In 2015, the Securities and Exchange Commission suggested what is known as Rule 30e-3, which modernizes the way companies and mutual funds report disclosure reports to shareholders and the public. The idea: getting rid of the requirement to deliver a hard copy and moving to the option of sending these digitally. However, this change is now facing opposition from interest groups. It turns out that there indeed such a thing as a tree lobby, and it’s much stronger than you think.
The fiscal and environmental impact of Rule 30e-3
A 2015 report by the Investment Company Institute puts the number of shareholder reports which are printed at mailed at 440 million (page 94), which, considering an individual cost of $0.70, adds up to a total cost of $308 million. This can save shareholders $2 billion over 10 years, and will save about 2 million trees from being chopped annually (assuming between 8,000 and 8,500 sheets per tree).
And yet, the proposal faces opposition.
Improvements for willing investors
As early as October 2016, Obama-appointed SEC Commissioner Kara Stein opposed the rule for a number of reason that don’t hold up, and that seem odd coming from an administration supposedly concerned about the environment. She writes in a statement: “An investor would have to ask for paper delivery. It is unrealistic to expect that we can impose this additional burden on busy investors without negatively affecting their engagement.”
The commissioner also points out that e-delivery is already available, and that investors simply do not choose this method. This is, at least indirectly, incorrect: current interpretations of Rule 10b-10 only allow electronic delivery if the commission has “specifically permitted” it. By this standard, a general permission to deliver via email or on a website does not exist. The only electronic means which is allowed under current rules is the fax machine (which the SEC still calls a “facsimile machine”), which doesn’t make the communication paperless at all.
Why does this all matter, you may ask.
You’d presume that a rule which digitizes reports for shareholders, without stripping them off the possibility to communicate via hard copies, and considering that the overwhelming majority of investors already have access to the internet, that this would be an easy sell for lawmakers. Furthermore, consider the immense advantage of sifting through reports when CTRL-F is an option: computers give us the opportunity to search for specific words in large documents, which make comprehending these files easier. Save money, save trees, and make life easier for investors: what’s not to like?
The tree lobby
The American Forest and Paper Association and the Envelope Manufacturers Association, joined by the American Postal Workers Union, the National Association of Letter Carriers, National Rural Letter Carriers Association, the Printing Industries Alliance, as well as the Printing Industries of America, are all groups that fund Consumers for Paper Options, a lobbying organization opposing the rule change. They focused their efforts on congressional representatives from Maine, where paper manufacturing and its raw material inputs are influential industries. Rep. Bruce Poliquin, R-Maine, complained on the House floor that “Millions of our fellow Americans will be left in the information desert.”, presumably attempting to fear-monger his way out of the rule change.
Rep. Rodney Frelinghuysen, R-N.J., chairman of the Appropriations Committee, and Rep. Tom Graves, R-Ga., chairman of the Financial Services and General Government Subcommittee, are the key figures in determining this rule’s fate. If they were to strike down Rule 30e-3, it’d be another display of cronyism, which is so indicative in the legislative process of the federal government. This article doesn’t need to be printed on paper for the reader to figure that out.
This article was first published by the Washington Examiner.
Thanks for liking and sharing!