns because e-delivery would not occur in
advance of when covered information is actually available. See supra
section II.B.6.
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We anticipate that, if Reg E-Delivery were adopted, certain
principles in the 1995 Guidance and 1996 Guidance that are not based on
a framework of the concepts of notice, access, and evidence to show
delivery would continue to remain relevant and would be reaffirmed.
This would likely include the following principles:
(1) Investors who must receive notice of an update to a preliminary
prospectus that is posted online: If a company places a preliminary
prospectus on a website and then materially amends the registration
statement (also updating the preliminary prospectus on the website) and
determines that recirculation of the updated prospectus is required
prior to effectiveness, the company must send notice of the update only
to those investors who are expected to purchase securities in the
offering (or take other measures to deliver the information to those
investors). (Reaffirmation of the principles in 1995 Guidance, Example
9)
(2) ``Envelope theory'' of covered information provided through
electronic media: Where different pieces of
[[Page 45937]]
covered information are delivered together electronically (e.g., both
are included as attachments to the same email and neither is
comparatively more burdensome to access), they should be considered
delivered together as if they were in the same paper envelope. An
example includes an email with a fund's final prospectus and
supplemental sales literature included as separate pdf attachments: the
fund may send supplemental sales literature in this fashion.\429\
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\429\ See rule 160 under the Securities Act. Rule 160 exempts
from the consumer consent requirements of the E-SIGN Act
prospectuses of registered investment companies that are used for
the sole purpose of permitting supplemental sales literature to be
provided to prospective investors. In adopting this rule, the
Commission stated that, consistent with the E-Delivery Guidance, the
rule permits a registered investment company to provide its
prospectus and supplemental sales literature on its website or by
other electronic means without first obtaining investor consent to
the electronic format of the prospectus. See Exemption From section
101(c)(1) of the Electronic Signatures in Global and National
Commerce Act for Registered Investment Companies, Securities Act
Release No. 7877 (July 27, 2000) [65 FR 47281 (Aug. 2, 2000)].
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Similarly, where one electronically provided document includes a
hyperlink to another electronic document, the hyperlinked document is
generally considered delivered together with the first document as if
they were in the same paper envelope. An example is a company's sales
literature delivered through e-delivery that includes a hyperlink to
the website address where the company's final prospectus is available
online.
Moreover, documents in close proximity on a website are generally
considered delivered together as if they were in the same paper
envelope. An example is a company that places its final prospectus and
supplemental sales literature on its website. Both the sales literature
and the prospectus are clearly identified and can be accessed on the
same screen. In this example, the prospectus would accompany the sales
literature. However, in order for a prospectus to be considered
delivered along with the sales literature, the prospectus cannot be
significantly more burdensome to access (e.g., no additional software
is necessary to read the prospectus, although the documents may be in
different formats).
(Reaffirmation of the principles in 1995 Guidance, Examples 14, 15,
34, 35, 38, 39, 40; 1996 Guidance, Example 4. See also 2000 Guidance,
Section II.A.4 (``Clarification of the `Envelope Theory' ''))
(3) Evidence of accessing covered information online: Where a
company has evidence that an individual has accessed covered
information online (e.g., through downloading, or by entering user
credentials), delivery requirements for that covered information are
satisfied. (Reaffirmation of the principles in 1995 Guidance, Examples
36, 48 and 49 (extending principles focused on prospectus delivery to
the delivery of any covered information))
(4) Implications of delivering a Statement of Additional
Information (``SAI'') in paper, where prospectus is delivered via e-
delivery: Where a fund places its prospectus on a website and does not
also include the SAI on the website (but instead provides a paper copy
of the SAI free of charge to any person who requests it), paper
delivery of the SAI does not prevent a fund from satisfying its
prospectus delivery requirements electronically.\430\ (Reaffirmation of
the principles in 1995 Guidance, Example 52)
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\430\ See Form N-1A, General Instruction C.2 and Item 1(b)(1).
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(5) Differences in format and content between paper and electronic
versions of a prospectus: Where an electronic version of a fund
prospectus has the same text as the paper version, but the text appears
in a different format (e.g., certain text is included as a block in the
margin of a page of the paper version, but that formatting is modified
in the electronic version to enhance online readability), the fund need
not make a separate filing under Securities Act rule 497 with respect
to the electronic version. The mere difference in format without any
difference in text would not qualify the electronic version as a
different ``form of prospectus'' for which filing is required. This
principle extends to differences in different electronic versions of a
prospectus (e.g., a mobile-optimized prospectus versus a prospectus
that one reads on a personal computer). However, where content differs
between the paper and electronic version, both versions should be filed
with the Commission as part of the company's registration statement, or
separately pursuant to rule 497. (Reaffirmation of the principles in
1996 Guidance, Example 6 (extended also to discuss differences in
different electronic versions of a prospectus), Example 7)
(6) Communications from Broker-Dealers' Customers and Investment
Advisers' Clients--In addition to requirements to deliver information,
the Exchange Act and the Advisers Act provide for broker-dealers and
investment advisers to ``receive'' or ``obtain'' responses from their
customers or clients. For example, Exchange Act rules 8c-1 and 15c2-1
require, under certain circumstances, broker-dealers to obtain a
customer's written consent in order to hypothecate securities.
Similarly, under the Advisers Act, certain provisions call for clients
to consent to a transaction or acknowledge receipt of certain
disclosures.\431\ The Commission generally views an electronic
communication from a customer to a broker-dealer or from a client to an
investment adviser as satisfying the requirements for such written
consent or acknowledgement. (Reaffirmation of the principles in 1996
Guidance, Section II.C, regarding communications from customers and
clients)
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\431\ See, e.g., Advisers Act Sec. Sec. 205(a)(2) and 206(3);
17 CFR 275.206(3)-2(a)(1).
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There are certain aspects of the 1995 Guidance that we would not
reaffirm, if Reg E-Delivery were adopted, because they have been
rendered moot or unnecessary by subsequent Commission rules.\432\ These
include:
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\432\ Similarly, if Reg E-Delivery were adopted, the Commission
anticipates that it would not reaffirm certain aspects of the 1995
Guidance or the 1996 Guidance that seem to be truisms. This includes
the following examples in the 1995 Guidance: Examples 17, 18, 19,
21, 22, 27, 41, and 44 in section II.D. This also includes the
discussion of the permissibility of using various electronic media
to disseminate advertisements for an investment adviser's services
or other information that is not subject to a delivery requirement,
in the second paragraph of section II.D of the 1996 Guidance.
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(1) Filing additional materials included as part of prospectus
using electronic media: Example 13 in the 1995 Guidance provides that,
when a company delivers a prospectus through electronic media and
additional materials are included in the delivery as part of the
prospectus (e.g., a movie illustrating the company's operations), the
company would need to file these materials with the Commission as an
appendix to the prospectus just as it would have to supplementally
provide these materials to the Commission in sales material. This
example is now addressed in rule 304(a) of Regulation S-T, and
therefore need not additionally be reaffirmed in this release.\433\
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\433\ See rule 304(a) of Regulation S-T (providing that if a
filer includes graphic, image, audio or video material in a document
delivered to investors and others that is not reproduced in an
electronic filing, the electronically filed version of that document
must include a fair and accurate narrative description, tabular
representation or transcript of the omitted material).
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(2) Preliminary prospectus online linking to a research report.
Example 16 in the 1995 Guidance provides that, where a company places a
preliminary prospectus online and provides direct access via hyperlink
to a broker's research report on the company, the direct and quick
access to the research report would be similar to the company
[[Page 45938]]
including the paper version of the research report in the same envelope
that it is using to mail the paper version of the preliminary
prospectus to potential investors. This example is now outdated in
light of the Commission's Securities Offering Reform amendments adopted
in 2005 (specifically, amendments to rules 137, 138, and 139 under the
Securities Act, expanding the circumstances in which offering
participants and persons who are not offering participants will have
safe harbor exemptions for dissemination of research reports during a
registered offering).\434\ Therefore, this example need not
additionally be reaffirmed in this release.
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\434\ See Securities Offering Reform Adopting Release, supra
footnote 13.
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(3) Offering materials online in the context of Regulation D
offerings: Example 20 in the 1995 Guidance provides that, where a
company is selling its common stock in a private placement pursuant to
Securities Act rule 506 of Regulation D, and the company places its
offering materials on its website, the placing of the offering
materials online would not be consistent with the prohibition against
general solicitation or advertising in rule 502(c) of Regulation
D.\435\ It is unnecessary to reaffirm topics addressing the extent to
which the use of internet websites entails general solicitation, as
this has been addressed in numerous Commission releases following the
publication of the 1995 Guidance.\436\
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\435\ Subsequent to the 1995 Guidance, Regulation D was amended
to permit general solicitation in connection with offerings
conducted under Rule 506(c). See Eliminating the Prohibition Against
General Solicitation and General Advertising in Rule 506 and Rule
144A Offerings, Securities Act Release No. 9415 (July 10, 2013) [78
FR 44771 (July 24, 2013)]. Accordingly, this example remains
applicable only for offerings conducted under Rule 506(b) of
Regulation D.
\436\ See, e.g., Facilitating Capital Formation and Expanding
Investment Opportunities by Improving Access to Capital in Private
Markets, Securities Act Release No. 10884 (Nov. 2, 2020) [86 FR 3496
(Jan. 14, 2021)] (``The Commission has stated that other uses of
publicly available media, such as unrestricted websites, also
constitute general solicitation and general advertising.''); Concept
Release on Harmonization of Securities Offering Exemptions,
Securities Act Release No. 10649 (June 18, 2019) [84 FR 30460 (June
26, 2019)]; see also 2000 Guidance, supra footnote 3, at section
II.C.2 (``Online Private Offerings under Regulation D'').
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(4) Timing for maintaining fund prospectuses and annual and semi-
annual reports online: Example 50 in the 1995 Guidance addresses these
timing points, which are now addressed by the principles in proposed
Reg E-Delivery, rules 498 and 498A under the Securities Act, and rule
30e-1 under the Investment Company Act.
(5) Hyperlinks and sequencing requirements in a Form N-1A
prospectus: Example 51 in the 1995 Guidance discusses these
requirements, where a prospectus is transmitted electronically. These
requirements are now addressed in Form N-1A and rule 498 under the
Securities Act.
We request comment on the following:
166. If Reg E-Delivery were adopted, is it appropriate that the
rule would supersede the 1995 Guidance and 1996 Guidance in their
entirety, with certain principles from these releases reaffirmed in any
release adopting Reg E-Delivery? Would this be appropriate in light of
the fact that much of the 1995 Guidance and 1996 Guidance are based on
a framework of notice, access, and evidence to show delivery, and
therefore reflect an approach to e-delivery that is distinct from the
approach in proposed Reg E-Delivery? Alternatively, should the
Commission adopt only the provisions of proposed Reg E-Delivery that
provide a framework and requirements for an opt-out default, not the
general provisions relating to disclosure, electronic delivery methods,
or website availability, and retain the general interpretive framework
of the E-Delivery Guidance as it applies to the use of affirmative
consent or other evidence of delivery?
167. If Reg E-Delivery were adopted, should we generally reaffirm
the 2000 Guidance, except for those sections and examples of the 2000
Guidance that involve applications of the concepts of notice, access,
and evidence to show delivery? Are there any additional sections that
should be retained? For example, would it be helpful to retain section
II.A.2 (``Global Consent''), given that covered entities could continue
seeking affirmative consent from covered recipients even though they
would not be required to do so under the proposed rule? Or would it be
helpful to reaffirm the 2000 Guidance in its entirety? Alternatively,
should Reg E-Delivery, if adopted, supersede the 2000 Guidance in its
entirety, with only certain principles reaffirmed in any release
adopting Reg E-Delivery?
168. Do commenters agree that the consent-based approaches
discussed in Examples 42, 43, 45, or 46 in the 1995 Guidance may not
result in actual or meaningful delivery of covered information? Why or
why not? Do commenters agree that a notice that is provided multiple
months before information is made available online would not result in
actual or meaningful delivery of covered information?
169. Are there any other aspects of the 1995, 1996, or 2000
Guidance that describe e-delivery practices that may not result in
actual or meaningful delivery of covered information?
170. If Reg E-Delivery were adopted, should the Commission retain
the E-Delivery Guidance releases in their entirety, and permit covered
entities to choose whether to comply with Reg E-Delivery or
alternatively to reference the earlier E-Delivery Guidance releases
when effecting e-delivery to covered recipients? Would such an approach
enhance choice or would it be confusing for covered entities and/or
covered recipients? Would this be helpful to preserve flexibility for
covered entities that develop a method of e-delivery that differs from
Reg E-Delivery but results in the required information being delivered?
171. If Reg E-Delivery were adopted, should we reaffirm certain
principles from the 1995 Guidance and 1996 Guidance that do not involve
applications of the concepts of notice, access, and evidence to show
delivery? Would this reaffirmation assist practitioners and others who
otherwise could be confused about what aspects of the 1995 Guidance and
1996 Guidance continue to apply? Would this reaffirmation be helpful in
updating outdated technological concepts in the 1995 Guidance and 1996
Guidance? Alternatively or additionally, should we reaffirm any
principles from the E-Delivery Guidance that do involve applications of
the concepts of notice, access, and evidence to show delivery? If so,
what principles and why? For example, to the extent that covered
entities anticipate continuing to obtain affirmative consent to use e-
delivery, would restating any of these principles be helpful? Should
any of the principles from the E-Delivery Guidance be incorporated in
Reg E-Delivery? For example, should Reg E-Delivery address any of the
principles in the above discussion of the ``envelope theory'' of
covered information provided through electronic media, for instance to
address the delivery of a fund's prospectus along with supplemental
sales literature?
172. Do commenters agree with the inclusion and framing of the E-
Delivery Guidance principles we would anticipate retaining, as
discussed above? Should any of the included principles not be retained?
Are there any additional principles from the 1995 Guidance and 1996
Guidance that should be retained?
H. Compliance Period
As discussed above, we anticipate that if Reg E-Delivery were
adopted, it would generally supersede the existing
[[Page 45939]]
E-Delivery Guidance.\437\ Specifically, we anticipate that Reg E-
Delivery would supersede the 1995 Guidance and 1996 Guidance in their
entirety, with certain principles from these releases reaffirmed in any
release adopting Reg E-Delivery.\438\ We anticipate that we would
retain the majority of the 2000 Guidance (and only certain sections and
examples would be superseded by Reg E-Delivery). We anticipate
providing a two-year interim period running from the rule's effective
date (which we propose to be 60 days after publication of any final
rule in the Federal Register) before rescinding the 1995 Guidance and
1996 Guidance (with certain principles reaffirmed in any release
adopting Reg E-Delivery).\439\ Following this, covered entities that
wish to be assured that they have satisfied applicable requirements to
deliver covered information under the Federal securities laws through
the use of e-delivery would have to comply with the requirements of Reg
E-Delivery.
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\437\ See supra section II.G.
\438\ See supra footnote 425 and accompanying text.
\439\ We anticipate rescinding these releases on the date that
the Commission would adopt Reg E-Delivery, with the rescission
effective two years following Reg E-Delivery's effective date.
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The two-year interim period would be designed to keep this guidance
in place while covered entities are reviewing their practices for
compliance with Reg E-Delivery, as well as while covered recipients
receiving paper are (as applicable) being moved to default e-delivery,
as discussed above in section II.D. The two-year interim period would
provide covered entities that are transitioning covered recipients
receiving paper to default e-delivery with flexibility regarding when
to provide the required initial notice. Also, this period would permit
covered entities, if they choose, to take more than 180 days to begin
e-delivery of covered information to covered recipients receiving paper
(the transition time that the proposed rule specifies following the
initial notice), before the rescission of the 1995 Guidance and 1996
Guidance would be effective. In addition, the two-year interim period
would give covered entities time to adjust their current e-delivery
practices, for example, to develop the required e-delivery disclosures,
conform their e-delivery statements of availability (or direct delivery
of covered information) to reflect the content that Reg E-Delivery
would require, and to ensure that they are prepared to comply with Reg
E-Delivery's other requirements. A two-year interim period would
provide time for covered entities to review their processes and systems
in light of the requirements of Reg E-Delivery and make any necessary
updates.
We considered a tiered compliance period, with a longer compliance
period for small entities. While reliance on Reg E-Delivery is
voluntary, we anticipate that covered entities that choose to rely on
the rule would review their current e-delivery processes for
consistency with the rule's requirements and update those processes as
appropriate. Therefore, small entities may benefit from additional time
to review and update processes. While covered entities would have some
flexibility on when to start relying on proposed Reg E-Delivery, they
effectively would be constrained by the period that the E-Delivery
Guidance is in place to the extent that they want to use an approach
that either the E-Delivery Guidance or Reg E-Delivery provides. Because
it would be confusing to rescind the E-Delivery Guidance with respect
to certain covered entities but not others, a tiered compliance period
for small covered entities would not be workable in the context of
proposed Reg E-Delivery. Taking all of this into account, we are
proposing a relatively long compliance period (two years) for all
covered entities, not just small covered entities.
After the publication of Reg E-Delivery as it may be finalized, but
before the effective date of any E-Delivery Guidance rescission, a
covered entity could rely either on the E-Delivery Guidance or on Reg
E-Delivery when using e-delivery to satisfy delivery requirements under
the Federal securities laws. To promote regulatory consistency,
however, any covered entity that would elect to rely on Reg E-Delivery
during this period would only be able to rely on Reg E-Delivery and the
principles of the E-Delivery Guidance that the Commission would
reaffirm, as discussed above. A covered entity would not, for example,
be able to transition covered recipients receiving paper to default e-
delivery under Reg E-Delivery without complying with the other
requirements of Reg E-Delivery that are not covered under the E-
Delivery Guidance (such as the content requirements for statements of
availability, the provision of paper copies of covered information at
no charge upon request, etc.).
Further, a covered entity that received affirmative consent under
the E-Delivery Guidance to deliver all covered information by or on
behalf of the covered entity electronically to the covered recipient as
of the effective date of Reg E-Delivery, if adopted, would not be
required to provide disclosure to that covered recipient about the e-
delivery of covered information.\440\ That covered recipient already is
receiving regulatory communications at the electronic address provided.
Nevertheless, that covered entity would be required to comply with all
other provisions of Reg E-Delivery to be assured of the delivery safe
harbor that the rule would provide.\441\ In addition, a covered
recipient who provided affirmative consent under the E-Delivery
Guidance may revoke that affirmative consent on or after the effective
date of Reg E-Delivery. In that case, the covered recipient would opt
out of e-delivery using the processes that the covered entity describes
under the requirements in proposed Reg E-Delivery and would be treated
like other covered recipients who request paper delivery under Reg E-
Delivery.\442\
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\440\ See proposed Reg E-Delivery Sec. 303.102(b); see supra
section II.B.2. Covered entities that obtain a covered recipient's
affirmative consent to e-delivery after the effective date of Reg E-
Delivery would, however, have to provide the disclosure of E-
Delivery required under Sec. 303.102(b)(ii) before relying on Reg
E-Delivery to use e-delivery to deliver covered information to that
covered recipient. See also supra footnote 224.
\441\ See supra sections II.B and II.C.
\442\ See proposed Reg E-Delivery Sec. 303.102(f); see supra
section II.B.7.
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Similarly, we anticipate that following a two-year interim period
running from the rule's effective date, covered entities with delivery
obligations under Regulations 14A, 14C, and 14D would have to comply
with the applicable requirements of the proposed amended rules in
Regulations 14A and 14C and proposed amended rule 14d-5, including the
provisions of Reg E-Delivery that are incorporated into such amended
rules. The two-year interim period would allow covered entities to
review their practices for compliance with these proposed amended rules
and give covered entities time to adjust their current e-delivery
practices for proxy materials to, for example, to develop the required
e-delivery disclosures, conform their e-delivery statements of
availability of proxy materials (or direct delivery of proxy materials)
to reflect the content that the proposed amended rules would require,
and to ensure that they are prepared to comply with other requirements
in the proposed amended rules. A two-year interim period would provide
time for covered entities to review their processes and systems in
light of the requirements in the proposed amended rules in Regulations
14A and 14C and proposed amended rule 14d-5 (including the requirements
of Reg E-Delivery incorporated into such rules) and make any necessary
updates.
[[Page 45940]]
In addition, after the publication of Reg E-Delivery and the proposed
amended rules in Regulations 14A and 14C as they may be finalized, but
before the effective date of any E-Delivery Guidance rescission, when
using e-delivery to satisfy delivery requirements under Regulations 14A
and 14C, a covered entity could rely either on the current rules in
Regulations 14A and 14C and the E-Delivery Guidance or on the proposed
amended rules in Regulations 14A and 14C (including the requirements of
Reg E-Delivery incorporated into such rules) and the principles of the
E-Delivery Guidance that the Commission would reaffirm.
We request comment on the proposed interim period:
173. Would a two-year interim period provide covered entities that
seek to rely on Reg E-Delivery sufficient time to come into compliance
with Reg E-Delivery? Should the interim period be shorter or longer?
Would a one-year or sixteen-month interim period be beneficial and
feasible? Does the E-Delivery Guidance need to remain in place while
covered entities are transitioning to Reg E-Delivery? Please explain.
174. Would a two-year interim period be sufficient to provide
covered entities with delivery obligations under Regulations 14A, 14C,
and 14D time to come into compliance with the proposed amended rules in
Regulations 14A and 14C and proposed amended rule 14d-5 (including the
requirements of Reg E-Delivery incorporated into such rules)? Should
the interim period for compliance with these rules be shorter or
longer? Please explain. Should the interim period for compliance with
the proposed amended rules in Regulations 14A and 14C instead be tied
to the timing of shareholder meetings such that compliance is required
for any shareholder meeting held after a specific date (e.g., for any
shareholder meeting held after July 31, 2028)?
175. Rather than the two-year proposed compliance period, should we
adopt tiered compliance periods for small and large covered entities?
For example, should we provide two years for small covered entities to
continue relying on the E-Delivery Guidance, before the effective date
of its rescission, with some shorter period for large covered entities?
176. Should Reg E-Delivery explicitly address any scenarios related
to the transition from reliance on the E-Delivery Guidance to reliance
on Reg E-Delivery? For example, should Reg E-Delivery address scenarios
where covered entities have obtained a covered recipient's affirmative
consent to e-delivery obtained in reliance on the E-Delivery Guidance
Releases? Should Reg E-Delivery explicitly address what the Commission
expects if that affirmative consent is revoked by a covered recipient
after Reg E-Delivery's effective date?
III. Economic Analysis
A. Introduction
Paper, printing, and mailing costs associated with the delivery of
regulatory disclosures and reports can be significant, and those costs
routinely exceed the costs of e-delivery.\443\ Further, since the E-
Delivery Guidance releases were published, access to and usage of
electronic communications technologies have expanded
significantly.\444\ Proposed Reg E-Delivery, if adopted, would be the
Commission's primary rule addressing e-delivery. Under proposed Reg E-
Delivery, a covered entity would, at its option, be able to use e-
delivery as the default delivery method to satisfy its requirements
under the Federal securities laws to deliver or transmit covered
information to covered recipients. The use of e-delivery under the
proposed rule, regardless of whether a covered entity chooses to use
electronic or paper delivery as the default delivery method, would be
subject to certain conditions on the method, timing, and ability to
change delivery methods, as well as requirements for websites on which
covered information is available.\445\ Covered entities that comply
with the conditions of Reg E-Delivery would be assured that they have
satisfied, through the use of e-delivery, applicable requirements to
deliver covered information under the Federal securities laws. Also,
covered recipients that affirmatively express a preference for delivery
in paper format would receive it free of charge.
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\443\ See supra section II.A.
\444\ See supra sections I.B and II.A and infra section
III.B.3.b.
\445\ See supra section I.D for an overview of the requirements
of proposed Reg-E-Delivery.
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The proposal, if adopted, would generally supersede the current
guidance-based e-delivery framework, which effectively defaults
investors and other recipients of covered information to deliveries in
paper format if no delivery preference is affirmatively expressed. Reg
E-Delivery would reduce barriers to the use of e-delivery by replacing
the current framework that is based largely on an opt-out e-delivery
approach.\446\ The proposed conditions for e-delivery under the
proposed rule, which generally reflect our understanding of current
common e-delivery practices, are designed to help ensure that
information delivered electronically is delivered in a user-friendly
format while also protecting PFI and providing a mechanism for covered
recipients to change delivery methods.
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\446\ See supra section II.A at text before and accompanying
footnote 57; see also section II.F for a more detailed discussion of
the proposal to rescind rule 30e-3, section II.G for a discussion of
the anticipated superseding of much of the E-Delivery Guidance by
Reg E-Delivery (if adopted), and section I.B for a discussion of
survey data on investor preferences.
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The Commission also addresses the application of the E-SIGN Act
with respect to proposed Reg E-Delivery. To the extent that any covered
information delivered under proposed Reg E-Delivery would have been
subject to the consumer consent requirements of the E-SIGN Act, such
covered information would be exempt from these requirements.\447\
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\447\ See supra section II.E.
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We are mindful of the costs imposed by, and the benefits obtained
from, our rules. Section 2(b) of the Securities Act, section 3(f) of
the Exchange Act, section 2(c) of the Investment Company Act and
section 202(c) of the Advisers Act state that when the Commission is
engaging in rulemaking under such titles and is required to consider or
determine whether the action is necessary or appropriate in (or, with
respect to the Investment Company Act, consistent with) the public
interest, the Commission shall consider whether the action will promote
efficiency, competition, and capital formation, in addition to the
protection of investors. Further, section 23(a)(2) of the Exchange Act
requires the Commission to consider, among other matters, the impact
such rules will have on competition and states that the Commission
shall not adopt any rule that will impose a burden on competition not
necessary or appropriate in furtherance of the purposes of the Exchange
Act. The following analysis considers, in detail, the potential
economic effects that may result from the proposed rule, including the
benefits and costs to investors and other market participants as well
as the broader implications of the proposed rule for efficiency,
competition, and capital formation.
Where possible, we have attempted to quantify the benefits, costs,
and effects on efficiency, competition, and capital formation expected
to result from the proposed rule. We are providing both a qualitative
assessment and quantified estimates of the potential economic
[[Page 45941]]
effects of the proposed rule (and related proposed amendments) where
feasible. As explained in more detail below, because we do not have,
and in certain cases do not believe we can reasonably obtain, reliable
quantitative evidence to use as a basis for our analysis, we are unable
to quantify certain economic effects.
B. Baseline and Affected Parties
The baseline against which the benefits, costs, and the impact on
efficiency, competition, and capital formation of the proposed rule and
the proposed amendments to existing Commission rules to facilitate the
proposed e-delivery framework are measured consists of the current
state of the securities markets and the current regulatory framework
with respect to e-delivery of covered information.\448\
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\448\ See, e.g., Nasdaq Stock Mkt. LLC v. SEC, 34 F.4th 1105,
1111-14 (D.C. Cir. 2022). This approach also follows SEC staff
guidance on economic analysis for rulemaking.See SEC Staff, Current
Guidance on Economic Analysis in SEC Rulemakings (Mar. 16, 2012),
available at https://www.sec.gov/divisions/riskfin/rsfi_guidance_econ_analy_secrulemaking.pdf (``The economic
consequences of proposed rules (potential costs and benefits
including effects on efficiency, competition, and capital formation)
should be measured against a baseline, which is the best assessment
of how the world would look in the absence of the proposed
action.''); see also id. at 7 (``The baseline includes both the
economic attributes of the relevant market and the existing
regulatory structure. . .'').
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1. Guidance and Existing Regulations Governing Use of Electronic Media
The Federal securities laws generally do not prescribe paper as the
sole means of delivery of regulatory documents; however, required
regulatory disclosures and reports have generally been delivered in
paper unless the person with the right to receive these disclosures and
reports has elected otherwise.\449\ The Commission has expressed
interpretive views on the use of e-delivery in the E-Delivery Guidance
\450\ and, over time, many investors have increasingly expressed a
preference for e-delivery of financial and other regulatory
disclosures.
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\449\ See supra footnote 8 and accompanying text; see also
requests for comment supra section II.B.7 (it is our understanding
that there may be certain firms that currently reserve the right,
when a person establishes a customer or client relationship with
such firm or otherwise through contract, to restrict or close the
account of a person who requests paper).
\450\ See E-Delivery Guidance, supra footnote 3.
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The E-Delivery Guidance is largely based on an ``opt in'' approach
to e-delivery and provides an interpretive framework for issuers and
certain other market intermediaries to rely on to transmit disclosure
materials and other required information electronically in lieu of
paper. In the E-Delivery Guidance, the Commission discussed three main
elements to consider in satisfying delivery requirements
electronically--notice, access and evidence of delivery--and much of
the E-Delivery Guidance includes discussions and examples of how these
elements may be satisfied.\451\ For instance, the 1995 Guidance and
1996 Guidance provide a framework for analyzing whether an electronic
communication has been delivered or transmitted under the Federal
securities laws and provide a non-exhaustive and non-exclusive list of
examples of procedures that would satisfy the delivery requirements,
including, for example: (1) obtaining informed consent from an investor
to receive information through electronic media; and (2) obtaining
evidence that an investor actually received information through
electronic media.\452\ The 2000 Guidance similarly includes some
discussion and examples that involve applications of the concepts of
notice, access, and evidence to show delivery, including through
obtaining informed consent from the investor.\453\ Issuers and other
market intermediaries acting consistently with the E-Delivery Guidance
typically obtain an investor's informed consent to e-delivery to
satisfy the ``evidence of delivery'' condition.\454\
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\451\ See supra footnote 423 and accompanying text.
\452\ See 1995 Guidance and 1996 Guidance supra footnote 3; see
also supra section II.G. In addition to the examples discussed
above, the E-Delivery Guidance also includes the following as
examples of procedures evidencing satisfaction of the delivery
requirements: (1) disseminating information through certain
facsimile methods; (2) an investor's accessing a document with
hyperlinking to a required document and (3) using forms or other
material available only by accessing the information.
\453\ See 2000 Guidance, supra footnote 3.
\454\ See E-Delivery Guidance, supra footnote 3; see also
Tailored Shareholders Report Adopting Release, supra footnote 13.
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E-delivery practices under the E-Delivery Guidance vary. In terms
of the format of e-delivery, we understand that it is common for
investors and other recipients of information who have elected to
receive e-delivery typically to receive an email or other electronic
notice that contains a link to where the materials are available online
or an email that includes the materials as attachments, similar to the
notice of availability approach and direct delivery approaches
discussed in sections II.B.3 and II.B.4 above. The E-Delivery Guidance
includes no generally-applicable requirements for content, format, or
manner of delivery.\455\ The timing of e-delivery generally occurs
within the same time frame as investors and other recipients of covered
information would receive paper documents.\456\ While the E-Delivery
Guidance does not include specific requirements for PFI, it does state
that information specific to personal financial matters requires
intermediaries to take reasonable precautions to ensure the integrity,
confidentiality, and security of that information.\457\
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\455\ See contra supra sections II.B.3, II.B.4, and II.B.6
(discussing content, format, and manner of delivery requirements
under proposed Reg E-Delivery). But see 1995 Guidance, supra
footnote 3, at text following n.22 (stating that, as is the case
with paper delivery, there should be an opportunity to retain a
permanent record of the electronically delivered information); 1995
Guidance at text accompanying n.14 (paper-based requirements
relating to font size, bold-face type, red ink, graphics, and
mailing may be modified as appropriate for documents delivered in
electronic format).
\456\ See 1995 Guidance, supra footnote 3, at text accompanying
n.11 (stating that the release addresses only the procedural aspects
under the Federal securities laws of electronic delivery, and does
not affect the rights and responsibilities of any party under the
Federal securities laws); see also id. at text accompanying n.26
(stating that if disclosure is made available by posting it on the
internet, making it available through online services, or making it
available by similar means, the document should be accessible for as
long as the delivery requirement applies); see also supra section
II.B.6.
\457\ See 1996 Guidance, supra footnote 3; see also supra
section II.B.5.
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The E-Delivery Guidance addresses the right to revoke consent of e-
delivery and receive paper, and to request paper copies of
electronically delivered information.\458\ While we understand that
many covered entities provide free paper copies of electronically
delivered covered information, the E-Delivery Guidance does not
directly address the provision of free paper copies, in the context of
investors and others who affirmatively elect e-delivery (although it
does discuss charges associated with electronic delivery, and the
provision of free paper, in certain specific contexts).\459\ Because
the E-Delivery
[[Page 45942]]
Guidance is based largely on an informed consent model of e-delivery,
it also does not address other aspects of proposed Reg E-Delivery that
are designed to provide protections to covered recipients in light of
the proposal to permit a default e-delivery method, such as the ability
to update one's electronic address (and choice of type of electronic
address) for free,\460\ and the proposed disclosure and notice
requirements associated with the use of e-delivery.\461\
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\458\ See 1995 Guidance, supra footnote 3, at text accompanying
n.27 (stating the Commission believes that, as a matter of policy,
where a person has a right to receive a document under the Federal
securities laws and chooses to receive it electronically, that
person should be provided with a paper version of the document if
any consent to receive documents electronically were revoked or the
person specifically requests a paper copy (regardless of whether any
previously provided consent was revoked)).
\459\ See, e.g., 1996 Guidance, supra footnote 3, at n.23 and
accompanying text (in discussing the provision of consent to e-
delivery, stating that the broker-dealer, transfer agent, or
investment adviser should inform the customer that there may be
potential costs associated with electronic delivery, such as on-line
charges), and at n.57 (discussing charges associated with obtaining
paper versions of investment adviser written disclosure statements,
or ``brochures,'' under Advisers Act rule 204-3); see also 2000
Guidance, supra footnote 3, at Example 5 (discussing the provision
of free PDF viewing software and the use of a toll-free telephone
number to request paper copies); see also Brown & Wood, SEC Staff
No-Action Letter (Feb. 17, 1995) (providing a staff no-action
position regarding conditions in order for a prospectus to be
considered delivered electronically, including delivery of a paper
copy upon request without charge); see also supra section II.B.7.
The E-Delivery Guidance also discusses procedures that would likely
be viewed as ``unduly burdensome'' in the context of determining
whether intended recipients can effectively access the information
provided. See 1995 Guidance at text accompanying n.24. Certain rules
under the Federal securities laws specifically provide for the
delivery of free paper copies (see, e.g., rule 14a-16 under the
Exchange Act; rule 30e-1 under the Investment Company Act). But see
section 101(c) of the E-SIGN (addressing the possibility of fees
being charged for paper).
\460\ See supra section II.B.8.
\461\ See supra sections II.B.2, II.D.2.
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There are no specific requirements in the E-Delivery Guidance for
policies and procedures reasonably designed to identify and remediate
e-delivery failures.\462\ There are also no specific requirements in
the E-Delivery Guidance for policies and procedures designed to ensure
website availability of required information, or specific requirements
for presentation of covered information on a website.\463\ However, the
E-Delivery Guidance states that an electronic medium would not provide
an adequate means for the delivery of required disclosure, and thus not
serve the statutory purposes, if the medium does not permit effective
communication to investors or is practically unavailable.\464\
Similarly, the E-Delivery Guidance states that issuers and other
entities providing e-delivery should have reason to believe that the
electronic means they select will result in the satisfaction of the
delivery requirements, and should consider the need to establish
procedures to ensure that these delivery obligations are met.\465\
Therefore, we anticipate that covered entities using e-delivery under
the E-Delivery Guidance have generally developed processes to identify
e-delivery failures and website availability failures. Our
understanding is that covered entities' practices with respect to
website presentation of covered information are varied.\466\
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\462\ See supra section II.B.9.
\463\ See supra section II.C. The presentation of covered
information on a website is generally addressed through the
discussion in the E-Delivery Guidance about the use of electronic
media that are so burdensome that intended recipients cannot
effectively access the information provided. See, e.g., 1995
Guidance, supra footnote 3, at n.24 and accompanying text.
\464\ See 1995 Guidance, supra footnote 3, at text accompanying
n.20; see also id. at text accompanying nn.21-22 (stating that the
Commission would view information distributed through electronic
means as satisfying the delivery or transmission requirements of the
Federal securities laws if such distribution results in the delivery
to the intended recipients of substantially equivalent information
as these recipients would have had if the information were delivered
to them in paper form).
\465\ See 1995 Guidance and 1996 Guidance, supra footnote 3.
\466\ See, e.g., supra footnote 141 and accompanying text; see
also, e.g., ADI 2025-15, website Posting Requirements, available at
https://www.sec.gov/about/divisions-offices/division-investment-management/accounting-disclosure-information/adi-2025-15-website-posting-requirements.
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Since the publication of the E-Delivery Guidance, electronic
communications methods have evolved with advances in technology and the
increased population of investors and others electing to receive
financial documents and other regulatory materials electronically.\467\
The regulatory framework has also evolved and, since the publication of
the E-Delivery Guidance, the Commission and other U.S. regulators \468\
have increasingly taken action to broaden both the scope of permissible
electronic communications and to transition out of a regulatory
framework in which paper is considered the default delivery method.
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\467\ See supra footnote 25 and accompanying text; see also
supra section I.B for a more detailed discussion regarding
advancements in telecommunications capability and changes in e-
delivery preference.
\468\ See supra footnote 46 and accompanying text (discussing
that some SROs have also taken steps to permit disclosure through
electronic media and shift from a framework that looks to paper as a
default delivery method).
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Over the past decades, the Commission has adopted rules that entail
disclosure approaches involving electronic media. Among other rules, as
described in more detail in section I.A and section II.F, these
included a string of amendments to the proxy rules under the Exchange
Act, beginning in 2007 with the E-Proxy Adopting Release \469\ and the
Shareholder Choice Regarding Proxy Materials Adopting Release \470\ and
continuing in 2010 with the Amendments to Rules Requiring internet
Availability of Proxy Materials Adopting Release.\471\ In each case, an
issuer or other soliciting person can satisfy its obligation to furnish
proxy materials under the current proxy rules to shareholders by
posting its proxy materials on a website and sending the notice of
internet availability or providing a full set of proxy materials to
record holders.\472\ In addition, under the current proxy rules,
issuers are required to make copies of the proxy materials available to
shareholders on request, at no charge to the shareholders.\473\
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\469\ See E-Proxy Adopting Release, supra footnote 13.
