The SEC’s move is more like a tiny first step, covering one type of document known as a shareholder report. Currently, investors get them in paper form unless they opt for digital-only. The reports, which are sent twice a year, contain information on the fund’s holdings, performance and expenses, but they are also filled with fine-print legalese and marketing pitches. The proposed rule would simply allow a fund company to change the default delivery option to electronic.

The measure doesn’t cover other fund mailings, such as prospectuses or customers’ statements, and it still requires fund companies to mail a notice giving the web address where information can be found online. The note would also have a toll-free phone number that investors could call and elect to permanently get paper delivery.

Uncustomary Arguments

The dispute has caused both sides to make some uncustomary arguments. While the paper industry is touting the value of dense financial information, fund companies are downplaying the importance of their own reports.

According to an American Forest & Paper Association letter last year to the SEC, the reports “are critical information upon which millions of Americans depend to make sound investment decisions.”

The Investment Company Institute, the funds’ trade group, countered that the documents can be as long as 651 pages. “While they contain important information, many shareholders likely find the contents and length of these reports quite daunting,” the ICI told the agency in March.

The SEC should keep in mind “the business opportunity they represent for paper purveyors,” the association said.

Paper companies and their supporters say they are mobilizing against the measure because it could set a government-wide precedent, marking the first time a regulator would allow people to be switched out of a paper option without their express consent.

‘Red Flag’

“This development raised a red flag to us,” said Mark Pitts, executive director of printing-writing and pulp at the American Forest & Paper Association.