What the SEC E-Delivery Rule Could Mean for Firms
In a hearing on the oversight of the SEC earlier this month, Chairperson Paul Atkins confirmed that the agency is working on an electronic delivery rule as well as updates to its rules governing off-channel communications. The proposed electronic delivery (or e-delivery) rule would modernize how firms deliver required disclosures and investor communications, potentially allowing electronic delivery to become the default method.
Key takeaways
- Prepare digital delivery to become the default for required disclosures.
- Recordkeeping obligations may shift, including what must be retained and for how long.
- Continued scrutiny of off-channel communications should be expected.
- Supervision of messaging tools stays firmly in regulators’ sights.
- Now is the time to reassess delivery processes, retention policies, and communication controls.
How the SEC e-delivery rule could impact firms
Electronic delivery would allow broker-dealers and advisers to send disclosures, reports, and other required documents digitally rather than through paper mail.
Why e-delivery matters
Supporters argue that electronic delivery:
- Reduces costs
- Improves efficiency
- Cuts down on paper waste
- Aligns with how investors already receive most financial information
Representative (MI) Bill Huizenga noted that similar changes have already been adopted by other agencies, including:
- The IRS
- FINRA
Why recordkeeping rules are under review now
Because current recordkeeping rules vary depending on the market participant (broker-dealers, advisers, rating agencies, etc.), lawmakers have questioned whether registered entities have clear and reasonable guidance. The different standards raise important questions, especially considering how firms conduct modern business:
- What defines a “business record”?
- Do recordkeeping obligations apply to internal communications and other activities that don’t create risk of investor harm?
- How do rules apply to generative AI outputs and agentic AI integrations?
Atkins agreed, describing current recordkeeping rules as a “crazy quilt” of standards.
The call for updating recordkeeping rules to give firms clear and reasonable guidance wasn’t just raised by the oversight committee. In the last two years, high-profile off-channel communications settlements have driven firms to ask regulators for more explicit guidance on:
- What information should be retained
- What activities can be done to mitigate the risks that employees are using unapproved tools
Learn more about what caused some of the biggest off-channel communication enforcement actions in the past few years.
Even the SEC itself wasn’t immune to off-channel communications. Nearly a year’s worth of text messages from former SEC Chairperson Gary Gensler’s government-issued phone were erased due to an automated policy that was not fully understood.
The SEC’s inspector general conducted a review to determine:
- What happened
- How the agency responded
- The implications for federal records management
The incident intensified scrutiny around both private sector and government recordkeeping practices.
Possible electronic delivery rule changes
While Chairperson Atkins’ comments were made in response to Representative Huizenga’s question, it’s unclear how the recordkeeping rule changes might take shape. Possible changes could:
- Make recordkeeping limited to only specific types of communications, such as those that are made with investors or external parties
- Take a “principles-based” approach that allows firms to decide what should be kept, which aligns with the SEC’s historical pattern of shying away from prescriptive rules
- Fit the regulatory strategy of simplifying and reducing regulatory burdens
Whatever the outcome, industry firms and advocacy groups will continue to push regulators toward action.
SEC updates to off-channel communications rules
The SEC is also reviewing its rules governing off-channel communications.
Off-channel communications generally refer to business-related communications that occur outside approved systems and can’t be supervised or monitored.
Over the past several years, the SEC has aggressively enforced recordkeeping violations tied to off-channel communications.
Chairperson Atkins indicated the agency is working to update these rules and address inconsistencies across distinct types of market participants, including:
- Broker-dealers
- Investment advisers
- Rating agencies
Get this e-book for the latest guidance on mitigating off-channel communications risk.
What this means for broker-dealer and registered adviser firms
If adopted, these rule changes could:
- Allow firms to default to digital delivery of disclosures
- Clarify expectations around text messages and messaging apps
- Simplify or standardize record retention rules
- Reduce compliance ambiguity across entity types
However, rulemaking processes can take time, and formal proposals have not yet been issued.
Firms should monitor SEC announcements closely and review their:
- Electronic communication policies
- Disclosure delivery processes
- Record retention systems
When could these changes take effect?
At this stage, the SEC has not released a formal proposal or timeline. Chairperson Atkins has instructed staff to begin work on these initiatives, but any rule changes would require:
- A formal proposal
- Public comment period
- Final rule adoption
Until then, current recordkeeping and delivery rules are still in effect.
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