\470\ See also Shareholder Choice Adopting Release, supra
footnote 272.
\471\ See Amendments Adopting Release, supra footnote 272.
\472\ See rule 14a-16; see also supra footnote 276.
\473\ 17 CFR 240.14a-16(j)(1).
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Commission rules that involve the use of electronic media to
deliver regulatory information also include rule 30e-3 under the
Investment Company Act, which the Commission adopted in 2018.\474\ This
rule provides certain registered investment companies with an optional
method to satisfy their obligations to transmit shareholder reports by
making such reports and other materials accessible online, free of
charge, at a website address specified in a notice to
shareholders.\475\ Investment companies that choose to rely on the rule
are required to make their shareholder reports available online and to
provide shareholders with paper notices of the website availability of
the shareholder reports. The rule was designed to accommodate the
preferences of all investors regarding the means of communications--
whether they wished to receive reports in paper or electronically, or
simply to be notified that the reports are available online.\476\ In
2022, the Commission adopted rules to narrow the scope of rule 30e-3
such that open-end funds could no longer rely on the rule to satisfy
their shareholder report transmission obligations.\477\ Under this
narrower scope, only filers of Form N-2 (registered closed-end
management companies and business development companies) and Form N-3
(managed
[[Page 45943]]
insurance company separate accounts) that have shareholder report
transmission obligations under Investment Company Act rule 30e-1 may
choose to rely on rule 30e-3.
---------------------------------------------------------------------------
\474\ See Rule 30e-3 Adopting Release, supra footnote 213. In
addition, Securities Act rule 172 provides an ``access equals
delivery'' model for final prospectus delivery obligations for
certain offerings. Under this rule, subject to certain exclusions
and conditions, final prospectus delivery obligations under section
5(b)(2) of the Securities Act are deemed satisfied through the
filing of the final prospectus with the Commission. See Securities
Offering Reform Adopting Release, supra footnote 13; see also supra
section II.F.1 for a more detailed discussion of rule 30e-3.
\475\ See Rule 30e-3 Adopting Release, supra footnote 213.
\476\ See id. at text following n.17.
\477\ See Tailored Shareholder Reports Adopting Release, supra
footnote 13.
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2. Affected Parties
The proposed rule would affect the delivery by covered entities of
covered information to covered recipients. Below we present baseline
statistics on the covered entities, which would include any person
required to deliver covered information to a covered recipient under
the Federal securities laws--including registered investment advisers,
regulated investment companies, registered broker-dealers, transfer
agents, corporate issuers, indenture trustees and obligors with
delivery obligations under the Trust Indenture Act, third parties that
are required to deliver covered information to covered recipients who
are not their own shareholders,\478\ municipal securities dealers,
security-based swap dealers (``SBSDs'') and major security-based swap
participants (``MSBSPs''), security-based swap data repositories
(``SBSDRs''), security-based swap execution facilities
(``SBSEFs''),\479\ and funding portals. For each covered entity, we
also provide available baseline statistics on covered recipients that
may receive covered information from the entity under the proposed
rule.
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\478\ See section II.B.1 for a description of covered entities
and covered recipients under the proposed rule.
\479\ In this release, SBSDs, MSBPs, SBSDRs and SBSEFs are
collectively referred to as the ``SBS Entities.''
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(a) Registered Investment Advisers
Registered investment advisers provide a variety of services to
their clients, including financial planning advice, portfolio
management, and pension consulting.\480\ These advisers are required to
deliver information to their clients pursuant to Federal securities
laws that would be covered by the proposed rule. This information
primarily includes firm brochures and brochure supplements,\481\ client
relationship summaries,\482\ privacy notices,\483\ data breach
notices,\484\ and quarterly statements.\485\
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\480\ See Form ADV, Item G.
\481\ 17 CFR 275.204-3.
\482\ 17 CFR 275.204-5.
\483\ 17 CFR 248.5.
\484\ 17 CFR 248.3.
\485\ 17 CFR 270.3a-4.
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As of December 31, 2025, there were 16,442 investment advisers
registered with the Commission with a total of more than 65 million
clients and $177 trillion in assets under management.\486\
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\486\ Form ADV data for the reporting period ending December
2025 with filings received through March 31, 2026. The number of
clients is based on Item 5.D(a-n) and Item 5.F(2)(c).
[GRAPHIC] [TIFF OMITTED] TP21JY26.005
[[Page 45944]]
Figure 1 shows the cumulative distribution of the number of clients
(all types) across investment advisers registered with the Commission
as of December 31, 2025. The distribution is right-skewed, with a small
number of advisers serving large numbers of clients: 16 advisers
reported more than one million clients, while approximately 94% of
advisers reported fewer than 2,000 clients. The median adviser reported
98 clients.\487\ For comparison, the figure includes a log-normal
reference curve, which illustrates how the observed distribution
departs from a symmetric benchmark.
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\487\ Form ADV, Items 5D(a). See supra footnote 486.
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(b) Regulated Investment Companies
The regulated investment companies that would be permitted to rely
on the proposed rule would include registered open-end and closed-end
funds, business development companies (``BDCs''), and unit investment
trusts (``UITs''). The primary covered information that regulated
investment companies are required to deliver to shareholders pursuant
to the Federal securities laws includes: prospectuses/summary
prospectuses, shareholder reports, proxy voting materials, and privacy
notices. As of December 31, 2025,\488\ there were 14,296 regulated
investment companies, including 12,710 open-end management investment
companies,\489\ 707 closed-end management investment companies,\490\
693 UITs,\491\ 15 insurance company separate accounts that are
management investment companies offering variable annuities or variable
life insurance contracts,\492\ and 171 BDCs.\493\ We do not have direct
access to data on the number of fund shareholders that would be covered
by the proposed rule. One industry study, however, estimates that funds
delivered covered information to 544.3 million accounts through 272.2
million physical mailings in 2025.\494\ According to a service
provider, funds in that year provided 290 million deliveries of fund
reports and annual prospectuses and, as a percentage of all positions
held, 15% of fund reports and 7% of prospectuses were sent by physical
mail. Regarding the extent to which funds use an intermediary to
deliver information, one industry study estimates that between 67% and
85% of fund mailings of proxy voting materials, shareholder reports and
prospectuses are intermediated.\495\ Another industry report estimates
that, in 2025, 73% of mutual fund-owning households held mutual funds
through employer-sponsored retirement plans and 72% owned mutual funds
outside such plans, which purchased funds through both investment
professionals and the direct market channel.\496\ The same report
estimates that in 2025, almost half (49%) of households owning mutual
funds held funds purchased through an investment professional, and 27%
owned funds purchased through the direct market channel.\497\ As of
December 31, 2025, approximately 75 million households received covered
information from regulated investment companies.\498\
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\488\ The number of registered investment companies (excluding
BDCs) was based on Form N-CEN data for the reporting period ending
December 2025 with filings received through March 31, 2026.
\489\ Form N-1A filers; includes all open-end funds, including
ETFs registered on Form N-1A.
\490\ Form N-2 filers not classified as BDCs.
\491\ The number of UITs includes Form N-4, N-6, N-8B-2, and S-6
filers.
\492\ Form N-3 filers.
\493\ The number of BDCs was based on Form 10-K filings and
related amendments in calendar year 2025.
\494\ See Nov. 2025 ICI Letter, supra footnote 17, at Appendix
B, computed as sum of the entries in Table 1 except account
statements, tax documents, and trade confirmations.
\495\ See ICI survey, supra footnote 25, at Appendix B.
\496\ See ICI, 2026 Investment Company Fact Book: A Review of
Trends and Activities in the Investment Company Industry, at 86,
available at https://www.ici.org/system/files/2026-04/2026-factbook.pdf.
\497\ See id.
\498\ 56% of 134.8 million households (in 2025) = 75 million
households owning funds. See id. at 79. The source for the total
number of households is the U.S. Census Bureau via FRED[supreg],
available at https://fred.stlouisfed.org/series/TTLHH.
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(c) Registered Broker-Dealers
Brokers,\499\ as well as dealers \500\ would be permitted to rely
on the proposed rule.\501\ In the market for broker-dealer services, a
relatively small set of large- and medium-sized broker-dealers accounts
for a significant share of total assets while smaller broker-dealers
compete in niche or regional segments of the market.\502\
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\499\ See 15 U.S.C. 78c(a)(4).
\500\ See 15 U.S.C. 78c(a)(5).
\501\ This would include government securities brokers and
government securities dealers registered with the Commission under
the Exchange Act. As noted above, this proposal does not address any
obligations of 15C firms pursuant to rules promulgated by Treasury
under the GSA. See supra footnote 85. There are currently no 15C
firms, but they would be included as covered entities if any 15C
firms are registered in the future.
\502\ See Regulation Best Interest, supra footnote 97, at page
33406.
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The primary information that broker-dealers are required to deliver
under the Federal securities laws includes: disclosures pursuant to
Regulation Best Interest,\503\ Form CRS,\504\ quarterly free credit
balance notices,\505\ disclosure of credit terms of margin loans as
required under the Exchange Act,\506\ initial and annual privacy
notices as required pursuant to Regulation S-P,\507\ and trade
confirmations as required under the Exchange Act for each transaction
effected for or with a customer.\508\ Industry-wide, broker-dealers
generate approximately 40.6 billion written trade confirmations per
year in the aggregate.\509\ We do not have direct access to the
aggregate volume of the other deliveries, which broker-dealers maintain
as records.
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\503\ 17 CFR 240.15l-1.
\504\ 17 CFR 275.204-5.
\505\ 17 CFR 230.15c3-3(j)(1).
\506\ 17 CFR 240.10b-16.
\507\ 17 CFR 248.4; 17 CFR 248.5.
\508\ 17 CFR 240.10b-10. Broker-dealers also have delivery
obligations under SRO rules, which are outside the scope of this
rulemaking.
\509\ This estimate is the average of the total values reported
on items 8107, 8108, and 8109 over the last three years (2023-2025)
based on Schedule I on FOCUS filings.
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In addition, we understand that investors frequently are not direct
shareholders of record, but instead hold their securities in ``street
name'' through accounts with their broker-dealer.\510\ In the case of
broker-dealers, SRO rules provide that broker-dealer member firms are
required to distribute certain disclosure documents, such as annual
reports and interim reports, to customers for which they hold
securities in street name, so long as the broker-dealer is assured that
its reasonable expenses incurred in doing so will be reimbursed.\511\
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\510\ See, e.g., Tailored Shareholder Reports Adopting Release,
supra footnote 13, at n.603 (citing the Rule 30e-3 Adopting Release,
supra footnote 213).
\511\ See Tailored Shareholder Reports Adopting Release, supra
footnote 13, at section IV.B.1.
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Based on an analysis of Schedule I to the FOCUS reports and Form BD
filings, there were 3,262 registered broker-dealers during the fourth
quarter of 2025.\512\ Of these, 274 were dually registered as
investment advisers.\513\ There were approximately 308 million customer
accounts reported by those broker-dealers that hold customer cash and
securities (``carrying broker-dealers'').\514\
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\512\ The numbers in this section exclude notice-registered
broker-dealers.
\513\ The number of broker-dealers dually registered as
investment advisers was estimated based on FOCUS filings for broker-
dealers during the fourth quarter of 2025 and Form ADV filings for
investment advisers for the reporting period ending December 2025
with filings received through March 31, 2026.
\514\ The number of customer accounts reported by carrying
broker-dealers was estimated based on Form X-17A-5 Schedule I, Item
I8080 for 2025.
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(d) Transfer Agents
Transfer agents may be registered with the Commission under the
Exchange Act, or another appropriate
[[Page 45945]]
regulatory agency as defined in section 3(a)(34)(B) of the Exchange
Act.\515\ Transfer agents maintain records of security ownership on
behalf of issuers, process changes of ownership, and communicate
information from issuers to securityholders. Transfer agents also act
as paying agents, by accepting payments from issuers of securities and
distributing the payments to the holders of those securities.
---------------------------------------------------------------------------
\515\ 15 U.S.C. 78c(a)(34)(B).
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Transfer agents are covered entities under the proposed rule and
could rely on the proposed rule in delivering covered information to
covered recipients. Specifically, transfer agents have obligations
under the Federal securities laws to:
Deliver information in response to inquiries and requests;
\516\
---------------------------------------------------------------------------
\516\ 17 CFR 240.17Ad-5.
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Notify guarantors and presentors of rejections of requests
for transfer due to inadequate signature guarantees; \517\
---------------------------------------------------------------------------
\517\ 17 CFR 240.17Ad-15.
---------------------------------------------------------------------------
Send notifications to security holders that do not
negotiate checks within certain time periods of the checks being sent;
\518\ and
---------------------------------------------------------------------------
\518\ 17 CFR 240.17Ad-17.
---------------------------------------------------------------------------
Send data breach notifications to affected customers
pursuant to Regulation S-P \519\ and Regulation S-AM.\520\
---------------------------------------------------------------------------
\519\ 17 CFR 248.1-248.30.
\520\ 17 CFR 248.101-248.128.
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As of December 31, 2025, there were 269 transfer agents registered
with the Commission, with an additional 55 registered with another
appropriate regulatory agency as defined in section 3(a)(34)(B) of the
Exchange Act.\521\
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\521\ See SEC, Statistics & Data Visualizations: Transfer Agents
(Mar. 17, 2026), available at https://www.sec.gov/data-research/statistics-data-visualizations/transfer-agents.
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(e) Corporate Issuers and Transaction Participants
Corporate issuers with a class of securities registered under the
Exchange Act or that are required to file reports under section 15(d)
of the Exchange Act, obligors or trustees with delivery obligations
under the Trust Indenture Act, and entities conducting securities
offerings that are registered or exempt from the registration
requirements under the Securities Act would be covered entities under
proposed Reg E-Delivery.\522\ These covered entities would be able to
rely on the proposed rule to e-deliver covered information that would
primarily include: issuer prospectuses, issuer offering circulars,
tender offer statements and solicitation/recommendation
statements.\523\ In the case of proxy statements, information
statements, and issuer annual reports to security holders, which are
also covered information, covered entities would be required to comply
with the applicable requirements of proposed Reg E-Delivery, in
addition to the applicable requirements in proposed amended rule 14a-
16, when delivering this covered information electronically. Under
proposed Reg E-Delivery, covered entities would also include third
parties that are required, pursuant to Regulations 14A, 14C, and 14D,
to deliver covered information to covered recipients. Such third
parties would include bidders in third-party tender offers and
dissidents in contested proxy solicitations that are required to
deliver covered information to the issuer's security holders.
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\522\ See supra section II.B.1.
\523\ Information required under Regulation Crowdfunding is
excluded from the definition of ``covered information'' under this
proposal because offerings under Regulation Crowdfunding must be
conducted exclusively through an online platform operated by a
registered intermediary, a broker-dealer or funding portal and are
already subject to specific e-delivery requirements. See supra
section II.B.1.
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In 2025, approximately 3,900 issuers were conducting a registered
securities offering under the Securities Act,\524\ and approximately
1,500 issuers were conducting a securities offering exempt from the
registration requirements under the Securities Act.\525\ During the
same year, 7,579 issuers had a class of securities registered under
section 12 of the Exchange Act \526\ or were required to file reports
under section 15(d) of the Exchange Act. There were approximately 700
obligors or trustees under an indenture subject to the qualification
requirements of the Trust Indenture Act,\527\ approximately 50 bidders
in third-party tender offers,\528\ 30 dissidents (or dissident groups)
in contested proxy solicitations,\529\ and 50 filing persons on
Schedule 13E-3.\530\ There were 9,654 issuers and transaction
participants in total.\531\ As of December 31, 2025, approximately 28
million households owned stocks directly.\532\
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\524\ This estimate is based on unique filers of 424B
prospectuses in 2025 that also previously filed one or more of the
following corporate issuer registration statements in the three
preceding years: Forms S-1, S-3, S-3ASR, S-4, S-11, SF-1, SF-3, F-1,
F-3, F-3ASR, F-4, F-6, F-7, F-8, and F-10; and unique filers that
did not file 424B prospectuses but filed one or more Forms S-8 or S-
20 in 2025.
\525\ This estimate is based on unique filers of Regulation D
and Regulation A filings in 2025, according to staff analysis of
EDGAR filings on Form 1-A (excluding post-qualification amendments)
and on Form D (including Form D amendments). The filers of
Regulation D are included only to the extent that a filer sells to
non-accredited investors.
\526\ This estimate is based on unique filers of Forms 10-K, 20-
F, and 40-F (excluding BDCs) in 2025.
\527\ This estimate is based on unique filers of 424B
prospectuses specifically related to debt offerings during 2025 that
also previously filed one or more of the following corporate issuer
registration statements in the three preceding years: Forms S-1, S-
3, S-3ASR, S-4, S-11, SF-1, SF-3, F-1, F-3, F-3ASR, F-4, F-6, F-7,
F-8, and F-10; and unique indenture trustees identified in those
same 424B prospectuses.
\528\ This estimate is based on unique filers of Schedule TO-T
in 2025. The Schedule TO-T filing appears twice in EDGAR for each
tender offer: once for the bidder (also referred to as offeror) and
once for the issuer. To avoid double counting, we excluded issuers
and only counted bidders.
\529\ This estimate is based on unique filers of DEFC14As in
2025. Both issuers and dissidents (there could be more than one
dissident) can file their own DEFC14As resulting in two or more
DEFC14A filings for the same shareholder vote. We only counted the
unique dissidents in DEFC14A filings.
\530\ This estimate is based on unique filers of Schedule 13E-3
in 2025.
\531\ This estimate is based on unique entities among all
issuers, obligors or trustees, bidders in third-party tender offers,
dissidents (or dissident groups) in contested proxy solicitations,
and filing persons on Schedule 13E-3.
\532\ 21% of 134.8 million households (in 2025) = 28 million
households owning stocks directly. The percentage of households
owning stocks directly was estimated using the 2022 Survey of
Consumer Finances (SCF) data, available at https://www.federalreserve.gov/econres/scfindex.htm. The source of the total
number of households is U.S. Census Bureau via FRED[supreg],
available at https://fred.stlouisfed.org/series/TTLHH. This estimate
only includes household investors and does not include institutional
investors.
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(f) Other Covered Entities
As of December 31, 2025, there were 16 municipal securities dealers
registered with the Commission on Form MSD. These municipal securities
dealers are banks, or separately identifiable departments or divisions
of banks with customer delivery obligations. The primary covered
information that municipal securities dealers registered with the
Commission on Form MSD are required to deliver to covered recipients
includes preliminary and final official statements (upon the request of
potential customers),\533\ and, under certain circumstances, the
written disclosure of any control relationship with an issuer and of
any participation or financial interest in a distribution.\534\
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\533\ 17 CFR 15c2-12(b)(2); 17 CFR 15c2-12(b)(4).
\534\ 17 CFR 15c1-5; 17 CFR 15c1-6. Municipal securities dealers
also have delivery obligations under SRO rules, which are outside
the scope of this rulemaking.
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As of December 31, 2025, there were 54 SBSDs conditionally
registered with the Commission.\535\ To date, no applications for
registration as an
[[Page 45946]]
MSBSP have been filed with the Commission.\536\ There were three SBSDRs
registered with the Commission as of December 31, 2025.\537\ There were
eight SBSEFs registered with the Commission as of March 24, 2026.\538\
All SBS Entities are covered entities under proposed Reg E-Delivery and
would be permitted to rely on the proposed rule to satisfy their
respective delivery obligations for covered information. The primary
covered information that SBS Entities are required to deliver pursuant
to the Federal securities laws is counterparty disclosures.\539\
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\535\ See SEC Statistics & Data Visualizations: Security-Based
Swap Dealers (SBSDs), available at https://www.sec.gov/data-research/statistics-data-visualizations/security-based-swap-dealers-sbsds.
\536\ See List of Security-Based Swap Dealers and Major
Security-Based Swap Participants (last reviewed or updated Jan. 2,
2025), available at https://www.sec.gov/about/divisions-offices/division-trading-markets/list-registered-security-based-swap-dealers-major-security-based-swap-participants.
\537\ The three SBSDRs that are currently registered with the
Commission are: ICE Trade Vault, LLC, DTCC Data Repository (U.S.),
LLC, and KOR Reporting, Inc.
\538\ The eight SBSEFs that are currently registered with the
Commission are: Bloomberg SEF LLC, GFI Swaps Exchange LLC, GLMX
TECHNOLOGIES, LLC, ICE Swap Trade, LLC, tpSEF Inc., Tradition SEF
LLC, TW SEF LLC, and WEMATCH.LIVE LLC. See Security-Based Swap
Execution Facilities (SBSEFs), available at https://www.sec.gov/about/divisions-offices/division-trading-markets/security-based-swap-execution-facilities-sbsefs.
\539\ See e.g., 17 CFR 240.15Fh; 17 CFR 240.13n-10; 17 CFR
242.812.
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Funding portals are registered with the Commission and are members
of FINRA.\540\ As of April 9, 2026, there were 75 registered funding
portals that were members of FINRA (excluding funding portals that had
withdrawn their registration and FINRA membership).\541\ The primary
covered information that funding portals are required to deliver
pursuant to the Federal securities laws includes: initial and annual
privacy notices, opt-out notices and data breach notifications to
affected customers pursuant to Regulation S-P \542\ and Regulation S-AM
\543\ and disclosures required pursuant to Regulation S-ID.\544\ These
registered funding portals are covered entities under proposed Reg E-
Delivery and would be permitted to rely on the proposed rule to satisfy
their customer delivery obligations for covered information.\545\
---------------------------------------------------------------------------
\540\ 17 CFR 227.400. See Regulation Crowdfunding, supra
footnote 101.
\541\ See FINRA, Funding Portals We Regulate, available at
https://www.finra.org/about/funding-portals-we-regulate (last
updated Apr. 7, 2026).
\542\ 17 CFR 248.1-248.30.
\543\ 17 CFR 248.101-248.128.
\544\ 17 CFR 248.202.
\545\ This excludes information delivered under Regulation
Crowdfunding, as detailed in section II.B.1.
---------------------------------------------------------------------------
3. External Studies
(a) Investor Experience With the Opt-In Requirement
Some studies have produced findings that are consistent with the
view that the current opt-in requirement for e-delivery has limited the
ability of covered entities to provide e-delivery of covered
information to investors. For example, one study reports findings from
a survey of 1,300 individual investors (fielded May 16-19, 2022;
investors had at least $5,000 in relevant accounts) in which 42% of
surveyed investors agreed with ``I still receive financial statements
through the mail, but I would prefer to receive them all
electronically.'' \546\ Another study reports that, among fund
investors who receive some regulatory disclosures in paper, 6% say that
signing up for e-delivery ``takes too much time.'' \547\
---------------------------------------------------------------------------
\546\ See SIFMA Survey, supra footnote 23.
\547\ See Nov. 2025 ICI Letter, supra footnote 17, at Figure 9
(``6 percent of fund investors indicate that signing up for e-
delivery took too much time, which suggest that they want e-delivery
but did not have time to sign up for it'').
---------------------------------------------------------------------------
Even investors who decide to opt out of paper delivery (i.e., who
choose e-delivery) may face obstacles to receiving e-delivery.
According to one survey, 27% of respondents who do not currently
receive e-delivery said ``I have signed up for e-delivery but still
receive paper documents.'' \548\ According to another survey, among
fund investors who receive some regulatory disclosures in paper, 32%
say they ``signed up for e-delivery but still receive paper
documents.'' \549\ This pattern could reflect difficulties in
processing or responding to investor requests on the part of senders.
Alternatively, it could reflect investor confusion about whether a
request was successfully completed--for instance, whether a sign-up
process required a confirmation step that some investors did not take.
Under either interpretation, the frictions facing investors would
extend beyond the time and attention burden of deciding to opt out and
into the mechanics of the opt-out process.
---------------------------------------------------------------------------
\548\ See SIFMA Survey, supra footnote 23.
\549\ See ICI Survey, supra footnote 25, at Figure 9.
---------------------------------------------------------------------------
In another study, investors were asked through an online survey
whether they prefer paper, E-Delivery, or have no preference, and
whether they receive paper or E-Delivery currently.\550\ Table 1
presents some of the reported findings. As shown, between 58% and 78%
of investors prefer to receive E-Delivery depending upon the type of
document. The evidence also shows that, depending on the document,
between 58% and 83% of surveyed investors said they received E-Delivery
(email or app push notifications), and between 17% and 42% said they
received paper delivery. The percentage of respondents who said they
received paper exceeded the percentage who expressed a preference for
paper for all types of documents. Regarding E-Delivery, the reports of
receipt and preference were more closely aligned; this finding is
consistent with the fact that to get email delivery these participants
had to affirmatively request it.
---------------------------------------------------------------------------
\550\ See Broadridge Survey, supra footnote 30.
Table 1--Survey Evidence: Alignment Between Form and Preference of Delivery
[E-Delivery vs. Paper Mail] \a\
----------------------------------------------------------------------------------------------------------------
Summary
Account Tax forms Shareholder prospectus for Trade
statements (%) (%) reports/ proxy mutual funds confirmations
materials (%) (%) (%)
----------------------------------------------------------------------------------------------------------------
Participants currently receiving/preferring email or app ``push'' notification (E-Delivery)
----------------------------------------------------------------------------------------------------------------
Currently receive email or app 71 58 69 72 83
``push'' notification.............
Prefer to receive email or app 70 58 69 70 78
``push'' notification.............
Difference..................... 1 0 0 2 5
----------------------------------------------------------------------------------------------------------------
[[Page 45947]]
Participants currently receiving/preferring paper delivery (postal mail)
----------------------------------------------------------------------------------------------------------------
Currently receive postal mail...... 29 42 31 28 17
Prefer to receive postal mail...... 25 38 23 22 15
Difference..................... 4 4 8 6 2
----------------------------------------------------------------------------------------------------------------
Participant expressed no preference 6 4 7 8 7
for a delivery method.............
----------------------------------------------------------------------------------------------------------------
\a\ Source: See Broadridge Survey, supra footnote 30 at Figure 1. (``Question: Considering the delivery methods
of communication from your primary brokerage/investment firm, please tell us: A. How do you receive each of
the following communications? B. How do you prefer to receive each of these communications?'') The percentages
that ``currently receive or prefer to receive email or an app ``push'' notification'' in the Table are the sum
of the percentages from Figure 1 that (a) currently receive or prefer to receive email and (b) currently
receive or prefer to receive an app ``push'' notification.
Another study asked adults with employer-sponsored retirement plans
whether they would prefer to receive statements in one of three
formats: (1) electronic only, (2) mail only, or (3) a combination of
electronic statements supplemented with paper statements at least once
per year.\551\ In this study, 42% preferred electronic only, 20% mail
only, and 37% preferred a combination of electronic and mail delivery.
---------------------------------------------------------------------------
\551\ See 2022 AARP Study, supra footnote 33.
---------------------------------------------------------------------------
(b) Access to Internet and E-Delivery
Finally, some recent surveys present findings of large changes in
internet access, use, and preferences in recent years.\552\ One recent
survey reported that 96% of adults said they used the internet
regularly in 2025, compared to just 52% who said they used the internet
regularly in 2000.\553\
---------------------------------------------------------------------------
\552\ See supra section I.B.
\553\ See 2025 Pew Internet Fact Sheet, supra footnote 20.
[GRAPHIC] [TIFF OMITTED] TP21JY26.006
As population-wide internet usage has increased, the gap in usage
between different age groups has also narrowed. According to the same
survey, 90% of adults in the 65+ age group used the internet in 2025,
up from 14% in 2000. Almost all adults in the other surveyed age groups
(18-29, 30-49, and 50-64) used the internet in 2025.\554\
---------------------------------------------------------------------------
\554\ See id.
---------------------------------------------------------------------------
[[Page 45948]]
[GRAPHIC] [TIFF OMITTED] TP21JY26.007
(c) Volume of Paper Delivered
We do not have direct access to data on the total number of
deliveries of covered information that occur by paper mail currently.
We also do not have access to data on the total number of covered
recipients who currently receive E-Delivery. Some industry studies and
reports on deliveries of certain covered information by certain covered
entities, however, provide evidence on the current annual volume of
paper mailings for such covered information, which could, after
adoption of the proposed rule, begin to be delivered in electronic
form. Specifically, one study presents evidence regarding the potential
cost savings from funds and broker-dealers defaulting to E-Delivery for
certain covered information, which it analyzes partially based on a
survey of the frequency of paper mailings per account for those types
of covered information.\555\ Table 2 details the findings of the study
regarding disclosures by funds, and disclosures relating to
transactions in fund shares, that would be covered information under
the proposed rule, either through delivery obligations of the fund
(proxy voting materials, shareholder reports, prospectuses and summary
prospectuses) or of the broker-dealer (trade confirmations).\556\
---------------------------------------------------------------------------
\555\ See Nov. 2025 ICI Letter, supra footnote 17.
\556\ The study does not consider all types of covered
information under the proposed rule and considers some documents
that are not covered information under the proposed rule. The study
presents findings on account statements, for example, which are not
covered information under the proposed rule.
Table 2--Estimates of the Numbers of Physical Documents Funds and Broker-Dealers Send by Mail Annually
[Covered information with available data] \a\
----------------------------------------------------------------------------------------------------------------
Number of Accounts w/ Number of
Document type accounts electronic Frequency mailings
(millions) delivery (%) (millions)
----------------------------------------------------------------------------------------------------------------
Delivered by Funds
----------------------------------------------------------------------------------------------------------------
Proxy voting materials................................ 544.3 88 0.5 32.7
----------------------------------------------------------------------------------------------------------------
Shareholder reports................................... 544.3 82 2 196
Prospectuses/Summary prospectuses..................... 544.3 92 1 43.5
Sub-total estimated number of physical mailings .............. .............. ........... 272
per year.........................................
----------------------------------------------------------------------------------------------------------------
Delivered by Broker-Dealers
----------------------------------------------------------------------------------------------------------------
Trade confirmations................................... 307.9 83 2 104.7
----------------------------------------------------------------------------------------------------------------
Estimated number of physical mailings per year.... .............. .............. ........... 377
----------------------------------------------------------------------------------------------------------------
\a\ See ICI Letter, supra footnote 17, at app. B, tbl1 (providing estimates of the numbers of mailings annually
of documents eligible for default E-Delivery to fund shareholders).
[[Page 45949]]
C. Benefits and Costs
Covered entities that comply with the conditions of Reg E-Delivery
would generally be permitted (but not required) to use E-Delivery as
the default delivery method to deliver covered information to covered
recipients.\557\ Covered entities that choose to rely on Reg E-Delivery
for E-Delivery of covered information, would be assured that they have
satisfied, through the use of E-Delivery, their applicable requirements
to deliver covered information under the Federal securities laws.\558\
Additionally, Reg E-Delivery would permit (but not require) covered
entities to use E-Delivery as the default method of delivery for
covered information, subject to certain conditions. Covered entities
that would choose to pursue the default E-D model under Reg E-Delivery
would be permitted to e-deliver covered information without first
obtaining recipients' affirmative consent to pursue the default. We
estimate that the vast majority of covered entities that deliver
covered information electronically would thus choose to comply with the
conditions of Reg E-Delivery to satisfy their delivery requirements
under the Federal securities laws.\559\ The choice to rely on proposed
Reg E-Delivery to e-deliver covered information would not affect the
content of information that covered recipients receive, although
covered recipients may benefit in some ways from enhanced abilities to
access, read, and search material in electronic formats.
---------------------------------------------------------------------------
\557\ While compliance with the requirements of proposed Reg E-
Delivery would be optional for most covered entities that choose to
rely on Reg E-Delivery to e-deliver covered information, if an
issuer, other soliciting person, or intermediary elects to use E-
Delivery to furnish a proxy statement, information statement, or
annual report to security holders, the amendments we are proposing
to Regulations 14A and 14C would require the issuer, other
soliciting person, or intermediary to comply with the requirements
associated with the permitted E-Delivery methods and the
requirements for website availability of information under Reg E-
Delivery, in addition to the requirements in proposed amended
Regulations 14A and 14C. For purposes of the discussion in section
III, when describing the requirements of proposed Reg E-Delivery as
``optional,'' we are not referring to issuers, other soliciting
persons, or intermediaries that are required to furnish a proxy
statement, information statement, or annual report to security
holders under Regulations 14A or 14C. See supra section II.F.2.
\558\ Reg E-Delivery would not preclude a covered entity from
continuing to obtain affirmative consent from covered recipients,
instead of using e-delivery as the default method of delivery, if
the covered entity prefers this approach. See supra footnote 115.
\559\ See infra footnote 658 and accompanying text.
---------------------------------------------------------------------------
Covered entities that choose to rely on proposed Reg E-Delivery
would be required to meet the requirements of the proposed rule
concerning the methods for e-delivery described in section II.B, the
requirements for website availability that are described in section
II.C, and, to the extent they choose to use E-Delivery as their default
delivery method, notification regarding the upcoming change in the
default form of delivery during the transition process for covered
recipients who are currently receiving paper described in section II.D.
The proposed rule would supersede practices under the baseline that
covered entities and covered recipients currently follow under the E-
Delivery Guidance, rule 30e-3, rule 14a-16, and the E-SIGN Act. If
adopted, Reg E-Delivery would supersede the parts of the E-Delivery
Guidance that provide a somewhat different framework for analyzing
whether delivery has been satisfied--specifically, the provisions of
the E-Delivery Guidance that are based on more general applications of
the concept of notice and access, and a different approach to evidence
of delivery, as discussed in section II.G. The Commission is also
proposing to rescind rule 30e-3 and to amend rules relating to the
dissemination of proxy materials and tender offer materials to
facilitate the proposed new E-Delivery framework, as discussed in
section II.F. Finally, the Commission is proposing that certain
categories of covered information delivered under proposed Reg E-
Delivery would be exempt from the consumer consent requirements of the
E-SIGN Act as discussed in section II.E above, and therefore the
practices under proposed Reg E-Delivery would effectively replace these
consumer consent requirements. The Commission is proposing a two-year
transition period from the time of the publication of the rule in the
Federal Register until the rule's compliance date.
1. Benefits
(a) Benefits to Covered Entities
The benefits to covered entities that choose to implement default
e-delivery in reliance on the proposed rule would take the form of cost
savings. These covered entities would no longer incur paper, printing,
and postage costs to deliver covered information to covered recipients,
unless a covered recipient expressly affirms a preference for paper
delivery.\560\ Evidence in the academic literature supports the view
that moving from an opt-in regime to an opt-out regime, with e-delivery
as the new default, would increase the share of deliveries made
electronically.\561\ The magnitude of the cost savings for a covered
entity would depend on multiple factors, including the number of
covered recipients currently receiving paper delivery, the number of
covered recipients that have or have not provided electronic addresses,
the number of covered recipients that would expressly affirm a
preference for paper delivery under the proposed rule, and the
frequency of delivery of the covered information.
---------------------------------------------------------------------------
\560\ We anticipate that any covered entities that maintain a
default paper delivery approach would choose to rely on the proposed
rule for e-deliveries to covered recipients that have affirmatively
chosen to receive covered documents electronically. We expect most
such covered entities currently follow the E-Delivery Guidance. To
the extent those covered entities would rely on proposed Reg E-
Delivery, they may benefit from increased legal certainty (and
associated reduction in legal costs) resulting from the assurance
that they have satisfied, through the use of e-delivery, applicable
requirements to deliver required disclosures, reports, and other
regulatory materials under the Federal securities laws. But they
would not experience the benefits from the savings in printing and
mailing costs from defaulting to e-delivery, as discussed in this
section.
\561\ While we are not aware of academic studies analyzing paper
versus electronic delivery of covered information, academic evidence
that defaults materially affect real-world choices across domains is
summarized in Jon M. Jachimowicz et al., When and Why Defaults
Influence Decisions: A Meta-Analysis of Default Effects, 3 Behav.
Pub. Pol'y 159 (2019) (reporting substantially higher uptake under
opt-out defaults than opt-in defaults). Classic field evidence
includes Brigitte C. Madrian & Dennis F. Shea, The Power of
Suggestion: Inertia in 401(k) Participation and Savings Behavior,
Q.J.E. (2001) (showing large participation changes under automatic
enrollment/defaults) and Richard H. Thaler and Shlomo Bernatzi, Save
More TomorrowTM Using Behavioral Economics to Increase
Employee Saving, Journal of Political Economy 112(1):S164-S187
(2004) (showing higher rates of enrollment in employee savings plans
when enrollment is automatic compared to when enrollment requires an
employee to complete a form).
---------------------------------------------------------------------------
In quantifying the magnitude of these cost savings, we assume that
95% of covered entities for which we provide such estimates would rely
on the proposed rule to default to an e-delivery model of delivery and
that 95% of current recipients of paper mailings from those covered
entities would transition to e-delivery (i.e., not opt out). These two
assumptions imply that current paper deliveries would be reduced by a
factor of 0.9025 \562\ (``cost reduction factor'') for those entities
as a result of the proposal. In addition, for types of covered entities
for which we do not have direct estimates for the number of paper
mailings of covered information under the baseline, we make the
assumption that 15% of covered information is currently sent in
[[Page 45950]]
paper.\563\ Using these assumptions, we estimate that reliance on the
proposed rule to use default e-delivery would yield annual savings in
the cost of paper, printing and postage from substitution of e-delivery
for paper delivery of approximately $35.2 million by registered
investment advisers,\564\ $196.5 million by regulated investment
companies,\565\ $103.0 million by broker-dealers,\566\ and $127.9
million from corporate issuers (e-delivery of corporate proxy
materials).\567\ These estimates yield total aggregate cost savings
from the proposed rule of about $462.6 million annually.\568\
---------------------------------------------------------------------------
\562\ 0.9025 = 0.95 x 0.95. To the extent that current paper
deliveries would be reduced by more than 90.25 percent, cost savings
would be larger; to the extent that paper deliveries would be
reduced by less than this percentage, cost savings would be lower.
