29158 Federal Register / Vol. 83, No. 121 / Friday, June 22, 2018 / Rules and Regulations 

1 17 CFR 270.30e–3. 

2 15 U.S.C. 80a–1 et seq. Unless otherwise noted, 

all references to statutory sections are to the 

Investment Company Act, and all references to 

rules under the Investment Company Act are to 

Title 17, Part 270 of the Code of Federal Regulations 

[17 CFR part 270]. 

3 17 CFR 239.15A and 17 CFR 274.11A. 

4 17 CFR 239.14 and 17 CFR 274.11a–1. 

5 17 CFR 239.17a and 17 CFR 274.11b. 

6 17 CFR 239.17b and 17 CFR 274.11c. 

7 17 CFR 239.17c and 17 CFR 274.11d. 

8 15 U.S.C. 77a et seq. 

9 17 CFR 249.331 and 17 CFR 274.128. 

10 15 U.S.C. 78a et seq. 

11 17 CFR 230.498. 

12 17 CFR 240.14a–16. 13 17 CFR 200.800. 

SECURITIES AND EXCHANGE 

COMMISSION 

17 CFR Parts 200, 230, 239, 240, 249, 

270, and 274 

[Release Nos. 33–10506; 34–83380; IC– 

33115; File No. S7–08–15] 

RIN 3235–AL42 

Optional Internet Availability of 

Investment Company Shareholder 

Reports 

AGENCY: Securities and Exchange 

Commission. 

ACTION: Final rule. 

SUMMARY: The Securities and Exchange 

Commission is adopting new rule 

30e–3 under the Investment Company 

Act of 1940. Subject to conditions, new 

rule 30e–3 will provide certain 

registered investment companies with 

an optional method to satisfy their 

obligations to transmit shareholder 

reports by making such reports and 

other materials accessible at a website 

address specified in a notice to 

investors. We are also adopting 

amendments to rule 498 under the 

Securities Act of 1933 and our fund 

registration forms to require that during 

a certain transition period funds that 

choose to implement the new delivery 

method for shareholder reports provide 

prominent disclosures in prospectuses 

and certain other shareholder 

documents that will notify investors of 

the upcoming change in transmission 

format for a period of two years. New 

rule 30e–3 and the amendments to rule 

498 and our registration forms address 

the fact that some investors may wish to 

receive shareholder reports in paper. As 

such, the new rule incorporates a set of 

protections so that investors who prefer 

to receive reports in paper will continue 

to receive them in that format. These 

protections include, among others, a 

minimum length phase-in period that 

ends no earlier than December 31, 2020 

and notice requirements that must be 

implemented and followed beginning 

January 1, 2019, or the date shares are 

first publicly offered, if a registered 

investment company would want to use 

new rule 30e–3 as of January 1, 2021. 

The rule requires that a paper notice be 

sent to an investor each time a current 

shareholder report is accessible online. 

The notice must include instructions for 

how an investor can elect—at any 

time—to receive all future reports in 

paper, or request to receive particular 

reports in paper on an ad hoc basis. We 

are also adopting related amendments to 

certain other rules and forms. This 

optional method is intended to 

modernize the manner in which 

periodic information is made available 

to investors, which we believe will 

improve investors’ experience while 

reducing expenses associated with 

printing and mailing shareholder 

reports that are borne by investment 

companies and ultimately their 

investors. 

DATES: This rule is effective January 1, 

2019, except: 

• Amendatory Instructions 5 and 25 

to 17 CFR 230.498 and Form N–CSR 

(referenced in 17 CFR 249.331 and 

274.128), which are effective January 1, 

2021; and 

• Amendatory Instructions 6, 13, 16, 

18, 20, 22, and 24 to 17 CFR 230.498, 

17 CFR 270.30e–3, Form N–1A 

(referenced in 17 CFR 239.15A and 

274.11A), Form N–2 (referenced in 17 

CFR 239.14 and 274.11a–1), Form N–3 

(referenced in 17 CFR 239.17a and 

274.11b), Form N–4 (referenced in 17 

CFR 239.17b and 274.11c), and Form 

N–6 (referenced in 17 CFR 239.17c and 

274.11d), which are effective January 1, 

2022. 

FOR FURTHER INFORMATION CONTACT: 

J. Matthew DeLesDernier and John 

Lee, Senior Counsels; or Michael C. 

Pawluk, Senior Special Counsel, at (202) 

551–6792, Investment Company 

Regulation Office, Division of 

Investment Management, Securities and 

Exchange Commission, 100 F Street NE, 

Washington, DC 20549–8549. 

SUPPLEMENTARY INFORMATION: The 

Securities and Exchange Commission 

(the ‘‘Commission’’) is adopting: New 

rule 30e–3 1 under the Investment 

Company Act of 1940 (‘‘Investment 

Company Act’’); 2 amendments to Forms 

N–1A,3 N–2,4 N–3,5 N–4,6 and N–6 7

under the Investment Company Act and 

the Securities Act of 1933 (‘‘Securities 

Act’’); 8 amendments to Form N–CSR9

under the Investment Company Act and 

the Securities Exchange Act of 1934 

(‘‘Exchange Act’’); 10 amendments to 

rule 498 11 under the Securities Act; 

amendments to rule 14a–16 12 under the 

Exchange Act; and amendments to 

Section 800 of 17 CFR part 200.13

Table of Contents 

I. Introduction 

A. Public Comment 

B. Overview of Final Rule and 

Transmission Framework Generally 

C. Other Actions 

II. Discussion 

A. General Comments Regarding Rule 

30e–3 

1. Increased Internet Usage 

2. Use of ‘‘Implied Consent’’ 

3. Cost Savings 

4. Regulatory Consistency 

5. Environmental Benefits 

6. Reliability and Security Concerns 

7. Investor Advisory Committee 

B. Adoption of Rule 30e–3 and Related 

Amendments 

1. Overview 

2. Conditions of Rule 30e–3 

3. Related Amendments 

C. The Role of Certain Financial 

Intermediaries 

1. Distribution of Notices to Beneficial 

Owners 

2. Beneficial Owner Elections for Paper 

Reports 

3. Website Availability of Materials 

D. Extension of Similar Delivery 

Framework to Other Documents 

E. Effective Dates 

1. Rule 30e–3 

2. Disclosure Amendments 

3. Other Amendments 

4. Communications With Investors During 

the Extended Transition Period 

III. Economic Analysis 

A. Introduction 

B. Economic Baseline and Affected Parties 

C. Benefits 

1. Cost Savings 

2. Increased Access to and Review of 

Portfolio Information and Shareholder 

Reports 

D. Costs 

1. Compliance Costs 

2. Other Costs 

E. Alternatives 

IV. Paperwork Reduction Act 

A. Availability of Shareholder Report and 

Other Materials 

B. Proposed Initial Statement 

C. Notice 

D. Delivery Upon Request 

E. Impact on Information Collections for 

Rules 30e–1 and 30e–2 

F. Related Disclosure Amendments 

G. Form N–CSR 

V. Final Regulatory Flexibility Analysis 

A. Need for and Objectives of the Rule, 

Rule Amendments and Form 

Amendments 

B. Significant Issues Raised by Public 

Comments 

C. Small Entities Subject to the Rule 

D. Projected Reporting, Recordkeeping, and 

Other Compliance Requirements 

E. Agency Action To Minimize Effect on 

Small Entities 

VI. Statutory Authority 


daltland on DSKBBV9HB2PROD with RULES2
Federal Register / Vol. 83, No. 121 / Friday, June 22, 2018 / Rules and Regulations 29159 

14Rule 30e–3 was proposed in May 2015 as part 

of the Commission’s broader Investment Company 

Reporting Modernization proposal. See Investment 

Company Reporting Modernization, Investment 

Company Act Release No. 31610 (May 20, 2015) [80 

FR 33590 (June 12, 2015)] (‘‘Proposing Release’’). As 

part of the proposal, we also proposed new forms 

(Form N–CEN and Form N–PORT), amendments to 

Regulation S–X, and other amendments to 

modernize the reporting and disclosure of 

information by registered investment companies. In 

October 2016, the Commission adopted final rules 

related to the proposal, with the exception of rule 

30e–3. See Investment Company Reporting 

Modernization, Investment Company Act Release 

No. 32314 (Oct. 13, 2016) [81 FR 81870 (Nov. 18, 

2016)] (‘‘Reporting Modernization Adopting 

Release’’). 

15Unless the context otherwise requires, for ease 

of reference, throughout this release ‘‘fund’’ or 

‘‘funds,’’ individually or collectively, refers to 

registered management companies (and any 

separate series thereof) and UITs. 

16The final rule applies to reports required by 

rule 30e–1 (reports of registered management 

companies) and reports required by rule 30e–2 

(reports to shareholders of registered UITs, 

substantially all of the assets of which consist of 

securities issued by a management company). See 

rule 30e–3(a); rule 30e–1(a); rule 30e–2(a). 

17 Interests in securities issued by insurance 

company separate accounts organized as UITs are 

typically referred to as accumulation units, not 

shares. For convenience, however, in this release 

owners of interests in securities issued by UITs, 

whether the issuer is a separate account or 

otherwise, are referred to as shareholders, and 

accumulation units are referred to as shares. 

18See, e.g., Use of Electronic Media for Delivery 

Purposes, Investment Company Act Release No. 

