The SEC has a fight on its hands over a proposal to have mutual fund shareholders opt in for paper delivery of shareholder reports.

Consumer groups and, not surprisingly, the paper industry, think it’s a bad idea.

Seeing a way to reduce costs, the fund industry is supporting the proposed move to electronic delivery, which would be done via mutual fund websites.

In addition, as part of a proposed broad revamp of investment company reporting rules, funds would have to file more information with the SEC in a standardized data format, including monthly portfolio holdings and derivatives exposure.

Comments on the proposal were due this month.

In its May release asking for comment, the SEC said “permitting electronic delivery ‘by default’ would improve overall alignment of transmission method with investor preference.”

But the Forest Resources Association and the American Forest & Paper Association argued against forcing investors to opt in to paper delivery.

The paper-industry groups cited studies showing that most investors prefer hard copy for financial information—including a 2012 study done for the SEC by Siegel+Gale. And they warned that about a quarter of the U.S. population still does not have broadband access. 

Despite the advantages to electronic access, “we simply have not yet reached the point in this country where a sufficient percentage of investors prefer to receive disclosures electronically to justify a default to electronic delivery,” said Barbara Roper, director of investor protection for the Consumer Federation of America, in a comment letter.

The SEC is not proposing to release publicly the monthly portfolio holdings it wants to collect. It would maintain the current practice of quarterly disclosure via filings with the agency and semiannually in reports sent to shareholders.

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