SEC OKs Online Shareholder Reports Rule

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By Alexandra Semenova

The SEC has adopted a rule that will give mutual funds the option to send electronic copies of annual reports to investors.

Shareholders will be able to access reports online and be notified as they become available. The rule requires funds to continue administering paper reports until 2021 and give investors two years’ notice of the change. Investors will have the option to continue to receive paper reports.

“The new rule significantly modernizes delivery options for fund information while preserving the right of fund investors to receive information in paper form as they do today,” Securities and Exchange Commission Chairman Jay Clayton said.

SEC Commissioner Kara Stein, a Democrat, called the rule a potential hurdle for investors and recommended it be adopted as a pilot program subject to modification based on investors’ delivery preferences.

“In some ways, it disregards the goals of the Commission’s past disclosure effectiveness initiatives by potentially making it more difficult for investors to receive the information they need,” Stein said.

The Investment Company Institute, an association that represents regulated funds, praised the optional transition from paper to electronic statements.

“Once implemented, this new rule will create substantial savings, for the benefit of fund shareholders,” ICI President and CEO Paul Schott Stevens said in a statement.

The shift from a paper-default is part of an effort by the Division of Investment Management to explore different ways to deliver fund disclosures.

The SEC has asked for public feedback on shareholder report delivery processing fees.

To contact the reporter on this story: Alexandra Semenova at asemenova@bloomberglaw.com

To contact the editor responsible for this story: Michael Ferullo at mferullo@bloomberglaw.com

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