21399 (Oct. 6, 1995) [60 FR 53458 (Oct. 13, 1995)] 

(‘‘1995 Release’’) (providing Commission views on 

the use of electronic media to deliver information 

to investors, with a focus on electronic delivery of 

prospectuses, annual reports, and proxy solicitation 

materials); Use of Electronic Media by BrokerDealers, Transfer Agents, and Investment Advisers 

for Delivery of Information, Investment Company 

Act Release No. 21945 (May 9, 1996) [61 FR 24644 

(May 15, 1996)] (‘‘1996 Release’’) (providing 

Commission views on electronic delivery of 

required information by broker-dealers, transfer 

agents, and investment advisers); Use of Electronic 

Media, Investment Company Act Release No. 24426 

(Apr. 28, 2000) [65 FR 25843 (May 4, 2000)] (‘‘2000 

Release’’) (providing updated interpretive guidance 

on the use of electronic media to deliver documents 

on matters such as telephonic and global consent, 

issuer liability for website content, and legal 

principles that should be considered in conducting 

online offerings). 

See also Securities Offering Reform, Securities 

Act Release No. 8591 (July 19, 2005) [70 FR 44722 

(Aug. 3, 2005)] (‘‘Securities Offering Reform’’) 

(adopting rule 172 under the Securities Act 

providing an ‘‘access equals delivery’’ framework 

under which issuers and intermediaries can satisfy 

their final prospectus delivery obligations); 

Shareholder Choice Regarding Proxy Materials, 

Investment Company Act Release No. 27911 (July 

26, 2007) [72 FR 42222 (Aug. 1, 2007)] 

(‘‘Shareholder Choice Regarding Proxy Materials 

Release’’) (adopting rule amendments requiring 

issuers to post their proxy materials on a specified 

website and provide shareholders with a notice of 

internet availability of the materials); Enhanced 

Disclosure and New Prospectus Delivery Option for 

Registered Open-End Management Investment 

Companies, Investment Company Act Release No. 

28584 (Jan. 13, 2009) [74 FR 4546 (Jan. 26, 2009)] 

(‘‘Summary Prospectus Release’’) (permitting the 

use of a summary prospectus by registered openend management investment companies); 

Interactive Data for Mutual Fund Risk/Return 

Summary, Investment Company Act Release No. 

28617 (Feb. 11, 2009) [74 FR 7748 (Feb. 19, 2009)] 

(‘‘XBRL Release’’) (requiring open-end funds to 

provide the risk/return section of their prospectus 

in interactive data format using eXtensible Business 

Reporting Language (‘‘XBRL’’)); Amendments to 

Rules Requiring Internet Availability of Proxy 

Materials, Securities Act Release No. 9073 (Feb. 22, 

2010) [75 FR 9073 (Feb. 26, 2010)] (‘‘Internet 

Availability of Proxy Materials Release’’) (providing 

additional flexibility regarding the format of the 

notice of internet availability of proxy materials); 

Reporting Modernization Adopting Release, supra 

note 14; Inline XBRL Filing of Tagged Data, 

Securities Act Release No. 10323 (Mar. 1, 2017) [82 

FR 14282 (Mar. 17, 2017)] (‘‘Inline XBRL Release’’) 

(proposing the use of the Inline XBRL format for the 

submission of operating company financial 

statement information and mutual fund risk/return 

summaries); Exhibit Hyperlinks and HTML Format, 

Securities Act Release No. 10322 (Mar. 1, 2017) [82 

FR 14130 (Mar. 17, 2017)] (‘‘Exhibit Hyperlinks and 

HTML Format Release’’) (requiring exhibit 

hyperlinks and filings in HTML format); FAST Act 

Modernization and Simplification of Regulation 

S–K, Securities Act Release No. 10425 (Oct. 11, 

2017) [82 FR 50988 (Nov. 2, 2017)] (‘‘FAST Act 

Regulation S–K Release’’) (proposing amendments 

to modernize and simplify certain disclosure 

requirements in Regulation S–K, and related rules 

and forms). 

19For example, in 2011, the Commission engaged 

a consultant to conduct investor testing regarding 

shareholder reports. The consultant’s report 

concerning that testing (‘‘Investor Testing of Mutual 

Fund Shareholder Reports’’) is in the comment file 

for this rule (available at www.sec.gov/comments/ 

s7-08-15/s70815.shtml). Separately, Commission 

staff prepared a study of investor financial literacy 

pursuant to Section 917 of the Dodd-Frank Act. 

Materials relating to this study, including the staff’s 

report, are available at http://www.investor.gov/ 

publications-research-studies/sec-research. 

In addition, in 2007, the Commission engaged a 

consultant to conduct focus group interviews and 

a telephone survey concerning investors’ views and 

opinions about various disclosure documents filed 

by companies, including mutual funds. The 

consultant’s report concerning the focus group 

testing and related transcripts are in the comment 

file for this rule (available at www.sec.gov/ 

comments/s7-08-15/s70815.shtml). The consultant’s 

report concerning the telephone survey is available 

at http://www.sec.gov/pdf/disclosuredocs.pdf. 

20Fund Retail Investor Experience and Disclosure 

Request for Comment, Investment Company Act 

Release No. 33113 (June 5, 2018) (‘‘Disclosure 

Request for Comment’’). Comments are requested by 

October 31, 2018; see infra Section I.C. 

21Request for Comments on the Processing Fees 

Charged by Intermediaries for Distributing Materials 

Other Than Proxy Materials to Fund Investors, 

Investment Company Act Release No. 33114 (June 

5, 2018) (‘‘Processing Fee Request for Comment’’). 

Comments are requested by October 31, 2018; see 

infra Section I.C. 

I. Introduction 

Today we are adopting rule 30e–3 

under the Investment Company Act,14 a 

rule that provides registered 

management companies and any 

separate series thereof and certain 

registered unit investment trusts 

(‘‘UITs’’) 15 with an optional method to 

satisfy requirements to transmit 

shareholder reports by posting those 

reports online if they meet certain 

conditions.16 In order to rely on the 

rule, funds will be required to make 

their reports and other required 

materials publicly accessible, free of 

charge, at a website address specified in 

a notice to shareholders,17 and meet 

certain other conditions specified in the 

rule. In recognition of the fact that some 

investors may wish to receive their 

shareholder reports in paper, the rule 

incorporates a set of protections 

designed to preserve the ability of these 

investors to do so. Thus, the rule 

accommodates the preferences of all 

investors regarding their preferred 

means of communication—whether they 

wish to receive reports in paper or 

electronically, or simply to be notified 

that the reports are available online. To 

that end, we are also adopting an 

extended transition period with staged 

effective dates, and the earliest that a 

fund could rely on the rule to satisfy 

shareholder report transmittal 

requirements is January 1, 2021. 

This new option is intended to 

modernize the manner in which funds 

deliver periodic information to 

investors. We believe it will improve 

investors’ ability to access and use this 

information (for example, by providing 

investors with access to at least a full 

year of complete portfolio holdings 

information in one location), while 

reducing expenses associated with 

printing and mailing that are borne by 

funds, and ultimately, by their 

investors. The rule draws on the 

Commission’s experience of more than 

twenty years with use of the internet as 

a medium to provide documents and 

other information to investors.18 The 

rule also draws on the Commission’s 

investor testing efforts and other 

empirical research concerning investors’ 

preferences about methods of delivery 

for required disclosure documents and 

use of the internet for financial and 

other purposes generally.19

We continue to search for better ways 

of providing investors with the 

disclosure that they need to evaluate 

funds in which they are considering 

investing or currently hold shares. As 

part of these general efforts, we are also 

issuing a Request for Comment directed 

at investors regarding ways in which 

fund disclosure, including shareholder 

reports, may be improved.20 We are also 

issuing a second Request for Comment 

on the processing fees charged by 

intermediaries for distributing fund 

shareholder reports and other materials 

to investors.21

A. Public Comment 

We received over 1,000 comments on 

the Proposing Release, the vast majority 

of which specifically commented on 


daltland on DSKBBV9HB2PROD with RULES2
29160 Federal Register / Vol. 83, No. 121 / Friday, June 22, 2018 / Rules and Regulations 

22See infra Section II.A. The comment letters on 

the Proposing Release (File No. S7–08–15) are 

available at https://www.sec.gov/comments/s7-08- 

15/s70815.shtml. 

23See infra Sections II.B.2 (application to UITs 

with transmission obligations under rule 30e–2), 

II.C (shares held through certain financial 

intermediaries). 

24See 1995 Release, supra note 18; 1996 Release, 

supra note 18; 2000 Release, supra note 18. 

25For example, a fund or intermediary will not 

be required to send those investors, electronically 

or otherwise, a notice required by the rule. Some 

investors who receive shareholder reports pursuant 

to rule 30e–3 may in the future elect delivery under 

the Commission’s electronic delivery guidance. The 

final rule requires funds to include in notices 

instructions regarding how an investor can elect to 

receive shareholder reports or other documents by 

electronic delivery if the fund offers electronic 

delivery. See rule 30e–3(c)(1)(v)(C). 

26See infra Sections II.B.2.c, II.B.2.d. 

27See infra Section II.B.2.a. 

28See infra Section II.B.2.b; note 191 (reminding 

funds of their obligations with respect to the 

antifraud provisions of the federal securities laws). 

29See infra Sections II.B.2.d, II.B.2.f, II.E. 

30See infra Section II.B.2.b.v. 

31See infra Section II.C. 

32See Exchange Act Release Nos. 83378 (June 5, 

2018) (Order Affirming Action by Delegated 

Authority Approving SR–NYSE–2016–55 and 

Discontinuing Stay); 79370 (Nov. 21, 2016) [81 FR 

85655 (Nov. 28, 2016)] (Stay Order); 79355 (Nov. 

