Capitol Building by Andrew Malone is licensed under CC BY 2.0.
Americans for Tax Reform strongly supports the bipartisan Improving Disclosure for Investors Act of 2024 as a standalone bill and as filed as Amendment #12 to the Expanding Access to Capital Act of 2023 (H.R. 2799).
Amendment #12 as filed in the House Rules Committee is sponsored by Reps. Bill Huizenga (R-Mich.), Bryan Steil (R-Wis.), Jake Auchincloss (D-Mass.), and Wiley Nickel (D-N.C.). The Senate bill is sponsored by Sens. Thom Tillis (R-N.C.) and John Hickenlooper (D-Colo.).
The bill would require the Securities and Exchange Commission (SEC) to issue rules that would allow the electronic dissemination of certain investor disclosure documents to be the default method by which investors would receive these disclosures. Currently, certain documents, such as prospectuses, trade confirmations, proxy statements, privacy notices, and marketing notices are required to be delivered in paper form. Notably, the bill would not force individual investors to accept electronic delivery of disclosures. In fact, investors would be allowed to opt out of receiving electronic delivery of disclosures. Investors that prefer to receive paper disclosures would be able to continue to receive information in paper form.
Before the new rules go into effect, broker-dealers, registered investment advisers, investment companies, and other financial institutions would be required to issue notices about the transition to electronic delivery to investors that do not currently receive all their disclosure information via electronic delivery. This explicit requirement is intended to give certain investors ample notice about the move to electronic delivery.
Self-regulatory organizations, such as the Financial Industry Regulatory Authority (FINRA) and the Municipal Securities Rulemaking Board (MSRB), would also be required to publish rules “consistent with” the bill and consistent with rules finalized by the SEC.
The bill and amendment to H.R. 2799 is commonsense policy. The goal of the bill is to streamline the investor disclosure dissemination process by uprooting outdated regulations and replacing them with updated reforms that provide flexibility for both financial institutions and investors. This provides cost savings for financial institutions and ultimately investors. One study from 2015 found that a similar transition to electronic delivery would save hundreds of millions of dollars in expenses that would accrue to retirement “plan participants.” It stands to reason that making electronic delivery the default for SEC disclosures would result in as much if not more savings for individual investors.
There is also precedent for enabling electronic delivery as the primary method for disclosure dissemination. In 2020, the Trump administration’s Department of Labor (DOL) issued a final rule allowing “employers to deliver disclosures to [retirement] plan participants primarily electronically.” The rule estimated that it would reduce costs by “$3.2 billion over the next decade.” The Improving Disclosure for Investors Act builds off DOL’s streamlined regulations and requires the SEC to do the same for individual investors using a brokerage account.
Investors are not just wealthy individuals or institutions. Almost 60 percent of all U.S. households own a defined contribution retirement account (e.g., 401(k) plan), and forty-two percent own an individual retirement account. A large swath of Americans possess access to capital markets and use it to save for retirement. Requiring the SEC to update regulations and keep with the times is essential to enhancing market transparency for individual investors most of all. Accordingly, ATR supports the Improving Disclosure for Investors Act of 2024.