Investment reports

Say goodbye to some paper investment reports: NPR

The Securities and Exchange Commission has voted to allow investment firms, beginning in 2021, to stop creating and sending paper mutual fund reports to investors.

Andrew Harnik/AP


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Andrew Harnik/AP


The Securities and Exchange Commission has voted to allow investment firms, beginning in 2021, to stop creating and sending paper mutual fund reports to investors.

Andrew Harnik/AP

Investors and retirees who now receive lengthy paper reports on the status of their mutual funds and other investment funds will have to go online for the same updates. A Washington regulator’s new ruling frustrates consumer watchdogs.

On Monday, the Securities and Exchange Commission voted to allow investment firms to stop creating and sending paper fund reports to investors. Instead, financial firms could publish digital copies of reports electronically on the Internet as the default way to update investors on the status of their funds. These reports sometimes span over 100 pages.

The SEC said in a statement that the push toward dematerialization is aimed at “improving the experience” for investors.

The new rule will come into effect on January 1, 2021. When it comes into effect, investors could tell their financial company that they would like the option to continue to receive hard copies of reports at any time, free of charge.

But it will be up to the investor to inform the financial companies of his preference. Investors will receive a short paper document in the mail notifying them that their digital report is ready to view online.

Critics of the SEC’s decision warn that it could mean fewer investors are checking in on how their mutual funds are doing.

And SEC Commissioner Robert Jackson Jr. said the decision goes against what the commission knows about investor behavior. He was the only “no” on the 4-1 vote to go paperless.

“The commission is today reversing the default rule for providing information to investors, a choice contrary to everything we know about the actual behavior of individual investors,” he said, according to the Wall Street Journal. .

SEC Public Affairs Director John Nester declined to comment on the vote, but pointed to statements by commissioners explaining why they voted the way they did.

“While Washington spent its time ruminating, these documents continued to languish on doorsteps and recycling bins in homes across the country where their investor recipients read news online, bank online and buy online,” SEC Commissioner Michael Piwowar said, explaining why he voted in favor of the rule.

The vote comes from a commission project, underway for two years, that aims to modernize the delivery of regular, sometimes lengthy reports that cost the industry about $300 million a year. This cost is then passed on to shareholders.

Barbara Roper, director of investor protection at the Consumer Federation of America, said the savings from eliminating paper document deliveries are “literally pocket change.” She warned that the cost savings would not be passed on to investors.

But she’s even more concerned that the SEC isn’t acting in the best interests of investors.

“This will make it more difficult for these investors to continue to obtain their disclosure documents in their preferred format,” Roper said. “Why doesn’t investor preference matter? »

In a 2016 survey by the Financial Industry Regulatory Authority, a self-regulatory body, 49% of investors said they preferred paper investment reports; 33% said they would prefer a digital copy. The rest said they would prefer to know how their funds are doing through meetings with their brokers or advisers.

The decision to go paperless was not easy. The American Forest & Paper Association and the Envelope Manufacturers Association lobbied against the decision, delaying the SEC vote in 2016.

Although the effort has already been made, the SEC is trying to get direct feedback from investors on how to refine the delivery of the new digital reports. The open call for public comments closes October 31.

Charlotte Norsworthy is an intern at NPR’s Business Desk.