18, 2016) [81 FR 85291 (Nov. 25, 2016)] (Approval 

Order) (‘‘NYSE Approval Order’’); 78589 (Aug. 16, 

2016) [81 FR 56717 (Aug. 22, 2016)] (Notice). NYSE 

rule 451 outlines three types of processing fees 

discussed by commenters in connection with the 

proposal: (i) The ‘‘interim report’’ fee (a processing 

unit fee of $0.15 per account, whether a report is 

delivered in paper, or delivery is ‘‘suppressed’’ 

because the report is delivered electronically or not 

delivered because of ‘‘householding’’ or other 

reasons); (ii) the ‘‘preference management’’ fee (a 

$0.10 fee assessed for each suppressed account— 

e.g., accounts receiving shareholder reports by 

email or householded accounts); and (iii) a ‘‘notice 

and access’’ fee (an incremental fee charged at 

declining marginal levels based on the number of 

all financial intermediary accounts through which 

fund securities are beneficially owned; there are 

five marginal fee tiers (in $0.05 increments) per 

account beginning with the $0.25 per account tier 

and decreasing to $0.05 per account tier). See NYSE 

rule 451.90.3–451.90.5; see also NYSE rules 465 

and 451.10 (noting applicability of fees under NYSE 

proposed rule 30e–3.22 While some 

commenters provided comments on 

specific aspects of the proposal, most 

focused on whether the Commission 

should adopt the rule at all. 

Commenters supporting the proposed 

rule cited benefits including those 

related to website transmission 

generally, the proposed rule’s 

consistency with internet usage trends, 

savings to funds and ultimately 

investors from the reduction in printing 

and mailing costs, and environmental 

benefits. In many cases, these 

commenters recommended 

modifications to the proposed rule to 

increase cost savings and other benefits 

under the rule and to provide clarity 

regarding how the rule would operate in 

certain contexts.23

Commenters opposed to the proposed 

rule focused on concerns such as the 

impact on certain demographic groups 

that may have limited access to the 

internet, the proposed rule’s use of 

implied consent, the extent to which 

cost savings under the proposed rule 

would not be as great as anticipated by 

the Commission, and the adverse impact 

on certain third parties such as the 

paper industry and mail carriers. 

B. Overview of Final Rule and 

Transmission Framework Generally 

After consideration of the comments 

we received, we are adopting rule 

30e–3 with several modifications 

designed to respond to investor 

protection concerns, provide additional 

flexibility and clarity in the operation of 

this transmission regime, and further 

increase cost savings for investors. Some 

key elements of the new transmission 

framework under rule 30e–3 include: 

• Use of Rule is Optional. We note 

that this new method of transmission is 

optional—funds that wish to transmit 

shareholder reports in paper or pursuant 

to the Commission’s existing electronic 

delivery guidance 24 will continue to be 

able to satisfy their regulatory 

obligations by those methods. 

• Use of Rule With Respect to 

Investors Who Have Opted Into 

Electronic Delivery. The rule will not 

require changes to existing methods of 

delivering shareholder reports 

electronically. The rule does not 

supercede or modify the Commission’s 

existing guidance regarding electronic 

delivery of fund shareholder reports. 

Funds and intermediaries may continue 

to rely on the Commission’s guidance to 

electronically transmit reports to 

investors who have elected to receive 

reports electronically.25

• Preservation of Preference for Paper 

Reports. Recognizing that some 

investors may wish to receive their 

shareholder reports in paper, the final 

rule—as did the proposed rule— 

incorporates a set of protections 

designed to preserve the ability of 

investors to receive paper reports on a 

per report or ongoing basis if that is 

their preferred means of 

communication.26

• Website Availability of Reports and 

Other Information. As proposed, the 

shareholder report and other required 

materials must be made publicly 

accessible and free of charge at a 

website address specified in a notice to 

investors.27

• Notice. Substantially as proposed, 

investors must be provided with a paper 

notice of the website availability of the 

shareholder report (‘‘Notice’’) that 

contains instructions by which investors 

will be able to request a paper or email 

copy. The final rule allows funds greater 

flexibility than the proposal in the 

design of the Notice by permitting it to 

contain additional information 

including, for example, content from the 

shareholder report that the fund 

considers helpful to investors, 

instructions on how investors can elect 

electronic delivery of reports and other 

materials, and pictures, logos, or similar 

design elements so long as the design is 

not misleading and the information is 

clear.28

• New Extended Transition Period. 

To inform investors in advance of the 

change of transmission method, and to 

accommodate systems and operations 

changes by funds, intermediaries and 

service providers necessary to 

implement the new optional 

transmission regime, we are adopting an 

extended transition period.29 This 

extended transition period replaces the 

proposed requirement to send an 

‘‘Initial Statement’’ 60 days in advance 

of reliance on the rule with respect to 

an investor. 

• Filing of Notice. We have modified 

the proposal by adopting amendments 

to Form N–CSR to require the filing of 

Notices that incorporate disclosures 

from the shareholder report.30 This 

requirement should help further inform 

Commission regulatory efforts with 

respect to how the content of 

shareholder reports can be improved 

and should help our monitoring for 

compliance with the rule. 

• Guidance Regarding Financial 

Intermediaries. We are also providing 

guidance, as requested by commenters, 

to clarify the operation of the rule in the 

context of financial intermediaries such 

as broker-dealers.31

C. Other Actions 

We are committed to continuously 

improving the content and delivery of 

information to investors, including 

through efforts that encourage the use of 

technology to provide investors with the 

tools they need to evaluate their 

investments, and reducing costs and 

other regulatory burdens where 

appropriate. To that end, today we are 

taking two related actions intended to 

further these goals. 

First, we approved amendments to 

rules of the New York Stock Exchange 

(‘‘NYSE’’) regarding processing fees paid 

to financial intermediaries for the 

delivery of shareholder reports and 

Notices under ‘‘notice and access’’ rules 

such as rule 30e–3 to investors holding 

shares through certain financial 

intermediaries.32 The NYSE rule 


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Federal Register / Vol. 83, No. 121 / Friday, June 22, 2018 / Rules and Regulations 29161 

rule 451 to distribution of interim and annual 

reports). 

33See rule 14a–16 under the Exchange Act which 

permits issuers, that comply with the requirements 

of the rule, to distribute proxy material 

electronically through the ‘‘notice and access’’ 

method. 17 CFR 240.14a–16. 

34See NYSE rule 451.90(5). The Commission 

notes that the NYSE rule states that the ‘‘notice and 

access fees’’ in NYSE rule 451.90(5) apply to the 

‘‘distribution of investment company shareholder 

reports pursuant to any ‘notice and access’ rules 

adopted by the [Commission].’’ We believe that rule 

30e–3 qualifies as such a rule. 

35 Id. 

36 Id. 

37See Disclosure Request for Comment, supra 

note 20. 

38See Processing Fee Request for Comment, supra 

note 21. 

39See, e.g., Comment Letter of Capital Research 

and Management Company (Aug. 11, 2015) 

(‘‘Capital Research Comment Letter I’’); Comment 

Letter of Capital Research and Management 

Company (May 7, 2018) (‘‘Capital Research 

Comment Letter II’’); Comment Letter of Simpson 

Thacher & Bartlett LLP (Aug. 11, 2015) (‘‘Simpson 

Thacher Comment Letter’’); Comment Letter of 

Interactive Data Pricing and Reference Data LLC 

(Aug. 10, 2015) (‘‘Interactive Data Comment 

Letter’’); Comment Letter of Investment Company 

Institute (Aug. 12, 2015) (‘‘ICI Comment Letter I’’) 

(noting many investors now prefer enhanced 

availability of information on the internet). 

40See Comment Letter of Investment Company 

Institute (July 8, 2016) (‘‘ICI Comment Letter II’’) 

(‘‘Paper reports are unable to help investors 

navigate layered information or access more 

detailed information. The internet offers the 

ultimate a la carte menu: Those who want more 

extensive information can get it; those who do not 

can access or be provided the essential information 

they need, in a form they are likely to use.’’); see 

also Recommendation of the Investor Advisory 

Committee Regarding Promotion of Electronic 

Delivery and Development of a Summary 

Disclosure Document for Delivery of Investment 

Company Shareholder Reports (Dec. 7, 2017) 

(‘‘Investment Advisory Committee 

Recommendation’’); Comment Letter of the 

Consumer Action and National Consumers League 

to Anne Sheehan, Chairman of the Investor 

Advisory Committee (Dec. 1, 2017), available at 

https://www.sec.gov/comments/265-28/26528- 

2748128-161587.pdf. 

41See, e.g., Comment Letter of the Committee of 

Annuity Insurers (Aug. 11, 2015) (‘‘CAI Comment 

Letter I’’); Capital Research Comment Letter I; ICI 

Comment Letter I. 

42See, e.g., ICI Comment Letter I (noting 

widespread use of the internet among various age 

groups, education levels and income levels and 

highlighting a 2014 ICI study that ‘‘found the 

following with respect to internet access in mutual 

fund owning households: (1) Head of household age 

65 or older, 86% have access; (2) education level 

of high school diploma or less, 84% have access; 

and (3) household income of less than $50,000, 

84% have access’’); ICI Comment Letter II 

(highlighting a 2015 survey showing that 85% of all 

Americans had access to the internet); CAI 

Comment Letter I (stating that ‘‘very widespread 

internet access holds true even for those 

demographic groups that may generally be assumed 

to have relatively less internet access than most’’). 

43See, e.g., Capital Research Comment Letter I; 

Comment Letter of CFA Institute (Aug. 10, 2015) 

(‘‘CFA Institute Comment Letter’’) (‘‘We support 

this proposal to modernize the system for providing 

reports and believe most investors will view this as 

positively.’’); ICI Comment Letter II (stating ‘‘the 

Commission’s proposal aligns much more 

effectively with shareholder preferences for 

information access than the current outdated 

system’’). 

44See Comment Letter of T. Rowe Price 

Associates, Inc. (Aug. 21, 2015) (‘‘T. Rowe Price 

Comment Letter I’’) (comparing this with data from 

2005 when 65% of transactions processed with 

direct shareholders were made through electronic 

means); Comment Letter of T. Rowe Price 

Associates, Inc. (Apr. 17, 2018) (‘‘T. Rowe Price 

Comment Letter II’’) (noting that in 2017, 87% of 

their interactions ‘‘with personal and workplace 

investors took place digitally via mobile 

applications or the Web’’). 