\563\ As indicated in Table 1 and 2, the percentage of covered
recipients who currently receive e-delivery varies across covered
entities and by document type. For the purpose of estimating cost
savings, we make the assumption, based on this evidence, that 15% of
deliveries currently occur by paper mail.
\564\ For adviser deliveries of covered information, we estimate
$35.1975 million savings (=65 million x 0.15 x 5 x $0.80 x 0.9025),
based on staff estimates including the number of adviser clients
currently (65 million, see supra section III.B.2.a, the percentage
sent by paper mail currently (0.15), the number of deliveries per
client (5), and the cost reduction factor (0.9025).
\565\ For fund deliveries of covered information, we estimate:
$196.528 million savings (=272.2 million x $0.80 x 0.9025), based on
the number of mailings (272.2 million, see supra footnote 494) the
cost reduction factor (0.9025), and an estimate of $0.80 for the per
unit cost of printing and mailing (see Nov. 2025 ICI Letter, supra
footnote 15, at app. B, tbl2. We use the sum of the printing ($0.57)
and mailing ($0.23) unit cost provided for shareholder reports
($0.80 = $0.57 + $0.23), which is greater than that for
prospectuses/summary prospectuses and less than that for trade
confirmations or mailing of fund-related proxy voting information.)
We exclude from these estimates the preference management fee that
we discuss in infra section III.C.2.b and that would reduce the net
cost savings for some covered entities.
\566\ For broker-dealer deliveries of covered information, we
estimate $102.957 million savings (=142.6 million x 0.9025 x $0.80),
based on the above estimate of trade confirmation mailings (142.6
million; see section III.B.2.c, the cost reduction factor (0.9025)
and a $0.80 per-unit cost of paper printing and mailing described
above (see id.).
\567\ For deliveries of corporate proxy materials, we estimate
$127.9 million in the cost of paper, printing, and postage (before
netting out the preference management fee). This estimate is based
on proprietary industry data as well as the cost reduction factor
(0.9025).
\568\ We estimate savings of $462.6 million annually ($35.2
million + $196.5 million + $103.0 million + $127.9 million) in the
cost of paper, printing, and postage from reliance on the proposed
rule.
---------------------------------------------------------------------------
(b) Benefits to Covered Recipients
i. Default E-Delivery
Table 3 illustrates scenarios under which covered recipients would
be affected under the proposed rule.
Table 3--Delivery Scenarios for Covered Recipients, With and Without the Proposed Rule
----------------------------------------------------------------------------------------------------------------
Delivery scenario under proposed Reg E-Delivery
--------------------------------------------------------------------------
Covered entity chooses
Covered entity chooses Covered entity chooses to change default
Current delivery scenario (under the not to change default to change default delivery to e-delivery
baseline) delivery to e-delivery delivery to e-delivery under Reg E-Delivery,
under Reg E-Delivery under Reg E-Delivery, and, in turn, covered
and covered recipient and, in turn, covered recipient does not
does not amend recipient expresses express preference for
preference preference for paper paper
----------------------------------------------------------------------------------------------------------------
Covered recipient has expressed a Covered recipient Covered recipient's Covered recipient
preference for e-delivery under E- continues to receive e- delivery is changed continues to receive e-
Delivery Guidance and thus receives delivery. from e-delivery to delivery.
e-delivery. paper format.
Covered recipient has not expressed a Covered recipient Covered recipient Covered recipient's
preference for e-delivery under E- continues to receive continues to receive delivery is changed
Delivery Guidance and thus receives delivery in paper delivery in paper from paper format to e-
paper. format. format. delivery.
----------------------------------------------------------------------------------------------------------------
The benefits to covered recipients of covered entities that use Reg
E-Delivery to implement default e-delivery would include: (1) benefits
from the elimination of the burden of having to communicate a
preference for e-delivery for those covered recipients that do not have
a preference for paper; and (2) benefits that electronic documents can
provide or support, such as benefits enabled through search functions
and summary tools (e.g., AI tools), to facilitate the enhanced review
of the covered information by covered recipients. In addition, to the
extent that covered entities that choose to implement default e-
delivery pass through their cost savings from printing, mailing and
postage to their covered recipients, then these covered recipients
would also experience benefits in the form of reduced costs arising
from their relationship with covered entities under the proposed rule.
Reduced burden for some covered recipients. The proposed rule would
eliminate the requirement for covered recipients that have provided an
electronic address to the covered entity to communicate their
preferences for e-delivery in order to receive e-delivery. Covered
recipients who prefer e-delivery and would, under the baseline, incur
costs of their time and attention to communicate their preference would
benefit from the elimination of these costs.\569\ For others who prefer
e-delivery but would not have requested it under the baseline, the
benefits would also include delivery of covered information in their
preferred form (e-delivery) rather than the paper delivery that they
would have received otherwise. The magnitude of these benefits would
vary according to the strength of the covered recipient's preference
for electronic relative to paper delivery.\570\
---------------------------------------------------------------------------
\569\ Some academic studies show that consumers adopt the
default choice even when they would prefer opting out, because
opting out requires time, attention, and (often) information
acquisition, and many recipients do not choose to incur those costs;
see, e.g., Oren Bar-Gill & Omri Ben-Shahar, Optimal Defaults in
Consumer Markets, 45 J. Legal Stud. S137 (2016) (modeling default
design when recipients may be imperfectly informed and must incur
information/attention costs to decide whether to opt out). Evidence
that defaults materially affect real-world choices across domains is
summarized in Jon M. Jachimowicz et al., When and Why Defaults
Influence Decisions: A Meta-Analysis of Default Effects, 3 Behav.
Pub. Pol'y 159 (2019) (reporting substantially higher uptake under
opt out defaults than opt in defaults). Classic field evidence
includes Brigitte C. Madrian & Dennis F. Shea, The Power of
Suggestion: Inertia in 401(k) Participation and Savings Behavior,
Q.J.E. (2001) (showing large participation changes under automatic
enrollment/defaults). Experimental evidence linking defaults to
attention/decision time includes Andrew Caplin & Daniel J. Martin,
Defaults and Attention: The Drop Out Effect (NBER Working Paper No.
17988, 2012).
\570\ The ease with which an individual covered recipient
communicates her preferred choice as an alternative to the default
depends on the magnitude of opt-out frictions (including cognitive
and informational costs) that are required for individuals to
recognize the choice, become informed, and depart from the default,
as discussed in section III.B.3.
---------------------------------------------------------------------------
[[Page 45951]]
Enhanced review of covered information. The proposed rule may
benefit some covered recipients by enabling covered entities to provide
them with a potentially more personalized, interactive, and efficient
experience with disclosure than delivery in a paper format. For
example, a delivery method other than static paper permits the
inclusion of overlays in regulatory disclosure and reports, such as
calculators, hover-overs, or pop-up information, which have the
potential to enhance engagement. In addition, e-delivered documents are
better suited for AI tools that could help covered recipients digest
and analyze disclosures. E-delivery also has accessibility and
retention benefits, in that it allows for, among other things, font
size adjustment and other accessibility tools such as translation
tools, the use of search tools, and the ability to retain disclosure in
convenient electronic formats.
ii. Conditions of Reg E-Delivery
Disclosure of E-Delivery and Special Provisions for Covered
Recipients Receiving Paper. Before relying on the proposed rule to e-
deliver covered information to covered recipients who become entitled
to receive covered information after the effective date of the rule
(e.g., new investors in a registered investment company or new clients
of an investment adviser), or who receive any covered information in
paper as of the effective date of Reg E-Delivery, a covered entity must
provide certain disclosures to such covered recipients.\571\
---------------------------------------------------------------------------
\571\ See supra footnote 461 and accompanying text.
---------------------------------------------------------------------------
For covered recipients that become entitled to receive covered
information after the effective date of the rule, a covered entity
relying on Reg E-Delivery to e-deliver covered information to such
recipients would have to provide certain disclosures under Reg E-
Delivery section 303.102(b).\572\ Specifically, a covered entity that
intends to e-deliver covered information by default would need to
provide a clear and conspicuous disclosure to the covered recipient
that describes the types of covered information that will be delivered
electronically to the electronic address the covered recipient provides
(or accepts to use) to receive covered information, unless the covered
recipient opts out of e-delivery. Alternatively, for a covered entity
that intends only to use e-delivery where a covered recipient
affirmatively elects to receive covered information electronically, the
required disclosure would need to state that the covered recipient may
opt to have covered information delivered electronically to the
electronic address the covered recipient provides or accepts to use to
receive covered information.
---------------------------------------------------------------------------
\572\ See proposed Reg E-Delivery Sec. 303.102(b)(1).
---------------------------------------------------------------------------
The proposed disclosure requirements in Reg E-Delivery section
303.102(b) would benefit covered recipients of covered entities that
would use Reg E-Deliver to implement default e-delivery by helping
ensure that covered recipients who provide an electronic address to
receive covered information are aware of how the covered entity intends
to use the electronic address in communicating with the covered
recipient and to inform the covered recipient of the specific items of
covered information that will be electronically delivered using the
covered recipient's electronic address. For covered entities that do
not intend to pursue the default e-delivery model under Reg E-Delivery,
the disclosure would inform such covered recipients that they need to
affirmatively elect to receive covered information electronically if
that is their preference.\573\
---------------------------------------------------------------------------
\573\ See supra section II.B.2.
---------------------------------------------------------------------------
Reg E-Delivery would include a special provision for covered
recipients who, as of the effective date of Reg E-Delivery, are
receiving any covered information in paper format, where the covered
entity wishes to transition such covered recipients to default e-
delivery under the rule.\574\ Under this provision, a covered entity
that wishes to transition covered recipients receiving paper to default
e-delivery would generally be required to provide those covered
recipients currently receiving any covered information in paper format
(and for whom the covered entity has an electronic address) with a
paper initial notice at least 180 days before the transition to default
e-delivery, and a paper follow-up notice 30 days before the
transition.\575\ The proposed notice requirements in Reg E-Delivery
section 303.104 would benefit covered recipients currently receiving
paper by alerting them to the upcoming change in delivery method and
providing them an opportunity to elect to continue to receive paper
delivery if that is their preference or to update an electronic address
they have on file with the covered entity. The proposed 180-day period
would benefit covered recipients by providing sufficient time for
covered recipients receiving paper to receive and respond to notices of
upcoming default e-delivery and opt out, either in whole or in part.
The proposed requirement for a second, follow-up notice would benefit
investors by increasing the likelihood that covered recipients
receiving paper would see and review the notice and (if they wish) make
an election to opt out of e-delivery or update their current electronic
address.\576\
---------------------------------------------------------------------------
\574\ See proposed Reg E-Delivery Sec. 303.104.
\575\ The notices would alert the covered recipient about the
upcoming transition to e-delivery, specify the electronic address
where covered information would be provided, and include a prominent
statement describing the ability to: opt out of e-delivery and
receive paper copies at any time, free of charge; the ability to
update or confirm one's electronic address; and the process by which
a covered recipient could opt out of e-delivery and/or update or
confirm one's electronic address.
\576\ See supra section II.D.
---------------------------------------------------------------------------
E-Delivery Methods and Requirements. Covered entities that choose
to rely on proposed Reg E-Delivery to e-deliver any covered information
to covered recipients would be required to meet the requirements of the
proposed rule concerning the methods for e-delivery described in
section II.B.
Under the proposed rule, a covered entity could choose to deliver
covered information either directly to an electronic address or by
providing a statement of availability.\577\ Under the baseline, covered
entities already commonly follow a similar approach, and will typically
send an email or other electronic notice that contains a link to where
the materials are available online or an email that includes the
materials as attachments to covered recipients. Providing covered
entities with a choice between both electronic delivery methods would
therefore continue to allow covered entities to tailor the choice of
delivery method to the type of covered information and the covered
recipient's preferences. If information is delivered directly, the
direct delivery would be subject to certain content requirements, and
the covered entity must include all of the covered information being
delivered either in the body of the communication or as an attachment.
These requirements would benefit any covered recipients of covered
entities that currently do not follow similar practices by helping
ensure that a covered recipient receives complete covered information
through direct delivery and is able to easily review and preserve that
covered information.\578\ If covered information is delivered through a
statement of availability, the statement similarly would be subject to
certain content requirements. These requirements
[[Page 45952]]
would benefit any covered recipients of covered entities that currently
do not follow similar practices by helping ensure that covered
recipients understand the process by which the covered information will
be made available to them and by increasing the likelihood that covered
recipients click through and review the covered information.\579\ The
proposed rule also requires that a statement of availability or direct
delivery must include a prominent statement describing the covered
entity's obligation to provide a paper copy of covered information upon
request and the covered recipient's ability to opt out of electronic
delivery and update its electronic address. This proposed disclosure
requirement would also benefit covered recipients by helping to ensure
that covered entities provide disclosure that makes covered recipients
aware of these delivery options and to permit them to more easily act
upon them if they choose to do so.\580\
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\577\ The proposed rule would require delivery of covered
information that includes PFI using a statement of availability. See
supra section II.B.5.
\578\ See supra section II.B.4.
\579\ See supra section II.B.3; see also supra footnote 130.
\580\ See supra section II.B.3.
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In addition, the proposed rule would subject both directly
delivered information as well as delivery effectuated through a
statement of availability to conditions on the timing, format, and
manner of e-delivery. While the E-Delivery Guidance includes no
generally applicable requirements for content, format, or manner of
delivery, the timing of e-delivery generally already occurs within the
same time frame as required under proposed Reg E-Delivery. Therefore,
while the proposed rule would not affect the timing of e-delivery of
covered information, the proposed rule would benefit covered recipients
by helping ensure that the e-delivery is not lost or buried in other
communications or marketing materials so that covered recipients are
more likely to see the e-delivery and review the covered
information.\581\
---------------------------------------------------------------------------
\581\ See supra section II.B.6.
---------------------------------------------------------------------------
The proposed rule would also include conditions for the e-delivery
and website availability of covered information containing PFI that are
designed to provide enhanced protections for this sensitive
information. Among other requirements, the proposed rule would not
permit the e-delivery of covered information containing PFI through
direct delivery (it could only be delivered through the statement of
availability method of e-delivery) and would require that such
information be protected by a process reasonably designed to safeguard
the PFI. While the E-Delivery Guidance does not include the specific
requirements for PFI that are included in proposed Reg E-Delivery, it
does state that information specific to personal financial matters
requires intermediaries to take reasonable precautions to ensure the
integrity, confidentiality, and security of that information.\582\ To
the extent that any covered entities currently follow practices that
are less protective of covered information containing PFI than those
they would implement when relying on Reg E-Delivery, these conditions
would benefit their investors by helping reduce the risk of
unauthorized accesses to PFI and any associated risk of substantial
financial harm to the covered recipient.\583\ In addition, the proposed
rule would require that the website address included in the statement
of availability lead directly to the covered information immediately
after the covered recipient completes the process reasonably designed
to safeguard the PFI. To the extent that covered entities currently do
not provide similarly seamless access to covered information containing
PFI after informing a covered recipient of the availability of the
information, this requirement would benefit investors by allowing for
easy access to the covered information after the completion of the
safeguarding process.\584\
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\582\ While PFI generally is delivered through a statement of
availability method, we understand that some entities may directly
deliver materials with embedded multifactor authentication. See ICI
Survey, supra footnotes 25, 171.
\583\ See supra section II.B.5.
\584\ Id.
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The proposed rule provides that a covered entity must send, free of
charge, one paper format copy of any of the covered information that
the covered entity has delivered through e-delivery to a covered
recipient during the period the covered entity is required to retain
the covered information under the Federal securities laws (or during
the preceding two years if there is no such requirement), to any such
covered recipient requesting such a copy. As discussed above, the E-
Delivery Guidance does not directly require the provision of free paper
copies, in the context of investors and others who affirmatively elect
e-delivery.\585\ While we understand that many covered entities provide
free paper copies of electronically delivered covered information, we
also understand that there are certain firms that currently reserve the
right, when a person establishes a customer or client relationship with
such firm or otherwise through contract, to charge a fee for paper
deliveries.\586\ Any covered recipients that currently incur a fee for
paper delivery and who would affirmatively request to receive paper
delivery under the proposed rule would benefit by receiving paper
format delivery free of charge.
---------------------------------------------------------------------------
\585\ See supra footnote 459.
\586\ See supra section II.B.3 and section II.B.7.
---------------------------------------------------------------------------
Under the proposed rule, covered entities providing e-delivery must
permit a covered recipient, free of charge, to update their electronic
address upon request. In addition, if the covered entity offers a
choice as to the type of electronic address to be used for e-delivery
(for example, email or mobile phone number), the covered entity must
also permit the covered recipient to select a preference free of
charge.\587\ These provisions would benefit investors by ensuring that
covered recipients are able to receive electronic delivery to the
electronic address of their preference and, where the covered entity
supports multiple types of electronic addresses, to select the covered
recipient's preferred means of delivery.
---------------------------------------------------------------------------
\587\ See supra footnote 460 and accompanying text.
---------------------------------------------------------------------------
Finally, the proposed rule would require covered entities to adopt
and implement written policies and procedures reasonably designed to
identify and remediate failed e-delivery. If a covered entity
identifies an e-delivery failure, it would be required promptly to take
reasonable remediation steps, including obtaining a new electronic
address or delivering the covered information in paper format until the
covered recipient provides a new electronic address. We anticipate that
firms using e-delivery under the E-Delivery Guidance generally already
are following processes to identify and remediate e-delivery failures,
even though the E-Delivery Guidance does not specifically require the
adoption of policies and procedures addressing failed e-delivery.\588\
To the extent that some covered entities would be more effective at
identifying or remediating failed e-delivery when relying on proposed
Reg E-Delivery (because the proposed rule includes the requirement to
adopt policies and procedures addressing these topics), their covered
recipients would benefit by more reliably receiving the covered
information and, in the case of delivery failures, benefit in that
these failures are remediated effectively.
---------------------------------------------------------------------------
\588\ See supra footnotes 464 and 465 and accompanying text.
---------------------------------------------------------------------------
Website Availability Requirements. Covered entities that choose to
rely on
[[Page 45953]]
proposed Reg E-Delivery and deliver covered information through a
statement of availability, rather than direct delivery, would be
required to maintain a website that meets certain requirements relating
to: (1) timing; (2) availability period; (3) format and retainability;
and (4) continuous availability and periods of temporary
unavailability. The covered entity also would be required to adopt and
implement written policies and procedures reasonably designed to ensure
that the covered information is made available and remains available in
the manner required by the proposed rule.
Regarding the availability of covered information, we anticipate
that firms using e-delivery under the E-Delivery Guidance have
generally already developed processes to identify website availability
failures.\589\ The proposed requirements for Reg E-Delivery therefore
are likely to be generally consistent with existing practices of most
covered entities. For covered entities where this may not be the case,
these requirements would benefit covered recipients of such covered
entities by helping ensure that they can access the covered information
in a timely manner and that they have both the time to review the
information on the website and the ability to retain the covered
information permanently for their records if they choose. The
requirements would further benefit covered recipients by ensuring that
the covered information would be available in a format that is
convenient for both reading online and printing on paper, thus
facilitating review of that covered information in both formats.
Finally, in circumstances where a covered entity's website and covered
information become temporarily unavailable, the proposed rule would
benefit covered recipients by requiring protections to help ensure
continuous access to the covered information.\590\
---------------------------------------------------------------------------
\589\ See supra footnotes 464 and 465 and accompanying text.
\590\ See supra section II.C.
---------------------------------------------------------------------------
2. Costs
(a) Compliance Costs
Covered entities that would rely on the proposed rule would incur
compliance costs associated with satisfying the conditions of the
proposed new framework, including: the costs of any legal, management,
administrative, IT personnel, compliance consultants, and other
personnel and external resources; the costs of preparing revisions to
relevant written compliance or supervisory policies and procedures;
and, to the extent that covered information containing PFI is not
currently e-delivered in conformity with the requirements of the
proposed rule, the costs of changing how such covered information is
delivered going forward, even for covered recipients already receiving
e-delivery.\591\ These compliance costs would differ depending on the
extent to which related compliance processes already align with the
requirements of proposed Reg E-Delivery, or where they do not align,
the ease with which they can be adapted to comply. For purposes of
estimating compliance costs, we assume that all covered entities that
would rely on proposed Reg E-Delivery would also transition recipients
to default e-delivery.
---------------------------------------------------------------------------
\591\ See supra section II.B.5.
---------------------------------------------------------------------------
Disclosure of E-Delivery. Before relying on the proposed rule to
transition covered recipients to default e-delivery, a covered entity
must provide a clear and conspicuous disclosure to the covered
recipient that describes the covered information that will be delivered
electronically to the electronic address that the covered recipient
provides (or accepts to use) to receive the covered information, unless
the covered recipient opts out of e-delivery. The disclosure also must
describe the methods of e-delivery that may be used under the proposed
rule. The covered entity need not provide this disclosure to covered
recipients who receive an initial notice, or who receive e-delivery of
all covered information by or on behalf of the covered entity as of the
effective date of the proposed rule.\592\ We estimate that, in the
aggregate, covered entities that rely on the proposed rule would incur
one-time initial costs of approximately $33 million to prepare the
disclosure of e-delivery and recurring annual compliance costs
estimated at $11 million (as of the first year).\593\
---------------------------------------------------------------------------
\592\ See supra section II.B.2 and infra section IV.A.
\593\ See infra section IV.A (initial costs of $33,232,500 = 1.5
hrs. x $527.5/hr. x 42,000 covered entities; annual recurring costs
of $11,077,500 = 0.5 hrs. x $527.5/hr. x 42,000 covered entities).
These disclosures would have to be prepared for new covered
recipients that establish relationships with the covered entity
going forward, and the estimates then assume that, on an ongoing
basis, covered entities would confirm from a compliance perspective
that the initially prepared disclosure continues to meet the
requirements of Reg E-Delivery.
---------------------------------------------------------------------------
In addition, covered entities may incur costs associated with
delivering this disclosure. We anticipate that virtually all entities
would provide this disclosure electronically when first establishing a
relationship with a new covered recipient, as the disclosure would not
be required to be delivered in paper form. We anticipate that the
incremental costs of incorporating these disclosures into existing
account-opening or similar workflows would be minimal.
Methods of E-Delivery. Proposed Reg E-Delivery would permit a
covered entity to use two methods of e-delivery, depending on the type
of information being provided: statement of availability, and direct
delivery of covered information to an electronic address.\594\ The
proposed rule includes content requirements for both the statement of
availability and the direct delivery of covered information.\595\ The
permissible delivery method would depend on whether the covered
information includes PFI. For covered information that does not include
PFI, a covered entity would be permitted to e-deliver covered
information directly to a covered recipient's electronic address. For
covered information that includes PFI, a covered entity would not be
permitted to deliver this information directly to an electronic address
but instead would be required to deliver a statement of availability to
the covered recipient's electronic address.\596\ The covered entity
would deliver the statement of availability or the direct delivery of
covered information to the covered recipient no later than the date by
which the covered information is required to be delivered under the
Federal securities laws.\597\
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\594\ See supra sections II.B.3 and II.B.4.
\595\ Id.
\596\ See supra section II.B.5.
\597\ See supra section II.B.6.
---------------------------------------------------------------------------
We estimate that, in the aggregate, covered entities would incur
one-time initial costs of approximately $199 million associated with
preparing a template statement of availability and/or a template for
the direct delivery of covered information, meeting the requirements of
Reg E-Delivery, and recurring annual costs of approximately $66 million
for confirming, from a compliance perspective, that the initially-
prepared templates continue to meet the requirements of Reg E-
Delivery.\598\ This estimate reflects the average cost of compliance
across covered entities; these costs would be lower for covered
entities delivering proxy statements, information statements, or annual
reports to security holders under Regulations 14A and 14C by means of a
statement of availability because the content required in a statement
of availability is similar to the
[[Page 45954]]
content required in a notice of internet availability under current
rule 14a-16.
---------------------------------------------------------------------------
\598\ See infra section IV.B ($199,395,000 = 9 hrs. x $527.5/hr.
x 42,000 covered entities; $66,465,000 = 3 hrs. x $527.5/hr. x
42,000 covered entities).
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Obligation of Covered Entities To Provide Paper Copies of Covered
Information and Permit Opting Out of E-Delivery. Covered entities that
choose to rely on the proposed rule would be required to provide paper
delivery at no extra charge to any covered recipient who requests paper
delivery.\599\ We estimate that, in the aggregate, covered entities
would incur one-time initial costs of approximately $33 million,\600\
and recurring annual costs of $32 million per year, which includes the
paper and mailing costs related to the free delivery of documents upon
request.\601\ This estimate reflects the average cost of compliance
across covered entities; these costs would be lower for covered
entities delivering proxy statements, information statements, or annual
reports to security holders under Regulations 14A and 14C because those
entities must provide paper copies for free under current rule 14a-16.
---------------------------------------------------------------------------
\599\ See supra section II.B.7.
\600\ See infra section IV.C $33,232,500 = 1.5 hrs. x $527.5/hr.
x 42,000 covered entities.
\601\ See infra section IV.C $32,035,500 = (0.5 hrs. x $527.5/
hr. + $500 printing and mailing cost) x 42,000 covered entities).
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Identifying and Remediating E-Delivery Failures. Covered entities
that choose to rely on the proposed rule would be required to adopt and
implement written policies and procedures reasonably designed to
identify and remediate failed electronic delivery.\602\ These policies
and procedures would be designed so that, if any failed electronic
delivery is identified, the covered entity would under the conditions
of the proposed rule promptly take reasonable remediation steps,
including obtaining a new electronic address or delivering the covered
information in paper format until the covered recipient provides a new
electronic address. We estimate that, in aggregate, covered entities
would incur one-time initial costs of $66 million and recurring annual
costs of $22 million to adopt and implement written policies and
procedures reasonably designed to identify and remediate failed
electronic delivery.\603\
---------------------------------------------------------------------------
\602\ See infra section II.B.9.
\603\ See infra section IV.D (one-time initial costs of
$66,465,000 = 3 hrs. x $527.5/hr. x 42,000 covered entities; annual
recurring costs of $22,155,000 = 1 hrs. x $527.5/hr. x 42,000
covered entities).
---------------------------------------------------------------------------
Website Availability of Covered Information. Proposed Reg E-
Delivery would require covered entities that rely on the proposed rule
and deliver covered information through a statement of availability,
rather than direct delivery, to maintain a website that meets certain
requirements.\604\ The covered entity also would be required to adopt
and implement written policies and procedures reasonably designed to
ensure that the covered information is made available and remains
available in the manner required by the proposed rule.\605\
---------------------------------------------------------------------------
\604\ See supra section II.C.
\605\ Id.
---------------------------------------------------------------------------
We estimate that, in aggregate, covered entities would incur one-
time initial costs of $114 million and recurring annual costs of $51
million to comply with the website availability requirements of the
proposed rule.\606\ This is based on the estimate that 42,000 covered
entities would choose to rely on the rule and that all would incur the
cost of complying with these website requirements. However, Reg E-
Delivery does not require the use of a website if a covered entity uses
the direct delivery approach for covered information, so some covered
entities would not incur website-related costs.\607\ In addition, based
on our understanding of current e-delivery practices,\608\ we
anticipate that covered entities that currently make covered
information available on their website would typically already have
websites in place that substantially meet the proposed requirements.
Accordingly, to the extent that covered entities already have such
websites in place or do not rely on a website to deliver covered
information, their incremental compliance costs associated with this
requirement would be lower.\609\
---------------------------------------------------------------------------
\606\ See infra section IV.E (one-time initial costs of
$114,345,000 = 4.5 hrs. x $605/hr. x 42,000 covered entities; annual
recurring costs of $50,820,000 = 2 hrs. x $605/hr. x 42,000 covered
entities).
\607\ For example, covered information by investment companies
and corporate issuers would not include PFI, and thus those covered
entities could choose to rely on the direct delivery approach for
all covered documents.
\608\ See supra footnote 457 and accompanying text. In addition,
covered entities delivering proxy statements, information
statements, or annual reports to security holders under Regulations
14A and 14C must post those materials on a website under current
rule 14a-16, regardless of whether a statement of availability (or
notice of internet availability under current rule 14a-16) is used.
\609\ See supra section II.B.5. (Many covered entities have
already chosen to use an approach akin to the proposal's statement
of availability E-delivery method, instead of direct delivery, to
address confidentiality and security concerns that arise in
connection with the e-delivery of covered information containing PFI
or other non-public information.)
---------------------------------------------------------------------------
Initial and Follow-up Notices.\610\ Proposed Reg E-Delivery would
require the covered entities that choose to rely on the proposed rule
to transition covered recipients to default E-delivery to prepare and
send out notices to covered recipients currently receiving paper as
part of the process of transition to E-delivery. During the transition
process, the covered entity would be required to deliver an initial
notice to covered recipients receiving paper for whom the covered
entity has an electronic address, and could be obligated to send a
follow-up notice to any covered recipient that does not update or
confirm an electronic address at any time after receiving the initial
notice.\611\ Both such notices would be delivered in paper.
---------------------------------------------------------------------------
\610\ See supra section II.D.
\611\ See supra section II.B.6.
---------------------------------------------------------------------------
We anticipate that virtually all covered entities that choose to
rely on the proposed rule would also choose to transition covered
recipients to default e-delivery to take advantage of the associated
savings in paper and mailing costs. These covered entities would incur
costs of preparing and reviewing the notices that they are required to
send to covered recipients who have not expressed a preference for
electronic delivery. As the two different notices require nearly
identical information and would vary little, we anticipate that covered
entities would prepare them simultaneously. We estimate that, in the
aggregate, covered entities would incur initial one-time costs of
approximately $66 million for preparing and reviewing these
notices.\612\ These covered entities would also incur costs of paper,
printing, and postage to deliver the notices to covered recipients,
with aggregate costs estimated at $217 million in the first year after
the proposed rule goes into effect.\613\ These estimates are based on
the assumption that covered entities would send the same number of
notices for each of the initial and follow-up notices. If a covered
entity chooses not to send the follow-up notice to a covered recipient
who updates or confirms an electronic address after receiving the
initial notice, the cost would be lower.
---------------------------------------------------------------------------
\612\ See infra section IV.F ($66,465,000 = 3 hrs. x $527.5/hr.
x 42,000 covered entities).
\613\ See infra section IV.F (``We estimate that the annual
printing and mailing costs for the transition notices would be
approximately $217,000,000 in the first year and $0 in subsequent
years'').
---------------------------------------------------------------------------
Systems. Meeting the requirements of the proposed rule would entail
establishing relevant operations and compliance systems. These systems
would need to be designed to permit covered recipients to opt out of E-
delivery, to implement and track covered recipients' delivery
preferences, and to detect invalid or inoperable electronic addresses.
It is our understanding that many covered entities already maintain
operations and systems that can be
[[Page 45955]]
easily adopted to comply with the requirements of the proposed
rule.\614\ The incremental costs of compliance related to systems may
thus be quite limited for covered entities relying on Reg E-Delivery.
In addition, for any covered entity that does not already have such
systems in place, compliance costs may be mitigated if the entity
relies, or is able to rely, on a third party or intermediary for system
services, thereby gaining access to economies of scale and scope. We do
not have access to data on whether the requirements of the proposed
rule regarding methods ofe-delivery and system requirements would
require covered entities to make substantial changes to their existing
systems or to what extent any such burden may vary across covered
entities according to whether they already have such systems in place,
and therefore we do not quantify these costs.
---------------------------------------------------------------------------
\614\ See, e.g., supra footnote 198.
---------------------------------------------------------------------------
Rule 30e-3. Covered entities that currently rely on rule 30e-3
would have to make further updates to their systems and procedures to
reflect that the shareholder report transmission approach under rule
30e-3 is no longer permitted. However, we do not anticipate that the
costs of transitioning to Reg E-Delivery for covered entities that
currently rely on rule 30e-3 would be significantly different than the
costs for entities that do not rely on rule 30e-3 under the baseline.
Specifically, we believe that the costs associated with rescinding
current operating procedures related to the implementation of rule 30e-
3 would be minimal, and that the costs of developing new policies and
systems to rely on Reg E-Delivery would not be greater than for other
entities relying on Reg E-Delivery. In addition, some funds that rely
on rule 30e-3 may already post certain fund materials on websites that
are maintained by the fund, a broker-dealer firm, or a third-party
service provider of the fund or intermediary, which would mitigate the
incremental compliance costs for these funds associated with the
website requirements of Reg E-Delivery.\615\
---------------------------------------------------------------------------
\615\ See Optional internet Availability of Investment Company
Shareholder Reports, Investment Company Release No. 33115 (June 22,
2018) [83 FR 2918 (June 22, 2018)] (discussing web-hosting
conditions).
---------------------------------------------------------------------------
However, some funds that currently rely on rule 30e-3 may not have
electronic addresses for all investors. To the extent this is the case,
those funds would not be able to rely on Reg E-Delivery and instead
would have to deliver shareholder reports in paper or obtain these
customers' electronic addresses. We do not have data on the extent to
which funds currently rely on rule 30e-3, or the extent to which those
funds have electronic addresses for their customers. We are therefore
unable to quantify the aggregate costs associated with this effect.
E-SIGN Act. Covered entities that choose to rely on proposed Reg E-
Delivery would need to make further updates to their systems and
policies and procedures to e-deliver any covered information that would
otherwise be subject to the consumer consent requirements of the E-SIGN
Act, in order to remove the implementation of those requirements (from
which we are proposing an exemption). We believe that the costs to
covered entities to update current systems and operating procedures to
remove the implementation of the E-SIGN Act's consumer consent
requirements would be minimal, and that the costs of developing new
policies and systems to rely on Reg E-Delivery for delivering covered
information subject to the consumer consent requirements of the E-SIGN
Act would not be greater than for other covered entities relying on Reg
E-Delivery.
(b) Fees and Costs To Deliver Covered Documents Electronically
Covered entities may face costs of usinge-delivery as a substitute
for paper mail delivery in reliance on the proposed rule. The cost of
usinge-delivery could include the cost of paying a third party for the
service of reliably forwarding covered information to covered
recipients. The third party may require an initial and/or recurring
payment as compensation for its setup or fixed cost of providing this
service. The third party also could charge the covered entity on a per-
unit (per e-delivery ) basis to cover its costs.
The form and magnitude of a covered entity's payment to a third
party for increased use ofe-delivery under the proposed rule may depend
on whether the third party has sole access to the recipient's contact
information (and the covered entity does not have such access), as
occurs when a shareholder owns shares in a company through an
intermediated account and thus in ``street name,'' through a nominee,
such as a broker-dealer or bank. The costs ofe-delivery would in that
instance include costs of compensating the nominee for the service of
reliably forwarding the covered information to the covered recipient.
The fees that some covered entities pay broker-dealers to forward
covered information to intermediated account-holders are the subject of
SRO rules, which set forth maximum rates for compensating broker-
dealers for their expenses incurred in forwarding, on behalf of issuers
including funds, materials to customers that hold securities in street
name.\616\ There is a maximum ``preference management fee'' set forth
in the SRO rate schedule that applies with respect to each account for
which the nominee has eliminated the need to send materials in paper
format.\617\ It varies with the type of covered information. The
preference management fee for e-delivery of a set of corporate proxy
materials is $0.32,\618\ or approximately 4.1% of a recent industry
estimate of the cost of paper, printing and postage for delivery of
corporate proxy materials.\619\ The preference management fee is $0.10
for e-delivery of fund shareholder reports, prospectuses and summary
prospectuses and $0.16 for e-delivery of fund proxy voting
materials,\620\ or 13.5% and 6.8%, respectively, of the estimated costs
of paper, printing and postage for delivery of those materials from a
recent industry study.\621\ The
[[Page 45956]]
study also provided estimates of the preference management fees that
funds would pay under SRO rules for the service of forwarding covered
information in electronic form that is currently sent by paper mail to
their covered recipients. In the aggregate, the study estimated that
funds would be required to pay an additional $11-$25 million annually
in incremental preference management fees, if they were to transition
all of their paper-mail deliveries to e-delivery.\622\
---------------------------------------------------------------------------
\616\ See NYSE Rule 451 and FINRA Rule 2251. There are maximum
rates in these rules that apply to any method of distribution,
including paper and electronic delivery.
\617\ Id. Nominees, or the service provider to which they may
outsource the distribution service, typically charge the maximum
allowable rates under the SRO rate schedule. See Securities Exchange
Act Release No. 90303, SR-NYSE-2020-96 (Nov. 13, 2020).
\618\ NYSE Rule 451.90(4)(a) provides for a ``Preference
Management Fee'' of ``32 cents'' ``[f]or each set of proxy materials
described in Section 1(b).'' NYSE Rule 451.90(1(b) provides a
definition of ``set of proxy materials'' (``proxy statement form of
proxy and annual report when processed as a unit''). See Securities
Exchange Act Release No. 90303, SR-NYSE-20202-96, at 31 (Nov. 13,
2020).
\619\ The estimate of 4.1% (= $0.32/$7.87) is obtained by
dividing the preference management fee ($0.32) by an industry
estimate of the cost of mailing the full-set paper proxy package
($7.87), which is the sum of the $4.82 for printing and $3.05 for
postage (See Broadridge Proxy Season Key Statistics & Performance
Rating, 2025, at 3, available at https://www.broadridge.com/_assets/pdf/2025proxykeystats_report.pdf).
