Talk about a topic near and dear to my heart. My first site – RealCorporateLawyer.com – was launched twenty-five years ago based on the expertise I gained when I was in Corp Fin in the mid-‘90s providing guidance on how the advent of the Internet impacted the federal securities laws. Providing guidance on e-delivery was a big part of that site. The SEC issued interpretative e-delivery releases in 1995 and 1996 in the form of FAQs – as well as additional guidance in 2000 – that we all have relied upon for several decades.
Last week, as noted in this press release, the SEC proposed a new default for electronic delivery – in the form of “Regulation E-Delivery” – that would allow issuers, broker-dealers, investment advisers and other covered entities to use electronic delivery as the default method for required disclosures without first obtaining affirmative investor consent, provided certain conditions are met. Here’s the 379-page proposing release – and here’s the fact sheet. There’s a 60-day comment period.
Here are seven things to know beyond the default being proposed to be changed to “not needing to obtain affirmative investor consent”:
1. E-Delivery Would Be Optional, Not Mandatory – Covered entities could choose whether to rely on the new framework. Those preferring existing delivery methods wouldn’t be required to switch to e-delivery. The rule would apply broadly to virtually all information required to be delivered under the federal securities laws, covering issuers, broker-dealers, investment advisers and other obligated parties – as well as investors, shareholders, clients, customers and counterparties.
2. Three Conditions Must Be Met Before Default E-Delivery – A covered entity could rely on the proposed rule only if: (1) the recipient has provided an electronic address, (2) the recipient receives clear notice that electronic delivery will be used, and (3) the recipient has not opted out.
3. Recipients Retain Specific Rights – Investors would continue to have the ability to opt out of e-delivery at any time and request paper copies free of charge. The proposal also includes requirements regarding delivery timing, website accessibility and document availability.
4. Different Rules for Personal Financial Information – Documents containing personal financial information generally can’t be sent directly by email. Instead, recipients would receive a notice directing them to a secure website where the information could be accessed.
5. Existing Paper Recipients Receive Transition Protections – Investors currently receiving paper documents would receive two separate paper notices before being transitioned to e-delivery, providing advance notice and multiple opportunities to opt out.
6. E-SIGN Consent Requirements Would Be Waived – For information delivered under Reg E-Delivery, the proposal would exempt covered entities from the consumer consent requirements of the E-SIGN Act that would otherwise apply.
7. Current SEC Guidance Would Largely Be Superseded – If adopted, Regulation E-Delivery would become the SEC’s primary electronic delivery rule, replacing the existing guidance-based framework while preserving certain longstanding principles.
Authored by
Broc Romanek