See also FINRA Investor Education Foundation, 

Investors in the United States 2016 (Dec. 2016), 

available at http://www.usfinancialcapability.org/ 

downloads/NFCS_2015_Inv_Survey_Full_

Report.pdf (‘‘FINRA 2016 Investors Study’’). While 

the FINRA 2016 Investors Study does not 

distinguish fund shareholder reports from other 

disclosure materials regarding investments (nor 

does it specify what disclosure materials are 

contemplated in this survey e.g., shareholder 

reports, summary prospectuses, statutory 

prospectuses, account statements, etc.), it presents 

general investor survey data regarding investor 

disclosure preferences: 49% of respondents prefer 

paper documents physically mailed, 27% of 

respondents prefer electronic documents by email, 

14% prefer in-person meetings with a broker/ 

adviser, and 6% prefer that documents are accessed 

on the internet (not via email). 

45See ICI Comment Letter I. 

amendments state that ‘‘notice and 

access’’ processing fees, which 

previously applied only to proxy 

distributions where an issuer elects to 

utilize notice and access for a proxy 

distribution,33 may also apply to 

transmission of shareholder reports 

under rule 30e–3 to beneficial owners 

who purchase their fund shares through 

broker-dealer intermediaries.34 The 

amendments clarify, however, that the 

‘‘notice and access’’ fee will not be 

charged for any account with respect to 

which a fund pays a ‘‘preference 

management’’ fee in connection with a 

distribution of shareholder reports.35 In 

addition, the NYSE rule amendments 

clarify that, for purposes of determining 

the amount of notice and access fees to 

be charged, the number of accounts 

should be computed by aggregating 

shares of any class of stock of the issuer 

eligible to receive the same 

distribution.36

Second, today we also are issuing two 

releases requesting comment on issues 

related to shareholder reports. In the 

first release, we are requesting comment 

on enhancing fund disclosures to 

improve the investor experience and to 

help investors make more informed 

investment decisions.37 This release 

requests feedback directly from fund 

investors on the delivery, design and 

content of fund disclosure. 

In the second release, we are 

requesting comment on the processing 

fees charged by intermediaries for 

distributing fund shareholder reports 

and other materials to investors.38 For 

example, we are requesting comment on 

the current processing fee structure, 

including the application of various 

processing fees and rates thereof under 

the NYSE rules, transparency of these 

fees, practices related to the payment of 

these fees and remittances received by 

financial intermediaries for delivery of 

fund documents (including shareholder 

reports), and the appropriateness of 

these fees in cases where intermediaries 

are separately paid shareholder 

servicing fees from fund assets. 

II. Discussion 

A. General Comments Regarding Rule 

30e–3 

Most commenters on the proposal 

focused on whether we should adopt 

rule 30e–3 and particularly its optional 

method of satisfying requirements to 

transmit shareholder reports by making 

them available on websites. We discuss 

below general comments received on 

the proposal, as well as why we have 

determined to adopt the rule. Specific 

comments on the particular provisions 

of the rule as proposed are discussed in 

more detail in Sections II.B.2–II.E 

below. 

1. Increased Internet Usage 

Commenters supporting the rule cited 

the benefits of allowing transmission of 

shareholder reports by making them 

accessible on websites, including 

improving the overall accessibility of 

the information 39 and expanding the 

possibilities for innovative visual 

displays and layered disclosure.40

Commenters pointed to trends towards 

increasing internet usage, with some 

commenters highlighting that 94% of 

households owning mutual funds had 

some form of internet access in 2014, up 

from 68% in 2000.41 Commenters also 

noted that internet usage has increased 

among previously underserved 

demographic groups.42

A number of commenters stated that 

website disclosure is consistent with 

many investors’ preferences.43 One 

commenter stated that shareholder use 

of the internet to conduct fund 

transactions had increased sharply since 

2005, with 89% of the transactions 

processed by its fund family for direct 

shareholders made through electronic 

means in 2014.44 Similarly, another 

commenter stated that ‘‘with increased 

ease of access, investors also 

increasingly prefer enhanced 

availability of financial information on 

the internet.’’ 45 This commenter 

provided survey results from 2013 

finding that 82% of U.S. households 

owning mutual funds used the internet 


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46See id. 47See, e.g., CFA Institute Comment Letter (‘‘We 

believe the proposed conditions for using this 

option are appropriate to accommodate those 

investors wishing to receive paper reports.’’); 

Comment Letter of State Street Corporation (Aug. 

11, 2015) (‘‘State Street Comment Letter’’) (‘‘We 

believe there are adequate safeguards in Rule 30e– 

3 which would allow shareholders who desire a 

hardcopy to still receive one.’’); Comment Letter of 

Jonathan F. Zeschin, Independent Trustee and 

Board Chair of Matthews Asia Funds (Sept. 27, 

2016) (‘‘[T]hose few shareholders who prefer to 

receive written reports in the mail can still do so, 

and the proposed rule includes appropriate notices 

and other safeguards for those shareholders.’’); 

Comment Letter of Independent Directors Council 

(May 10, 2016) (‘‘IDC Comment Letter’’) (‘‘It is 

important to bear in mind that the proposed rule 

includes appropriate safeguards for those 

shareholders who may still prefer to receive written 

reports in the mail.’’); Comment Letter of Fidelity 

Equity and High Income Funds (Apr. 24, 2017) 

(‘‘Fidelity Comment Letter II’’) (‘‘Accordingly, 

investors ultimately would retain the ability to 

determine the manner in which they receive their 

shareholder reports and those who desire paper 

delivery would be appropriately protected.’’). 

48See, e.g., Comment Letter of Sen. Susan M. 

Collins, Sen. Angus S. King, Jr., and Rep. Bruce 

Poliquin (Aug. 10, 2016) (‘‘Collins, King and 

Poliquin Comment Letter’’) (‘‘Our concern, is that 

the safeguards in the proposed rule will not 

adequately ensure that those who rely on paper 

delivery will continue to have access to this 

important information.’’); Comment Letter of David 

T. Herrod (Aug. 1, 2015) (‘‘I feel an electronic 

default option would be detrimental to me as well 

as thousands of other investors.’’); Comment Letter 

of Thomas G. Umenhofer (July 20, 2015) (‘‘Not all 

Mutual Fund participants have access to computers 

or the internet, but do have access to the USPS. By 

implementing Rule 30e–3, you will be 

disadvantaging many mutual fund participants.’’). 

49See, e.g., Comment Letter of Zane Hollenberger 

(July 27, 2015) (contending that internet access was 

not universal and would serve as a ‘‘poor 

replacement’’ for timely receipt of personal 

financial information through the mail); Comment 

Letter of John R. Dyce, President of the Ohio State 

Association of Letter Carriers (July 28, 2015) 

(‘‘Significant portions of this country’s population 

lack access to electronic services.’’); Comment 

Letter of National Rural Letter Carriers’ Association 

(Aug. 5, 2015) (‘‘National Rural Letter Carriers’ 

Comment Letter’’) (‘‘[T]he proposed rule would 

disadvantage the elderly, those with disabilities, 

and racial and ethnic minorities as these groups are 

far less likely than other Americans to have regular 

access to the internet.’’). 

50See, e.g., Comment Letter of American Forest 

and Paper Association (Aug. 7, 2015) (‘‘American 

Forest and Paper Comment Letter’’); Comment 

Letter of Forest Resources Association Inc. (Aug 10, 

2015) (‘‘Forest Resources Comment Letter’’); 

Comment Letter of Consumer Action and National 

Consumers League (Apr. 12, 2016) (‘‘Consumer 

Action and Consumers League Comment Letter’’). 

See also Comment Letter of Broadridge Financial 

Solutions, Inc. (Aug. 11, 2015) (‘‘Broadridge 

Comment Letter I’’) (noting that ‘‘growth in internet 

usage is driven in part by a greater penetration of 

mobile devices whose use to access regulatory 

reports on the internet would add costs to 

investors’’). 

51See, e.g., American Forest and Paper Comment 

Letter; Comment Letter of Best Cutting Die 

Company (Aug. 6, 2015) (‘‘Many ‘seniors’ are not 

computer literate, and may not even own, or have 

access to a computer.’’); Comment Letter of 

Consumer Action (Jan. 8, 2016) (‘‘Consumer Action 

Comment Letter’’) (stating that seniors and 

minorities would be disadvantaged by the proposal 

given statistics showing these groups may be less 

likely to have access to the internet); National Rural 

Letter Carriers’ Comment Letter (‘‘internet access in 

some rural parts of the country remains limited and 

many of our customers must rely on the mail for 

their investment reports.’’). 

52See Proposing Release, supra note 14, at 33627; 

see, e.g., American Forest and Paper Comment 

Letter; Comment Letter of Eric Skogseth, EVP of Bay 

State Envelope (July 16, 2015); Comment Letter of 

Lydia J. Morgan, CEO of Morgan Printers, Inc. (June 

12, 2015). But see ICI Comment Letter I (discussing 

the results of a 2014 ICI survey showing that, among 

Americans 65 or older, those who own mutual 

funds are more likely to have internet access). 

53See, e.g., Broadridge Comment Letter I. 

54See id. 

55See American Forest and Paper Comment 

Letter. 