\620\ See Nov. 2025 ICI Letter, supra footnote 17, app. B tbl3
(stating a preference management fee of $0.16 associated with the
delivery of fund proxy voting materials); see also NYSE Rule
451(4)(a) (preference management fees for proxy materials if the
account is a managed account) and NYSE Rule 451.90(4)(b) (setting
preference management fee rates for investment company shareholder
reports, prospectuses, and proxy materials distributed through
broker and bank nominee accounts).
\621\ The estimate of 13.5% for shareholder reports and
prospectuses, including summary prospectuses, is obtained by
dividing the preference management fee ($0.10) by a weighted average
of the ``print unit cost'' and the ``mail unit cost'' for
shareholder reports and prospectuses, as reported in the Nov. 2025
ICI Letter, supra footnote 17, app. B, tbl2. (0.135 = $0.10/((196 x
$0.80) + (43.5 x $0.48))/(196 + 43.5)). The estimate of 6.8% for
proxy voting materials is obtained by dividing the preference
management fee ($0.16) for proxy voting materials by the sum of the
``print unit cost'' ($1.93) and the midpoint of the ``mail unit
cost'' ($0.41) for mailing fund proxy voting materials from id.
(0.068 =$0.16/($1.93 + $0.41)).
\622\ See Nov. 2025 ICI Letter, supra footnote 17, app. B tbl3.
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The preference management fees set forth in the SRO rate schedule
could apply to the use of e-delivery by corporations and investment
companies, to the extent they must rely on nominees to forward
materials in electronic form on their behalf. To estimate the cost of
the preference management fee payments by corporations from increased
use of e-delivery instead of paper mail under the proposed rule, we
obtained proprietary data from a service provider on the estimated
total cost to corporations of using paper mail to deliver proxy
materials. We analyzed the data using the assumptions that 90.25% of
mail deliveries of corporate proxy materials would default to e-
delivery under the proposed rule \623\ and that corporations would pay
the preference management fee from the SRO rate schedule of $0.32 for
e-delivery of proxy voting materials. Based on this analysis, we
estimate that the cost of the preference management fee to corporations
relying on the proposed rule to deliver proxy voting materials to
covered recipients would be $7 million per year.
---------------------------------------------------------------------------
\623\ See supra footnote 562 and accompanying text.
---------------------------------------------------------------------------
To estimate the cost of the preference management fee payments by
investment companies from the increased use of e-delivery instead of
paper mail under the proposed rule, we obtained data from an industry
survey on the preference management fees that investment companies pay
currently, by type of covered information, the number of mailings of
covered information that occur in paper form currently, and the
percentage of those mailings that are to intermediated accounts. We
analyzed the data using the assumption that 90.25% of mail deliveries
by investment companies would default to e-delivery under the proposed
rule and that investment companies would pay the preference management
fees from the SRO rate schedule of $0.10 for e-delivery of fund
shareholder reports, prospectuses, and summary prospectuses and $0.16
for e-delivery of fund proxy voting materials. Based on this analysis,
we estimate that the cost of the preference management fee to
investment companies relying on the proposed rule to delivery fund
proxy voting materials, shareholder reports, and prospectuses,
including summary prospectuses, to covered recipients would be $20
million per year.\624\
---------------------------------------------------------------------------
\624\ To obtain the estimate of $20.0 million per year, we
multiply the reduction factor (0.9025) by an estimate of the number
of investment company mailings of covered information annually
(272.2 million) from Table 2 and estimates of the ``percentage of
intermediated mailings'' (76%, the mid-point of the range ``67% to
85%'') and the weighted average of the suppression management fee
for such mailings from id. ($0.1072 = $0.16 x 32.5) + ($0.10 x (196
+ 43.5))/272.2) from id. ($20.010 million = 0.0925 x 272.2 million x
0.76 x $0.1072).
---------------------------------------------------------------------------
We thus estimate that the combined cost of the preference
management fee to corporations and investment companies would be $27
million per year.\625\
---------------------------------------------------------------------------
\625\ $25 million = $7 million (for corporations) + $20 million
(for investment companies).
---------------------------------------------------------------------------
In cases where the covered entity does not rely on a third party to
forward covered information to covered recipients, the covered entity
may incur costs of e-delivery in the form of costs of maintaining
internal technological systems that are sufficient to comply with the
requirements of the proposed rule relating to the reliability of e-
delivery. However, as most such entities that would increase their
reliance on electronic delivery under the proposed rule are likely to
already have such systems in place to effectuate existing electronic
deliveries, we anticipate that for those entities, any marginal cost of
making additional electronic deliveries would not be significant.
(c) Costs to Covered Recipients
Some costs of the proposed Reg E-Delivery would be borne by covered
recipients who prefer paper delivery. First, under the proposed rule, a
covered recipient may choose to request paper delivery from a covered
entity that chooses to rely on the proposed rule. The covered
recipients could incur costs (e.g., time commitment) in making the
request for paper delivery.\626\ Second, a covered recipient who
prefers paper may nevertheless choose not to request paper. In that
instance, the mismatch between the actual and preferred form of
delivery would be a cost of the proposed rule. This mismatch could
impede the review and usefulness of covered information for some of
these covered recipients.\627\ To the extent that covered recipients
regard the ability to print the covered information as a substitute for
receiving paper delivery, they would weigh the cost of printing the
information against the cost of communicating their preferences or
adjusting to e-delivery.
---------------------------------------------------------------------------
\626\ Alternatively, where a covered recipient has not provided
a covered entity with an email address under the baseline, the
covered recipient may simply decide to continue to not provide such
an email address to that covered entity, in which instance the
covered recipient will continue to receive paper delivery even when
the covered entity relies on the proposed rule. See section II.B.
There would be no additional cost for requesting paper deliver in
these circumstances.
\627\ For example, one working paper found evidence that
switching from paper to electronic dissemination of proxy statements
leads to a decrease in voter participation; see Rachel Geoffroy,
Electronic Proxy Statement Dissemination and Shareholder Monitoring
(Working Paper 2018), available at https://ssrn.com/abstract=3264846
(examining how the means of disseminating proxy statements affects
shareholder monitoring and estimating that a switch from paper to
electronic dissemination reduces total voting participation by about
1% to 2%).
---------------------------------------------------------------------------
The magnitude of these costs to covered recipients would vary
across recipients depending on the strength of their preferences for
paper relative to e-delivery and on how easily they are able to
communicate their preferences under the proposed rule. For example,
recipients who are indifferent between paper and e-delivery need not
incur any such costs. Conversely, recipients that have provided the
covered entity with an electronic address but prefer paper delivery and
face greater burdens (e.g., time constraints, other frictions) in
communicating this preference could incur more significant costs from
the change in the delivery default.\628\ These recipients would have to
(1) incur the burden of requesting paper from covered entities that
rely on the proposed rule, (2) experience the inconvenience or
disutility of receiving e-delivery when they prefer paper or (3) incur
the cost of printing the electronically delivered documents themselves.
---------------------------------------------------------------------------
\628\ See section II.B.7.
---------------------------------------------------------------------------
The costs from the proposed rule on covered recipients who prefer
paper delivery and would receive default e-delivery would be mitigated
to some extent by the provisions of the proposed rule that are designed
to permit and ensure easy communication of preferences. For example,
every time covered information is delivered via e-delivery under the
proposed rule, the e-delivery includes information about how to request
paper, so these instructions would be frequently communicated to
covered recipients.\629\
---------------------------------------------------------------------------
\629\ See sections II.B.3, II.B.4, II.B.7, II.D.
---------------------------------------------------------------------------
There may also be costs to covered recipients receiving e-delivery
of
[[Page 45957]]
covered documents. E-delivery may present certain risks to covered
recipients, including privacy and cybersecurity risks associated with
delivering PFI by e-delivery; and website communication system
outages.\630\ Any such costs would be mitigated by the safeguards that
are designed to address these risks.\631\ In addition, it may be more
costly for some covered recipients to access covered information that
contains PFI to the extent complying with the requirements of proposed
Reg E-Delivery make it more difficult for the covered recipient to
receive and make use of the covered information. For example, some
covered recipients who do not currently access information containing
PFI by going into the covered entity's website would be required to do
so and enter their user ID and password (or other process reasonably
designed to safeguard the PFI) under the proposed rule, and this could
be a cost of the rule for those covered recipients.
---------------------------------------------------------------------------
\630\ See supra footnote 60.
\631\ See supra sections II.B and II.C.
---------------------------------------------------------------------------
For some recipients who benefit from storing physical copies of
documents, the migration from paper to electronic delivery as a result
of the proposed rule could introduce costs arising from the extra steps
(e.g., downloading and printing) that the recipient would need to take
to retrieve and retain the document and associated disincentive that
this may create to retain the document.
Finally, as with cost savings, to the extent that covered entities
pass through their compliance cost and other costs to deliver covered
documents (including fees) to their covered recipients, then these
covered recipients would also experience increased costs arising from
their relationship with covered entities under the proposed rule.
3. Monetized Benefits and Costs
In this section, we present estimates of aggregate monetized
benefits and costs. These totals include only benefits and costs that
are monetized in the economic analysis and thus do not encompass all of
the proposed rule's benefits and costs. For example, we were not able
to quantify the burden in time and attention for certain covered
recipients who prefer to receive paper to opt out of default e-
delivery.\632\
---------------------------------------------------------------------------
\632\ See supra section III.C.2.c.
---------------------------------------------------------------------------
(a) Initial and Annual Aggregate Monetized Benefits and Costs
We estimate that the proposed rule would yield aggregate annual
cost savings (i.e., benefits) for covered entities of approximately
$463 million annually.\633\ This figure is based on a set of
assumptions, including that 95% of covered entities would choose to
rely on the proposed rule and that 95% of current recipients of paper
mailings from those covered entities would transition to e-
delivery.\634\
---------------------------------------------------------------------------
\633\ See supra section III.C.1.a.
\634\ See id. and supra footnote 562 and accompanying text.
---------------------------------------------------------------------------
In section III.C.2.a, we provided estimates of annual aggregate
compliance costs to covered entities that we estimate would choose to
rely on proposed Reg E-Delivery across certain provisions of the
proposed rule. In section III.C.2.b, we provide estimates of annual
aggregate preference management fees. As shown in Table 4, we estimate
initial one-time costs to covered entities of $511 million, and annual
costs of $426 million in the first year and $209 million in the second
year onward.
Table 4--Aggregate Monetized Cost Estimates By Source
[Millions of $]
------------------------------------------------------------------------
Annual costs
Initial -------------------------
Source of cost costs Year 2
Year 1 onward
------------------------------------------------------------------------
Disclosure of E-Delivery (for new 33 11 11
covered recipients).............
E-Delivery Methods............... 199 66 66
Delivery in Paper on Request..... 33 32 32
Identifying and Remediating E- 66 22 22
Delivery Failures...............
Website Availability............. 114 51 51
Initial and Follow-up Notices 66 217 0
(for covered recipients
currently receiving paper as of
Reg E-Delivery effective date)..
Preference Management Fees....... 0 27 27
--------------------------------------
Total........................ 511 426 209
------------------------------------------------------------------------
\a\ This table provides a summary of the costs associated with each of
the compliance conditions (sources of compliance cost) discussed in
section III.C.2.a. The cost of compliance with the ``Notices''
requirement is zero in years 2 and onward because notices would be
sent out only in year 1.
We summarize our estimates of aggregate monetized benefits and
costs in Table 5.\635\
---------------------------------------------------------------------------
\635\ See infra Table 6 for present value of monetized benefits
and costs over 10 years.
Table 5--Aggregate Monetized Benefits and Costs Estimates
[Millions of $]
------------------------------------------------------------------------
Initial Year 2
Aggregated monetized effects effects Year 1 onward
------------------------------------------------------------------------
Benefits......................... 0 463 463
Costs............................ 511 426 209
------------------------------------------------------------------------
[[Page 45958]]
(b) Present Values and Annualized Values of Aggregate Monetized
Benefits and Costs
Consistent with the requirements of Executive Order 12866, the
Commission reports estimated total monetized benefits and costs for all
affected entities in two additional ways specified in OMB Circular A-
4.\636\ These two presentations address the fact that the benefits and
costs of the proposed rule accrue at different points in time, and that
benefits and costs realized sooner are generally more valuable than
those realized later.\637\
---------------------------------------------------------------------------
\636\ See E.O. No. 12866 (Sept. 30, 1993), 58 FR 51735, 51741
(Oct. 4, 1993) (requiring agencies to provide an analysis of
benefits, costs, and regulatory alternatives to OIRA for significant
regulatory actions); OMB, Circular A-4, at 31-34, 45 (Sept. 17,
2003) (providing guidance to agencies regarding compliance with E.O.
12866); see also E.O. No. 14215 (Feb. 18, 2025), 90 FR 10447, 10448
(Feb. 24, 2025) (requiring independent agencies to comply with E.O.
No. 12866). In addition, E.O. 14192 requires agencies to provide
their best approximation of the total costs or savings associated
with each new regulation or repealed regulation consistent with the
analyses required by E.O. 12866. See E.O. No. 14192 (Jan. 31, 2025),
90 FR 9065, 9066 (Feb. 6, 2025).
\637\ See Circular A-4, at 32.
---------------------------------------------------------------------------
We report (1) the present values of expected benefits and costs
that are monetized in our economic analysis, aggregated across all
affected entities over a 10-year time horizon starting in 2026, and (2)
the annualized values over the same time horizon, derived from the
present values. This time horizon represents the period over which the
principal benefits and costs that are monetized in the Economic
Analysis are expected to accrue.\638\ The present values and annualized
values account for the timing of benefits and costs through
discounting, which is a procedure that accounts for the time value of
money.\639\
---------------------------------------------------------------------------
\638\ See id. at 31 (stating that ``[t]he ending point should be
far enough in the future to encompass all the significant benefits
and costs likely to result from the rule''). For the purposes of
this analysis, we assume the effective date of the proposal, as well
as the start year for the analysis's time horizon, is the present
year.
\639\ See id. at 32 (``The Rationale for Discounting'') and 45
(``Treatment of Benefits and Costs over Time''); see also OIRA,
Regulatory Impact Analysis: A Primer, at 11 (Aug. 15, 2011),
available at https://www.reginfo.gov/public/jsp/Utilities/circular-a-4_regulatory-impact-analysis-a-primer.pdf (``To provide an
accurate assessment of benefits and costs that occur at different
points in time or over different time horizons, an agency should use
discounting. Agencies should provide benefit and cost estimates
using both 3 percent and 7 percent annual discount rates expressed
as a present value as well as annualized.''); Harvey S. Rosen & Ted
Gayer, Public Finance 151 (8th ed. 2008) (defining present value as
``the value today of a given amount of money to be paid or received
in the future'').
---------------------------------------------------------------------------
Throughout this Economic Analysis, we have provided estimates of
the benefits and costs of the proposed rule on an annual basis. The
monetized benefits are the cost savings from the proposed rule that
were presented in section III.C.1.a. The monetized costs are the
compliance costs and fee costs from the proposed rule that were
presented in sections III.C.2.a and III.C.2.b, respectively.
Table 6 provides the present discounted values of these monetized
annual benefits and costs. The analysis uses annual real discount rates
of three percent and seven percent over a 10-year time horizon,
starting in 2026. We estimate that the present value of total monetized
benefits is about $4,008 million using a three percent discount rate
and about $3,364 million using a seven percent discount rate. We
estimate that the present value of total monetized costs is about
$2,534 million using a three percent discount rate and about $2,239
million using a seven percent discount rate.
Table 6--Present Value of Monetized Benefits and Costs Over 10 Years
From 2026 to 2035
[Millions of 2026 dollars] \a\
------------------------------------------------------------------------
3% real 7% real
Estimated effects \b\ discount discount
rate rate
------------------------------------------------------------------------
Benefits...................................... $4,008 $3,364
Costs......................................... 2,534 2,239
------------------------------------------------------------------------
\a\ This Table includes only benefits and costs that are monetized. As
discussed in this economic analysis, there are other benefits and
costs that we are not able to monetize.
\b\ For each discount rate, the present value calculations are based on
these assumptions: (i) all one-time monetized costs are incurred
immediately and not discounted; (ii) all recurring annual monetized
benefits and costs begin to accrue in the first year in which affected
entities rely on the proposed rule; (iii) recurring monetized benefits
and costs occur in a steady stream. We use a mid-year discount rate.
Table 7 reports annualized aggregate monetized benefits and costs
using real discount rates of 3 percent and 7 percent over a 10-year
horizon.\640\ The lump sum present values of aggregate monetized
benefits and costs reported in Table 6 are converted in Table 7 into a
constant stream of annualized benefits and costs over a 10-year time
horizon, starting in 2026.\641\ Annualized benefits and costs may
differ from the sum of recurring monetized annual benefits and costs
discussed earlier in this Economic Analysis because they incorporate
the timing of benefits and costs through discounting, and combine one-
time and recurring benefits and costs.\642\ We estimate that annualized
total monetized benefits are about $463 million per year using a three
percent discount rate and about $463 million per year using a seven
percent discount rate. We estimate that annualized total monetized
costs are about $293 million per year using a three percent discount
rate and about $308 million per year using a seven percent discount
rate.
---------------------------------------------------------------------------
\640\ This approach is consistent with the recommended treatment
of benefits and costs over time in Circular A-4. See id. at 45
(``You should present annualized benefits and costs using real
discount rates of 3 and 7 percent'').
\641\ For each discount rate, the annualized monetized benefits
(costs, respectively) in Table 7 represent the constant annual
stream of benefits (costs, respectively) whose present value over
the time horizon equates the corresponding present value in Table 6.
See note a, Table 7 for additional calculation details.
\642\ The annualized benefits and costs present these values
over the 10-year time horizon, starting in the present year.
[[Page 45959]]
Table 7--Annualized Monetized Benefits and Costs Over 10 Years from 2026
to 2035
[Millions of 2026 dollars] \a\
------------------------------------------------------------------------
3% real 7% real
Estimated effects \b\ discount discount
rate rate
------------------------------------------------------------------------
Benefits...................................... $463 $463
Cost.......................................... 293 308
------------------------------------------------------------------------
\a\ This Table includes only benefits and costs that are monetized. As
discussed in this economic analysis, there are other benefits and
costs that we are not able to monetize.
\b\ For each discount rate, the annualized values are calculated by
dividing the corresponding present values in Table 6 by the sum of
discount factors over the time horizon. The discount factor in year t
of the time horizon is equal to 1/(1 + discount rate) \(t-0.5)\.
D. Effects on Efficiency, Competition and Capital Formation
The proposed rule is expected to lower the costs to covered
entities of delivering covered information to covered recipients. Lower
delivery costs would reduce the resources that covered entities devote
to certain compliance activities and allow those resources to be
reallocated toward alternative productive uses (such as the provision
of investment advice for an adviser), thereby enhancing the efficiency
of capital allocation and potentially lowering barriers to entry.\643\
Conversely, the costs of complying with the provisions of proposed Reg
E-Delivery would reduce these effects.\644\ To the extent that any net
cost savings would be proportionally larger for larger covered entities
compared to smaller covered entities, this could create a competitive
advantage for larger covered entities.\645\
---------------------------------------------------------------------------
\643\ See, e.g., Craig Lewis & Joshua White, Deregulating
Innovation Capital: The Effects of the JOBS Act on Biotech Startups,
12 Rev. Corp. Fin. Stud. 240 (2023); see also Michael Dambra &
Matthew Gustafson, Do the Burdens to Being Public Affect the
Investment and Innovation of Newly Public Firms?, 67 Mgmt. Sci. 594
(2021) (finding that the JOBS Act exemptions led to more efficient
investment for newly public companies with the elimination of
certain disclosure, auditing, and governance requirements for a
subset of newly public firms). See also supra section III.C.1
(discussing the anticipated cost savings in printing, mailing and
postage costs for covered entities that choose to implement default
e-delivery). These cost savings could be partially offset by any
fees and costs to deliver covered information electronically, as
discussed in section III.C.2.b.
\644\ While we anticipate that covered entities would, in
aggregate, experience net cost savings as a result of relying on
proposed Reg E-Delivery, some covered entities, including any
covered entities that may choose not to implement default e-
delivery, could experience net cost increases. See supra section
III.C.2.a (discussing the costs of complying with the conditions of
proposed Reg E-Delivery to e-deliver covered information, which
costs are summarized in Table 4).
\645\ To the extent smaller covered entities would rely on a
third-party service provider to transition to compliance with
proposed Reg E-Delivery, this could mitigate any competitive
disadvantage, as it would allow such covered entities to gain access
to economies of scale and scope indirectly. See supra section
III.C.2.a (discussing the use of service providers to access
economies of scale and scope in the context of establishing
operations and compliance systems).
---------------------------------------------------------------------------
To the extent that some covered entities pass through the
associated cost savings to covered recipients, covered recipients would
also benefit, such as through lower fees. Where covered recipients are
investors, a reduction in their costs of investing could help promote
capital formation and competition among certain covered entities for
that capital.
The proposed rule is expected to increase the number of covered
recipients receiving electronic delivery of covered information. Some
of those recipients could benefit from an enhanced review of that
information,\646\ which can improve their ability to incorporate such
information in their valuation of asset prices and to make informed
decisions about whether to buy or sell securities or how to allocate
investments in funds. This could add to the efficiency gains of the
proposed rule.
---------------------------------------------------------------------------
\646\ See supra section III.C.1.b. E-delivery also sidesteps the
risk that paper mail may get lost or stolen.
---------------------------------------------------------------------------
Conversely, the proposed rule would impose costs on covered
recipients who prefer paper delivery, as they would have to either
allocate their time and attention to request paper delivery or
experience disutility from being migrated to e-delivery, which may
include the out-of-pocket cost of printing e-delivery documents in
paper form. To the extent that some of those covered recipients may
nevertheless choose not to request paper, the mismatch between the
actual and preferred form of delivery could impede the review and
usefulness of covered information for some of these covered recipients,
reducing the efficiency of informed capital allocation.\647\ Also, by
increasing the number of covered recipients that get e-delivery of
covered information, the proposed rule would increase the number of
covered recipients that can be exposed to certain risks associated with
e-delivery, such as privacy and cybersecurity risks associated with
delivering PFI by e-delivery and website communication system
outages.\648\ These effects could offset some of the efficiency gains
of the proposed rule.
---------------------------------------------------------------------------
\647\ See supra footnote 627 and accompanying text.
\648\ See supra footnote 630 and accompanying text.
---------------------------------------------------------------------------
E. Reasonable Alternatives
1. Charging for Paper Delivery
The proposed rule would require covered entities to permit covered
recipients to opt out of e-delivery on a document-by-document basis,
free of charge. The proposed rule also would require covered entities
to provide a paper copy of any covered information, free of charge upon
request, for as long as the covered entity is required to retain the
covered information under the Federal securities laws. We considered
permitting covered entities that choose to rely on the proposed rule to
charge for paper delivery at their discretion. In that instance, we
could require covered entities to disclose their policy on providing
paper free of charge (or as applicable, their policy for charging for
opting out of e-delivery or for requests for paper copies) in the
notices that they send to covered recipients of their intent to rely on
the proposed rule. We also considered whether information about the
cost of providing paper delivery to the recipient should be included in
the notice and, if so, what other information should be disclosed about
a covered entity's policies on providing paper free of charge and
whether or how this should be disclosed.
The effect of charging for paper delivery under Reg E-Delivery
would be to provide a disincentive for recipients to opt out of e-
delivery or to request paper copies of covered information, and which
would likely reduce the occurrence of paper deliveries under the
proposed rule. This would increase the savings in printing and mailing
costs from the proposed rule and could potentially increase the number
of
[[Page 45960]]
covered entities that choose to rely on the proposed rule. The proposed
requirements to permit opting out of e-delivery for free, and to permit
covered recipients to request paper copies of covered information for
free, are however designed to assist covered recipients in accessing
covered information in the format they prefer, particularly in view of
the default e-delivery approach that would be permitted under the
proposed rule.
We also considered requiring the provision of free copies only for
a limited time period; allowing more time or a more flexible standard
for covered entities to respond to requests for paper copies; and
permitting covered recipients to opt out only on a ``global'' basis,
where they would receive all covered information from that covered
entity in paper. We considered providing for delivery of free copies
for a limited time period with exceptions that are tailored to the
potential value of the paper delivery to the recipient, such as
according to the type of covered information. The benefit of these
alternatives would be to tailor the requirement for provision of paper
on request free of charge more narrowly to the type of covered
information and the circumstances of the covered entity and covered
recipient, and to reduce the incentives to request paper for those
recipients for whom e-delivery is a good (and less costly) substitute.
The cost of these alternatives would be the potential loss of access to
covered information for some recipients compared to the proposed rule
and additional compliance costs associated with the need to tailor
compliance and administrative systems to support this more granular
approach. The proposed rule would apply the requirements to provide
paper at no charge on request equally across all covered entities. We
believe that the proposed rule strikes the appropriate balance by
ensuring that all covered recipients can access covered information in
their preferred format, while maintaining administrative simplicity and
supporting investor protection. This approach avoids the risk that fees
or restrictive policies could deter recipients from obtaining important
information, and it provides a clear, uniform standard that is easier
for both covered entities and recipients to understand and implement.
2. Additional Paper Notices Following Transition to Default E-Delivery
To help ensure that covered recipients are aware of the transition
to default e-delivery and their ability to receive documents in paper,
the transition provision of the proposed rule would require covered
entities to provide those covered recipients currently receiving any
covered information in paper format (and for whom the covered entity
has an electronic address) with a paper initial notice at least 180
days before the transition to default e-delivery, and a paper follow-up
notice 30 days before the transition.\649\
---------------------------------------------------------------------------
\649\ See supra section II.D.2.
---------------------------------------------------------------------------
As an alternative, we considered also requiring entities to mail
additional paper notices to covered recipients who have not opted out
of default e-delivery after the transition to default e-delivery.
Specifically, we considered requiring covered entities to send follow-
up notices, either after one year or annually, after the covered entity
begins delivering covered information electronically to each covered
recipient. Receiving a one-time or annual reminder in paper form after
the transition to e-delivery may be more salient to these recipients
than the initial and follow-up notices they would receive through e-
delivery under the proposal. However, this alternative would result in
an increase in costs, as covered entities would be required to print
and mail additional notices, potentially every year in perpetuity,
rather than just before the transition to e-delivery.
For these reasons, the Commission believes the proposed rule, which
requires only an initial and follow-up notice before the transition to
e-delivery, more appropriately balances the need to inform covered
recipients of their rights with the need to avoid imposing unnecessary
and potentially recurring costs on covered entities. This approach
ensures that recipients are adequately notified of their ability to opt
out of e-delivery before the transition, while maintaining
administrative efficiency and cost-effectiveness.
3. Access Equals Delivery Approach to E-Delivery
As a further alternative to the proposed framework, the Commission
considered an ``access equals delivery'' model of e-delivery. Under
such a model, a covered entity would post covered information online,
rather than delivering it directly (or a notice of availability
directly) to investors and other recipients of information required
under the Federal securities laws by electronic means or in paper
format. In this approach, the covered entity would not notify covered
recipients of the availability of the covered information. This would
depart from the proposed approach of requiring that the covered entity
deliver the covered information (or a notice of availability of covered
information) directly to the covered recipient, either by electronic
means (e-delivery) or in paper format (mail). Under the alternative
access-equals-delivery approach, covered recipients could access a
website and ``pull'' the covered information for their use and review.
We also considered a variation of this approach that would permit
differences in the notice requirements across different types of
covered recipients. For example, we could restrict the use of access
equals delivery under the proposal to the delivery of covered
information to covered recipients who are institutional investors and
clients of the covered entity, as opposed to retail.
One benefit of this alternative is that it would confer greater
savings from the elimination of costs of printing and mailing (either
the covered information, or notices of availability that covered
information is available online) than under the proposed rule. These
cost savings could be significant for covered entities, as they would
no longer need to send physical documents or notices. The alternative
would, however, impose additional costs and risks on covered recipients
by requiring them to seek out information without any accompanying
notice that information is available online. Because recipients may not
know when new information is posted, they may not be aware of
significant developments, miss time-sensitive disclosures, or be unable
to make optimal investment decisions. This lack of notification could
be particularly problematic for retail investors, who may not have the
resources or habits to regularly check for updates. Restricting the use
of access equals delivery to institutional recipients could lessen this
cost relative to a broader approach, as institutional investors may
have more robust systems for monitoring disclosures. However, the
benefits of this alternative--primarily cost savings for covered
entities--would not be conferred on all recipients and would come at
the expense of eliminating the benefits of the proposed rule's
requirements to provide notices that are designed to alert recipients
to the availability and location of covered information. These notices
are designed to help recipients make informed decisions based on the
documents that covered entities are required to send under the
securities laws. Accordingly, the new framework that we are proposing
does not follow an access equals delivery approach.
[[Page 45961]]
4. Alternative Notice and Access Approach to E-Delivery (Permitting
Paper Notice)
As an additional alternative, the Commission considered a notice
and access approach under which covered recipients would receive a
paper notice, such as a postcard, that the covered information is
available online. This notice would go out to all recipients, whether
or not they provide an electronic address. The covered entity would
provide a paper notice that includes a legend as well as other
information designed to alert the recipient about the type and
importance of the information that is available and the website address
where the information could be found. There is a limited Commission
rule that currently permits this approach for certain registrants for
certain communications.\650\ However, the approach in this rule was
designed for investors who did not elect to receive disclosures through
e-delivery.\651\
---------------------------------------------------------------------------
\650\ See 17 CFR 270.30e-3 and supra footnote 65; see also supra
section II.F.1; see also 17 CFR 240.14a-16.
\651\ See infra section II.F.1.
---------------------------------------------------------------------------
The Commission preliminarily believes that most covered recipients
who provide an electronic address would be transitioned to e-delivery
under the proposed rule if adopted, and a covered recipient who has
declined to provide an electronic address may be more likely to prefer
to receive covered information in paper format. Thus, the Commission
preliminarily believes that the alternative approach may impose a
greater cost on covered recipients who prefer paper delivery than under
the proposed rule, while being less effective in eliminating the costs
of printing and mailing documents in paper form. In addition, this
approach would impose costs on recipients by requiring them to take
additional steps to access covered information. The lack of a direct
electronic link or notification would make it less convenient for
recipients to access the information and could make it more difficult
for them to act on the covered information in a timely manner.\652\
This could make it more difficult for some covered recipients to act
upon important updates or to make informed decisions based on the
covered information.
---------------------------------------------------------------------------
\652\ If the paper notice were to include a QR code or URL, this
could partially mitigate the inconvenience of not having a direct
electronic link for those covered recipients that are comfortable
using QR codes or transcribing URLs.
---------------------------------------------------------------------------
5. Alternatives to Proposed Definition of PFI and Requirements
Regarding E-Delivery of Covered Information Containing PFI
The proposed rule defines PFI as information specific to a covered
recipient's personal financial matters, such as an account number or
details regarding a specific securities transaction, and requires
covered information containing PFI to be delivered through the
statement of availability method with a password or other reasonably
designed process. We considered alternative approaches to providing
enhanced protection of sensitive information under the new e-delivery
framework. We considered, for example, using a broader definition than
PFI, such as ``personally identifiable information'' or permitting
covered information containing PFI to be delivered through direct
delivery under certain conditions. We understand that a small minority
of entities may currently use a direct secure delivery approach, which
may involve secure email or encrypted attachments, and that permitting
direct secure delivery as an alternative could impose lower costs on
those entities compared to the proposed requirement to use the
statement of availability method.
We also considered a more principles-based approach, such as
requiring covered entities to implement reasonable safeguards for
sensitive information without specifying the delivery method or the
exact definition of PFI. Under this alternative, covered entities would
have flexibility to determine the appropriate level of protection based
on the nature of the information and the risks involved, rather than
following prescriptive requirements.
These alternatives would be less restrictive and provide covered
entities with more flexibility in the transmission of sensitive
information, including as technology and cyber threats may evolve. We
understand, however, that the proposed approach closely aligns with
industry practices that have become commonplace and have evolved to
reflect industry experience with threats and the protection of
integrity, confidentiality, and security associated with the delivery
of private information over electronic media. The proposed approach
would thus impose limited costs as it would require little or no
departure from current standard practices for most covered entities and
would provide protections for covered recipients consistent with those
provided by current industry best practices.\653\
---------------------------------------------------------------------------
\653\ See section II.B.5 and associated requests for comment.
---------------------------------------------------------------------------
6. Alternatives to Proposed Transition Process
The proposed rule requires notices to be sent to covered recipients
receiving paper for whom the covered entity has an electronic address
and who would therefore be subject to a change from paper to default e-
delivery. The two notices would be mailed over a period of about 180
days to only the covered recipients who receive paper and for whom the
covered entity has an electronic address. We considered an alternative
requiring the covered entity to send the notice to all covered
recipients for whom the entity has electronic addresses, even for those
who have previously consented to e-delivery. This approach would
provide notices of the transition to a greater number of covered
recipients. Some of the covered recipients who had previously consented
to e-delivery may become aware of their ability to revert their consent
and opt out of e-delivery. The result could be a better alignment
between the form of delivery and preferences for those covered
recipients. The alternative approach would, however, be more costly in
terms of the time and attention of the covered recipients who receive
the notices and the cost of paper, printing, and postage that is paid
by the covered entity. Accordingly, we are proposing that notices only
be sent to those covered recipients receiving paper for whom the
covered entity has an electronic address.\654\
---------------------------------------------------------------------------
\654\ See section II.D.1.
---------------------------------------------------------------------------
7. Alternatives for Smaller Covered Entities
The proposed rule would apply to all covered entities, regardless
of their size. As an alternative, we considered providing smaller
entities with greater flexibility in meeting the requirements of the
proposed rule than larger entities. For example, we considered
providing additional time for smaller entities to provide paper copies
of covered information to covered recipients upon request. This could
reduce the cost of compliance for smaller entities that do not have
dedicated staff to time their workflow in a way that lowers the cost of
relying on the proposed rule. However, this could be a source of
inconvenience to some recipients who expect to receive their documents
in a shorter time frame and in particular for covered recipients who
have received
[[Page 45962]]
paper copies of covered information from other covered entities within
three business days of their request. In addition, we considered
providing for smaller entities to provide only all-or-nothing paper
delivery to those who elect paper (as opposed to permitting covered
recipients to pick and choose what covered information they would
receive electronically). This could benefit covered recipients who
prefer paper delivery but would not otherwise request to receive
covered information in paper form versus electronically under proposed
Reg E-Delivery due to costs of their time and attention and other
frictions. This would reduce some of the systems costs for smaller
entities, recognizing that systems for tracking and fulfilling the
bespoke paper preferences of covered recipients could be costly.
Without such a system, however, more covered recipients may require
paper delivery for all documents (rather than receiving e-delivery for
some information and paper for other information, for example), which
could lead to a higher volume and thus cost of paper delivery. In
addition, this approach would not confer the benefit of a standardized
framework for e-delivery that the proposed rule would provide.
F. Request for Comment
We seek comment on the economic analysis, including whether the
analysis has: (1) identified all benefits and costs, including all
effects on efficiency, competition, and capital formation; (2) given
due consideration to each benefit and cost, including each effect on
efficiency, competition, and capital formation; and (3) identified and
considered reasonable alternatives to the proposed rule. We request and
encourage any interested person to submit comments regarding the
proposed rules, our analysis of the potential effects of the proposed
rules, and other matters that may have an effect on the proposed rule.
We request that commenters identify sources of data and information as
well as provide data (with documentation) and information to assist us
in analyzing the economic consequences of the proposed rules and
proposed amendments. If available, we request that commenters provide
examples to illustrate answers. We also are interested in comments on
the qualitative benefits and costs we have identified and any benefits
and costs we may have overlooked. In addition to our general request
for comments on the economic analysis associated with the proposed
rules and proposed amendments, we request specific comments on the
following aspects of the proposal:
177. How might changes in the cost of transmitting covered
information affect the quantity, quality, or timing of transmissions?
178. Does the Commission's economic analysis accurately describe
the current frequency of paper delivery? Under what circumstances is
paper delivery most frequently used now? If available, please provide
information on the type of information and number of documents being
delivered under each method.
179. If Reg E-Delivery is adopted, which types of covered
information would covered recipients be most likely to begin receiving
electronically compared to the current baseline? Would the benefits of
Reg E-Delivery be enhanced with respect to any particular type of
covered information or covered entity? If available, please provide
estimates of the anticipated cost savings likely to result for each
such type of covered information.
180. What specific changes in practice, spending, and staffing
might result if Reg E-Delivery is adopted? Would those changes be more
significant for some covered entities than others?
181. Recipients of covered information who prefer e-delivery would
benefit from the proposed rule, particularly from savings in the time
and attention currently required to obtain their covered information
from covered recipients in their preferred format, to the extent the
covered entity implements default e-delivery. In addition to the
evidence that we have provided, what is the evidence of benefits to
recipients from the proposed rule? To what extent would those benefits
include potential savings to recipients who prefer e-delivery from the
proposed rule? What other benefits would accrue to recipients from the
proposed rule?
182. Recipients of covered information who prefer paper would
experience costs from a default to e-delivery in terms of the burden on
their time and attention to obtain their preferred form of delivery.
How else would the proposed rule affect covered recipients who prefer
paper delivery?
183. According to an industry study, recipients of regulatory
documents report that they sometimes request, but do not receive, e-
delivery.\655\ Please provide an explanation for this reported finding.
Please also provide evidence on the extent to which covered entities
have in the past not provided e-delivery when it is requested.
Conversely, to what extent, if any, have covered entities provided e-
delivery to recipients who did not request it or who preferred paper)?
---------------------------------------------------------------------------
\655\ See supra footnote 548 and accompanying text.
---------------------------------------------------------------------------
184. Under what conditions do covered entities currently provide
paper delivery at no charge on request? Under what conditions do
covered entities currently charge, directly or indirectly, for paper
delivery?
