The capital markets reform bill passed by the House on Thursday includes a provision that would allow electronic delivery to become the default mechanism for providing certain regulatory documents to investors and reduce the amount of physical mail handled by the financially beleaguered US Postal Service.
The legislation is the latest example of the federal government cutting back on core Postal Service activities.
Section 205 of the INVEST Act directs the SEC to finalize a rule within one year of enactment allowing investment firms to convert to electronic delivery of financial information legally required to be sent to clients in hard copy. Customers can receive paper documents if they wish.
The SEC currently allows electronic delivery of certain documents if a registered institution provides notice that the information is available electronically and clients voluntarily participate.
Supporters say modernizing disclosure requirements will make the financial system more efficient, reduce waste and be safer from theft than physical mail.
“Electronic delivery provides a more accessible, cost-effective and faster means of transmitting and receiving information than paper delivery. Using electronic delivery to communicate with investors also creates opportunities for the industry to provide dynamic, real-time information rather than static data, making it easier for consumers to find information at the level of detail they prefer,” said the Investment Institute.
Mass marketers and printing industry suppliers oppose the move, saying it threatens jobs and revenue in the direct mail sector, as well as the U.S. Postal Service.
Many older Americans are more comfortable with technology and may prefer paper documents because they have difficulty navigating digital platforms. Mackay Mitchell Envelope said in a LinkedIn post that the process of opting out of paper delivery can be complicated for seniors. Electronic delivery is not a viable solution for rural households without reliable high-speed internet.
The measure, which has yet to be considered by the Senate, “would also have a significant detrimental effect in terms of reduced revenue and volume for the United States Postal Service at a time when Kaka cannot afford such a loss.” Nonprofit Shippers’ Alliance, in a letter to members.
The Postal Service had an operating loss of $2.8 billion in the fiscal year ended Sept. 30, as first-class mail volume fell 5 percent.
Paper communication is still one of the most secure channels. Sivitter argued that the need to transfer digital documents increases exposure to cyberattacks, identity theft, and data breaches.
“Digital disclosure does not equal understanding. Paper ensures that important financial information is actually seen, read and kept — not buried in inboxes or spam folders. Digital systems only fail during outages, disasters or cyber incidents. Paper provides the necessary backup that keeps information moving when systems fail,” the letter states.
In October, Social Security stopped sending paper checks to retiree beneficiaries in response to a presidential executive order designed to modernize payment systems, save administrative costs and reduce fraud and identity theft across the government. The SSA said the transition will only affect a small group of people who have not yet switched to electronic payment methods. Currently, less than 1 percent of beneficiaries receive a paper check.
According to the U.S. Treasury Department, it costs about 50 cents to issue a paper check, while electronic funds transfers cost less than 15 cents. This change could save the federal government millions of dollars annually.
Paper checks are 16 times more likely to be lost or stolen than electronic payments, which increases the risk of fraud, the SSA says on its website.
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