56See, e.g., American Forest and Paper Comment 

Letter (stating that the Internal Revenue Service 

does not allow financial organizations to use 

implied consent to enroll investors in electronic 

delivery of tax documents); Comment Letter of 

Domtar (Aug. 3, 2015) (‘‘The SEC should follow 

other federal agencies in requiring recipients to take 

an affirmative action for e-delivery of important 

investment documents.’’). With respect to electronic 

delivery (where documents or website links thereto 

are emailed directly to an investor’s individual 

email address), the Commission also does not 

permit implied consent. See 1995 Release, supra 

note 18; cf. Comment Letter of L.A. Schnase (July 

2, 2015) (‘‘Schnase Comment Letter’’) (supporting 

the proposal, but expressing concern about the 

‘‘piecemeal approach’’ the Commission is taking to 

the regulatory scheme governing electronic 

deliveries). 

57See, e.g., American Forest and Paper Comment 

Letter; Consumer Action Comment Letter. The 

proposed rule, however, would not have required 

electronic transmission of shareholder reports, and 

investors would not have been required to go online 

to interact with the Commission or any other 

government agency. 

58See proposed rule 30e–3(c). 

59See Collins, King and Poliquin Comment 

Letter; Comment Letter of Karen Hibdon (July 31, 

2015). 

60See, e.g., Comment Letter of Barry Daniels (June 

12, 2015); Comment Letter of Larry Hensley, 

Process Engineer, Glatfelter (Aug. 3, 2015); 

Comment Letter of Craig Timm (Aug. 10, 2015). 

61See, e.g., Comment Letter of Bob Broadbear 

(July 20, 2015); Comment Letter of Marina Joyce 

(June 12, 2015); Comment Letter of Forest2Market 

(Aug. 7, 2015). 

62See Comment Letter of Robert C. Tugwell (Aug. 

10, 2015). 

63See, e.g., ICI Comment Letter II (‘‘[F]ewer than 

half of mutual fund shareholders still review some 

printed materials for information about their fund 

for financial purposes.46 Several 

commenters also believed that the rule 

as proposed included appropriate 

protections for investors preferring 

paper by preserving the option for fund 

investors to continue receiving paper 

reports.47

A number of commenters in 

opposition to the proposed rule, 

however, suggested that the rule could 

have adverse effects on investors.48

Specifically, several commenters argued 

that internet access and use among 

Americans was not universal.49 Some 

commenters provided data showing that 

approximately 25–30% of Americans do 

not have a computer with broadband 

internet access in their homes.50 Some 

commenters noted that particular 

demographic groups may be less likely 

to use the internet.51 Some commenters 

drew on the results of studies we noted 

in the Proposing Release, which 

indicate that, in 2013, 41% of seniors 65 

and older do not use the internet and 

that, in 2014, 34% of seniors 65 and 

older own mutual funds.52 Some 

commenters suggested that some people 

are less likely to use the internet 

specifically for financial purposes, to 

research funds, or to receive shareholder 

reports and other disclosure.53

2. Use of ‘‘Implied Consent’’ 

A number of commenters addressed 

the use of ‘‘implied consent’’ to allow 

for website transmission of shareholder 

reports. One commenter pointed to 

behavioral research that suggested 

implied consent is a ‘‘weak’’ reflection 

of actual willingness and that the 

introduction of new processes (e.g., 

website transmission) may block 

‘‘psychologically effective access’’ to 

shareholder reports.54 Another 

commenter stated that implied consent 

is inadequate because the proposed 

method for obtaining implied consent 

‘‘does not justify the conclusion that 

implied consent is gained for investors’’ 

and that most investors preferred paper 

communications.55 Some commenters 

noted that certain federal agencies do 

not permit implied consent for 

electronic delivery of certain 

materials.56 Commenters also pointed to 

a 2013 survey that asked if the 

government or firms in the private 

sector should force consumers to shift 

from paper to electronic content in 

which 73% of respondents said it is 

wrong to expect anyone to go online to 

interact with government agencies.57

Some commenters opposed to the 

implied consent provisions in proposed 

rule 30e–3 suggested that the proposed 

Initial Statement (from which consent 

would be inferred under the proposed 

rule) 58 could be inadvertently discarded 

or missed by investors.59

We also received a number of 

comments stating that website 

transmission of shareholder reports 

should not be the default transmission 

option.60 Others expressed concerns 

with having to use personal printers to 

print shareholder reports,61 and one 

commenter expressed concern that 

funds would eventually charge investors 

for paper shareholder reports.62

On the other hand, we received 

several comments stating that the 

proposed rule better aligns with investor 

preferences for access to financial 

information,63 and recommending that 


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Federal Register / Vol. 83, No. 121 / Friday, June 22, 2018 / Rules and Regulations 29163 

investments, and over two-thirds of these 

individuals likewise access online materials to 

gather information on their fund investments.’’). 64See, e.g., Comment Letter of Allianz Life 

Insurance of North America (Aug, 11, 2015) 

(‘‘Allianz Comment Letter’’) (recommending that 

the Commission expand proposed rule 30e–3 to 

allow broader electronic delivery of certain 

documents, including prospectuses, using implied 

consent); ICI Comment Letter I (recommending that 

the Commission permit investors’ implied consent 

to cover all series and funds in a fund complex and 

all funds held through a single financial 

intermediary). 

65See ICI Comment Letter I. 

66See, e.g., id.; see also Comment Letter of The 

Dreyfus Corporation (Aug. 11, 2015) (‘‘Dreyfus 

Comment Letter’’). 

67See, e.g., Comment Letter of BlackRock, Inc. 

(Aug. 11, 2015) (‘‘BlackRock Comment Letter’’); 

Comment Letter of the Center for Capital Markets 

Competitiveness (Sept. 6, 2016) (‘‘CCMC Comment 

Letter’’); Comment Letter of Confluence 

Technologies, Inc. (Aug. 11, 2015) (‘‘Confluence 

Comment Letter’’); ICI Comment Letter I; ICI 

Comment Letter II; IDC Comment Letter; Comment 

Letter of Mutual Fund Directors Forum (Aug. 11, 

2016); Schnase Comment Letter; Comment Letter of 

the Securities Industry and Financial Markets 

Association (Aug. 11, 2015) (‘‘SIFMA Comment 

Letter’’); Comment Letter of the Asset Management 

Group of the Securities Industry and Financial 

Markets Association (Aug. 11, 2015) (‘‘SIFMA AMG 

Comment Letter’’); Simpson Thacher Comment 

Letter; T. Rowe Price Comment Letter I; T. Rowe 

Price Comment Letter II; Comment Letter of 

Vanguard (Aug. 11, 2015) (‘‘Vanguard Comment 

Letter’’); Capital Research Comment Letter II. 

68Another commenter cited a third party’s 

estimate of $320 million in savings from the 

Commission’s e-proxy initiative in 2014. See 

Confluence Comment Letter (citing estimates 

published by Broadridge in Analysis of Distribution 

and Voting Trends Fiscal Year Ended June 30, 

2014). The commenter further stated that ‘‘[b]y 

changing the default, Rule 30e–3 will result in a 

greater percentage of electronic delivery, which in 

turn will lower fund expenses, lower fund expense 

ratios, and generate higher returns, a benefit to all 

investors, both those comfortable with electronic 

delivery and those who require continued physical 

delivery.’’ 

69See T. Rowe Price Comment Letter I. 

70See ICI Comment Letter I (stating further that 

if the Commission adopted the commenter’s 

suggested changes to the rule, potential net savings 

could instead total $465 million within the initial 

three-year timeframe). In a subsequent comment 

letter, the commenter revised its estimates to 

account for another commenter’s interpretation of 

how NYSE processing fees would be applied to a 

rule 30e–3 framework. See Comment Letter of 

Investment Company Institute (Mar. 14, 2016) (‘‘ICI 

Comment Letter III’’) (stating that based on this 

interpretation, the net savings would be less than 

the ICI Comment Letter I projections; and 

estimating that even if ICI’s recommended 

‘‘postcard’’ modification were incorporated in the 

final rule, there would be a net cost of $84 million 

in the initial year and a subsequent net savings of 

$83 million per each subsequent year). 

71See Comment Letter of Consumer Federation of 

America (July 29, 2015). 

72See Broadridge Comment Letter I (contending 

that, based on its interpretation of New York Stock 

Exchange regulated rates, approximately 5% of 

fund report distribution jobs that Broadridge 

processes would result in a savings of $10,000 or 

more). We believe that in light of the NYSE 

Approval Order regarding processing fees paid to 

financial intermediaries for the delivery of 

shareholder reports and other documents to 

investors holding shares through certain financial 

intermediaries, the facts supporting the 

assumptions underlying this commenter’s analysis 

have changed. See supra note 32. 

73See Broadridge Comment Letter I; Comment 

Letter of Broadridge Financial Solutions, Inc. (Jan. 

13, 2016) (‘‘Broadridge Comment Letter II’’). This 

commenter subsequently submitted presentation 

materials in connection with a meeting with 

Division of Investment Management staff, which 

included survey data in support of their projections. 

See Memorandum from the Division of Investment 

Management re: Meeting with Broadridge (Sept. 27, 

2017) (including attachments thereto containing the 

survey data presented) (‘‘Broadridge Meeting Memo 

I’’); Memorandum from the Division of Investment 

Management re: Meeting with Broadridge (Apr. 13, 

2018) (‘‘Broadridge Meeting Memo II’’) 

74See Broadridge Comment Letter I; Broadridge 

Comment Letter II. 

75Broadridge Comment Letter I. 

76See, e.g., ICI Comment Letter II; Broadridge 

Comment Letter I. 

77See supra Section I.C. 

78But see supra note 56 and accompanying text 

(noting some commenters that stated that certain 

federal agencies do not permit implied consent for 

electronic delivery of certain materials). 