185. How would the requirement for entities relying on the proposed
rule to provide paper at no charge on request affect the extent to
which covered entities choose to rely on the proposed rule? How would
it affect the cost or cost savings from the proposed rule, including
whether and how cost savings are passed along to covered recipients and
other parties? How would this requirement affect the experiences of
covered recipients in reviewing the covered information?
186. Economies of scale and scope can limit the incremental cost of
compliance for covered entities and other affected parties. To what
extent would the presence or absence of scale economies in the supply
of services to parties affected by the proposed rule influence the cost
of compliance with the proposed rule?
187. Could the reduction in the total number of paper documents
sent result in an increase in the price or fee that covered entities
pay for paper delivery?
188. Could an increase in the total number of electronic
transmissions of covered information cause an increase in the price or
fee that covered entities pay for electronic delivery. If so, please
explain how.
189. The proposed rule would facilitate a reduction in costs of
paper, printing, and postage that are associated with the delivery of
covered information by paper mail. To what extent, and under what
conditions, would these cost savings accrue entirely to the covered
entity and to what extent, and under what conditions, would they be
passed on to the covered recipients or other parties? Please explain
with attention to the mechanism through which a covered entity may
fully retain, or pass along, the savings and how the result may vary
with type of covered entity, covered information, covered recipient or
other factors.
190. The cost of providing paper delivery will vary across covered
entities according to the type of covered information, and on the
extent to which they rely on intermediaries to transmit covered
information and on what choices covered entities and potentially
intermediaries make about, e.g., the
[[Page 45963]]
kind of mail used, as industry studies have shown. To what extent would
variation in the kind of mail used across covered entities, or the
choices they make in this regard, affect the benefit or cost of the
proposed rule? Please provide estimates of the differences in the
benefits or costs of the proposed rule in relation to the differences
in choice of mail, by type of covered information and covered
recipient, if available, along with details on how the estimates are
derived.
191. What costs would covered entities incur in transitioning from
reliance on the E-Delivery Guidance to reliance on Reg E-Delivery in
addition to those costs that are quantified and discussed in the
economic analysis?
192. What costs would covered entities incur as a result of the
transition from reliance on rule 30e-3 to reliance on Reg E-Delivery?
Please provide details and examples, with attention to how or whether
these costs would vary with the scale of operations of the affected
entity or the scale of operations of any provider of services to the
affected entity. Provide quantitative estimates, if available.
193. What costs would covered entities incur in transition from
reliance on rule 14a-16 to reliance on revised rule 14a-16 and Reg E-
Delivery for the delivery of covered information? Please provide
details and examples, with attention to how or whether these costs
would vary with the scale of operations of the affected entity and its
service providers. Provide quantitative estimates, if available.
194. The proposed rule requires the delivery of information in
paper form, free of charge, on request by covered entities after the
transition to e-delivery. Under what conditions would entities likely
receive requests for paper delivery from covered recipients whose
deliveries were previously defaulted to e-delivery? What are the likely
costs of this requirement to covered entities and recipients? Please
explain and provide quantitative information, if available, to support
your explanation. Please also explain, and present evidence regarding
the implications of this requirement for cost of relying on the
proposed rule and the choice of a covered entity to rely on the rule.
195. It is our understanding that most covered entities and their
service providers already provide toll-free numbers and websites for
various investor, customer, client or other covered recipient inquiries
and that, based on this, the cost to most entities of maintaining the
websites and systems (for such inquiries) that are required by Reg E-
Delivery would be small. Is our understanding correct? Under what
circumstances and to what extent would covered entities not already
have such systems in place? Under what, if any, conditions would a
covered entity face significant costs of the web systems requirements
of the proposed rule relative to current practice?
196. The proposed rescission of rule 30e-3 would cause covered
entities to incur a one-time cost of updating their systems and
procedures to conform to the requirements of the new e-delivery
framework. This cost may vary across covered entities based on factors
that include whether they rely on a service provider or intermediary
for the maintenance of those systems and procedures. We are requesting
comment on the cost to entities that rely on rule 30e-3 of
transitioning to the proposed new framework for E-Delivery, including
the magnitude of the cost, and whether and how covered entities may
rely on service providers or intermediaries to mitigate this cost.
197. The proposed rule limits the scope for a covered entity to
default a covered recipient into paper delivery, such as through
restriction on the electronic addresses to which a covered entity may
e-deliver covered information. These restrictions and other conditions
of the proposed rule are designed to prevent the e-delivery of covered
information to recipients who lack internet access or lack the digital
literacy that is necessary to avoid being made worse off by a
transition from paper to e-delivery. Are there any scenarios under
which these restrictions and conditions do not sufficiently protect
against e-delivery to recipients who would be worse off from receiving
covered information by e-delivery? For each such scenario, what would
be the effect on the covered recipient and what, if any, changes to the
proposed rule would mitigate that effect. Please consider in your
answer whether or how the ability of the covered entity to choose
whether to rely on the rule (and thus, whether to provide e-delivery)
could serve to mitigate the potential harm.
198. For some types of covered information, is it possible that
lowering the incremental cost of delivering the covered information
(for entities relying on the rule) could create an incentive for the
covered entity (or, in the case of proxy materials, a third party) to
increase the number or frequency of deliveries or to change the
delivery timing beyond what is required under applicable law? We
request comment on whether (and under what conditions) the proposed
rule would affect the timing or frequency of deliveries of covered
information to covered recipients. Please provide specific examples
regarding the type of covered information and the conditions under
which a change could occur.
199. What, if any, effect on the physical storage of documents and
the costs of storage would arise from the change from paper to e-
delivery under the proposed rule? Would the total cost decline? Would
the form of storage change?
200. We understand that covered entities generally have chosen an
approach to transmitting information containing PFI that does not
involve direct delivery. Covered entities commonly will deliver an
electronic notification informing a recipient that a disclosure is
available, while providing access to the document via a link to a
secure website such as an online portal. We request comment on the
degree to which there are any exceptions to this practice, such as by
using a direct secure delivery method. What would be the effect of
requiring any entities that currently do not sent a statement of
availability to comply with the provisions of the proposed rule
relating to PFI.
201. We have provided estimated savings in the cost of paper,
printing and postage from reliance on the proposed rule based on
assumptions about the percent of deliveries that currently occur in
paper and that 90.25 percent of those paper deliveries would default to
e-delivery under the proposed rule. What alternative assumptions should
we consider as a basis for estimating the savings in paper, printing
and postage from the proposed rule? Does your answer vary according to
the type of covered entity or covered information for which the
estimate is being generated?
IV. Paperwork Reduction Act Analysis
New proposed rule Reg E-Delivery contains ``collection of
information'' requirements within the meaning of the Paperwork
Reduction Act of 1995 (the ``PRA'').\656\ The Commission is submitting
these collections of information to the Office of Management and Budget
(``OMB'') for review in accordance with 44 U.S.C. 3507(d) and 5 CFR
1320.11. The new collections of information relate to (1) proposed
section 303.102(b) of Reg E-Delivery regarding disclosure of e-
delivery, (2) proposed section 303.102(c) of Reg E-Delivery regarding
e-delivery methods, (3) proposed section 303.102(f) of Reg E-Delivery
regarding the obligation of covered
[[Page 45964]]
entities to provide free paper copies of covered information and to
permit covered recipients to opt out of e-delivery; (4) proposed
section 303.103 of Reg E-Delivery regarding requirements for website
availability of covered information; and (5) proposed section 303.104
of Reg E-Delivery regarding notices of the default to e-delivery. The
Commission is also providing analysis regarding information collections
associated with the proposed rescission of rule 30e-3, and amendments
to Regulations 14A and 14C regarding the dissemination of proxy
materials and information statements to shareholders. An agency may not
conduct or sponsor, and a person is not required to respond to, a
collection of information unless it displays a currently valid OMB
Control Number.
---------------------------------------------------------------------------
\656\ See 44 U.S.C. 3501 et seq.
---------------------------------------------------------------------------
We discuss below the collection of information burdens associated
with the proposed rule. These PRA burden estimates are not the only
economic effects of the proposed rulemaking. Section III above
discusses the economic effects of the proposed rulemaking
comprehensively. The discussion in Section III incorporates an estimate
of the proposed rulemaking's aggregated monetized benefits and costs,
including the estimate that the proposed rule would yield aggregate
annual cost savings for covered entities of approximately $463 million
annually.
The PRA burden estimates discussed below do not include the time
and cost burdens associated with underlying statutory and regulatory
requirements to deliver covered information. These are accounted for as
appropriate in the existing collections of information associated with
the respective regulatory requirements addressing this covered
information. If Reg E-Delivery is adopted, the Commission will make any
needed adjustments to the burden estimates for existing collections of
information associated with Commission rules regarding the delivery of
covered information (specifically, cost burdens associated with print
and mail) in connection with its submission of these collections of
information to OMB for extension or renewal. As discussed in the
economic analysis, we anticipate the overall result would be to reduce
burdens on covered entities. The anticipated burden reduction may be
dispersed across the existing collections of information, however, and
the burden reduction associated with any given OMB control number may
vary depending on the assumptions reflected in the prior supporting
statements for each collection. We invite public comment on possible
burden adjustments resulting from this rule (for example the possible
changes in printing and mailing costs or the possible changes in time
devoted to paper and digital communication) and note that the OMB
extension and renewal processes will also provide an opportunity for
public comment when the existing collections are adjusted.
A. Reg E-Delivery: Disclosure of Electronic Delivery
Proposed section 303.102(b) of Reg E-Delivery, if adopted, would
require a covered entity, before using electronic delivery to deliver
covered information to a covered recipient, to provide certain
disclosures to that covered recipient, as described in section II.B.2
above. A covered entity would not have to provide this disclosure if
the covered recipient received an initial notice under the requirements
to transition to default e-delivery, as described in section II.D
above, or who received e-delivery of all covered information by or on
behalf of the covered entity as of the effective date of Reg E-
Delivery.
The table below summarizes our PRA initial and ongoing annual
burden estimates associated with the proposed requirements regarding
disclosure of e-delivery under section 303.102(b). As of December 31,
2025, we estimate that there were 44,134 covered entities that could
choose to rely on Reg E-Delivery.\657\ We estimate that 95% of these
covered entities would actually rely on Reg E-Delivery to use
electronic delivery, meaning that approximately 42,000 covered entities
would be required to prepare and deliver the required disclosure.\658\
---------------------------------------------------------------------------
\657\ Our estimates indicate that as of December 31, 2025, there
were 14,296 registered investment companies (including business
development companies); 16,442 registered investment advisers; 3,262
broker-dealers; 324 transfer agents; 75 funding portals; 9,654
corporate issuers excluding business development companies (see
supra section III.B.2.e for a discussion of the calculation of this
figure); 16 municipal securities dealers; 54 security-based swap
dealers; 0 major security-based swap participants; 3 security-based
swap data repositories; and 8 security-based swap execution
facilities, for a total of 44,134 covered entities. See supra
section III.B.2.
\658\ For example, in 2018, we estimated that 90% of all funds
would rely on rule 30e-3, which, subject to certain conditions,
permits funds to satisfy shareholder report delivery requirements by
making those reports available online. See Rule 30e-3 Adopting
Release, supra footnote 213. Given the continued and historical
shift to e-delivery, we estimate that the percentage of covered
entities that would utilize e-delivery, and therefore rely on
proposed Reg E-Delivery, has likely risen to 95%. 95% x 44,134
covered entities (see supra footnote 657) = 41,927 covered entities.
We round this to 42,000 covered entities.
Table 8--Reg E-Delivery Sec. 303.102(b) PRA Estimates
----------------------------------------------------------------------------------------------------------------
Internal
initial hour Internal annual burden Wage rate Internal annual time
burdens \1\ \2\ costs
----------------------------------------------------------------------------------------------------------------
PROPOSED ESTIMATES FOR REG E-DELIVERY Sec. 303.102(b)
----------------------------------------------------------------------------------------------------------------
Internal preparation of required 1.5 1 hour \3\............. \4\ $528 $528.
disclosure.
Number of responses \5\......... .............. x 42,000 responses..... ......... x 42,000 responses.
---------------------------------------------------------------------------
Total annual burden for Sec. .............. 42,000 hours........... ......... $22,000,000.\6\
102(b)).
----------------------------------------------------------------------------------------------------------------
Notes:
\1\ Includes ongoing annual burden hours, plus initial burden estimates annualized over a 3-year period.
[[Page 45965]]
\2\ To calculate the occupational hourly rates used in this release, the Commission uses occupational mean
hourly wage data from the Occupational Employment and Wage Statistics (OEWS) program of the Bureau of Labor
Statistics (BLS) for ``Securities, Commodity Contracts, and Other Financial Investments and Related
Activities'' (NAICS 523)+. See Occupational Employment and Wage Statistics, U.S. BUREAU OF LABOR STATISTICS,
https://www.bls.gov/oes/; see also Standard Occupational Classification, U.S. BUREAU OF LABOR STATISTICS,
https://www.bls.gov/soc/ (describing occupational classification system used by BLS); EXEC. OFF. OF THE
PRESIDENT, OFF. OF MGMT. & BUDGET, NORTH AMERICAN INDUSTRY CLASSIFICATION SYSTEM (2022), available at https://www.census.gov/naics/reference_files_tools/2022_NAICS_Manual.pdf (describing the industry classification
system used by BLS and other agencies). The mean hourly wage for each occupation is adjusted for changes in
the seasonally adjusted employment cost index for private wages and salaries between the data reference period
and when the data are released by BLS. See Employment Cost Index, U.S. BUREAU OF LABOR STATISTICS, https://www.bls.gov/eci/. The adjusted mean hourly wage is then multiplied by a factor that accounts for nonwage costs
borne by employers, such as bonuses, benefits, and overhead. This factor is calculated as an average over the
10 most recently available years of data of the ratio of the Bureau of Economic Analysis's annual gross output
data for NAICS 523 to total annual wages across all occupations for NAICS 523 in the OEWS data. See Gross
Output by Industry, U.S. BUREAU OF ECONOMIC ANALYSIS, https://www.bea.gov/data/industries/gross-output-by-industry industry; Occupational Employment and Wage Statistics, U.S. BUREAU OF LABOR STATISTICS, https://www.bls.gov/oes/ oes/. The final product is the occupational hourly rate. See generally UPDATED METHODOLOGY FOR CALCULATING
OCCUPATIONAL HOURLY RATES (Dec. 19, 2025), available at https://www.sec.gov/files/method-occupational-hourly-rates.pdf.
\3\ This estimate assumes that, after the initial 1.5 hours that a covered entity would spend on the disclosure
of electronic delivery, which we annualize over a 3-year period, the covered entity would incur 0.5 burden
hours annually associated with ongoing compliance with this requirement. The estimate of 1 hour is based on
the following calculation: (1.5 initial hour burden/3) = .5 hour + 0.5 ongoing annual burden. This estimate
includes the preparation of the notice, as well as any related recordkeeping.
\4\ $528 reflects a $527.50 blended wage rate, based on current estimates for an attorney ($774) and paralegal
($281). We round this to $528.
\5\ This estimate assumes that, because each covered entity prepares general or template disclosure that would
be provided to covered recipients, there is 1 response per covered entity (therefore, number of responses =
number of covered entities relying on Reg E-Delivery).
\6\ $528 x 42,000 = $22,176,000. The PRA internal annual time cost estimates in this release are rounded to the
nearest million.
B. Reg E-Delivery: E-Delivery Methods
Proposed section 303.102(c) of Reg E-Delivery, if adopted, would
permit a covered entity to use two methods of e-delivery, depending on
the type of information being provided: statement of availability, and
direct delivery of covered information to an electronic address, as
described in sections II.B.3 and II.B.4 above. The permissible delivery
method would depend on whether the covered information includes PFI.
For covered information that does not include PFI, a covered entity
would be permitted to electronically deliver covered information
directly to a covered recipient's electronic address. For covered
information that includes PFI, a covered entity would not be permitted
to deliver this information directly to an electronic address, but
instead would be required to deliver a statement of availability to the
covered recipient's electronic address. The proposed rule includes
content requirements for both the statement of availability and the
direct delivery of covered information.
The table below summarizes our PRA initial and ongoing annual
burden estimates associated with the statement of availability
requirements, as well as the requirements associated with directly
delivering covered information to an electronic address, as described
in Reg E-Delivery section 303.102(c). As discussed above, we estimate
that approximately 42,000 covered entities would rely on Reg E-
Delivery.\659\
---------------------------------------------------------------------------
\659\ See supra footnote 658 and accompanying text.
Table 9--Reg E-Delivery Sec. 303.102(c) PRA Estimates
----------------------------------------------------------------------------------------------------------------
Internal
initial hour Internal annual Wage rate Internal annual
burdens burden \1\ \2\ time costs
----------------------------------------------------------------------------------------------------------------
PROPOSED ESTIMATES FOR REG E-DELIVERY Sec. 303.102(c)
----------------------------------------------------------------------------------------------------------------
Preparation of statements of 9 6 hours \3\........ x \4\ $528 $3,168.
availability of covered
information to an electronic
address and/or direct delivery
of covered information.
Number of responses \5\.......... .............. x 42,000 responses. ........ ......... x 42,000 responses.
------------------------------------------------------------------------------
Total annual burden for Sec. .............. 252,000 hours...... ........ ......... $133,000,000.\6\
303.102(c).
----------------------------------------------------------------------------------------------------------------
Notes:
\1\ Includes ongoing annual burden hours, plus initial burden estimates annualized over a 3-year period.
\2\ See supra footnote 2 to Table 8 (discussing calculation of the occupational hourly rates used in this
release).
\3\ This estimate assumes that, after the initial 9 hours that a covered entity would spend on developing a
template statement of availability and/or a template for the direct delivery of covered information, which we
annualize over a 3-year period, the covered entity would incur 3 burden hours annually associated with ongoing
compliance with this requirement. The estimate of 6 hours is based on the following calculation: (9 initial
hour burden/3) = 3 hours + 3 hours ongoing annual burden.
\4\ $528 reflects a $527.50 blended wage rate, based on current estimates for an attorney ($774) and paralegal
($281). We round this to $528.
\5\ This estimate assumes that, because each covered entity prepares general or template statement of
availability or direct delivery mailing that would be provided to covered recipients, there is 1 response per
covered entity (therefore, number of responses = number of covered entities relying on Reg E-Delivery).
\6\ $3,168 x 42,000 = $133,056,000. The PRA internal annual time cost estimates in this release are rounded to
the nearest million.
C. Reg E-Delivery: Delivery of Covered Information in Paper on Request
Section 102(f) of Reg E-Delivery would obligate the covered entity
to provide one paper copy of covered information, free of charge upon
request. We describe this requirement in more detail in section II.B.7
above. The burdens associated with this collection of information would
involve the burdens associated with responses to these requests,
including print and mail costs associated with providing paper copies
of covered information.
While Reg E-Delivery permits covered recipients to opt out of e-
delivery generally (to receive paper versions of all or a subset of
covered information
[[Page 45966]]
following the request), the burdens estimated below do not include the
print and mail costs associated with opting out of e-delivery
generally. These would be burdens associated with the underlying
statutory and regulatory requirements to deliver covered information,
and these are accounted for as appropriate in existing collections of
information associated with the respective other regulatory
requirements addressing this covered information. The burdens
associated with ad hoc paper copy requests, however, are a burden
associated with Reg E-Delivery because these would be additive to the
costs of providing covered information as addressed in existing
collections of information associated with the regulatory requirements
for this covered information.
The table below summarizes our PRA initial and ongoing annual
burden estimates associated with the requirements in Reg E-Delivery
Sec. 303.102(f). As discussed above, we estimate that approximately
42,000 covered entities would rely on Reg E-Delivery.\660\
---------------------------------------------------------------------------
\660\ See supra footnote 658 and accompanying text.
Table 10--Reg E-Delivery Sec. 303.102(f) PRA Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
Internal
initial hour Internal annual burden Wage rate Internal annual time Annual external cost
burdens \1\ \2\ costs burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
PROPOSED ESTIMATES FOR REG E-DELIVERY Sec. 303.102(f)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Delivery of covered information in 1.5 1 hour \3\............... x \4\ $528 $528.................... $500.\5\
paper on request.
Number of responses................... .............. x 42,000 responses....... ...... ......... x 42,000 responses...... x 42,000 responses.
-----------------------------------------------------------------------------------------------------------------
Total annual burden for Sec. .............. 42,000 hours............. ...... ......... \6\ $22,000,000......... $21,000,000.
303.102(f).
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\1\ Includes ongoing annual burden hours, plus initial burden estimates annualized over a 3-year period.
\2\ See supra footnote 2 to Table 8 (discussing calculation of the occupational hourly rates used in this release).
\3\ This estimate assumes that, after the initial 1.5 hours that a covered entity would spend on processes associated with providing paper copies of
covered information, and processing e-delivery opt-out requests, which we annualize over a 3-year period, the covered entity would incur 0.5 burden
hours annually associated with ongoing compliance with this requirement. The estimate of 1 hour is based on the following calculation: (1.5 initial
hour burden/3) = 0.5 hours + 0.5 hours ongoing annual burden.
\4\ $528 reflects a $527.50 blended wage rate, based on current estimates for an attorney ($774) and paralegal ($281). We round this to $528.
\5\ Because we do not have specific data regarding the cost of printing and mailing the materials that must be provided on request, or the number of
requests for printed materials that covered entities would receive annually, for purposes of our analysis we estimate $500 per year for each covered
entity to collectively print and mail such materials upon request. See similar estimates in Tailored Shareholder Reports Adopting Release, supra
footnote 13, at section V.B (Table 8).
\6\ $528 x 42,000 = $22,176,000. The PRA internal annual time cost estimates in this release are rounded to the nearest million.
D. Reg E-Delivery: Identifying and Remediating E-Delivery Failures
Section 102(h) of Reg E-Delivery would require that covered
entities adopt and implement written policies and procedures reasonably
designed to identify and remediate e-delivery failures, as described in
greater detail in section II.B.9, above.
The table below summarizes our PRA initial and ongoing annual
burden estimates associated with the adoption and implementation of the
written policies and procedures requirements in Reg E-Delivery Sec.
303.102(h). As discussed above, we estimate that approximately 42,000
covered entities would rely on Reg E-Delivery.\661\
---------------------------------------------------------------------------
\661\ See supra footnote 658 and accompanying text.
Table 11--Reg E-Delivery Sec. 303.102(h) PRA Estimates
----------------------------------------------------------------------------------------------------------------
Internal
initial hour Internal annual Wage rate Internal annual
burdens burden \1\ \2\ time costs
----------------------------------------------------------------------------------------------------------------
PROPOSED ESTIMATES FOR REG E-DELIVERY Sec. 303.102(h)
----------------------------------------------------------------------------------------------------------------
Adoption and Implementation of 3 2 hours \3\........ x \4\ $528 $1,056.
Written Policies and Procedures.
Number of responses............... .............. x 42,000 responses. ........ ......... x 42,000
responses.
-----------------------------------------------------------------------------
Total annual burden for Sec. .............. 84,000 hours....... ........ ......... $44,000,000.\5\
303.102(h).
----------------------------------------------------------------------------------------------------------------
Notes:
\1\ Includes ongoing annual burden hours, plus initial burden estimates annualized over a 3-year period.
\2\ See supra footnote 2 to Table 8 (discussing calculation of the occupational hourly rates used in this
release).
\3\ This estimate assumes that, after the initial 3 hours that a covered entity would spend on the adoption and
implementation of written policies and procedures, which we annualize over a 3-year period, the covered entity
would incur 1 burden hour annually associated with ongoing compliance. The estimate of 2 hours is based on the
following calculation: (3 initial hour burden/3) = 1 hour + 1 hour ongoing annual burden.
\4\ $528 reflects a $527.50 blended wage rate, based on current estimates for an attorney ($774) and paralegal
($281). We round this to $528.
\5\ $1,056 x 42,000 = $44,352,000. The PRA internal annual time cost estimates in this release are rounded to
the nearest million.
[[Page 45967]]
E. Reg E-Delivery: Requirements for website Availability of Covered
Information
If a covered entity uses the statement of availability method for
e-delivery, the covered information must be posted to a website (which
is not the Commission's electronic filing system), meeting certain
requirements as described in section II.C above. This would include
minimum requirements for: (1) the length of time the covered
information must be made available on the website; and (2) the format
for presenting covered information on the website. In circumstances
where a covered entity's website and covered information become
temporarily unavailable, Reg E-Delivery section 303.103 would provide
that the website availability requirements would be deemed to be met as
long as two conditions are met: (1) the covered entity adopts and
implements written policies and procedures reasonably designed to
ensure that the covered information is made available and remains
available in the manner required by the rule; and (2) the covered
entity, once such an unavailability occurs, takes prompt action to
ensure that the covered information becomes available in the manner
required by Reg E-Delivery as soon as practicable following the earlier
of the time at which the covered entity knows or reasonably should have
known that the covered information is temporarily unavailable.
The table below summarizes our PRA initial and ongoing annual
burden estimates associated with the website availability requirements
in Reg E-Delivery Sec. 303.103. As discussed above, we estimate that
approximately 42,000 covered entities would rely on Reg E-
Delivery.\662\
---------------------------------------------------------------------------
\662\ See supra footnote 658 and accompanying text.
Table 12--Reg E-Delivery Sec. 303.103 PRA Estimates
----------------------------------------------------------------------------------------------------------------
Internal
initial hour Internal annual Wage rate Internal annual
burdens burden \1\ \2\ time costs
----------------------------------------------------------------------------------------------------------------
PROPOSED ESTIMATES FOR REG E-DELIVERY Sec. 303.103
----------------------------------------------------------------------------------------------------------------
Website availability requirements 4.5 2.5 hours \4\...... x \5\ $605 $1,512.5.
for covered information \3\.
Number of responses \5\.......... .............. x 42,000 responses. ........ ......... x 42,000 responses.
------------------------------------------------------------------------------
Total annual burden for Sec. .............. 105,000 hours...... ........ ......... $64,000,000.\6\
303.103.
----------------------------------------------------------------------------------------------------------------
Notes:
\1 \ Includes ongoing annual burden hours, plus initial burden estimates annualized over a 3-year period.
\2 \ See supra footnote 2 to Table 8 (discussing calculation of the occupational hourly rates used in this
release).
\3 \ The estimate for website posting of covered information includes burdens related to the development of a
posting protocol for the website, the timing and availability requirements regarding the covered information
posted on the website, the format and retainability requirements of the covered information posted on the
website, and the development of monitoring of safeguards to protect PFI. This estimate also includes estimates
for the adoption and implementation of written policies and procedures reasonably designed to ensure that the
covered information is made available and remains available in the manner required by the rule, and the
quarterly maintenance of the website.
\4 \ This estimate assumes that, after the initial 4.5 hours that a covered entity would spend on compliance
burdens relating to the website availability requirements, which we annualize over a 3-year period, the
covered entity would incur 2 burden hours annually associated with ongoing compliance. The estimate of 2.5
hours is based on the following calculation: (4.5 initial hour burden/3) = 1.5 hours + 1 hour ongoing annual
burden.
\5 \ $605 reflects a blended wage rate, based on current estimates for an attorney ($774) and a computer
programmer ($436).
\6 \ $1,512.50 x 42,000 = $63,525,000. The PRA internal annual time cost estimates in this release are rounded
to the nearest million.
F. Reg E-Delivery: Initial and Follow-Up Notices
New proposed section 303.104 of Reg E-Delivery would require
covered entities to provide certain notices to covered recipients
regarding an upcoming transition to default e-delivery as described in
greater detail in section II.D above. Under the proposed rule, covered
entities would be required to deliver initial notices to covered
recipients receiving paper and could be obligated to send a follow-up
notice to any covered recipient that does not provide or confirm an
electronic address at any time after receiving the initial notice. The
collection of information is necessary to alert covered recipients
receiving paper of the upcoming change in delivery method and provide
them with an opportunity to elect to continue to receive paper delivery
if that is their preference or to update an electronic address they
have on file with the covered entity.
Internal Hours Burden
[[Page 45968]]
The respondents to this information collection would be the covered
entities required to deliver notices of the transition to e-delivery,
including registered investment companies, investment advisers, broker-
dealers, transfer agents, funding portals, and corporate issuers. We
estimate that approximately 42,000 covered entities would rely on Reg
E-Delivery and would be required to send notices to covered recipients
regarding an upcoming transition to default e-delivery.\663\ The two
different notices require nearly identical information and would vary
little, so we anticipate that covered entities would prepare them
simultaneously. With respect to these covered entities, we estimate
compliance with the notice requirements of Reg E-Delivery would require
an average of 3 hours per covered entity in the first year.\664\ We do
not anticipate that there would be burdens related to the notices after
the first year. We estimate that the covered entity would prepare the
notices internally and that this would be carried out by an attorney
and paralegal at an average of $528.\665\ Accordingly, amortizing
burdens over three years, we estimate that the notice requirement would
impose an average total internal annual hour burden of 42,000 hours on
applicable covered entities.\666\ Accounting for such amortization, we
estimate the total cost of the internal annual burden hours to be
$22,000,000.\667\
---------------------------------------------------------------------------
\663\ See supra footnote 657 and accompanying text (estimating
44,134 covered entities). To calculate the number of covered
entities that would send transition notices, we exclude bidders in
third-party tender offers and dissidents in contested proxy
solicitations. See supra section III.B.2.e. This calculation would
result in 44,082 covered entities instead of 44,134 covered
entities. We assume that 95% of covered entities would utilize
proposed Reg E-Delivery to transition covered recipients to default
e-delivery (see supra footnote 658). 95% x 44,082 covered entities =
41,878 covered entities. We round this to 42,000 covered entities.
\664\ We estimate that the initial and follow-up notices would
collectively incur 3 hours of burden to develop in the first year of
compliance with the rule and would only need to be performed once.
\665\ $528 reflects a $527.50 blended wage rate, based on
current estimates for an attorney ($774) and paralegal ($281). See
supra footnote 2 to Table 8 (discussing calculation of the
occupational hourly rates used in this release). We round this to
$528.
\666\ This estimate is based on the following calculations:
42,000 covered entities x 1 hour annualized burden = 42,000 total
internal annual hour burden.
\667\ This estimate is based on the following calculations:
average total internal annual hour burden of 42,000 x $528 (blended
rate for an attorney and paralegal, as discussed in supra footnote
665) = $22,176,000 total cost of the internal annual burden. The PRA
internal annual time cost estimates in this release are rounded to
the nearest million.
---------------------------------------------------------------------------
External Burden
In addition, we estimate that covered entities would incur external
costs if they rely on Reg E-Delivery and are required to provide notice
of the transition to default e-delivery.\668\ We estimate that in the
first year, each covered entity would incur printing and mailing costs
related to the transition notices. These costs account for the
preparation and transmission of the two separate notices. We estimate
that covered entities would send approximately the same number of
notices for each of the initial and follow-up notices.\669\ We estimate
that 95% of covered entities would rely on Reg E-Delivery and would
transition covered recipients receiving paper to e-delivery \670\ and
that covered entities would need to send paper notices to 30% of their
respective covered recipients because we estimate that percentage of
covered recipients receives at least some (if not necessarily all)
covered information in paper.\671\ Based on this formulation, we
estimate that 135,660,000 covered recipients \672\ would receive
transition notices.\673\ We estimate printing costs for the notices to
be approximately $0.57 and mailing cost to be approximately $0.23.\674\
We estimate that the annual printing and mailing costs for the
transition notices would be approximately $217,000,000 in the first
year and $0 in subsequent years.\675\ Amortized over three years, we
estimate annual external burden costs of approximately
$72,000,000.\676\
---------------------------------------------------------------------------
\668\ We note that cost estimates may vary across covered
entities based on factors that include whether they rely on a
service provider or intermediary for the delivery of notices and
maintenance of relevant systems and procedures.
\669\ Some covered recipients would not need to receive a
subsequent notice if they update or confirm an electronic address in
response to the initial notice (see supra section II.D.2) so this
likely is an overestimate.
\670\ See supra footnote 663 and accompanying text.
\671\ We estimate 30% of covered recipients are covered
recipients receiving paper after averaging data of persons currently
receiving mail provided in the Broadridge Survey presented in Table
1 ``Survey Evidence: Alignment between Form and Preference of
Delivery (E-Delivery vs. Paper Mail'' supra section III.B.3. We note
that the ICI Survey found that 84% of fund investors recall
receiving at least some of their financial documents electronically.
More specifically 51% recalled receiving all documents in paper, 33%
both electronic and paper documents, and 16% receive paper only. See
ICI Survey, supra footnote 25.
\672\ See supra section III.B.2 discussing our estimation of
covered recipient aggregate household accounts. Our estimates
indicate that as of December 31, 2025, that registered investment
companies (including business development companies) had 75 million
households; registered investment advisers had 65 million clients;
broker-dealers had 308 million customer accounts at carrying
brokers; and corporate issuers (excluding business development
companies) had 28 million households for a total of 476 million
covered recipients.
\673\ This estimate is based on the following calculations: (476
million total number of covered recipients) x 0.95 (percentage of
covered entities utilizing transition) x 0.30 (percentage of covered
recipients receiving paper) = 135,660,000 total number of covered
recipients who will receive transition notice mailings.
\674\ See ICI Letter supra footnote 17 (outlining printing and
mailing costs in Table 2). We estimate that the notice's mailing and
print costs would be similar to that of fund shareholder reports in
length and operational burden ($0.57 for print costs and $0.23 for
mailing costs, respectively).
\675\ $0.80 ($0.57 + $0.23, see supra footnote 674) x
135,660,000 covered recipients x 2 notices in year 1 = $217,056,000.
We round this to the nearest million.
\676\ $217,000,000/3 = $72,333,333. We round this to the nearest
million.
Table 13--Reg E-Delivery Sec. 303.104 PRA Estimates
----------------------------------------------------------------------------------------------------------------
Internal
initial hour Internal annual burden Wage rate Internal annual time
burdens \1\ costs
----------------------------------------------------------------------------------------------------------------
PROPOSED ESTIMATES FOR REG E-DELIVERY Sec. 303.104
----------------------------------------------------------------------------------------------------------------
Internal preparation of notices..... 3 1 hour \3\............. $528 \2\ $528.
Number of responses \4\............. .............. x 42,000 responses..... ......... x 42,000 responses.
----------------------------------------------------------------------------------------------------------------
Total initial internal burden... .............. 42,000 hours........... ......... Total initial internal
burden hours
$22,000,000.\5\
----------------------------------------------------------------------------------------------------------------
Notes:
\1\ Includes initial burden estimates annualized over a 3-year period. After the initial dissemination of the
transition notices we do not anticipate additional costs related to the notices.
[[Page 45969]]
\2.\ $528 reflects a $527.50 blended wage rate, based on current estimates for an attorney ($774) and paralegal
($281). We round this to $528.
\3\ This estimate assumes that, after the initial 3 hours that a covered entity would spend on compliance
burdens relating to developing the notices, there would be no further ongoing compliance cost related to
developing the notices. The amortized annual estimate of 1 hour is based on the following calculation: (3
initial hour burden/3 years) = 1 hour.
\4\ This estimate assumes that, because each covered entity prepares general or template disclosure that would
be provided to covered recipients, there is 1 response per covered entity (therefore, number of responses =
number of covered entities relying on Reg E-Delivery).
\5\ $528 x 42,000 = $22,176,000. The PRA internal annual time cost estimates in this release are rounded to the
nearest million.
Table 14--Reg E-Delivery Sec. 303.104 External Printing and Mailing Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
Covered
recipient Cost per Number of Initial external External annual
accounts notice notices burden costs burden cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
PROPOSED ESTIMATES FOR REG E-DELIVERY Sec. 303.104
--------------------------------------------------------------------------------------------------------------------------------------------------------
External printing and mailing costs............................... 135,660,000 x \2\ $0.80 x 2 \3\ $217,000,000 \4\ 72,000,000
\1\
-------------------------------------------------------------------------------------
Total annual burden for Sec. 104............................ .............. ...... ......... ......... .................. $72,000,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\1\ This estimate is based on the following calculations: (476 million total number of covered recipients) x 0.95 (percentage of covered entities
utilizing transition) x 0.30 (percentage of covered recipients receiving paper) = 135,660,000 total number of covered recipients who would receive
transition notice mailings.
\2\ See ICI Survey (outlining printing and mailing costs in Table 2). We estimate that the notice's mailing and print costs would be similar to that of
fund shareholder reports in length and operational burden ($0.57 for mailing costs and $0.23 for print cost, respectively).
\3\ See supra footnote 661.
\3\ Includes initial printing and mailing burden estimates of the notices annualized over a 3-year period. After the initial dissemination of the
transition notices, we do not anticipate additional costs related to the notices.
\4\ We estimate that, in the first year, each covered entity would incur printing and mailing costs related to the transition notices, and would incur
no print and mail costs in subsequent years. The external annual burden cost estimate of $72,000,000 is based on the following calculation:
($217,000,000 initial external printing and mailing costs/3) = $72,333,333 rounded to the nearest million, $72,000,000.
G. Reg E-Delivery: Aggregate Paperwork Reduction Act Burden
We estimate that the aggregate burden to comply with Reg E-Delivery
would be: 567,000 annual internal hour burden, $307,000,000 annual
internal cost burden, and $93,000,000 annual external cost burden:
----------------------------------------------------------------------------------------------------------------
Annual
internal Annual Annual
Reg E-Delivery information collection hour burden internal cost external cost
(hours) burden burden
----------------------------------------------------------------------------------------------------------------
Disclosure of Electronic Delivery (Reg E-Delivery Sec. 42,000 $22,000,000 N/A
303.102(b)).......................................................