79See, e.g., ICI Comment Letter I. But see Schnase 

Comment Letter (supporting the proposal, but 

arguing that the Commission should go further and 

‘‘allow funds to use the web to satisfy their delivery 

obligations for prospectuses, [statements of 

additional information] and other investor 

documents in addition to shareholder reports 

. . . .’’). 

we broaden the use of implied consent 

in certain ways.64 One of these 

commenters noted that the proposal, 

which would allow investors to ‘‘opt 

into’’ paper delivery, would allow funds 

to more readily accommodate the 

preferences of all investors.65 Several 

commenters also noted that this 

approach was consistent with prior 

Commission efforts to improve 

accessibility of information for the 

benefit of investors.66

3. Cost Savings 

Many commenters supporting the 

proposed rule stated that the rule would 

result in reduced printing and mailing 

costs for funds (and ultimately fund 

investors).67 Several commenters 

provided estimates of costs relating to 

potential cost savings under rule 30e– 

3.68 One commenter indicated that its 

fund group spends approximately $3.8 

million annually to print and mail 

shareholder reports to direct fund 

investors, and estimated that the 

proposed rule would result in savings of 

up to 50% of that amount.69 Another 

commenter estimated annual industry 

costs for print and mail delivery of 

shareholder reports at $344 million and 

suggested that, if the proposed rule was 

adopted, it had the potential to save 

fund shareholders on a net basis an 

estimated $140 million within the first 

three years and $89 million per year 

after the first year.70

One commenter claimed that the cost 

savings realized from proposed rule 

30e–3 would likely not be passed on to 

investors and would not have a 

noticeable impact on investor costs even 

if it were passed on to investors.71

Another commenter suggested that the 

cost savings would benefit a relatively 

small number of mutual funds and be 

less significant than in the notice and 

access approach used in the proxy 

statement context, which the 

commenter compared to the proposed 

rule.72 This commenter stated that the 

proposed rule would result in greater 

processing fees for fund shares held 

through certain intermediaries. This 

commenter also suggested that cost 

savings could be better realized through 

the continued growth of electronic 

delivery under the Commission’s 

existing guidance, which the commenter 

suggests is already common and 

projected to reach 59% of all 

transmissions of shareholder reports in 

2018.73 The commenter estimated that 

fund companies currently expend $354 

million for printing and mailing of 

shareholder reports and projected 

printing and mailing costs of $382 

million in 2018 under the existing 

requirements.74 The commenter 

estimated that aggregate net savings 

under the proposed rule would be about 

$18 million, or $0.02 per report, in 

2018.75

Finally, several commenters 

highlighted that the potential cost 

savings for funds and investors resulting 

from the proposed rule may depend in 

part on the application of the NYSE 

processing fees that funds pay to 

financial intermediaries.76 As noted 

earlier, today we approved amendments 

to NYSE rules regarding processing fees 

paid to financial intermediaries that 

would clarify the application of certain 

fees under the rule 30e–3 framework.77

4. Regulatory Consistency 

Some commenters also supported the 

proposed rule as consistent with other 

regulatory frameworks adopted by the 

Commission and other regulatory bodies 

that encourage website availability as a 

means to satisfy disclosure 

obligations.78 For example, one 

commenter stated that the proposed rule 

was consistent with prior Commission 

efforts to modernize the manner in 

which information is provided to 

investors and to improve accessibility 

by taking advantage of technology for 

the benefit of investors.79 Others 

asserted that the notice and access 

model under the proposed rule was 

similar to the model adopted by another 

federal agency in 2014 for certain 

financial institutions to satisfy privacy 


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29164 Federal Register / Vol. 83, No. 121 / Friday, June 22, 2018 / Rules and Regulations 

80See, e.g., CAI Commenter Letter; ICI Comment 

Letter I. Referring to a rule adopted by the Bureau 

of Consumer Financial Protection (commonly 

known as the Consumer Financial Protection 

Bureau and referenced herein as the ‘‘Bureau’’). The 

rule that the Bureau adopted in 2014 permitted 

financial institutions to post the required privacy 

notice online if they met certain conditions, 

including the financial institution notifying 

consumers by mail on an annual basis about the 

availability of the notice. See Amendment to the 

Annual Privacy Notice Requirement Under GrammLeach-Bliley Act (Regulation P), Bureau of 

Consumer Financial Protection (Oct. 20, 2014), 

available at http://files.consumerfinance.gov/f/ 

201410_cfpb_final-rule_annual-privacy-notice.pdf. 

In December 2015, Congress amended the 

Gramm-Leach-Bliley Act (‘‘GLBA’’) as part of the 

Fixing America’s Surface Transportation Act. These 

amendments to the GLBA provide an exception 

under which financial institutions that meet certain 

conditions are not required to provide annual 

privacy notices to customers. Because the Bureau 

determined that the alternative delivery method 

was no longer necessary in light of this new 

statutory exception, the Bureau proposed in June 

2016 to remove the alternative delivery method 

from its regulations implementing the GLBA. See 

Amendment to the Annual Privacy Notice 

Requirement Under the Gramm-Leach-Bliley Act 

(Regulation P), Bureau of Consumer Financial 

Protection (June 29, 2016), available at http://

www.consumerfinance.gov/policy-compliance/ 

rulemaking/rules-under-development/amendmentannual-privacy-notice-requirement-under-grammleach-bliley-act-regulation-p/. 

81See ICI Comment Letter II. This commenter 

suggested that the proposed rule was consistent 

with a global movement toward online financial 

disclosure and cited three foreign regimes as 

examples of this movement. These examples 

include: (1) The European Union, where funds are 

permitted to post shareholder reports on a website, 

with paper annual or semi-annual reports available 

by mail on request; (2) Canada, where funds send 

a negative consent letter to shareholders on an 

annual basis and shareholders may request a copy 

of the shareholder report by mail if desired; and (3) 

Australia, where funds can make shareholder 

reports available on a website, as long as in the first 

year of doing so they notify shareholders, explain 

how to access the website, and provide the option 

to request a mailed copy of the report. 

82See, e.g., Comment Letter of Environmental 

Paper Network (Oct. 4, 2016) (proposed rule would 

reduce landfill waste and resources associated with 

processing, printing, and transportation, which 

ultimately would reduce greenhouse gas emissions, 

water consumption and pollution, air pollution, 

wood and energy use, and solid waste); ICI 

Comment Letter II (estimating that the proposed 

rule would save approximately 2 million trees each 

year); Comment Letter of the Committee of Annuity 

Insurers (July 22, 2016) (‘‘CAI Comment Letter II’’) 

(noting that several members of the Committee 

indicated that they each send approximately 1 

billion pages per year to contract owners in 

connection with their regulatory obligation to 

delivery annual and semi-annual reports to contract 

owners). 

83See ICI Comment Letter II (citing the American 

Business Act on Climate Pledge). 

84See id. (citing the United Nations Framework 

Convention on Climate Change, the Paris 

Agreement). 

85See, e.g., ICI Comment Letter II; BlackRock 

Comment Letter. 

86See, e.g., Comment Letter of Doug Delaney 

(Aug. 7, 2015); Comment Letter of Mark A. Heyde 

(Aug. 7, 2015); Comment Letter of Shane Johnson 

(June 12, 2015). Many other commenters argued 

that the proposed rule would harm the paper 

industry and postal workers. See, e.g., Comment 

Letter of Kathy Watters (July 20, 2015); Comment 

Letter of James Sandstrom (Aug. 7, 2015) 

(‘‘Sandstrom Comment Letter’’); Comment Letter of 

PDF Print Communications Inc. (Aug. 10, 2015). 

87See, e.g., Comment Letter of Richard Griffin 

(July 28, 2015); Comment Letter of Tom Jones (July 

28, 2015); Comment Letter of Michael J. Flynn (Aug. 

4, 2015). 

88See, e.g., Comment Letter of Kenneth J. 

Janulewicz (July 27, 2015); Comment Letter of Mary 

Wells (Aug. 17, 2015); Comment Letter of Jacquelyn 

Mangold (July 29, 2015). 

89See, e.g., Regulation S–P [17 CFR 248.30] 

(requiring written policies and procedures that 

address administrative, technical, and physical 

safeguards for the protection of customer records 

and information); Privacy of Consumer Financial 

Information (Regulation S–P), Exchange Act Release 

No. 42974 (June 22, 2000) [65 FR 40334 (June 29, 

2000)] (adopting Regulation S–P); Disposal of 

Consumer Report Information, Exchange Act 

Release No. 50781 (Dec. 2, 2004) [69 FR 71322 (Dec. 

8, 2004)] (adopting requirements for proper disposal 

of consumer report information and records). 

90Section 911 of the Dodd-Frank Wall Street 

Reform and Consumer Protection Act added Section 

39 to the Securities Exchange Act of 1934, which 

establishes the Investor Advisory Committee. The 

Committee advises and consults with the 

Commission on regulatory priorities, issues, and 

initiatives and submits findings and 

recommendations to the Commission. 15 U.S.C. 

78pp(a). The Commission reviews the findings and 

recommendations of the Committee and issues a 

public statement assessing the finding or 

recommendation and disclosing the action, if any, 

the Commission intends to take with respect to the 

finding or recommendation. 15 U.S.C. 78pp(g). 

91See Investment Advisory Committee 

Recommendation, supra note 40. 

notice transmission requirements.80 In 

addition, one commenter highlighted 

regulatory regimes in foreign 

jurisdictions that permit a transmission 

framework for shareholder reports 

similar to that under the proposed 

rule.81

5. Environmental Benefits 

Some commenters highlighted the 

environmental benefits associated with 

the reduction of paper reports under the 

rule, including fewer trees needed to 

make paper and a reduction in landfill 

waste.82 Some of these commenters also 

stated that the proposed rule is 

consistent with certain national and 

international initiatives regarding 

environmental issues, including The 

American Business Act on Climate 

Pledge 83 and The Paris Agreement 84 to 

combat climate change.85 Some 

commenters suggested, however, that 

environmental benefits of the proposed 

rule are overstated, citing environmentfriendly initiatives previously 

undertaken by the paper industry.86

6. Reliability and Security Concerns 

A number of commenters also 

expressed a preference for transmission 

of paper shareholder reports because of 

the reliability and security of 

information delivered by the U.S. Postal 

Service.87 We note that, under the rule 

as proposed and final rule 30e–3, paper 

Notices would be mailed to investors, 

and those investors who prefer to have 

their shareholder reports mailed to them 

will continue to be able to receive them 

in that manner by making a request to 

permanently receive all future reports in 

paper, or by requesting individual 

reports in paper whenever they desire. 

We also received a number of 

comments expressing cybersecurity 

concerns related to the proposed rule. 

The vast majority of these comments, 

however, did not appear to fully 

appreciate the method of transmission 

proposed under the rule (e.g., paper 

notice of the website availability of the 

reports rather than electronic delivery of 

the reports by email or other means) or 

the information that would be made 

available (e.g., shareholder reports 

rather than account statements that may 

have personal information).88

We are sensitive to these issues and 

acknowledge the importance of 

protecting the security of personal 

information. However, we do not 

believe that this new method of 

transmission would meaningfully 

increase the cybersecurity risks, such as 

identity thefts or ‘‘phishing’’ attacks, 

noted by these commenters. Rule 30e– 

3, as proposed and adopted, does not 

present email ‘‘phishing’’ attack 

concerns because investors will not 

receive email communications as a 

result of the rule. Rather, shareholder 

reports would be posted on a public 

website, and investors would be 

provided with a paper notice regarding 

their availability. The final rule does not 

require that a Notice contain any 

personally identifiable information. If a 

fund were to choose to include this 

information in a Notice, the fund should 

take measures to protect this 

information just as funds do today 

regarding other mailings, like account 

statements, that may contain sensitive 

information.89

7. Investor Advisory Committee 

In December 2017, the Investor 

Advisory Committee 90 issued a 

recommendation regarding the 

promotion of electronic delivery and the 

development of a summary disclosure 

document for the delivery of fund 

reports.91 The recommendation 

provided, among other things, that the 

Commission explore: (i) Methods to 

encourage a transition to electronic 

delivery that respect investor 

preferences and that increase the 

likelihood that investors will see and 

read important disclosure documents; 

and (ii) development of a summary, 

layered disclosure document for annual 


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Federal Register / Vol. 83, No. 121 / Friday, June 22, 2018 / Rules and Regulations 29165 

92 If any provision of this rule, or the application 

thereof to any person or circumstance, is held to be 

invalid, such invalidity shall not affect other 

provisions or the application of such provisions to 

other persons or circumstances that can be given 

effect without the invalid provision or application. 

93We understand that internet access and use is 

not uniformly distributed geographically. See infra 

note 97. In considering whether use of the rule is 

appropriate, we encourage each fund, in 

consultation with its intermediaries, to consider the 

prevalence of internet access and use across its 

investor base. 

94See supra note 18. 95See supra notes 78–81 and accompanying text. 

But see supra note 56 and accompanying text 

(noting that some commenters stated that certain 

federal agencies do not permit implied consent for 

electronic delivery of certain materials); supra note 

80 (noting that because of provisions in the Fixing 

America’s Surface Transportation Act that amended 

the GLBA to provide an exception under which 

financial institutions that meet certain conditions 

are not required to provide annual privacy notices 

to customers, the Bureau determined that the 

alternative delivery method for the annual privacy 

notice requirement was no longer necessary in light 

of this new statutory exception). 

96For example, investor testing sponsored by the 

Commission and conducted in 2011 (‘‘2011 Investor 

Testing’’) suggested that an investor looking for a 

fund’s annual report is most likely to seek it out on 

the fund’s website, rather than request it by mail or 

phone or by retrieving it from the Commission’s 

Electronic Data, Gathering, Analysis, and Retrieval 

System (‘‘EDGAR’’). Proposing Release, supra note 

14, at 33626–27. Many investors indicated that they 

would prefer that fund information be made 

available in both electronic and paper versions, 

with a plurality of respondents preferring electronic 

transmission by email with the option to easily 

request a paper copy of a particular report, though 

a significant minority indicated that they would 

still prefer to receive a paper copy through the mail. 

Id. at 33627. 

According to the most recent U.S. census data, 

approximately 77.2% of U.S. households had some 

form of internet access in their home in 2015 and 

86.8% have a computer (e.g., desktop, laptop, tablet 

or smartphone). See Camille Ryan & Jamie M. 

Lewis, Computer and internet Usage in the United 

States: 2015 (Sept. 2017), available at https://

www.census.gov/content/dam/Census/library/ 

publications/2017/acs/acs-37.pdf; see also Sarah 

Holden, Daniel Schrass & Michael Bogdan, 

Ownership of Mutual Funds, Shareholder 

Sentiment, and Use of the internet, 2017 (Oct. 

2017), available at https://www.ici.org/pdf/per23- 

07.pdf (‘‘[i]n mid-2017, 95 percent of households 

owning mutual funds had internet access, up from 

about two-thirds in 2000’’ and ‘‘86 percent of 

mutual fund-owning households with a household 

head aged 65 or older had internet access in mid2017’’); Andrew Perrin & Maeve Duggan, 

Americans’ internet Access: 2000–2015 (June 2015), 

available at http://assets.pewresearch.org/wpcontent/uploads/sites/14/2015/06/2015-06-26_

internet-usage-across-demographics-discover_

FINAL.pdf (finding in 2015, 84 percent of all U.S. 

adults use the internet). 

But see Broadridge Meeting Memo I (citing 

studies on investor delivery preference for 

shareholder reports and mandatory disclosures 

regarding investments, which depending on the 

particular study, found 43% to 55% of investors 

preferred paper delivery). 

Understanding that an investor’s experience 

when accessing a shareholder report may differ 

between a mobile device and a laptop, we request 

comment about investor experiences and 

preferences for fund disclosures on mobile devices 

in the Disclosure Request for Comment. See supra 

note 20. 

97Since the 2011 Investor Testing, third-party 

studies and surveys indicate access to and use of 

the internet has continued to increase rapidly, 

including among demographic groups that have 

previously been less likely to use the internet. See, 

e.g., supra notes 41–42 and accompanying text; see 

also Pew Research Center, Who’s Not Online and 

Why, at 2 (Sept. 25, 2013), available at http://

pewinternet.org/Reports/2013/Non-internetusers.aspx. The Pew Research Center study, 

conducted in 2013, found that only 15% of 

American adults ages 18 and older do not use the 

internet or email—falling from 26% in 2011, when 

the Commission’s investor testing was conducted, 

and from 36% a decade before in 2001. See Pew 

Research Center, Older Adults and Technology Use, 

at 1 (Apr. 3, 2014), available at http://

www.pewinternet.org/2014/04/03/older-adults-andtechnology-use/. These researchers also found that 

in 2016, 67% of adults over the age of 64 used the 

internet, a 55% increase since 2000. See Pew 

Research Center, Tech Adoption Climbs Among 

Older Adults, at 2 (May 17, 2017), available at 

http://assets.pewresearch.org/wp-content/uploads/ 

sites/14/2017/05/16170850/PI_2017.05.17_OlderAmericans-Tech_FINAL.pdf; see also Investment 

Company Institute, 2017 Investment Company Fact 

Book, available at https://www.ici.org/pdf/2017_

factbook.pdf (‘‘2017 ICI Fact Book’’) at 129 (stating 

that 92% of U.S. households owning mutual funds 

had internet access in mid-2016). 

These trends have also extended to use of the 

internet for financial purposes. For example, a 

recent survey by the Investment Company Institute 

found that in 2017, 95% of U.S. households owning 

mutual funds had internet access (up from about 

two-thirds in 2000), with widespread use of the 

internet among various age groups, education levels 

and income levels, including access by 86% of 

mutual fund owning households headed by 

someone age 65 or older. See Ownership of Mutual 

Funds, Shareholder Sentiment, and Use of the 

internet, supra note 96, at 18. 

98Proposing Release, supra note 14, at 33627. In 

the Proposing Release, we noted concerns that some 

investors who prefer to receive shareholder reports 

in paper and some demographic groups of investors 

that may be less likely to use the internet might not 

fully understand the actions they would need to 

take under the proposed rule to continue to receive 

their reports in paper. See id. 

shareholder reports that incorporates 

key information from the report along 

with prominent notice regarding how to 

obtain a copy of the full report, and 

would be designed to be delivered 

either by mail or by email (depending 

on the investors’ delivery preferences). 

The Committee also recommended that 

the Commission seek comment on the 

appropriate content and format of such 

a disclosure document and engage in 

investor testing or encourage testing by 

industry members. 

B. Adoption of Rule 30e–3 and Related 

Amendments 

1. Overview 

After consideration of the comments 

discussed above, we are adopting rule 

30e–3 with several modifications 

designed to address preservation of 

investor preferences, cost, and 

administrability of the rule. Rule 30e–3 

is intended to modernize the manner in 

which shareholder reports and other 

information are made available to 

investors and reduce expenses 

associated with printing and mailing 

that are currently borne by funds, and 

ultimately, fund investors.92

Reliance on the rule is optional. 

Funds are permitted to satisfy their 

delivery obligations by mailing 

shareholder reports in paper, delivering 

reports pursuant to the Commission’s 

electronic delivery guidance, providing 

notice and website accessibility 

pursuant to rule 30e–3, or any 

combination of the foregoing, so long as 

the conditions of the applicable 

transmission methods are met. We 

believe that a fund is in the best 

position to choose whether or not to 

implement the rule after considering the 

costs and benefits of the rule, including 

consideration of the needs and 

preferences of the fund’s particular 

investors.93 As discussed below, the 

final rule has been modified from the 

proposal to provide increased flexibility 

for funds to implement the rule 

according to their particular 

circumstances and the preferences of 

their investors. For example, these 

modifications permit funds to include 

in the Notice additional information 

from shareholder reports that they may 

deem helpful when notifying investors 

of the availability of reports. 