E-Delivery Methods (Reg E-Delivery Sec. 303.102(c)).............. 252,000 133,000,000 N/A
Delivery of Covered Information in Paper on Request (Reg E-Delivery 42,000 22,000,000 21,000,000
Sec. 303.102(f))................................................
Adoption and Implementation of Written Policies and Procedures 84,000 44,000,000 N/A
Regarding E-Delivery Failures (Reg E-Delivery Sec. 303.102(h))..
Requirements for Website Availability of Covered Information (Reg E- 105,000 64,000,000 N/A
Delivery Sec. 303.103)..........................................
Initial and Follow-Up Notices (Reg E-Delivery Sec. 303.104)...... 42,000 22,000,000 72,000,000
--------------------------------------------
Total Burden................................................... 567,000 307,000,000 93,000,000
----------------------------------------------------------------------------------------------------------------
H. Rule 30e-3
In our most recent PRA submission for rule 30e-3 under the
Investment Company Act, we estimated for this rule a total hour burden
of 1,406 hours and a total annual external cost burden of
$5,129,088.\677\ Because we are proposing to rescind rule 30e-3, those
PRA burdens would be reduced to zero.
---------------------------------------------------------------------------
\677\ This estimate is based on the last time the rule's
information collection was submitted for PRA renewal in 2025.
---------------------------------------------------------------------------
I. Regulations 14A and 14C and Rule 14d-5
As we discuss in greater detail above,\678\ Regulations 14A and 14C
prescribe specific requirements for issuers and other soliciting
persons to furnish proxy materials and information statements to
shareholders.\679\ Under the current proxy rules, an issuer or other
soliciting person may furnish proxy materials to shareholders by
delivering a notice of internet availability or a full set of proxy
materials.\680\ Moreover, if the issuer or other soliciting person has
obtained affirmative consent to electronic delivery of proxy materials
from a record holder, the issuer or other soliciting person could
deliver the notice of internet availability or the full set to the
record holder electronically. We are proposing to expressly incorporate
the requirements associated with the permitted e-delivery methods and
the requirements for website availability of information under Reg E-
Delivery into the delivery framework for proxy materials and
information statements while preserving certain requirements unique to
proxy statements and information statements required to be delivered
under Regulations 14A and 14C.\681\ We are also proposing amendments
that would streamline the existing proxy rules by revising or removing
requirements that are outdated or would be unnecessary if Reg E-
Delivery is adopted.\682\ One result of these amendments would be that
if an issuer, other soliciting person, or intermediary were to use e-
delivery to furnish proxy materials or an information statement, the
issuer, other soliciting person, or intermediary would
[[Page 45970]]
be required to comply with the requirements associated with the
permitted e-delivery methods (i.e., a statement of availability of
proxy materials or direct delivery of proxy materials) and website
availability of information under Reg E-Delivery, in addition to the
requirements in proposed amended Regulations 14A and 14C. Another
result of these amendments would be that if an issuer or other
soliciting person were to use the notice and access model to furnish a
proxy statement or an information statement, the notice would not be
permitted to be sent in paper form. Instead, an issuer or other
soliciting person would be required to send such notice (i.e., a
statement of availability of proxy materials) electronically.
---------------------------------------------------------------------------
\678\ See supra section II.F.2.
\679\ See rule 14a-16.
\680\ See id.
\681\ See supra section II.F.2.b.
\682\ See id.
---------------------------------------------------------------------------
We recognize that, because the proposed amendments to Regulations
14A \683\ and 14C \684\ could change the way in which the notice would
be required to be provided for certain shareholders (i.e.,
electronically rather than in paper form), the proposed amendments
could reduce some of the paperwork burdens associated with Regulations
14A and 14C.\685\ We also note, however, that the proposed amendments
would not eliminate any information collection requirements under
Regulation 14A or 14C or significantly alter the substance of the
notice that an issuer or other soliciting person would be required to
provide to shareholders under those regulations. Because we cannot
estimate with precision the potential reduction in burden associated
with the proposed amendments, and in order to err on the side of
potentially overstating burdens rather than understating burdens, we do
not estimate any reduction in the paperwork burdens associated with
Regulations 14A and 14C. Additionally, many of the content requirements
for the direct delivery of covered information apply to the statement
of availability under Reg E-Delivery. While the content required in the
statement of availability under Reg E-Delivery (which is incorporated
into proposed amended rule 14a-16) \686\ is similar to the content
required in the notice of internet availability under current rule 14a-
16,\687\ there are no corresponding content requirements in current
rule 14a-16 for the direct e-delivery of proxy materials. However, we
expect the content required in a direct e-delivery of proxy materials
to be similar to the content included in a direct e-delivery of proxy
materials in the absence of such requirements, with a modest increase
in content. As a result, we do not believe that these requirements will
increase the annual burden associated with collections of information
under Regulations 14A and 14C, nor do we believe there will be any
change in the information collection for Regulation 14D as a result of
the changes to rule 14d-5.
---------------------------------------------------------------------------
\683\ OMB Control No. 3235-0059.
\684\ OMB Control No. 3235-0057.
\685\ See E-Proxy Adopting Release at 4161 (discussing the
estimated burden hours for these collections of information).
\686\ See proposed rule 14a-16(c)(1).
\687\ See 17 CFR 240.14a-16(d).
---------------------------------------------------------------------------
J. Request for Comment
We request comment on whether these estimates are reasonable.
Pursuant to 44 U.S.C. 3506(c)(2)(B), the Commission solicits comments
in order to: (1) evaluate whether the proposed collection of
information is necessary for the proper performance of the functions of
the Commission, including whether the information will have practical
utility; (2) evaluate the accuracy of the Commission's estimate of the
burden of the proposed collection of information, including the
validity of the methodology and assumptions used; (3) determine whether
there are ways to enhance the quality, utility, and clarity of the
information to be collected; and (4) determine whether there are ways
to minimize the burden of the collection of information on those who
are to respond, including through the use of appropriate automated,
electronic, mechanical, or other technological collection techniques or
other forms of information technology. Persons wishing to submit
comments on the collection of information requirements of the proposed
amendments should direct them to the OMB Desk Officer for the
Securities and Exchange Commission,
[email protected], and should send a copy to
Vanessa A. Countryman, Secretary, Securities and Exchange Commission,
using any of the methods in the ADDRESSES section, with reference to
File No. S7-2026-25. OMB is required to make a decision concerning the
collections of information between 30 and 60 days after publication of
this release; therefore a comment to OMB is best assured of having its
full effect if OMB receives it within 30 days after publication of this
release. Requests for materials submitted to OMB by the Commission with
regard to these collections of information should be in writing, refer
to File No. S7-2026-25, and be submitted to the Securities and Exchange
Commission, Office of FOIA Services, 100 F Street NE, Washington, DC
20549-2736.
V. Initial Regulatory Flexibility Analysis
The Regulatory Flexibility Act (``RFA'') requires an agency, when
issuing a rulemaking proposal, to prepare and make available for public
comment an Initial Regulatory Flexibility Analysis (``IRFA'') that
describes the impact of the proposed rule on small entities, unless the
Commission certifies that the rule, if adopted, would not have a
significant economic impact on a substantial number of small
entities.\688\ This IRFA has been prepared in accordance with the RFA.
It relates to the proposed new Reg E-Delivery.
---------------------------------------------------------------------------
\688\ See 5 U.S.C. 601 et seq.
---------------------------------------------------------------------------
A. Reasons for and Objectives of the Proposed Actions
Proposed Reg E-Delivery would permit the use of default e-delivery
(that is, using e-delivery as the default delivery method, with the
ability to opt out of default e-delivery, and also to receive paper
copies of covered information on request). In addition, regardless of
whether an entity chooses to use default e-delivery, Reg E-Delivery
would establish conditions under which the Commission would consider
delivery requirements under the Federal securities laws to have been
satisfied by e-delivery. These are designed to help ensure that
investors and other recipients receive information in their preferred
format, particularly in view of the default e-delivery approach that
would be permitted under the proposed rule. The proposal also is
designed to encourage the benefits that increased e-delivery would
bring to recipients of regulatory information, for example through
increased accessibility, security, and the opportunity for a more
engaging experience with disclosure. To facilitate the proposed e-
delivery rule and to take a modernized approach to the use of
electronic media in Commission rules and forms, we are also proposing
to rescind and make amendments to current Commission rules.\689\
---------------------------------------------------------------------------
\689\ Rule 30e-3 under the Investment Company Act and certain
rules in Regulations 14A and 14C and rule 14d-5 under the Exchange
Act.
---------------------------------------------------------------------------
B. Legal Basis
The Commission is proposing the rules contained in this document
under the authority set forth in the Securities Act, particularly,
sections 3(b), 4(a)(2), 4A, 7, 10, 19, 27A, and 28 thereof [15 U.S.C.
77a et seq.]; the Trust Indenture Act, particularly sections 304, 305,
314, and 319 thereof [15 U.S.C. 77ddd-eee, 77nnn, 77sss]; the Exchange
Act,
[[Page 45971]]
particularly, sections 3D, 13, 14, 15, 15F, 17A, 23 and 35A thereof [15
U.S.C. 78a et seq.]; the Investment Company Act, particularly, sections
6, 8, 19, 20, 24, 30, and 38 thereof [15 U.S.C. 80a et seq.]; the
Advisers Act, particularly, sections 203(c)(1), 204, 206A, and 211(a)
[15 U.S.C. 80b-3(c)(1), 80B-, and 80b-11(a)]; and the E-SIGN Act,
particularly section 104(d)(1) [15 U.S.C. 7001 et seq.].
C. Small Entities Subject to the Proposed Rule
Proposed Reg E-Delivery would be available to any entity required
to deliver covered information to a covered recipient, including
entities that are considered to be a small business or small
organization (collectively, ``small entity'') for purposes of the
RFA.\690\ For purposes of the RFA, under the Exchange Act a broker,
dealer, or funding portal is a small entity if it: (1) had total
capital of less than $500,000 on the date in its prior fiscal year as
of which its audited financial statements were prepared or, if not
required to file audited financial statements, on the last business day
of its prior fiscal year; and (2) is not affiliated with any person
that is not a small entity.\691\ Under the Investment Company Act, an
investment company is a small entity if, together with other investment
companies in the same group of related investment companies, it has net
assets of $50 million or less as of the end of its most recent fiscal
year.\692\ Under the Advisers Act, a small entity is an investment
adviser that: (1) manages less than $25 million in assets; (2) has
total assets of less than $5 million on the last day of its most recent
fiscal year; and (3) does not control, is not controlled by, and is not
under common control with another investment adviser that manages $25
million or more in assets, or any person that has had total assets of
$5 million or more on the last day of the most recent fiscal year.\693\
For purposes of the RFA, under our rules under the Securities Act and
the Exchange Act, an issuer of securities or a person, other than an
investment company, is a ``small business'' or ``small organization''
it if had total assets on the last day of its most recent fiscal year
of $5 million or less and that is engaged or proposing to engage in
small business financing.\694\
---------------------------------------------------------------------------
\690\ The Commission has a pending proposal addressing the
definition under the Investment Company Act and Advisers Act of
small organization and small business for purposes of the Regulatory
Flexibility Act. The Commission encourages commenters to review the
proposal to determine whether it might affect their comments on this
IRFA. See Amendments to the ``Small Business'' and ``Small
Organization'' Definitions for Investment Companies and Investment
Advisers for Purposes of the Regulatory Flexibility Act, Investment
Company Act Release No. 35864 (Jan. 7, 2026) [91 FR 1107 (Jan. 12,
2026)].
\691\ 17 CFR 240.0-10.
\692\ 17 CFR 270.0-10(a).
\693\ 17 CFR 275.0-7.
\694\ 17 CFR 230.157 and 17 CFR 240.0-10(a). The Commission has
proposed amendments to the definitions of ``small business'' and
``small organization'' in 17 CFR 230.157 and 17 CFR 240.0-10(a). See
Enhancement of Emerging Growth Company Accommodations and
Simplification of Filer Status for Reporting Companies, Securities
Act Release No. 11419 (May 19, 2026) [91 FR 30086 (May 21, 2026)].
We encourage commenters to review that proposal to determine whether
it might affect their comments on this IRFA.
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Based on Commission filings, we estimate that approximately 630
broker-dealers,\695\ 73 funding portals,\696\ 129 transfer agents,\697\
67 investment companies,\698\ 466 registered investment advisers,\699\
and 707 issuers \700\ may be considered small entities.
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\695\ Estimate based on FOCUS Report data collected by the
Commission as of 2025 Q4.
\696\ Estimate based on staff analysis and public filings.
\697\ Estimate based on the transfer agents who reported a value
of fewer than 1,000 in response to questions 4(a) and 5(a) on the
latest Form TA-2(/A) as of December 31, 2025.
\698\ Based on Commission staff approximation that as of
December 2025, approximately 27 open-end funds (including 7
exchange-traded funds), 34 closed-end funds, 1 unit investment trust
and 5 business development companies are small entities.
\699\ Estimate based on Form ADV data for the reporting period
ending December 2025 with filings received through March 31, 2026.
\700\ Estimate based on staff analysis of issuers that filed an
annual report (i.e., Form 10-K, Form 20-F, or Form 40-F), excluding
BDCs and issuers of asset-backed securities, in calendar year 2025
and had total assets of $5 million or less on the last day of the
fiscal year covered in that annual report.
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D. Projected Reporting, Recordkeeping, and Other Compliance
Requirements
The proposed rule would create, amend, or eliminate current
reporting, recordkeeping, or other compliance requirements for small
entities.
Reg E-Delivery is designed to be a regulatory safe harbor to permit
the use of e-delivery as the default method of delivery, subject to
appropriate conditions.\701\ As described above, proposed Reg E-
Delivery also would establish conditions under which the Commission
would consider delivery requirements under the Federal securities laws
to have been satisfied by e-delivery. In addition to Reg E-Delivery, we
are also proposing to rescind and make amendments to current Commission
rules to facilitate the proposed e-delivery rule and to take a
modernized approach to the use of electronic media in Commission rules
and forms.\702\ Covered entities would not be required to deliver
covered information under the proposed rule, insofar as they would not
be required to use e-delivery to deliver covered information.
Additionally, as discussed above, the Commission recognizes that while
Reg E-Delivery would be the only regulatory safe harbor whereby a
covered entity would be deemed to have satisfied applicable delivery
requirements under the Federal securities laws using e-delivery (with
limited exception), a covered entity could develop a method of e-
delivery that differs from Reg E-Delivery but results in the required
information being delivered in a manner that satisfies applicable
delivery requirements under the Federal securities laws. Further, Reg
E-Delivery provides a framework under which many covered entities are
able to deliver covered information using a variety of methods that are
appropriate to their resources and business model. In some important
respects related to investor protection, such as transition notices and
protection of PFI, there are specific requirements to which covered
entities must adhere if they rely on Reg E-Delivery. For those covered
entities that would choose to deliver covered information using e-
delivery subject to the requirements of proposed Reg E-Delivery, there
may be some aspects of these requirements that would present particular
challenges to covered entities that are small entities.
---------------------------------------------------------------------------
\701\ See supra section II.A.
\702\ See supra footnote 689.
---------------------------------------------------------------------------
For example, proposed Reg E-Delivery would provide requirements for
website availability of covered information, but some small entities do
not currently have a website. As discussed above, covered entities
would be able to deliver covered information using one of several
permissible methods under the proposed rule, including direct delivery
of covered information that does not include PFI, which would not
require the use of a website. The use of a website for e-delivery is
therefore optional for covered entities delivering covered information
that does not include PFI, and these provisions of the rule would only
apply to covered entities that choose to e-deliver covered information
under the proposed rule as part of their business model.
Proposed Reg E-Delivery would require PFI to only be accessible
through a specified process reasonably designed to safeguard the
covered information. Some small entities may not have user portals
protected by a password (or other process reasonably designed to
safeguard the PFI) or systems to automatically filter PFI, and
therefore may incur greater expenses in securing such information.
Nevertheless, we expect most, if not all, small entities to already
have some
[[Page 45972]]
processes in place for handling various types of personal information.
The Commission has provided provisions in the 1996 Guidance for PFI,
and protecting sensitive personal information is already covered by
various duties covered entities have and the Commission rules regarding
protection of such information by most covered entities regardless of
size.\703\
---------------------------------------------------------------------------
\703\ See Reg S-P.
---------------------------------------------------------------------------
Proposed Reg E-Delivery would require covered entities to provide
paper copies of covered information free of charge on request in
certain circumstances. Some small entities may not have agreements in
place to deliver paper copies on demand and would incur greater expense
per delivery than larger firms with established processes to meet these
requirements. We are requesting comment on providing additional time
for small entities to provide paper copies.
Proposed Reg E-Delivery would require mailing of notices to covered
recipients during the transition process for default e-delivery. Some
small entities may not have systems in place for mass mailing to
covered recipients that are required for those notices. Such services
are available in the market for small entities to purchase. We
acknowledge that small entities may pay a higher rate for this service
than large clients, but notifying covered recipients of this change and
appraising them of their ability to opt out of e-delivery is critical
to protecting covered recipients during this transition.
Reg E-Delivery would require covered entities to allow covered
recipients to receive certain documents in paper on a document-by-
document basis. Providing different means of delivery for different
documents may be particularly challenging for small entities. We are
requesting comment on allowing small entities to offer only all-or-
nothing paper delivery for those who elect paper.
E. Duplicative, Overlapping, or Conflicting Federal Rules
Reg E-Delivery, if adopted, would be the only regulatory safe
harbor for e-delivery by covered entities under the Federal securities
laws, so it is not duplicative of other rules or regulations. There are
other data privacy rules (including Regulation S-P) that may overlap
with the PFI provisions in some ways, but these generally do not create
significant additional burden since information needs to only be
protected once, even if this is required by different rules. Similarly,
there are other Commission rules on web posting of information.\704\
Additionally, some Commission registrants that also serve retirement
plans may be subject to Department of Labor delivery rules and
regulations governing ERISA disclosures.\705\ While some aspects of
these disclosure requirements may overlap with the proposed disclosure
requirements of covered entities, they do not impose duplicative
burdens because to the extent the same disclosure is required by
multiple rules or regulations, a covered entity's obligations are
generally satisfied once disclosure is made once.
---------------------------------------------------------------------------
\704\ See, e.g., rule 30-1 under the Investment Company Act;
rule 498 under the Securities Act.
\705\ See 29 CFR 2520.104b-1(c); 29 CFR 2520.104b-31; section
338 of the SECURE 2.0 Act.
---------------------------------------------------------------------------
F. Significant Alternatives
The RFA directs the Commission to consider significant alternatives
that would accomplish our stated objectives, while minimizing any
significant economic impact on small entities. The Commission
considered several alternatives for small entities in relation to our
proposed amendments such as establishing different time frames to
provide paper copies of documents or permitting small entities to
provide only for all-or-nothing paper delivery for those who elect
paper (as opposed to permitting covered recipients to pick and choose
what covered information they would receive electronically) to account
for resources available to small entities. We understand that current
e-delivery practices under the E-Delivery Guidance do not significantly
vary among small entities versus larger entities. The Commission
believes that establishing different e-delivery requirements for small
entities would not be consistent with the Commission's goal of industry
oversight and investor protection.
G. General Request for Comment
The Commission requests comments regarding this IRFA. We request
comments on the number of small entities that may be affected by our
proposed rules and guidelines, and whether the proposed rules and
guidelines would have any effects not considered in this analysis. We
request that commenters describe the nature of any effects on small
entities subject to the rules, and provide empirical data to support
the nature and extent of such effects. We also request comment on the
proposed compliance burdens and the effect these burdens would have on
smaller entities.
VI. Congressional Review Act
For purposes of Subtitle E of the Small Business Regulatory
Enforcement Fairness Act of 1996 (also known as the Congressional
Review Act),\706\ the Commission must seek OMB's determination whether
a final regulation constitutes a ``major'' rule. Under the Act, a rule
is considered ``major'' where, if adopted, it results in or is likely
to result in:
---------------------------------------------------------------------------
\706\ See 5 U.S.C. chapter 8.
---------------------------------------------------------------------------
An annual effect on the economy of $100 million or more;
A major increase in costs or prices for consumers or
individual industries; or
Significant adverse effects on competition, investment, or
innovation.\707\
---------------------------------------------------------------------------
\707\ See 5 U.S.C. 804(2) (defining ``major rule'').
---------------------------------------------------------------------------
To help inform OMB's determination whether any final rule that
results from the proposal would be a ``major rule,'' we solicit comment
and data on:
The potential effect on the U.S. economy on an annual
basis;
Any potential increase in costs or prices for consumers or
individual industries; and
Any potential effect on competition, investment, or
innovation.
Commenters are requested to provide empirical data and other
factual support, to the extent possible, to inform this decision
regarding whether the final rule following this proposal is likely to
be a ``major rule'' for the purposes of the Congressional Review Act.
Based on current information available to SEC, we believe this rule, if
finalized as proposed, is likely to be a ``major rule.''
VII. Other Matters
This action is an economically significant regulatory action under
section 3(f)(1) of Executive Order 12866 and has been reviewed by the
Office of Management and Budget. This action, if finalized as proposed,
is expected to be an Executive Order 14192 deregulatory action.
Statutory Authority
The Commission is proposing the rules contained in this document
under the authority set forth in the Securities Act, particularly,
sections 3(b), 4(a)(2), 4A, 7, 10, 19, 27A, and 28 thereof [15 U.S.C.
77a et seq.]; the Trust Indenture Act, particularly sections 304, 305,
314, and 319 thereof [15 U.S.C. 77ddd-eee, 77nnn, 77sss]; the Exchange
Act, particularly, sections 3D, 13, 14, 15, 15F, 17A, 23, and 35A
thereof [15 U.S.C. 78a et seq.]; the Investment Company Act,
particularly, sections 6, 8, 19, 20,
[[Page 45973]]
24, 30, and 38 thereof [15 U.S.C. 80a et seq.]; the Advisers Act,
particularly, sections 203(c)(1), 204, 206A, and 211(a) [15 U.S.C. 80b-
3(c)(1), 80b-4, and 80b-11(a)]; and the E-SIGN Act, particularly
section 104(d)(1) [15 U.S.C. 7001 et seq.].
List of Subjects
17 CFR Part 240
Brokers, Reporting and recordkeeping requirements, Securities.
17 CFR Part 270
Investment companies, Reporting and recordkeeping requirements,
Securities.
17 CFR Part 303
Brokers, Communications, Computer technology, Electronic filing,
internet, Investment companies, Personally identifiable information,
Reporting and recordkeeping requirements, Securities.
PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF
1934
0
1. The general authority citation for part 240 continues to read as
follows:
Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77Z-2, 77Z-3,
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78c-3, 78c-5, 78d, 78e, 78f,
78g, 78i, 78j, 78j-1, 78j-4, 78k, 78k-1, 78l, 78m, 78n, 78n-1, 78o,
78o-4, 78o-10, 78p, 78q, 78q-1, 78s, 78u-5, 78w, 78x, 78dd, 78ll,
78mm, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4, 80b-11,
1681w(a)(1), 6801-6809, 6825, 7201 et seq., and 8302; 7 U.S.C.
2(c)(2)(E); 12 U.S.C. 5221(e)(3); 18 U.S.C. 1350; and Pub. L. 111-
203, 939A, 124 Stat. 1376 (2010); and Pub. L. 112-106, sec. 503 and
602, 126 Stat. 326 (2012), unless otherwise noted.
* * * * *
Sections 240.14a-1, 240.14a-3, 240.14a-13, 240.14b-1, 240.14b-2,
240.14c-1, and 240.14c-7 also issued under secs. 12, 15 U.S.C. 781,
and 14, Pub. L. 99-222, 99 Stat. 1737, 15 U.S.C. 78n.
* * * * *
Sections 240.14a-3, 240.14a-13, 240.14b-1, and 240.14c-7 also
issued under secs. 12, 14, and 17, 15 U.S.C. 781, 78n, and 78g.
* * * * *
Sections 240.14c-1 to 240.14c-101 also issued under sec. 14, 48
Stat. 895; 15 U.S.C. 78n.
* * * * *
Section 240.17a-3 also issued under secs. 2, 17, 23a, 48 Stat.
897, as amended; 15 U.S.C. 78d-1, 78d-2, 78q; secs. 12, 14, 17,
23(a), 48 Stat. 892, 895, 897, 901; secs. 1, 4, 8, 49 Stat. 1375,
1379; sec. 203(a), 49 Stat. 704; sec. 5, 52 Stat. 1076; sec. 202, 68
Stat. 686; secs. 3, 5, 10, 78 Stat. 565-568, 569, 570, 580; secs. 1,
3, 82 Stat. 454, 455; secs. 28(c), 3-5, 84 Stat. 1435, 1497; sec.
105(b), 88 Stat. 1503; secs. 8, 9, 14, 18, 89 Stat. 117, 118, 137,
155; 15 U.S.C. 78l, 78n, 78q, 78w(a).
* * * * *
0
2. Amend Sec. 240.14a-1 by revising it to read as follows:
Sec. 240.14a-1 Definitions.
Unless the context otherwise requires, all terms used in this
regulation have the same meanings as in the Act or elsewhere in the
general rules and regulations thereunder. In addition, the following
definitions apply unless the context otherwise requires:
Address. The term ``address'' means a mailing address, which would
include a street address, a post office box number, or other similar
destination to which paper documents are delivered, a facsimile
telephone number, or an electronic address, as defined in Sec. 303.101
of Regulation E-Delivery (Sec. Sec. 303.100 through 104).
Associate. The term ``associate,'' used to indicate a relationship
with any person, means:
(1) Any corporation or organization (other than the registrant or a
majority owned subsidiary of the registrant) of which such person is an
officer or partner or is, directly or indirectly, the beneficial owner
of 10 percent or more of any class of equity securities;
(2) Any trust or other estate in which such person has a
substantial beneficial interest or as to which such person serves as
trustee or in a similar fiduciary capacity; and
(3) Any relative or spouse of such person, or any relative of such
spouse, who has the same home as such person or who is a director or
officer of the registrant or any of its parents or subsidiaries.
Direct electronic delivery. The term ``direct electronic delivery''
means direct electronic delivery in accordance with Sec. 303.102(c)(2)
of Regulation E-Delivery.
Electronic delivery requirements. The term ``electronic delivery
requirements'' means the requirements in Sec. 303.102 of Regulation E-
Delivery.
Employee benefit plan. For purposes of Sec. Sec. 240.14a-13,
240.14b-1, and 240.14b-2, the term ``employee benefit plan'' means any
purchase, savings, option, bonus, appreciation, profit sharing, thrift,
incentive, pension, or similar plan primarily for employees, directors,
trustees, or officers.
Entity that exercises fiduciary powers. The term ``entity that
exercises fiduciary powers'' means any entity that holds securities in
nominee name or otherwise on behalf of a beneficial owner but does not
include a clearing agency registered pursuant to section 17A of the Act
or a broker or a dealer.
Exempt employee benefit plan securities. For purposes of Sec. Sec.
240.14a-13, 240.14b-1, and 240.14b-2, the term ``exempt employee
benefit plan securities'' means:
(1) Securities of the registrant held by an employee benefit plan,
as defined in this section, where such plan is established by the
registrant; or
(2) If notice regarding the current solicitation has been given
pursuant to Sec. 240.14a-13(a)(1)(ii)(C) or if notice regarding the
current request for a list of names, addresses, and securities
positions of beneficial owners has been given pursuant to Sec.
240.14a-13(b)(3), securities of the registrant held by an employee
benefit plan, as defined in this section, where such plan is
established by an affiliate of the registrant.
Last fiscal year. The term ``last fiscal year'' of the registrant
means the last fiscal year of the registrant ending prior to the date
of the meeting for which proxies are to be solicited or if the
solicitation involves written authorizations or consents in lieu of a
meeting, the earliest date they may be used to effect corporate action.
Opt out of electronic delivery. The term ``opt out of electronic
delivery'' refers to opting out of electronic delivery pursuant to
Sec. 303.102(f)(2) of Regulation E-Delivery.
Proxy. The term ``proxy'' includes every proxy, consent, or
authorization within the meaning of section 14(a) of the Act. The
consent or authorization may take the form of failure to object or to
dissent.
Proxy statement. The term ``proxy statement'' means the statement
required by Sec. 240.14a-3(a) whether or not contained in a single
document.
Record date. The term ``record date'' means the date as of which
the record holders of securities entitled to vote at a meeting or by
written consent or authorization shall be determined.
Record holder. For purposes of Sec. Sec. 240.14a-13, 240.14a-16,
240.14b-1, and 240.14b-2, the term ``record holder'' means any broker,
dealer, voting trustee, bank, association, or other entity that
exercises fiduciary powers which holds securities of record in nominee
name or otherwise or as a participant in a clearing agency registered
pursuant to section 17A of the Act.
Registrant. The term ``registrant'' means the issuer of the
securities in respect of which proxies are to be solicited.
Respondent bank. For purposes of Sec. Sec. 240.14a-13, 240.14a-16,
240.14b-1, and 240.14b-2, the term ``respondent bank'' means any bank,
association, or other entity that exercises fiduciary powers which
holds securities on behalf of beneficial owners and deposits such
[[Page 45974]]
securities for safekeeping with another bank, association, or other
entity that exercises fiduciary powers.
Solicitation.
(1) The terms ``solicit'' and ``solicitation'' include:
(i) Any request for a proxy whether or not accompanied by or
included in a form of proxy:
(ii) Any request to execute or not to execute, or to revoke, a
proxy; or
(iii) The furnishing of a form of proxy or other communication to
security holders under circumstances reasonably calculated to result in
the procurement, withholding, or revocation of a proxy, including:
(A) Any proxy voting advice that makes a recommendation to a
security holder as to its vote, consent, or authorization on a specific
matter for which security holder approval is solicited, and that is
furnished by a person that markets its expertise as a provider of such
proxy voting advice, separately from other forms of investment advice,
and sells such proxy voting advice for a fee.
(B) [Reserved]
(2) The terms do not apply, however, to:
(i) The furnishing of a form of proxy to a security holder upon the
unsolicited request of such security holder;
(ii) The performance by the registrant of acts required by Sec.
240.14a-7;
(iii) The performance by any person of ministerial acts on behalf
of a person soliciting a proxy;
(iv) A communication by a security holder who does not otherwise
engage in a proxy solicitation (other than a solicitation exempt under
Sec. 240.14a-2) stating how the security holder intends to vote and
the reasons therefor, provided that the communication:
(A) Is made by means of speeches in public forums, press releases,
published or broadcast opinions, statements, or advertisements
appearing in a broadcast media, or newspaper, magazine, or other bona
fide publication disseminated on a regular basis,
(B) Is directed to persons to whom the security holder owes a
fiduciary duty in connection with the voting of securities of a
registrant held by the security holder, or
(C) Is made in response to unsolicited requests for additional
information with respect to a prior communication by the security
holder made pursuant to this paragraph (l)(2)(iv); or
(v) The furnishing of any proxy voting advice by a person who
furnishes such advice only in response to an unprompted request.
Statement of availability. The term ``statement of availability''
means a statement of availability delivered in accordance with Sec.
303.102(c)(1) of Regulation E-Delivery.
website availability requirements. The term ``website availability
requirements'' means the requirements in Sec. 303.103 of Regulation E-
Delivery.
0
3. Amend Sec. 240.14a-2 by revising paragraph (b)(9) to read as
follows:
Sec. 240.14a-2 Solicitations to which Sec. 240.14a-3 to Sec.
240.14a-15 apply.
* * * * *
(b) * * *
(9) Paragraphs (b)(1) and (b)(3) of this section shall not be
available to a person furnishing proxy voting advice covered by Sec.
240.14a-1 (``proxy voting advice business'') unless the proxy voting
advice business includes in its proxy voting advice or in an electronic
medium used to deliver the proxy voting advice prominent disclosure of:
(i) Any information regarding an interest, transaction, or
relationship of the proxy voting advice business (or its affiliates)
that is material to assessing the objectivity of the proxy voting
advice in light of the circumstances of the particular interest,
transaction, or relationship; and
(ii) Any policies and procedures used to identify, as well as the
steps taken to address, any such material conflicts of interest arising
from such interest, transaction, or relationship.
0
4. Amend Sec. 240.14a-3 by:
0
a. Revising paragraph (a) to remove paragraph (a)(3) and add ``or''
between paragraphs (a)(1) and (a)(2);
0
b. Revising paragraph (b)(2)(ii); and
0
c. Revising paragraph (e).
The revisions read as follows:
Sec. 240.14a-3 Information to be furnished to security holders.
(a) No solicitation subject to this regulation shall be made unless
each person solicited is concurrently furnished or has previously been
furnished with:
(1) A publicly-filed preliminary or definitive proxy statement, in
the form and manner described in Sec. 240.14a-16, containing the
information specified in Schedule 14A (Sec. 240.14a-101); or
(2) A preliminary or definitive written proxy statement included in
a registration statement filed under the Securities Act of 1933 on Form
S-4 or F-4 (Sec. 239.25 or Sec. 239.34 of this chapter) or Form N-14
(Sec. 239.23 of this chapter) and containing the information specified
in such Form.
(b) * * *
(2) * * *
(ii) Where the annual report to security holders is delivered
through an electronic medium, issuers may satisfy legibility
requirements applicable to printed documents, such as type size and
font, by presenting all required information in a widely available
format that is convenient for reading in electronic format, being
printed on paper, and permanently retaining in an electronic format.
* * * * *
(e)
(1)
(i) A registrant will be considered to have delivered an annual
report to security holders, proxy statement, or statement of
availability of proxy materials, as described in Sec. 240.14a-16, to
all security holders of record who share an address if:
(A) The registrant delivers one annual report to security holders,
proxy statement, or statement of availability of proxy materials, as
applicable, to the shared address;
(B) The registrant addresses the annual report to security holders,
proxy statement, or statement of availability of proxy materials, as
applicable, to the security holders as a group (for example, ``ABC Fund
[or Corporation] Security Holders,'' ``Jane Doe and Household,'' ``The
Smith Family''), to each of the security holders individually (for
example, ``John Doe and Richard Jones''), or to the security holders in
a form to which each of the security holders has consented in writing;
Note to paragraph (e)(1)(i)(B): Unless the registrant addresses the
annual report to security holders, proxy statement, or statement of
availability of proxy materials to the security holders as a group or
to each of the security holders individually, it must obtain, from each
security holder to be included in the household group, a separate
affirmative written consent to the specific form of address the
registrant will use.
(C) The security holders consent, in accordance with paragraph
(e)(1)(ii) of this section, to delivery of one annual report to
security holders or proxy statement, as applicable;
(D) With respect to delivery of the proxy statement, the registrant
delivers, together with or subsequent to delivery of the proxy
statement, a separate proxy card for each security holder at the shared
address;
(E) With respect to delivery of the statement of availability of
proxy materials, the registrant includes for each security holder at
the shared address any control/identification numbers that the security
holder needs to access its form of proxy and instructions on how to
access the form of proxy; and
[[Page 45975]]
(F) The registrant includes an undertaking in the proxy statement
to deliver promptly upon written or oral request a separate copy of the
annual report to security holders, proxy statement, or statement of
availability of proxy materials, as applicable, to a security holder at
a shared address to which a single copy of the document was delivered.
(ii) Consent--
(A) Affirmative written consent. Each security holder must
affirmatively consent, in writing, to delivery of one annual report to
security holders or proxy statement, as applicable. A security holder's
affirmative written consent will be considered valid only if the
security holder has been informed of:
(1) The duration of the consent;
(2) The specific types of documents to which the consent will
apply;
(3) The procedures the security holder must follow to revoke
consent; and
(4) The registrant's obligation to begin sending individual copies
to a security holder within thirty days after the security holder
revokes consent.
(B) Implied consent. The registrant need not obtain affirmative
written consent from a security holder for purposes of paragraph
(e)(1)(ii)(A) of this section if all of the following conditions are
met:
(1) The security holder has the same last name as the other
security holders at the shared mailing address or the registrant
reasonably believes that the security holders are members of the same
family;
(2) The registrant has sent the security holder a notice at least
60 days before the registrant begins to rely on this section concerning
delivery of annual reports to security holders, proxy statements, or
statements of availability of proxy materials to that security holder.
The notice must:
(i) Be a separate written document;
(ii) State that only one annual report to security holders, proxy
statement, or statement of availability of proxy materials, as
applicable, will be delivered to the shared mailing address unless the
registrant receives contrary instructions;
(iii) Include a toll-free telephone number, or be accompanied by a
reply form that is pre-addressed with postage provided, that the
security holder can use to notify the registrant that the security
holder wishes to receive a separate annual report to security holders,
proxy statement, or statement of availability of proxy materials;
(iv) State the duration of the consent;
(v) Explain how a security holder can revoke consent;
(vi) State that the registrant will begin sending individual copies
to a security holder within thirty days after the security holder
revokes consent; and
(vii) Contain the following prominent statement, or similar clear
and understandable statement, in bold-face type: ``Important Notice
Regarding Delivery of Security Holder Documents.'' This statement also
must appear on the envelope in which the notice is delivered.
Alternatively, if the notice is delivered separately from other
communications to security holders, this statement may appear either on
the notice or on the envelope in which the notice is delivered.
Note to paragraph (e)(1)(ii)(B)(2): The notice should be written in
plain English. See Sec. 230.421(d)(2) of this chapter for a discussion
of plain English principles.
(3) The registrant has not received the reply form or other
notification indicating that the security holder wishes to continue to
receive an individual copy of the annual report to security holders,
proxy statement, or statement of availability of proxy materials, as
applicable, within 60 days after the registrant sent the notice
required by paragraph (e)(1)(ii)(B)(2) of this section; and
(4) The registrant delivers the document to a post office box or
residential street address.
Note to paragraph (e)(1)(ii)(B)(4): The registrant can assume that
a street address is residential unless the registrant has information
that indicates the street address is a business. If the registrant has
reason to believe that the address is a street address of a multi-unit
building, the address must include the unit number.
(iii) Revocation of consent. If a security holder, orally or in
writing, revokes consent to delivery of one annual report to security
holders, proxy statement, or statement of availability of proxy
materials to a shared address, the registrant must begin sending
individual copies to that security holder within 30 days after the
registrant receives revocation of the security holder's consent.
Note to paragraph (e)(1): A person other than the registrant making
a proxy solicitation may deliver a single proxy statement to security
holders of record or beneficial owners who have separate accounts and
share an address if: (a) the registrant or intermediary has followed
the procedures in this section; and (b) the registrant or intermediary
makes available the shared address information to the person in
accordance with Sec. 240.14a-7(a)(2)(i) and (ii).
(2) Notwithstanding paragraphs (a) and (b) of this section, unless
state law requires otherwise, a registrant is not required to send an
annual report to security holders or proxy statement to a security
holder if:
(i) An annual report to security holders and a proxy statement for
two consecutive annual meetings; or
(ii) All, and at least two, payments (if sent by first class mail)
of dividends or interest on securities, or dividend reinvestment
confirmations, during a twelve month period, have been mailed to such
security holder's mailing address and have been returned as
undeliverable. If any such security holder delivers or causes to be
delivered to the registrant written notice setting forth his then
current mailing address for security holder communications purposes,
the registrant's obligation to deliver an annual report to security
holders or a proxy statement under this section is reinstated.
* * * * *
0
5. Amend Sec. 240.14a-5 by revising paragraph (d)(2) to read as
follows:
Sec. 240.14a-5 Presentation of information in proxy statement.
* * * * *
(d) * * *
(2) Where a proxy statement is delivered through an electronic
medium, issuers may satisfy legibility requirements applicable to
printed documents, such as type size and font, by presenting all
required information in a widely available format that is convenient
for reading in electronic format, being printed on paper, and
permanently retaining in an electronic format.
* * * * *
0
6. Amend Sec. 240.14a-7 by:
0
a. Revising paragraph (a);
0
b. Revising paragraph (b)(2);
0
c. Adding a note to paragraph (b)(2);
0
d. Removing Note 1 to Sec. 240.14a-7; and
0
e. Redesignating Note 2 to Sec. 240.14a-7.
The revisions, addition, and redesignation read as follows:
Sec. 240.14a-7 Obligations of registrants to provide a list of, or
send soliciting material to, security holders.
(a) If the registrant has made or intends to make a proxy
solicitation in connection with a security holder meeting or action by
consent or authorization, upon the written request by any record or
beneficial holder of securities of the class entitled to vote at the
meeting or to execute a consent or authorization to provide a list of
security holders or to send the
[[Page 45976]]
requesting security holder's materials, regardless of whether the
request references this section, the registrant shall:
(1) Deliver to the requesting security holder within five business
days after receipt of the request:
(i) Notification as to whether the registrant has elected to send
the security holder's soliciting materials or provide a security holder
list if the election under paragraph (b) of this section is to be made
by the registrant;
(ii) A statement of the approximate number of record holders and
beneficial holders, separated by type of holder and class, owning
securities in the same class or classes as holders which have been or
are to be solicited on management's behalf, or any more limited group
of such holders designated by the security holder if available or
retrievable under the registrant's or its transfer agent's security
holder data systems; and
(iii) The estimated cost of sending a proxy statement, form of
proxy, or other communication to such holders, including to the extent
known or reasonably available, the estimated costs of any bank, broker,
and similar person through whom the registrant has solicited or intends
to solicit beneficial owners in connection with the security holder
meeting or action;
(2) Perform the acts set forth in either paragraphs (a)(2)(i) or
(a)(2)(ii) of this section, at the registrant's or requesting security
holder's option, as specified in paragraph (b) of this section:
(i) Send copies of any proxy statement, form of proxy, or other
soliciting material, including a statement of availability of proxy
materials (as described in Sec. 240.14a-16), furnished by the security
holder to the record holders, including banks, brokers, and similar
entities, designated by the security holder. A sufficient number of
copies must be sent to the banks, brokers, and similar entities for
distribution to all beneficial owners designated by the security
holder. The security holder may designate only record holders and/or
beneficial owners who would not receive the proxy materials in paper
format or have not requested paper copies of the proxy statement. If
the registrant has received affirmative written or implied consent to
deliver a single proxy statement to security holders at a shared
address in accordance with the procedures in Sec. 240.14a-3(e)(1), a
single copy of the proxy statement or statement of availability of
proxy materials furnished by the security holder shall be sent to that
address. The registrant shall send the security holder material with
reasonable promptness after tender of the material to be sent,
envelopes or other containers therefore, postage or payment for postage
and other reasonable expenses of effecting such distribution. The
registrant shall not be responsible for the content of the material; or
(ii) Deliver the following information to the requesting security
holder within five business days of receipt of the request:
(A) A reasonably current list of the names, all addresses, and
security positions of the record holders, including banks, brokers, and
similar entities holding securities in the same class or classes as
holders which have been or are to be solicited on management's behalf,
or any more limited group of such holders designated by the security
holder if available or retrievable under the registrant's or its
transfer agent's security holder data systems;
(B) The most recent list of names, all addresses, and security
positions of beneficial owners as specified in Sec. 240.14a-13(b), in
the possession, or which subsequently comes into the possession, of the
registrant;
(C) The names of security holders at a shared address that have
consented to delivery of a single copy of proxy materials to a shared
address, if the registrant has received written or implied consent in
accordance with Sec. 240.14a-3(e)(1); and
(D) The names of security holders who, as of the date that the
registrant receives the request, receive the proxy materials in paper
format or have requested paper copies of the proxy materials for the
meeting to which the solicitation relates.
(iii) All security holder list information shall be in the form
requested by the security holder to the extent that such form is
available to the registrant without undue burden or expense. The
registrant shall furnish the security holder with updated record holder
information on a daily basis or, if not available on a daily basis, at
the shortest reasonable intervals; provided, however, the registrant
need not provide beneficial or record holder information more current
than the record date for the meeting or action.
(b) * * *
(2) With respect to all other requests pursuant to this section,
the registrant shall have the option to either send the security
holder's material or furnish the security holder list as set forth in
this section.
Note to paragraph (b)(2): If the registrant cannot provide all of
the security holder list information specified in paragraph (a)(2)(ii)
of this section, the registrant must send the security holder's
material to record holders in accordance with paragraph (a)(2)(i) of
this section.
* * * * *
(e) The security holder shall reimburse the reasonable expenses
incurred by the registrant in performing the acts requested pursuant to
paragraph (a) of this section.
Note to Sec. 240.14a-7: When providing the information required by
Sec. 240.14a-7(a)(1)(ii), if the registrant has received affirmative
written or implied consent to delivery of a single copy of proxy
materials to a shared address in accordance with Sec. 240.14a-3(e)(1),
it shall exclude from the number of record holders those to whom it
does not have to deliver a separate proxy statement.
0
7. Amend Sec. 240.14a-13 by revising paragraphs (a)(1), (b), (b)(1),
and (b)(3) to read as follows:
Sec. 240.14a-13 Obligation of registrants in communicating with
beneficial owners.
(a) * * *
(1) Promptly:
* * * * *
(b) Any registrant requesting pursuant to Sec. 240.14b-1(b)(3) or
Sec. 240.14b-2(b)(4)(ii) and (iii) a list of names, all addresses, and
securities positions of beneficial owners of its securities who either
have consented or have not objected to disclosure of such information
shall:
(1) Promptly inquire of each record holder and each respondent bank
identified to the registrant pursuant to Sec. 240.14b-2(b)(4)(i)
whether such record holder or respondent bank holds the registrant's
securities on behalf of any respondent banks and, if so, the name and
address of each such respondent bank;
(2) * * *
(3) Make such request to the following persons that hold the
registrant's securities on behalf of beneficial owners: all brokers,
dealers, banks, associations, and other entities that exercise
fiduciary powers; Provided however, such request shall not cover
beneficial owners of ``exempt employee benefit plan securities,'' as
that term is defined in Sec. 240.14a-1; and, at the option of the
registrant, such request may give notice of any employee benefit plan
established by an affiliate of the registrant that holds securities of
the registrant that the registrant elects to treat as exempt employee
benefit plan securities;
* * * * *
0
8. Amend Sec. 240.14a-16 by revising it to read as follows:
[[Page 45977]]
Sec. 240.14a-16 Delivery and website availability of proxy materials.
(a) Delivery Methods.
(1) A registrant must use the following delivery methods when
furnishing to a security holder a proxy statement pursuant to Sec.
240.14a-3(a), or an annual report to security holders pursuant to Sec.
240.14a-3(b):
(i) Statement of availability. Delivery to the security holder of a
statement of availability, provided that the applicable electronic
delivery requirements and the website availability requirements are
satisfied;
(ii) Direct electronic delivery. Direct electronic delivery to the
security holder, provided that the applicable electronic delivery
requirements, the website availability requirements, and the
requirement of paragraph (c)(1)(iii) of this section (date for paper
copy request) are satisfied; or
(iii) Paper format. Delivery to the security holder in paper
format.
(2) A registrant must satisfy all applicable requirements of this
section when using any of the delivery methods listed in paragraph (a)
of this section.
(b) Website Availability of Proxy Materials.
(1) The proxy statement or annual report required to be furnished
to security holders in accordance with this section must:
(i) Be available on a website (which may not be the address of any
Commission electronic filing system) that meets the website
availability requirements no later than the date on which the proxy
statement or annual report, as applicable, is sent to security holders
and, if applicable, no later than the date on which the statement of
availability is delivered to security holders; and
(ii) Remain available on the website at least through the
conclusion of the meeting of security holders.
(2) All additional soliciting materials sent to security holders or
made public after the proxy statement has been sent must:
(i) Be available on the website described in paragraph (b)(1)(i) of
this section no later than the date on which such materials are first
sent to security holders or made public; and
(ii) Remain available on the website at least through the
conclusion of the meeting of security holders.
(c) Statement of Availability of Proxy Materials.
A registrant must comply with the following requirements when
furnishing its proxy statement or annual report to security holders
through the delivery of a statement of availability pursuant to
paragraph (a)(1)(i) of this section.
(1) The statement of availability of proxy materials must include:
(i) A prominent legend that states ``Important Notice Regarding the
Availability of Proxy Materials for the Shareholder Meeting To Be Held
[insert meeting date, time, and location]'';
(ii) Any control/identification numbers that the security holder
needs to access its form of proxy and instructions on how to access the
form of proxy;
(iii) The date by which a security holder should make a request to
obtain a paper copy of the proxy materials to facilitate timely
delivery before the shareholder meeting; and
(iv) The information required by Sec. 303.102(c)(1) of Regulation
E-Delivery (Sec. Sec. 303.100 through 104).
(2) If the registrant or soliciting person is conducting a consent
solicitation rather than a proxy solicitation or furnishing an
information statement pursuant to Sec. 240.14c-2, the statement of
availability must be revised accordingly, including disclosure of the
earliest date on which a corporate action may be taken if such action
is to be taken pursuant to written consent.
(3) A statement of availability of proxy materials must be
delivered separately from other communications, except:
(i) It may be combined with, or accompanied by, a notice of
security holder meeting required under State law, unless prohibited by
State law; and
(ii) In the case of an investment company registered under the
Investment Company Act of 1940, the statement of availability of proxy
materials may accompany the company's prospectus, a summary prospectus
that satisfies the requirements of Sec. 230.498(b) or Sec.
230.498A(b) or (c) of this chapter, or a report that is required to be
transmitted to stockholders by section 30(e) of the Investment Company
Act (15 U.S.C. 80a-29(e)) and its implementing regulations (e.g.,
Sec. Sec. 270.30e-1 and 270.30e-2 of this chapter).
(4) A form of the statement of availability of proxy materials must
be filed with the Commission pursuant to Sec. 240.14a-6(b) no later
than the date that the statement of availability is first sent to
security holders.
(d) Form of Proxy.
The registrant must provide security holders with a means to
execute a proxy as of the time a statement of availability, if any, is
first sent to security holders.
(e) Obligation to Provide Information and Copies to Record Holders
and Respondent Banks.
(1) If the registrant furnishes its proxy statement, information
statement, or annual report to security holders through either delivery
of a statement of availability pursuant to paragraph (a)(1)(i) of this
section or direct electronic delivery pursuant to paragraph (a)(1)(ii)
of this section, it must provide the record holder or respondent bank
with all information required for the statement of availability or
direct electronic delivery, as applicable, in sufficient time for the
record holder or respondent bank to prepare and deliver such materials
to beneficial owners in accordance with the electronic delivery
requirements.
(2) If the registrant furnishes its proxy statement, information
statement, or annual report to security holders through either delivery
of a statement of availability pursuant to paragraph (a)(1)(i) of this
section or direct electronic delivery pursuant to paragraph (a)(1)(ii)
of this section, the registrant must send the requested paper copies of
such documents by U.S. first class mail or through other reasonably
prompt means to any requesting record holder or respondent bank within
three business days after receiving the request and at no cost to the
record holder or respondent bank.
(f) Soliciting Person Other than Registrant.
A soliciting person other than the registrant must furnish a proxy
statement pursuant to Sec. 240.14a-3(a) to a security holder in
accordance with this section and must comply with the requirements
imposed on registrants by this section.
(g) Security Holder Information.
(1) A registrant or its agent shall maintain the website where the
proxy materials are made available in accordance with paragraph (c) of
this section in a manner that does not infringe on the anonymity of a
person accessing such website.
(2) The registrant and its agents shall not use any electronic
address obtained from a security holder solely to request a copy of
proxy materials, pursuant to paragraph (e) of this section, or opt out
of electronic delivery for any purpose other than to send a copy of
those materials to that security holder. The registrant shall not
disclose such information to any person other than an employee or agent
to the extent necessary to send a copy of the proxy materials pursuant
to paragraph (e) of this section or to implement the opt out of
electronic delivery.
0
9. Amend Sec. 240.14a-101 by:
0
a. Revising the header and checkboxes section at the beginning of this
section;
0
b. Adding paragraph (d) of Item 1;
[[Page 45978]]
0
c. Revising paragraphs (b)(1)(i), (b)(1)(ii), and (b)(1)(ix) of Item 5;
0
d. Revising paragraphs (a)(3)(i), (b)(1), and (c) through (c)(4) of
Item 22; and
0
e. Revising Item 23.
The revisions and additions read as follows:
Sec. 240.14a-101 Schedule 14A. Information required in proxy
statement.
Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange
Act of 1934
(Amendment No.)
Filed by the Registrant [ ]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material under Sec. 240.14a-12
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check all boxes that apply):
[ ] No fee required
[ ] Fee paid previously with preliminary materials
[ ] Fee computed on table in exhibit required by Item 25(c) per
Exchange Act Rules 14a-6(i)(1) and 0-11
* * * * *
Item 1. Date, time and place information.
* * * * *
(d) State the website address where the proxy materials are
available.
* * * * *
Item 5. Interest of certain Persons in Matters To Be Acted Upon
* * * * *
(b) * * *
(1) * * *
(i) Name and business mailing address of the participant.
(ii) The participant's present principal occupation or employment
and the name, principal business, and mailing address of any
corporation or other organization in which such employment is carried
on.
(iii) * * *
(iv) * * *
(v) * * *
(vi) * * *
(vii) * * *
(viii) * * *
(ix) State the amount of securities of the registrant owned
beneficially, directly or indirectly, by each of the participant's
associates and the name and mailing address of each such associate.
* * * * *
Item 22. Information required in investment company proxy
statement.
(a) * * *
(3) General disclosure. Furnish the following information in the
proxy statement of a Fund or Funds:
(i) State the name and mailing address of the Fund's investment
adviser, principal underwriter, and Administrator.
* * * * *
(b) * * *
(1) Provide the information required by the following table for
each director, nominee for election as director, Officer of the Fund,
person chosen to become an Officer of the Fund, and, if the Fund has an
advisory board, member of the board. Explain in a footnote to the table
any family relationship between the persons listed.
--------------------------------------------------------------------------------------------------------------------------------------------------------
(1) (2) (3) (4) (5) (6)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Name, Mailing Address, and Age... Position(s) Held Term of Office and Principal Number of Portfolios in Other Directorships Held
with Fund. Length of Time Occupation(s) Fund Complex Overseen by by Director or Nominee
Served. During Past 5 Years. Director or Nominee for for Director.
Director.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Instructions to paragraph (b)(1).
1. For purposes of this paragraph, the term ``family relationship''
means any relationship by blood, marriage, or adoption, not more remote
than first cousin.
2. No nominee or person chosen to become a director or Officer who
has not consented to act as such may be named in response to this Item.
In this regard, see Rule 14a-4(d) under the Exchange Act (Sec.
240.14a-4(d)).
3. If fewer nominees are named than the number fixed by or pursuant
to the governing instruments, state the reasons for this procedure and
that the proxies cannot be voted for a greater number of persons than
the number of nominees named.
4. For each director or nominee for election as director who is or
would be an ``interested person'' of the Fund within the meaning of
section 2(a)(19) of the Investment Company Act of 1940 (15 U.S.C. 80a-
2(a)(19)), describe, in a footnote or otherwise, the relationship,
events, or transactions by reason of which the director or nominee is
or would be an interested person.
5. State the principal business of any company listed under column
(4) unless the principal business is implicit in its name.
6. Include in column (5) the total number of separate portfolios
that a nominee for election as director would oversee if he were
elected.
7. Indicate in column (6) directorships not included in column (5)
that are held by a director or nominee for election as director in any
company with a class of securities registered pursuant to section 12 of
the Exchange Act (15 U.S.C. 78l), or subject to the requirements of
section 15(d) of the Exchange Act (15 U.S.C. 78o(d)), or any company
registered as an investment company under the Investment Company Act of
1940, (15 U.S.C. 80a), as amended, and name the companies in which the
directorships are held. Where the other directorships include
directorships overseeing two or more portfolios in the same Fund
Complex, identify the Fund Complex and provide the number of portfolios
overseen as a director in the Fund Complex rather than listing each
portfolio separately.
* * * * *
(c) Approval of investment advisory contract. If action is to be
taken with respect to an investment advisory contract, include the
following information in the proxy statement.
Instruction. Furnish information with respect to a prospective
investment adviser to the extent applicable (including the name and
mailing address of the prospective investment adviser).
(1) * * *
(2) State the name, mailing address, and principal occupation of
the principal executive officer and each director or general partner of
the investment adviser.
Instruction. If the investment adviser is a partnership with more
than ten general partners, name:
(i) * * *
(ii) * * *
[[Page 45979]]
(3) State the names and mailing addresses of all Parents of the
investment adviser and show the basis of control of the investment
adviser and each Parent by its immediate Parent.
Instructions.
1. If any person named is a corporation, include the percentage of
its voting securities owned by its immediate Parent.
2. If any person named is a partnership, name the general partners
having the three largest partnership interests (computed by whatever
method is appropriate in the particular case).
(4) If the investment adviser is a corporation and if, to the
knowledge of the persons making the solicitation or the persons on
whose behalf the solicitation is made, any person not named in answer
to paragraph (c)(3) of this Item 22 owns, of record or beneficially,
ten percent or more of the outstanding voting securities of the
investment adviser, indicate that fact and state the name and mailing
address of each such person.
* * * * *
Item 23. Delivery of documents to security holders sharing an
address. If one annual report to security holders, proxy statement, or
statement of availability of proxy materials is being delivered to two
or more security holders who share an address in accordance with Sec.
240.14a-3(e)(1), furnish the following information:
(a) State that only one annual report to security holders, proxy
statement, or statement of availability of proxy materials, as
applicable, is being delivered to multiple security holders sharing an
address unless the registrant has received contrary instructions from
one or more of the security holders;
(b) Undertake to deliver promptly upon written or oral request a
separate copy of the annual report to security holders, proxy
statement, or statement of availability of proxy materials, as
applicable, to a security holder at a shared address to which a single
copy of the documents was delivered and provide instructions as to how
a security holder can notify the registrant that the security holder
wishes to receive a separate copy of an annual report to security
holders, proxy statement, or statement of availability of proxy
materials, as applicable;
(c) Provide the phone number and address to which a security holder
can direct a notification to the registrant that the security holder
wishes to receive a separate annual report to security holders, proxy
statement, or statement of availability of proxy materials, as
applicable, in the future; and
(d) Provide instructions how security holders sharing an address
can request delivery of a single copy of annual reports to security
holders, proxy statements, or statements of availability of proxy
materials if they are receiving multiple copies of annual reports to
security holders, proxy statements, or statements of availability of
proxy materials.
* * * * *
0
10. Amend Sec. 240.14b-1 by revising it to read as follows:
Sec. 240.14b-1 Obligation of registered brokers and dealers in
connection with the prompt forwarding of certain communications to
beneficial owners.
(a) Definitions. Unless the context otherwise requires, all terms
used in this section shall have the same meanings as in the Act and,
with respect to proxy soliciting material, as in Sec. 240.14a-1
thereunder and, with respect to information statements, as in Sec.
240.14c-1 thereunder. In addition, as used in this section, the term
``registrant'' means:
(1) The issuer of a class of securities registered pursuant to
section 12 of the Act; or
(2) An investment company registered under the Investment Company
Act of 1940.
(b) Dissemination and beneficial owner information requirements. A
broker or dealer registered under section 15 of the Act shall comply
with the following requirements for disseminating certain
communications to beneficial owners and providing beneficial owner
information to registrants.
(1) The broker or dealer shall respond promptly to the registrant
no later than seven business days after the date it receives an inquiry
made in accordance with Sec. 240.14a-13(a) or Sec. 240.14c-7(a) by
indicating, by means of a search card or otherwise:
(i) The approximate number of customers of the broker or dealer who
are beneficial owners of the registrant's securities that are held of
record by the broker, dealer, or its nominee;
(ii) The number of customers of the broker or dealer who are
beneficial owners of the registrant's securities who have objected to
disclosure of their names, addresses, and securities positions if the
registrant has indicated, pursuant to Sec. 240.14a-13(a)(1)(ii)(A) or
Sec. 240.14c-7(a)(1)(ii)(A), that it will distribute the annual report
to security holders to beneficial owners of its securities whose names,
addresses, and securities positions are disclosed pursuant to paragraph
(b)(3) of this section; and
(iii) The identity of the designated agent of the broker or dealer,
if any, acting on its behalf in fulfilling its obligations under
paragraph (b)(3) of this section; Provided, however, that if the broker
or dealer has informed the registrant that a designated office(s) or
department(s) is to receive such inquiries, receipt for purposes of
paragraph (b)(1) of this section shall mean receipt by such designated
office(s) or department(s).
(2) Following receipt of the proxy, other proxy soliciting
material, information statement, and/or annual report to security
holders from the registrant or other soliciting person, the broker or
dealer shall:
(i) forward such materials to its customers who are beneficial
owners of the registrant's securities no later than five business days
after receipt of the proxy material, information statement, or annual
report to security holders:
(A) by direct electronic delivery to the beneficial owners,
provided that the applicable electronic delivery requirements and the
website availability requirements are satisfied; or
(B) in paper format; and
(ii) include in the broker's or dealer's request for voting
instructions to be sent with the proxy statement and annual report, a
brief description, if applicable, of the rules that permit the broker
or dealer to vote the securities if the beneficial owner does not
return his or her voting instructions.
Note to paragraph (b)(2): At the request of a registrant, or on its
own initiative so long as the registrant does not object, a broker or
dealer may, but is not required to, deliver one annual report to
security holders, proxy statement, information statement, or statement
of availability of proxy materials to more than one beneficial owner
sharing an address if the requirements set forth in Sec. 240.14a-
3(e)(1) (with respect to annual reports to security holders, proxy
statements, and statements of availability of proxy materials) and
Sec. 240.14c-3(c) (with respect to annual reports to security holders,
information statements, and statements of availability of proxy
materials) applicable to registrants, with the exception of Sec.
240.14a-3(e)(1)(i)(F), are satisfied instead by the broker or dealer.
(3) The broker or dealer shall, through its agent or directly:
(i) Provide the registrant, upon the registrant's request, with the
names, all addresses, and securities positions, compiled as of a date
specified in the registrant's request which is no earlier than five
business days after the date the
[[Page 45980]]
registrant's request is received, of its customers who are beneficial
owners of the registrant's securities and who have not objected to
disclosure of such information; Provided, however, that if the broker
or dealer has informed the registrant that a designated office(s) or
department(s) is to receive such requests, receipt shall mean receipt
by such designated office(s) or department(s); and
(ii) Transmit the data specified in paragraph (b)(3)(i) of this
section to the registrant no later than five business days after the
record date or other date specified by the registrant.
Note 1: Where a broker or dealer employs a designated agent to act
on its behalf in performing the obligations imposed on the broker or
dealer by paragraph (b)(3) of this section, the five business day time
period for determining the date as of which the beneficial owner
information is to be compiled is calculated from the date the
designated agent receives the registrant's request. In complying with
the registrant's request for beneficial owner information under
paragraph (b)(3) of this section, a broker or dealer need only supply
the registrant with the names, addresses, and securities positions of
non-objecting beneficial owners.
Note 2: If a broker or dealer receives a registrant's request less
than five business days before the requested compilation date, it must
provide a list compiled as of a date that is no more than five business
days after receipt and transmit the list within five business days
after the compilation date.
(c) Exceptions to dissemination and beneficial owner information
requirements. A broker or dealer registered under section 15 of the Act
shall be subject to the following with respect to its dissemination and
beneficial owner information requirements.
(1) With regard to beneficial owners of exempt employee benefit
plan securities, the broker or dealer shall:
(i) Not include information in its response pursuant to paragraph
(b)(1) of this section or forward proxies (or in lieu thereof requests
for voting instructions), proxy soliciting material, information
statements, or annual reports to security holders pursuant to paragraph
(b)(2) of this section to such beneficial owners; and
(ii) Not include in its response, pursuant to paragraph (b)(3) of
this section, data concerning such beneficial owners.
(2) A broker or dealer need not satisfy:
(i) Its obligations under paragraphs (b)(2), (b)(3), and (d) of
this section if the registrant or other soliciting person, as
applicable, does not provide assurance of reimbursement of the broker's
or dealer's reasonable expenses, both direct and indirect, incurred in
connection with performing the obligations imposed by paragraphs
(b)(2), (b)(3), and (d) of this section; or
(ii) Its obligation under paragraph (b)(2) of this section to
forward annual reports to security holders to non-objecting beneficial
owners identified by the broker or dealer, through its agent or
directly, pursuant to paragraph (b)(3) of this section if the
registrant notifies the broker or dealer pursuant to Sec. 240.14a-
13(c) or Sec. 240.14c-7(c) that the registrant will send the annual
report to security holders to such non-objecting beneficial owners
identified by the broker or dealer and delivered in a list to the
registrant pursuant to paragraph (b)(3) of this section.
(3) In its response pursuant to paragraph (b)(1) of this section, a
broker or dealer shall not include information about annual reports to
security holders, proxy statements, or information statements that will
not be delivered to security holders sharing an address because of the
broker or dealer's reliance on the procedures referred to in the Note
to paragraph (b)(2) of this section.
(d) Following receipt from the soliciting person of all of the
information listed in Sec. 240.14a-16(c), the broker or dealer shall:
(1) Prepare and send a statement of availability of proxy
materials, provided that the applicable electronic delivery
requirements and the website availability requirements are satisfied,
and containing the information required in paragraph (e) of this
section to beneficial owners no later than five business days after the
date it receives such information from the soliciting person or such
later date specified by the soliciting person; and
(2) Establish a website at which beneficial owners are able to
access the broker or dealer's request for voting instructions and, at
the broker or dealer's option, establish a website at which beneficial
owners are able to access the proxy statement and other soliciting
materials, provided that such websites are maintained in a manner
consistent with paragraph (b) of Sec. 240.14a-16; and
Note to paragraphs (d)(1) and (d)(2): If the broker or dealer will
not establish a separate website where beneficial owners are able to
access the proxy statement and other soliciting materials and the
statement of availability of proxy materials refers to the website
address provided by the registrant where beneficial owners are able to
access the proxy statement and other soliciting materials, the website
availability requirements will be deemed to be met as they relate to
the broker or dealer's obligations under that provision.
(3) Upon receipt of a request for a copy of the materials from a
beneficial owner:
(i) Request a copy of the soliciting materials from the registrant
or other soliciting person, in the form requested by the beneficial
owner, within three business days after receiving the beneficial
owner's request;
(ii) Forward a copy of the soliciting materials to the beneficial
owner, in the form requested by the beneficial owner, within three
business days after receiving the materials from the registrant or
other soliciting person; and
(e) Content of Statement of Availability of Proxy Materials. The
broker's or dealer's statement of availability of proxy materials
shall:
(1) Include all information, as it relates to beneficial owners,
required by Sec. 240.14a-16(c);
(2) Include a brief description, if applicable, of the rules that
permit the broker or dealer to vote the securities if the beneficial
owner does not return his or her voting instructions;
(3) Include the website address established pursuant to paragraph
(d)(2) of this section where beneficial owners are able to access the
broker's or dealer's request for voting instructions; and
(4) Otherwise be prepared and sent in a manner consistent with
paragraphs (c)(1), (c)(2), and (c)(3) of Sec. 240.14a-16.
0
11. Amend Sec. 240.14b-2 by revising it to read as follows:
Sec. 240.14b-2 Obligation of banks, associations and other entities
that exercise fiduciary powers in connection with the prompt forwarding
of certain communications to beneficial owners.
(a) Definitions. Unless the context otherwise requires, all terms
used in this section shall have the same meanings as in the Act and,
with respect to proxy soliciting material, as in Sec. 240.14a-1
thereunder and, with respect to information statements, as in Sec.
240.14c-1 thereunder. In addition, as used in this section, the
following terms shall apply:
(1) The term bank means a bank, association, or other entity that
exercises fiduciary powers.
(2) The term beneficial owner includes any person who has or
shares, pursuant to an instrument, agreement, or otherwise, the power
to vote, or to direct the voting of a security.
Note 1: If more than one person shares voting power, the provisions
of the
[[Page 45981]]
instrument creating that voting power shall govern with respect to
whether consent to disclosure of beneficial owner information has been
given.
Note 2: If more than one person shares voting power or if the
instrument creating that voting power provides that such power shall be
exercised by different persons depending on the nature of the corporate
action involved, all persons entitled to exercise such power shall be
deemed beneficial owners; Provided, however, that only one such
beneficial owner need be designated among the beneficial owners to
receive proxies or requests for voting instructions, other proxy
soliciting material, information statements, and/or annual reports to
security holders, if the person so designated assumes the obligation to
disseminate, in a timely manner, such materials to the other beneficial
owners.
(3) The term registrant means:
(i) The issuer of a class of securities registered pursuant to
section 12 of the Act; or
(ii) An investment company registered under the Investment Company
Act of 1940.
(b) Dissemination and beneficial owner information requirements. A
bank shall comply with the following requirements for disseminating
certain communications to beneficial owners and providing beneficial
owner information to registrants.
(1) The bank shall:
(i) Respond promptly to the registrant, no later than one business
day after the date it receives an inquiry made in accordance with Sec.
240.14a-13(a) or Sec. 240.14c-7(a) by indicating the name and address
of each of its respondent banks that holds the registrant's securities
on behalf of beneficial owners, if any; and
(ii) Respond promptly to the registrant no later than seven
business days after the date it receives an inquiry made in accordance
with Sec. 240.14a-13(a) or Sec. 240.14c-7(a) by indicating, by means
of a search card or otherwise:
(A) The approximate number of customers of the bank who are
beneficial owners of the registrant's securities that are held of
record by the bank or its nominee;
(B) If the registrant has indicated, pursuant to Sec. 240.14a-
13(a)(1)(ii)(A) or Sec. 240.14c-7(a)(1)(ii)(A), that it will
distribute the annual report to security holders to beneficial owners
of its securities whose names, addresses, and securities positions are
disclosed pursuant to paragraphs (b)(4)(ii) and (iii) of this section:
(1) With respect to customer accounts opened on or before December
28, 1986, the number of beneficial owners of the registrant's
securities who have affirmatively consented to disclosure of their
names, addresses, and securities positions; and
(2) With respect to customer accounts opened after December 28,
1986, the number of beneficial owners of the registrant's securities
who have not objected to disclosure of their names, addresses, and
securities positions; and
(C) The identity of its designated agent, if any, acting on its
behalf in fulfilling its obligations under paragraphs (b)(4)(ii) and
(iii) of this section;
Provided, however, that, if the bank or respondent bank has
informed the registrant that a designated office(s) or department(s) is
to receive such inquiries, receipt for purposes of paragraphs (b)(1)(i)
and (ii) of this section shall mean receipt by such designated
office(s) or department(s).
(2) Where proxies are solicited, the bank shall, within five
business days after the record date:
(i) Execute an omnibus proxy, including a power of substitution, in
favor of its respondent banks and forward such proxy to the registrant;
and
(ii) Furnish a notice to each respondent bank in whose favor an
omnibus proxy has been executed that it has executed such a proxy,
including a power of substitution, in its favor pursuant to paragraph
(b)(2)(i) of this section.
(3) Following receipt of the proxy, other proxy soliciting
material, information statement, and/or annual report to security
holders from the registrant or other soliciting person, the bank shall:
(i) forward such materials to each beneficial owner on whose behalf
it holds securities, no later than five business days after the date it
receives such material:
(A) by direct electronic delivery to the beneficial owners,
provided that the applicable electronic delivery requirements and the
website availability requirements are satisfied; or
(B) in paper format; and
(ii) where a proxy is solicited, forward, with the other proxy
soliciting material and/or the annual report to security holders,
either:
(A) A properly executed proxy:
(1) Indicating the number of securities held for such beneficial
owner;
(2) Bearing the beneficial owner's account number or other form of
identification, together with instructions as to the procedures to vote
the securities;
(3) Briefly stating which other proxies, if any, are required to
permit securities to be voted under the terms of the instrument
creating that voting power or applicable state law; and
(4) If the proxy is in paper format, being accompanied by an
envelope addressed to the registrant or its agent, if not provided by
the registrant; or
(B) A request for voting instructions (for which registrant's form
of proxy may be used and which shall be voted by the record holder bank
or respondent bank in accordance with the instructions received), and
if the voting instructions are in paper format, an envelope addressed
to the record holder bank or respondent bank.
Note to paragraph (b)(3): At the request of a registrant, or on its
own initiative so long as the registrant does not object, a bank may,
but is not required to, deliver one annual report to security holders,
proxy statement, information statement, or statement of availability of
proxy materials to more than one beneficial owner sharing an address if
the requirements set forth in Sec. 240.14a-3(e)(1) (with respect to
annual reports to security holders, proxy statements, and statements of
availability of proxy materials) and Sec. 240.14c-3(c) (with respect
to annual reports to security holders, information statements, and
statements of availability of proxy materials) applicable to
registrants, with the exception of Sec. 240.14a-3(e)(1)(i)(F), are
satisfied instead by the bank.
(4) The bank shall:
(i) Respond promptly to the registrant no later than one business
day after the date it receives an inquiry made in accordance with Sec.
240.14a-13(b)(1) or Sec. 240.14c-7(b)(1) by indicating the name and
address of each of its respondent banks that holds the registrant's
securities on behalf of beneficial owners, if any;
(ii) Through its agent or directly, provide the registrant, upon
the registrant's request, and within the time specified in paragraph
(b)(4)(iii) of this section, with the names, all addresses, and
securities position, compiled as of a date specified in the
registrant's request which is no earlier than five business days after
the date the registrant's request is received, of:
(A) With respect to customer accounts opened on or before December
28, 1986, beneficial owners of the registrant's securities on whose
behalf it holds securities who have consented affirmatively to
disclosure of such information, subject to paragraph (b)(5) of this
section; and
(B) With respect to customer accounts opened after December 28,
1986,
[[Page 45982]]
beneficial owners of the registrant's securities on whose behalf it
holds securities who have not objected to disclosure of such
information;
Provided, however, that if the record holder bank or respondent
bank has informed the registrant that a designated office(s) or
department(s) is to receive such requests, receipt for purposes of
paragraphs (b)(4)(i) and (ii) of this section shall mean receipt by
such designated office(s) or department(s); and
(iii) Through its agent or directly, transmit the data specified in
paragraph (b)(4)(ii) of this section to the registrant no later than
five business days after the date specified by the registrant.
Note 1: Where a record holder bank or respondent bank employs a
designated agent to act on its behalf in performing the obligations
imposed on it by paragraphs (b)(4)(ii) and (iii) of this section, the
five business day time period for determining the date as of which the
beneficial owner information is to be compiled is calculated from the
date the designated agent receives the registrant's request. In
complying with the registrant's request for beneficial owner
information under paragraphs (b)(4)(ii) and (iii) of this section, a
record holder bank or respondent bank need only supply the registrant
with the names, addresses, and securities positions of affirmatively
consenting and non-objecting beneficial owners.
Note 2: If a record holder bank or respondent bank receives a
registrant's request less than five business days before the requested
compilation date, it must provide a list compiled as of a date that is
no more than five business days after receipt and transmit the list
within five business days after the compilation date.
(5) For customer accounts opened on or before December 28, 1986,
unless the bank has made a good faith effort to obtain affirmative
consent to disclosure of beneficial owner information pursuant to
paragraph (b)(4)(ii) of this section, the bank shall provide such
information as to beneficial owners who do not object to disclosure of
such information. A good faith effort to obtain affirmative consent to
disclosure of beneficial owner information shall include, but shall not
be limited to, making an inquiry:
(i) Phrased in neutral language, explaining the purpose of the
disclosure and the limitations on the registrant's use thereof;
(ii) Either in at least one mailing separate from other account
mailings or in repeated mailings; and
(iii) In a mailing that includes a return card, postage paid
enclosure.
(c) Exceptions to dissemination and beneficial owner information
requirements. The bank shall be subject to the following with respect
to its dissemination and beneficial owner information requirements.
(1) With regard to beneficial owners of exempt employee benefit
plan securities, the bank shall not:
(i) Include information in its response pursuant to paragraph
(b)(1) of this section; or forward proxies (or in lieu thereof requests
for voting instructions), proxy soliciting material, information
statements, or annual reports to security holders pursuant to paragraph
(b)(3) of this section to such beneficial owners; or
(ii) Include in its response pursuant to paragraphs (b)(4) and
(b)(5) of this section data concerning such beneficial owners.
(2) The bank need not satisfy:
(i) Its obligations under paragraphs (b)(2), (b)(3), (b)(4), and
(d) of this section if the registrant or other soliciting person, as
applicable, does not provide assurance of reimbursement of its
reasonable expenses, both direct and indirect, incurred in connection
with performing the obligations imposed by paragraphs (b)(2), (b)(3),
(b)(4), and (d) of this section; or
(ii) Its obligation under paragraph (b)(3) of this section to
forward annual reports to security holders to consenting and non-
objecting beneficial owners identified pursuant to paragraphs
(b)(4)(ii) and (iii) of this section if the registrant notifies the
record holder bank or respondent bank, pursuant to Sec. 240.14a-13(c)
or Sec. 240.14c-7(c), that the registrant will send the annual report
to security holders to beneficial owners whose names, addresses, and
securities positions are disclosed pursuant to paragraphs (b)(4)(ii)
and (iii) of this section.
(3) For the purposes of determining the fees which may be charged
to registrants pursuant to Sec. 240.14a-13(b)(5), Sec. 240.14c-
7(a)(5), and paragraph (c)(2) of this section for performing
obligations under paragraphs (b)(2), (b)(3), and (b)(4) of this
section, an amount no greater than that permitted to be charged by
brokers or dealers for reimbursement of their reasonable expenses, both
direct and indirect, incurred in connection with performing the
obligations imposed by paragraphs (b)(2) and (b)(3) of Sec. 240.14b-1,
shall be deemed to be reasonable.
(4) In its response pursuant to paragraph (b)(1)(ii)(A) of this
section, a bank shall not include information about annual reports to
security holders, proxy statements, or information statements that will
not be delivered to security holders sharing an address because of the
bank's reliance on the procedures referred to in the Note to paragraph
(b)(3) of this section.
(d) Following receipt from the soliciting person of all of the
information listed in Sec. 240.14a-16(c), the bank shall:
(1) Prepare and send a statement of availability of proxy
materials, provided that the applicable electronic delivery
requirements and the website availability requirements are satisfied,
and containing the information required in paragraph (e) of this
section to beneficial owners no later than five business days after the
date it receives such information from the soliciting person or such
later date specified by the soliciting person; and
(2) Establish a website at which beneficial owners are able to
access the bank's request for voting instructions and, at the bank's
option, establish a website at which beneficial owners are able to
access the proxy statement and other soliciting materials, provided
that such websites are maintained in a manner consistent with paragraph
(b) of Sec. 240.14a-16; and
Note to paragraphs (d)(1) and (d)(2): If the bank will not
establish a separate website where beneficial owners are able to access
the proxy statement and other soliciting materials and the statement of
availability of proxy materials refers to the website address provided
by the registrant where beneficial owners are able to access the proxy
statement and other soliciting materials, the website availability
requirements will be deemed to be met as they relate to the bank's
obligations under that provision.
(3) Upon receipt of a request for a copy of the materials from a
beneficial owner:
(i) Request a copy of the soliciting materials from the registrant
or other soliciting person, in the form requested by the beneficial
owner, within three business days after receiving the beneficial
owner's request;
(ii) Forward a copy of the soliciting materials to the beneficial
owner, in the form requested by the beneficial owner, within three
business days after receiving the materials from the registrant or
other soliciting person; and
(e) Content of Statement of Availability of Proxy Materials. The
bank's statement of availability of proxy materials shall:
(1) Include all information, as it relates to beneficial owners,
required by Sec. 240.14a-16(c);
(2) Include the website address established pursuant to paragraph
(d)(2)
[[Page 45983]]
of this section where beneficial owners are able to access the bank's
request for voting instructions; and
(3) Otherwise be prepared and sent in a manner consistent with
paragraphs (c)(1), (c)(2), and (c)(3) of Sec. 240.14a-16.
0
12. Amend Sec. 240.14c-1 by revising it to read as follows:
Sec. 240.14c-1 Definitions.
Unless the context otherwise requires, all terms used in this
regulation have the same meanings as in the Act or elsewhere in the
general rules and regulations thereunder. In addition, the following
definitions apply unless the context otherwise requires:
Address. The term ``address'' means a mailing address, which would
include a street address, a post office box number, or other similar
destination to which paper documents are delivered, a facsimile
telephone number, or an electronic address, as defined in Sec. 303.101
of Regulation E-Delivery (Sec. Sec. 303.100 through 104).
Associate. The term ``associate,'' used to indicate a relationship
with any person, means:
(1) Any corporation or organization (other than the registrant or a
majority owned subsidiary of the registrant) of which such person is an
officer or partner or is, directly or indirectly, the beneficial owner
of 10 percent or more of any class of equity securities;
(2) Any trust or other estate in which such person has a
substantial beneficial interest or as to which such person serves as
trustee or in a similar fiduciary capacity; and
(3) Any relative or spouse of such person, or any relative of such
spouse, who has the same home as such person or who is a director or
officer of the registrant or any of its parents or subsidiaries.
Employee benefit plan. For purposes of Sec. 240.14c-7, the term
``employee benefit plan'' means any purchase, savings, option, bonus,
appreciation, profit sharing, thrift, incentive, pension, or similar
plan primarily for employees, directors, trustees, or officers.
Entity that exercises fiduciary powers. The term ``entity that
exercises fiduciary powers'' means any entity that holds securities in
nominee name or otherwise on behalf of a beneficial owner but does not
include a clearing agency registered pursuant to section 17A of the
Act, or a broker or a dealer.
Exempt employee benefit plan securities. For purposes of Sec.
240.14c-7, the term ``exempt employee benefit plan securities'' means:
(1) Securities of the registrant held by an employee benefit plan,
as defined in this section, where such plan is established by the
registrant; or
(2) If notice regarding the current distribution of information
statements has been given pursuant to Sec. 240.14c-7(a)(1)(ii)(C) or
if notice regarding the current request for a list of names, addresses,
and securities positions of beneficial owners has been given pursuant
to Sec. 240.14c-7(b)(3), securities of the registrant held by an
employee benefit plan, as defined in this section, where such plan is
established by an affiliate of the registrant.
Information statement. The term ``information statement'' means the
statement required by Sec. 240.14c-2, whether or not contained in a
single document.
Last fiscal year. The term ``last fiscal year'' of the registrant
means the last fiscal year of the registrant ending prior to the date
of the meeting with respect to which an information statement is
required to be distributed, or if the information statement involves
consents or authorizations in lieu of a meeting, the earliest date on
which they may be used to effect corporate action.
Proxy. The term ``proxy'' includes every proxy, consent, or
authorization within the meaning of section 14(a) of the Act. The
consent or authorization may take the form of failure to object or to
dissent.
Record date. The term ``record date'' means the date as of which
the record holders of securities entitled to vote at a meeting or by
written consent or authorization shall be determined.
Record holder. For purposes of Sec. 240.14c-7, the term ``record
holder'' means any broker, dealer, voting trustee, bank, association,
or other entity that exercises fiduciary powers which holds securities
of record in nominee name or otherwise or as a participant in a
clearing agency registered pursuant to section 17A of the Act.
Registrant. The term ``registrant'' means:
(1) The issuer of a class of securities registered pursuant to
section 12 of the Act; or
(2) An investment company registered under the Investment Company
Act of 1940 that has made a public offering of its securities.
Respondent bank. For purposes of Sec. 240.14c-7, the term
``respondent bank'' means any bank, association, or other entity that
exercises fiduciary powers which holds securities on behalf of
beneficial owners and deposits such securities for safekeeping with
another bank, association, or other entity that exercises fiduciary
powers.
0
13. Amend Sec. 240.14c-2 by revising paragraph (d) to read as follows:
Sec. 240.14c-2 Distribution of information statement.
* * * * *
(d) A registrant shall transmit an information statement to
security holders pursuant to paragraph (a) of this section by
satisfying the requirements set forth in Sec. 240.14a-16; provided,
however, that the registrant shall revise the information required in
the statement of availability of proxy materials, if any, including
changing the title of that statement, to reflect the fact that the
registrant is not soliciting proxies for the meeting.
* * * * *
0
14. Amend Sec. 240.14c-3 by revising paragraph (c) to read as follows:
Sec. 240.14c-3 Annual report to be furnished security holders.
* * * * *
(c) A registrant will be considered to have delivered a statement
of availability of proxy materials, annual report to security holders
or information statement to security holders of record who share an
address if the requirements set forth in Sec. 240.14a-3(e)(1) are
satisfied with respect to the statement of availability of proxy
materials, annual report to security holders, or information statement,
as applicable.
* * * * *
0
15. Amend Sec. 240.14c-4 by revising paragraph (d) to read as follows:
Sec. 240.14c-4 Presentation of information in information statement.
* * * * *
(d) Where an information statement is delivered through an
electronic medium, issuers may satisfy legibility requirements
applicable to printed documents, such as type size and font, by
presenting all required information in a widely available format that
is convenient for reading in electronic format, being printed on paper,
and permanently retaining in an electronic format.
0
16. Amend Sec. 240.14c-7 by revising paragraphs (a)(1), (a)(5),
(b)(1), (b)(2), and (b)(3) and Note 1 to paragraph (a) to read as
follows:
Sec. 240.14c-7 Providing copies of material for certain beneficial
owners.
(a) * * *
(1) Promptly:
* * * * *
(5) Upon the request of any record holder or respondent bank that
is supplied with statements of availability of proxy materials,
information statements and/or annual reports to security holders
pursuant to paragraph (a)(3) of this section, pay its reasonable
[[Page 45984]]
expenses for completing the sending of such material to beneficial
owners.
Note 1: If the registrant's list of security holders indicates that
some of its securities are registered in the name of a clearing agency
registered pursuant to section 17A of the Act (e.g., ``Cede & Co.,''
nominee for the Depository Trust Company), the registrant shall make
appropriate inquiry of the clearing agency and thereafter of the
participants in such clearing agency who may hold on behalf of a
beneficial owner or respondent bank, and shall comply with the above
paragraph with respect to any such participant (see Sec. 240.14c-1).
* * * * *
(b) * * *
(1) Promptly inquire of each record holder and each respondent bank
identified to the registrant pursuant to Sec. 240.14b-2(e)(1) whether
such record holder or respondent bank holds the registrant's securities
on behalf of any respondent banks and, if so, the name and address of
each such respondent bank;
(2) Request such list be compiled as of a date no earlier than five
business days after the date the registrant's request is received by
the record holder or respondent bank; Provided, however, that if the
record holder or respondent bank has informed the registrant that a
designated office(s) or department(s) is to receive such requests, the
request shall be made to such designated office(s) or department(s);
(3) Make such request to the following persons that hold the
registrant's securities on behalf of beneficial owners: all brokers,
dealers, banks, associations, and other entities that exercise
fiduciary powers; Provided, however, such request shall not cover
beneficial owners of ``exempt employee benefit plan securities,'' as
that term is defined in Sec. 240.14a-1; and, at the option of the
registrant, such request may give notice of any employee benefit plan
established by an affiliate of the registrant that holds securities of
the registrant that the registrant elects to treat as exempt employee
benefit plan securities;
* * * * *
0
17. Amend Sec. 240.14c-101 by revising Item 5 to read as follows:
Sec. 240.14c-101 Schedule 14C. Information required in information
statement.
* * * * *
Item 5. Delivery of documents to security holders sharing an
address. If one annual report to security holders, information
statement, or statement of availability of proxy materials is being
delivered to two or more security holders who share an address, furnish
the following information in accordance with Sec. 240.14a-3(e)(1):
(a) State that only one annual report to security holders,
information statement, or statement of availability of proxy materials,
as applicable, is being delivered to multiple security holders sharing
an address unless the registrant has received contrary instructions
from one or more of the security holders;
(b) Undertake to deliver promptly upon written or oral request a
separate copy of the annual report to security holders, information
statement, or statement of availability of proxy materials, as
applicable, to a security holder at a shared address to which a single
copy of the documents was delivered and provide instructions as to how
a security holder can notify the registrant that the security holder
wishes to receive a separate copy of an annual report to security
holders, information statement, or statement of availability of proxy
materials, as applicable;
(c) Provide the phone number and address to which a security holder
can direct a notification to the registrant that the security holder
wishes to receive a separate annual report to security holders,
information statement, or statement of availability of proxy materials,
as applicable, in the future; and
(d) Provide instructions how security holders sharing an address
can request delivery of a single copy of annual reports to security
holders, information statements, or statements of availability of proxy
materials if they are receiving multiple copies of annual reports to
security holders, information statements, or statements of availability
of proxy materials.
* * * * *
0
18. Amend Sec. 240.14d-5 by:
0
a. Revising paragraphs (a)(4)(ii), (b), (c), (f)(3)(iii), (f)(4)(v),
(g)(1), (g)(2), and Note to Sec. 240.14d-5; and
0
b. Adding a note to paragraph (c).
The revisions and addition read as follows:
Sec. 240.14d-5 Dissemination of certain tender offers by the use of
stockholder lists and security position listings.
(a) * * *
(4) * * *
(ii) if the subject company elects to comply with paragraph (b) of
this section, appropriate information concerning the location for
delivery of the bidder's tender offer materials, the approximate number
of security holders that will receive the tender offer materials in
paper format, and the approximate direct costs incidental to the
dissemination to security holders of the bidder's tender offer
materials computed in accordance with paragraph (g)(2) of this section.
(b) Dissemination of tender offer materials by the subject company.
A subject company which elects pursuant to paragraph (a)(3) of this
section to comply with the provisions of this paragraph shall perform
the acts prescribed by the following paragraphs.
(1) The subject company shall promptly contact each participant
named on the most recent security position listing of any clearing
agency within the access of the subject company and make inquiry of
each such participant as to the approximate number of beneficial owners
of the subject company securities being sought in the tender offer held
by each such participant.
(2) No later than the third business day after delivery of the
bidder's tender offer materials pursuant to paragraph (g)(1) of this
section, the subject company shall begin to send or cause to be sent
(and if sent by mail, by means of first class mail) a copy of the
bidder's tender offer materials to each person whose name appears as a
record holder of the class of securities for which the offer is made on
the most recent stockholder list referred to in paragraph (a)(2) of
this section. The subject company shall use its best efforts to send in
a timely manner but in no event shall the dissemination of the bidder's
tender offer materials be completed in a substantially greater period
of time than the subject company would complete the dissemination to
security holders of its own materials relating to the tender offer.
(3) No later than the third business day after the delivery of the
bidder's tender offer materials pursuant to paragraph (g)(1) of this
section, the subject company shall begin to transmit or cause to be
transmitted a sufficient number of sets of the bidder's tender offer
materials to the participants named on the security position listings
described in paragraph (b)(1) of this section. The subject company
shall use its best efforts to complete the transmittal in a timely
manner but in no event shall such transmittal be completed in a
substantially greater period of time than the subject company would
complete a transmittal to such participants pursuant to security
position listings of clearing agencies of its own material relating to
the tender offer.
(4) The subject company shall promptly give oral notification to
the bidder, which notification shall be confirmed in writing, of the
commencement of the dissemination
[[Page 45985]]
pursuant to paragraph (b)(2) of this section and of the transmittal
pursuant to paragraph (b)(3) of this section.
(5) During the tender offer and any extension thereof the subject
company shall use reasonable efforts to update the stockholder list and
shall send or cause to be sent promptly following each update a copy of
the bidder's tender offer materials (to the extent sufficient sets of
such materials have been furnished by the bidder) to each person who
has become a record holder since the later of
(i) the date of preparation of the most recent stockholder list
referred to in paragraph (a)(2) of this section or
(ii) the last preceding update.
(6) If the bidder has elected pursuant to paragraph (f)(1) of this
section to require the subject company to disseminate amendments
disclosing material changes to the tender offer materials pursuant to
this section, the subject company, promptly following delivery of each
such amendment, shall send or cause to be sent a copy of each such
amendment to each record holder whose name appears on the shareholder
list described in paragraphs (a)(2) and (b)(5) of this section and
shall transmit or cause to be transmitted sufficient copies of such
amendment to each participant named on security position listings who
received sets of the bidder's tender offer materials pursuant to
paragraph (b)(3) of this section.
(7) The subject company shall not include any communication other
than the bidder's tender offer materials or amendments thereto in the
envelopes or other containers furnished by the bidder for tender offer
materials that are mailed.
(8) Promptly following the termination of the tender offer, the
subject company shall reimburse the bidder the excess, if any, of the
amounts advanced pursuant to paragraph (f)(3)(iii) over the direct
costs incidental to compliance by the subject company and its agents in
performing the acts required by this section computed in accordance
with paragraph (g)(2) of this section.
(c) Delivery of stockholder lists and security position listings. A
subject company which elects pursuant to paragraph (a)(3) of this
section to comply with the provisions of this paragraph shall perform
the acts prescribed by the following paragraphs.
(1) No later than the third business day after the date of the
bidder's request, the subject company must furnish to the bidder at the
subject company's principal executive office a copy of the names and
all addresses of the record holders on the most recent stockholder list
referred to in paragraph (a)(2) of this section; the names and all
addresses of participants identified on the most recent security
position listing of any clearing agency that is within the access of
the subject company; and the most recent list of names, all addresses,
and security positions of beneficial owners as specified in Sec.
240.14a-13(b), in the possession of the subject company, or that
subsequently comes into its possession. All security holder list
information must be in the format requested by the bidder to the extent
the format is available to the subject company without undue burden or
expense.
(2) If the bidder has elected pursuant to paragraph (f)(1) of this
section to require the subject company to disseminate amendments
disclosing material changes to the tender offer materials, the subject
company shall update the stockholder list by furnishing the bidder with
the name and all addresses of each record holder named on the
stockholder list, and not previously furnished to the bidder, promptly
after such information becomes available to the subject company during
the tender offer and any extensions thereof.
Note to paragraph (c): For purposes of this paragraph (c), the term
``address'' means any mailing address, which would include a street
address, a post office box, or other similar destination to which paper
documents are delivered, facsimile telephone number, or electronic
address, as defined in Sec. 303.101 of Regulation E-Delivery
(Sec. Sec. 303.100 through 104). If the subject company cannot provide
all of the stockholder list information specified in paragraph (c)(1)
of this section, the subject company must send the bidder's tender
offer materials in accordance with paragraph (b) of this section.
* * * * *
(f) * * *
(3) * * *
(iii) The bidder shall advance to the subject company an amount
equal to the approximate cost of disseminating the bidder's tender
offer materials to security holders computed in accordance with
paragraph (g)(2) of this section;
* * * * *
(4) * * *
(v) The bidder shall mail by means of first class mail or otherwise
furnish with reasonable promptness, at its own expense, a copy of its
tender offer materials to each person whose identity appears on the
stockholder list as furnished and updated by the subject company
pursuant to paragraphs (c)(1) and (2) of this section;
* * * * *
(g) Delivery of materials, computation of direct costs.
(1) Whenever the bidder is required to deliver tender offer
materials or amendments to tender offer materials, the bidder shall
deliver to the subject company at the location specified by the subject
company in its notice given pursuant to paragraph (a)(4) of this
section a number of sets of the materials or of the amendment, as the
case may be, at least equal to the approximate number of security
holders receiving the tender offer materials by mail, as specified by
the subject company in such notice, together with appropriate envelopes
or other containers therefor: Provided, however, that such delivery
shall be deemed not to have been made unless the bidder has complied
with paragraph (f)(3)(iii) of this section at the time the materials or
amendments, as the case may be, are delivered.
(2) If applicable, the approximate direct cost of mailing the
bidder's tender offer materials shall be computed by adding (i) the
direct cost incidental to the mailing of the subject company's last
annual report to shareholders (excluding employee time), less the costs
of preparation and printing of the report, and postage, plus (ii) the
amount of first class postage required to mail the bidder's tender
offer materials. The approximate direct costs incidental to the mailing
of the amendments to the bidder's tender offer materials shall be
computed by adding (iii) the estimated direct costs of preparing
mailing labels, of updating shareholder lists, and of third party
handling charges plus (iv) the amount of first class postage required
to mail the bidder's amendment. Direct costs incidental to the mailing
of the bidder's tender offer materials and amendments thereto when
finally computed may include all reasonable charges paid by the subject
company to third parties for supplies or services, including costs
attendant to preparing shareholder lists, mailing labels, handling the
bidder's materials, contacting participants named on security position
listings and for postage, but shall exclude indirect costs, such as
employee time which is devoted to either contesting or supporting the
tender offer on behalf of the subject company. The final billing for
direct costs shall be accompanied by an appropriate accounting in
reasonable detail.
Note to Sec. 240.14d-5: Reasonably prompt methods of distribution
to security holders, including electronic
[[Page 45986]]
delivery in accordance with Sec. 303.102 of Regulation E-Delivery, may
be used instead of mailing. If alternative methods are chosen, the
approximate direct costs of distribution shall be computed by adding
the estimated direct costs of preparing the document for distribution
through the chosen medium (including updating of shareholder lists)
plus the estimated reasonable cost of distribution through that medium.
Direct costs incidental to the distribution of tender offer materials
and amendments thereto may include all reasonable charges paid by the
subject company to third parties for supplies or services, including
costs attendant to preparing shareholder lists, handling the bidder's
materials, and contacting participants named on security position
listings, but shall not include indirect costs, such as employee time
which is devoted to either contesting or supporting the tender offer on
behalf of the subject company.
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19. Amend Sec. 240.17a-3 by revising paragraph (a)(9)(ii) to read as
follows:
Sec. 240.17a-3 Records to be made by certain exchange members,
brokers and dealers.
* * * * *
(a) * * *
(9) * * *
(ii) Except with respect to ``exempt employee benefit plan
securities,'' as that term is defined in Sec. 240.14a-1, but only to
the extent such securities are held by employee benefit plans
established by the issuer of the securities, whether or not the
beneficial owner of securities registered in the name of such members,
brokers or dealers, or a registered clearing agency or its nominee
objects to disclosure of his or her identity, address, and securities
positions to issuers;
* * * * *
PART 270--GENERAL RULES AND REGULATIONS, INVESTMENT COMPANY ACT OF
1940
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20. The authority citation for part 270 continues to read in part as
follows:
Authority: 15 U.S.C. 80a-1 et seq., 80a-34(d), 80a-37, 80a-39,
and Pub. L. 111-203, sec. 939A, 124 Stat. 1376 (2010), unless
otherwise noted.
* * * * *
0
21. Remove Sec. 270.30e-3.
0
22. Add part 303 to read as follows:
PART 303--REGULATION E-DELIVERY: DELIVERING COVERED INFORMATION
THROUGH ELECTRONIC DELIVERY
Sec.
303.100 Purpose and Scope
303.101 Definitions
303.102 Use of Electronic Delivery; Electronic Delivery Methods and
Requirements
303.103 Requirements for website Availability of Covered Information
303.104 Transition Process for Covered Recipients Receiving Paper
Authority: 15 U.S.C. 77c, 77d, 77d-1, 77g, 77j, 77s, 77z-2, and
77z-3, 77ddd, 77eee, 77nnn, 77sss, 78c-4, 78m, 78n, 78o, 78o-10,
78q-1, 78w, 78ll, 80a-6, 80a-8, 80a-19(a), 80a-20, 80a-24, 80a-29,
80a-37, 80b-3, 80b-4, 80b-11, and 7004.
Sec. 303.100 Purpose and Scope.
Notwithstanding 15 U.S.C. 7001(c), a covered entity may rely on
Regulation E-Delivery to use electronic delivery to deliver covered
information to covered recipients, provided that the requirements in
Sec. Sec. 303.102 through104 are satisfied, as applicable.
Sec. 303.101 Definitions.
As used in Sec. 303.100 through Sec. 303.104, unless the context
requires otherwise:
Commission means the Securities and Exchange Commission.
Covered entity means any person required to deliver covered
information to a covered recipient.
Covered information means any information required to be delivered
to a covered recipient under the Securities Act of 1933, the Securities
Exchange Act of 1934, the Trust Indenture Act of 1939, the Investment
Company Act of 1940, the Investment Advisers Act of 1940, or any other
of the Federal securities laws, except information required to be
delivered under 17 CFR part 227 (Regulation Crowdfunding), 17 CFR
240.15c2-11, or 17 CFR 240.15Fi-2.
Covered recipient means any current or prospective customer,
client, investor, security holder, counterparty, or similar recipient
to whom a covered entity is required to deliver covered information.
Covered recipient receiving paper means a covered recipient who, as
of the effective date of Regulation E-Delivery, receives any covered
information in paper format from or on behalf of a covered entity, and
for whom such covered entity has an electronic address.
Deliver (or as relevant, delivery) means, as applicable, to
deliver, furnish, transmit, send, give, mail, provide, forward, make
available, or disseminate information, as described in the Federal
securities laws.
Electronic address means an identifier used to communicate with a
covered recipient electronically, including: an email address; a mobile
phone number; or any other means of electronic communication capable of
receiving electronic delivery pursuant to an electronic delivery method
as set forth in Sec. 303.102(c) and alerting a covered recipient that
covered information is available.
Electronic delivery means delivery of covered information to a
covered recipient's electronic address.
Personal financial information means information specific to a
covered recipient's personal financial matters, such as an account
number or details regarding a specific securities transaction.
Website means an internet website or other internet- or electronic-
based location where information is stored or presented, such as a
mobile application, to which a covered recipient has been provided
reasonable access.
Sec. 303.102 Use of Electronic Delivery; Electronic Delivery Methods
and Requirements.
(a) Use of electronic delivery. A covered entity may deliver
covered information to a covered recipient who has not opted out of
electronic delivery under paragraph (f)(2) of this section by
delivering that information to an electronic address that the covered
recipient provides (or accepts to use) to receive covered information,
and satisfying the requirements in paragraphs (b) through (h) of this
section.
(b) Disclosure of electronic delivery.
(1) Before relying on this section to deliver covered information
to a covered recipient electronically, a covered entity must provide a
clear and conspicuous disclosure to the covered recipient that:
(i) Describes the types of covered information that will be
delivered electronically to the electronic address the covered
recipient provides (or accepts to use) to receive covered information,
unless the covered recipient opts out of electronic delivery, and, if
applicable, discloses whether a covered recipient's request for paper
or to opt out of e-delivery could result in restrictions on or
termination of the covered recipient's relationship with the covered
entity; or
(ii) States that the covered recipient may opt to have covered
information delivered electronically to the electronic address the
covered recipient provides (or accepts to use) to receive covered
information.
(2) This disclosure also must describe the methods of electronic
delivery that may be used pursuant to Sec. 303.102(c).
(3) A covered entity is not required to provide this disclosure to
a covered recipient who received an initial notice, as described in
Sec. 303.104(c), or who received electronic delivery of all
[[Page 45987]]
covered information by or on behalf of the covered entity as of the
effective date of Regulation E-Delivery.
(c) Electronic delivery methods. A covered entity must use the
electronic delivery methods set forth in paragraphs (c)(1) or (c)(2),
as applicable.
(1) Delivery of statement of availability of covered information to
an electronic address. A covered entity must deliver covered
information that includes personal financial information, and may
deliver all other covered information, through delivery of a statement
of availability of covered information as set forth in this paragraph
(c)(1). A statement of availability must include the following content.
(i) A prominent statement alerting the covered recipient that
covered information is available, which identifies the covered
information and the covered entity.
(ii) A brief description of the covered information (that, as
applicable, identifies whether the covered information may require
action by the covered recipient within a fixed time frame to exercise
certain rights, and whether the covered information is delivered by a
person delivering on behalf of the covered entity).
(iii) A website address where the covered information is available,
that:
(A) With respect to covered information that does not include
personal financial information, leads the covered recipient directly to
the covered information that is described in the statement of
availability;
(B) With respect to covered information that includes personal
financial information, requires the use of a process reasonably
designed to safeguard the personal financial information, and leads the
covered recipient directly to the covered information immediately after
the covered recipient completes such process; and
(C) Meets the requirements in Sec. 303.103.
(iv) A statement that covered information made available on a
website may be superseded by subsequent versions of the covered
information.
(v) A prominent statement describing:
(A) The covered entity's obligation to provide a paper copy of
covered information free of charge, upon request;
(B) The ability to opt out of electronic delivery at any time and
receive all or a subset of covered information in paper format, free of
charge, following an opt-out election;
(C) The ability to update one's electronic address free of charge
(including, if applicable, an explanation of how to change the type of
electronic address that will be used for delivery, such as email or
mobile phone number); and
(D) The process for a covered recipient to request paper copies,
opt out of e-delivery, and update one's electronic address, which at a
minimum must direct a covered recipient to a website through which one
can make these requests and updates. If applicable, a covered entity
must disclose whether a covered recipient's request for paper or to opt
out of e-delivery could result in restrictions on or termination of the
covered recipient's relationship with the covered entity.
(2) Direct delivery of covered information that does not include
personal financial information to an electronic address. A covered
entity may deliver covered information that does not include personal
financial information directly to a covered recipient's electronic
address. The direct delivery of the covered information must include
the information described in paragraphs (c)(1)(i), (c)(1)(ii), and
(c)(1)(v) of this section (with the same prominence requirements as
described in these paragraphs), as well as all of the covered
information being delivered either in the body of the communication or
as an attachment (in either case presented in a widely available format
that is convenient for reading in electronic format, being printed on
paper, and permanently retaining in an electronic format).
(d) Timing of electronic delivery. The statement of availability as
described in paragraph (c)(1) or the direct delivery of covered
information as described in paragraph (c)(2) must be delivered no later
than the date by which the covered information is required to be
delivered under the Federal securities laws.
(e) Other requirements for form and manner of electronic delivery.
A statement of availability as described in paragraph (c)(1) may
provide that multiple items of covered information are available for
review, and multiple items of covered information may be included in a
direct delivery of covered information as described in paragraph
(c)(2). In addition, a statement of availability or direct delivery of
covered information must be delivered separately from communications
that are not covered information, except as otherwise provided under
the Federal securities laws. The statement of availability or direct
delivery must contain only the content required in paragraph (c)(1) and
(c)(2), as applicable, except that it also may include any content
expressly required under the Federal securities laws, and pictures,
logos, or similar design or text elements that are not misleading and
do not make the covered information unclear.
(f) Obligation of covered entity to provide paper copies of covered
information on request and to permit covered recipients to opt out of
electronic delivery.
(1) Paper copies of covered information. The covered entity must
send, free of charge, one paper copy of any of the covered information
that the covered entity has delivered through electronic delivery to a
covered recipient during the period the covered entity is required to
retain the covered information under the Federal securities laws, or in
the two years preceding the date of the covered recipient's request if
there is no such requirement, to any such covered recipient requesting
such a copy. Unless otherwise specified in the Federal securities laws,
the covered entity must send the paper copy of covered information by
U.S. first class mail or another reasonably prompt means within three
business days after receiving the covered recipient's request.
(2) Opting out of electronic delivery for any or all covered
information. A covered entity must permit a covered recipient to opt
out of electronic delivery at any time and receive delivery only in
paper format, free of charge, with respect to any or all covered
information after opting out. The covered entity must promptly comply
with a covered recipient's opt-out election.
(g) Updates to electronic address and choice of type of electronic
address used for electronic delivery. A covered entity must permit a
covered recipient, free of charge, to update the covered recipient's
electronic address upon request, including as applicable updating the
covered recipient's choice as to the type of electronic address to be
used for electronic delivery (for example, email, mobile phone number).
(h) Identifying and remediating electronic delivery failures. The
covered entity must adopt and implement written policies and procedures
reasonably designed to identify and remediate failed electronic
delivery. If any failed electronic delivery is identified, the covered
entity must promptly take reasonable remediation steps, including
obtaining a new electronic address or delivering the covered
information in paper format until the covered recipient provides a new
electronic address.
[[Page 45988]]
Sec. 303.103 Requirements for website Availability of Covered
Information.
When a covered entity uses the electronic delivery method in Sec.
303.102(c)(1) (delivery of statement of availability of covered
information to an electronic address), the covered information must be
posted to a website, which may not be the address of any Commission
electronic filing system, meeting the following requirements.
(a) Timing. The covered information must be available on the
website no later than the date by which the covered information must be
delivered under the Federal securities laws, and no later than the date
by which the statement of availability of covered information is
delivered.
(b) Availability period. The covered information must remain
available on the website for at least three years for covered
information that includes personal financial information or at least
one year for covered information that does not include personal
financial information, unless a different website availability period
is provided for the covered information under the Federal securities
laws.
(c) Format and retainability. The covered information must be
presented on the website in a format, or formats, that are convenient
for both reading online and printing on paper; persons accessing the
covered information must be able to retain the covered information
permanently, free of charge, in an electronic format that meets these
requirements.
(d) Accessing covered information that contains personal financial
information. Covered information that contains personal financial
information must be accessible on the website only through the use of a
process reasonably designed to safeguard the covered information.
(e) Continuous availability and periods of temporary
unavailability. The requirements set forth in paragraphs (a) through
(d) of this section will be deemed to be met notwithstanding the fact
that the website and covered information become temporarily
unavailable, provided that:
(1) Policies and Procedures. The covered entity adopts and
implements written policies and procedures reasonably designed to
ensure that the covered information is made available and remains
available in the manner required by this section; and
(2) Prompt action. The covered entity takes prompt action to ensure
that the covered information becomes available in the manner required
by this section as soon as practicable following the earlier of the
time at which the covered entity knows or reasonably should have known
that the covered information is temporarily unavailable.
Sec. 303.104 Transition Process for Covered Recipients Receiving
Paper.
(a) Scope. This section provides requirements regarding a covered
entity's transition to default electronic delivery for covered
recipients receiving paper.
(b) Transition timing. Except as otherwise provided in paragraph
(e) of this section, a covered entity may use electronic delivery as
the default delivery method for any covered recipient receiving paper
beginning 180 days following the date of the provision of the initial
notice described in paragraph (c) of this section, if the covered
entity provides a follow-up notice as required by paragraph (d) of this
section and the covered recipient receiving paper has not opted out of
electronic delivery.
(c) Initial notice. A covered entity must provide a clear and
conspicuous initial notice in paper format to each covered recipient
receiving paper at the covered recipient's last known physical address
of record.
(1) Required content. The initial notice must include the
following.
(i) A prominent statement that alerts the covered recipient about
the upcoming transition to electronic delivery of covered information,
which must include:
(A) A brief description of each type of covered information that
will be delivered using electronic delivery (identifying which covered
information may require action by the covered recipient within a fixed
time frame to exercise certain rights, and which covered information
may be delivered by someone other than the covered entity providing the
notice or a person delivering on behalf of the covered entity), and, if
applicable, discloses whether a covered recipient's request for paper
or to opt out of e-delivery could result in restrictions on or
termination of the covered recipient's relationship with the covered
entity; and
(B) A description of the methods of electronic delivery that may be
used pursuant to Sec. 303.102(c).
(ii) The electronic address that will be used to deliver covered
information to the covered recipient.
(iii) The date when the default to electronic delivery will begin,
which must be no earlier than 180 days after the date of the provision
of the initial notice.
(iv) A prominent statement describing:
(A) The ability to opt out of electronic delivery at any time and
receive all or a subset of covered information in paper format, free of
charge, following an opt-out election;
(B) The ability to update or confirm one's electronic address free
of charge (including, if applicable, an explanation of how to change
the type of electronic address that will be used for delivery, such as
email or mobile phone number);
(C) The process for a covered recipient to opt out of e-delivery
and/or update or confirm one's electronic address, which at a minimum
must include a toll-free telephone number and a website provided by the
covered entity; and
(D) Whether the covered entity intends to begin using electronic
delivery to deliver covered information earlier than 180 days after the
date of the provision of the initial notice if the covered recipient
updates or confirms an electronic address following delivery of the
initial notice.
(2) Separate provision of initial notice; permitted content. The
initial notice must be provided separately from other communications
and may contain only the information required by paragraph (c)(1) of
this section, except that it also may include pictures, logos, or
similar design elements that are not misleading and do not make the
notice unclear.
(d) Follow-up notice. A covered entity must provide a clear and
conspicuous follow-up notice in paper format to each covered recipient
receiving paper at the covered recipient's last known physical address
of record. The date of the provision of the follow-up notice must be 30
days prior to the date identified in paragraph (b) of this section. The
follow-up notice must comply with the content and other requirements
described in paragraph (c).
(e) Effect of Provision or Confirmation of Electronic Address. A
covered entity may begin using electronic delivery pursuant to Sec.
303.102 at any time for any covered recipient receiving paper who
updates or confirms an electronic address in response to receiving the
initial notice or follow-up notice described in paragraphs (c) and (d)
of this section, and who has not opted out of electronic delivery. If a
covered recipient receiving paper updates or confirms an electronic
address at any time after receiving the initial notice described in
paragraph (c) of this section, a covered entity is not required to
provide the follow-up notice described in paragraph (d) of this
section.
(f) Effect of Opting Out of Electronic Delivery. If a covered
recipient, at any
[[Page 45989]]
time after receiving the initial notice described in paragraph (c) of
this section, opts out of electronic delivery and elects to receive all
or a subset of covered information in paper format, as described in
paragraph (c)(1)(i)(A), a covered entity is not required to provide the
follow-up notice described in paragraph (d) of this section.
By the Commission.
Dated: July 16, 2026.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2026-14679 Filed 7-20-26; 8:45 am]
BILLING CODE 8011-01-P