The rule is consistent with our prior 

initiatives to harness the benefits of the 

internet and other new technologies for 

investors,94 and is consistent with 

similar initiatives of other regulators 

(both domestic and foreign).95

Furthermore, as we discussed in the 

Proposing Release, investor testing and 

internet usage trends have highlighted 

the evolution of investor preferences 

about electronic delivery of information, 

and shown that many investors would 

prefer enhanced availability of fund 

information on the internet.96 Given 

both current levels and trends in 

increasing internet access and use—in 

particular with the significant increase 

in the use of the internet as a tool for 

disseminating financial information 

among all age groups—we believe that 

it is appropriate to permit the internet 

availability of shareholder reports to 

satisfy transmission obligations, subject 

to certain conditions including 

protections for investors who continue 

to prefer reports in paper form.97

We recognize that it is critical for 

investors to continue to receive 

disclosure through means that are 

convenient and accessible for them.98

We believe that the final rule’s 

conditions include appropriate 

protections for those who lack internet 

access or who simply prefer paper 

reports. Investors who lack internet 

access or prefer paper reports will be 


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99See supra notes 54–62 and accompanying text. 

100See infra Section II.B.2.d. During the extended 

transition period, an investor in a mutual fund, for 

example, that seeks to begin relying on the rule 

before January 1, 2022 would receive approximately 

six notices of the upcoming change over a two-year 

period because each year, investors will receive 

notice on the summary prospectus or statutory 

prospectus, as well as the semi-annual and annual 

report to shareholders. 

101Rule 30e–3(a). The rule could also be used to 

satisfy any obligation to transmit an amendment to 

a report required by rule 30e–1 or 30e–2 by 

satisfying the same conditions. An amendment to 

a shareholder report could also be transmitted 

through other permitted means, such as in paper 

through the mail. 

102Rule 30e–3(f). 

103Rule 30e–3(j); see infra Sections II.B.2.f, II.E. 

104See rule 498 under the Securities Act 

(permitting the use of a summary prospectus) [17 

CFR 230.498]; rule 14a–16 under the Exchange Act 

(internet availability of proxy materials) [17 CFR 

240.14a–16]. 

105See 1995 Release, supra note 18. Under rule 

498, the requirement to send an electronic copy of 

a document by email may be satisfied by sending 

a direct link to the document on the internet; 

provided that a current version of the document is 

directly accessible through the link from the time 

that the email is sent through the date that is six 

months after the date that the email is sent and the 

email explains both how long the link will remain 

useable and that, if the recipient desires to retain 

a copy of the document, he or she should access 

and save the document. See rule 498(f)(1) under the 

Securities Act [17 CFR 230.498(f)(1)]. 

106Rule 30e–3(a). 

107See, e.g., CAI Comment Letter I; ICI Comment 

Letter II. 

108For example, in a change from the proposal, 

the rule uses the defined term ‘‘Company’’ to refer 

collectively to the entities with obligations under 

rules 30e–1 and 30e–2. See rule 30e–3(h)(1) 

(defining ‘‘Company’’ to mean a Fund required to 

transmit a report to shareholders pursuant to rule 

30e–1 or a UIT required to transmit a report to 

shareholders pursuant to rule 30e–2). For purposes 

of the rule, ‘‘Fund’’ is defined to mean a registered 

management company and any separate series of 

the management company. See rule 30e–3(h)(2). 

able to continue to receive them by 

mail: 

• First, the final rule provides that 

investors who prefer to receive reports 

in paper may continue to do so, either 

by making a one-time request to receive 

all future reports in paper, or by 

requesting individual reports in paper 

whenever they desire. 

• Second, as outlined below in 

Sections II.B.2.f and II.E, we are 

adopting an extended transition period 

with staged effective dates. During the 

extended transition period, the earliest 

that Notices may be transmitted to 

investors in lieu of paper reports is 

January 1, 2021. In general, funds will 

be required to provide two years of 

notice to shareholders before relying on 

the rule. Therefore, funds that begin 

providing notice at the start of 2019 will 

complete the two-year notice period, 

and may begin relying on the rule, on 

January 1, 2021. In addition, funds that 

are newly offered during the period of 

January 1, 2019 through December 31, 

2020 may rely on the rule starting 

January 1, 2021, if they provide notice 

to shareholders starting with their first 

public offering. Funds that are newly 

offered on January 1, 2021 and 

thereafter would not be subject to the 

condition and could therefore rely on 

the rule immediately without providing 

any advance notice through required 

statements. All other funds may not rely 

on the rule until they have completed a 

full two year notice period or until 

January 1, 2022, whichever comes first. 

Although we are eliminating the 

Initial Statement requirement, we 

nonetheless believe that it is important 

that investors receive sufficient notice of 

the change in transmission method and 

sufficient opportunity to express their 

delivery preference. Therefore, the 

extended transition period is designed 

to ensure that investors receive 

disclosures during the extended 

transition period and to provide funds 

electing to make use of this optional 

method and financial intermediaries 

time to educate investors of the coming 

change through disclosures on 

prospectuses and certain other fund 

documents and through other means. It 

will also provide funds and financial 

intermediaries with time to implement 

any necessary operations and systems 

changes. Finally, the Commission staff 

will also use this extended transition 

period to engage in educational and 

investor outreach efforts. 

We believe these protections will 

mitigate the various concerns raised by 

commenters regarding this new optional 

method for funds to satisfy requirements 

to transmit shareholder reports.99 For 

example, the additional disclosures on 

shareholder documents about the 

forthcoming internet availability of 

reports, as well as other educational 

efforts undertaken by funds, financial 

intermediaries, and Commission staff 

should decrease the possibility that an 

investor will be unaware of the change 

in transmission method and will result 

in many investors receiving 

considerably more notice of the change 

in transmission than they would have 

under the proposed rule. An investor in 

a mutual fund, for example, that seeks 

to begin relying on the rule before 

January 1, 2022 would be notified about 

six times compared to the proposal, 

which did not have an extended 

transition period and would have 

required only that one Initial Statement 

be sent 60 days in advance of a change 

in transmission method.100 We believe 

that the required disclosures, which 

must be made using plain English 

principles, also mitigate concerns that 

some investors might not fully 

understand what they need to do to 

continue to receive paper reports. To the 

extent an investor does not prefer or is 

unable to access shareholder reports via 

the internet, he or she can request paper 

copies of shareholder reports, either on 

a permanent or ad hoc basis. 

2. Conditions of Rule 30e–3 

New rule 30e–3 provides that a 

registered management company (and 

any separate series thereof) or UIT may 

satisfy its obligation to transmit a report 

required by rule 30e–1 or rule 30e–2, 

respectively, if certain conditions set 

forth in the rule are satisfied.101 These 

conditions generally relate to: (a) 

Availability of the report and other 

materials; (b) notice to investors of the 

website availability of the report; and (c) 

delivery of paper copies of materials 

upon request. Rule 30e–3 also requires 

transmission of paper reports to 

investors electing a delivery preference 

to receive them in that format.102

Finally, rule 30e–3 will also include a 

temporary condition relating to form 

amendments applicable during an 

extended transition period.103 The 

specific provisions of the rule are 

discussed in more detail in the sections 

that follow. 

These conditions are generally 

consistent with similar conditions in 

other rules adopted by the Commission, 

including its rules regarding the use of 

a summary prospectus and internet 

availability of proxy materials.104 For 

example, funds offering electronic 

delivery typically send investors an 

email notifying them of the online 

availability of the report or other 

information, along with a link to the 

website address where the document is 

available.105 Similarly, the Notice 

required under rule 30e–3 may satisfy 

shareholder report transmission 

obligations in part by containing a link 

to where the document may be accessed 

on the internet. 

Rule 30e–3 provides funds an 

optional means of satisfying shareholder 

report transmission obligations under 

rule 30e–1 and rule 30e–2.106 Some 

commenters recommended, however, 

that the rule be clarified as to its 

application to UITs, as UITs and not the 

underlying funds held by such UITs are 

the entities with transmission 

obligations under rule 30e–2.107 In 

response to this recommendation, the 

final rule clarifies, by use of terminology 

and otherwise, that the operative 

conditions of rule 30e–3 extend to a UIT 

seeking to meet its transmission 

obligations under rule 30e–2.108


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109Rule 30e–3(b)(1). 

110 Id. Rules 30e–1 and 30e–2 require that a report 

be transmitted within 60 days after the close of the 

period covered by the report. See rule 30e–1(c); rule 

30e–2(a). Under the proposal, (1) the report would 

have been required to be accessible on the website 

from the date the report was transmitted to 

investors, and (2) the Notice relating to the report 

would have been required to be transmitted within 

60 days of the close of the related reporting period. 

See proposed rule 30e–3(b), (d). As discussed 

below, we have modified the final rule to permit the 

Notice to be delivered up to 70 days after the close 

of the reporting period. However, we believe the 

report should nonetheless be available at the same 

time that reports are transmitted to investors, either 

in paper or electronically, in order that reports 

covering a complete year are available on the 

website at all times. 

111See 1995 Release, supra note 18 (noting that 

to satisfy access requirements under the 

Commission’s electronic delivery guidance, ‘‘as is 

the case with a paper document, a recipient should 

have the opportunity to retain the information or 

have ongoing access equivalent to personal 

retention’’). 

112Rule 30e–3(b)(1)(ii). If a fund is transmitting 

a report for its first operational semi-annual period, 

the fund could rely on rule 30e–3 to transmit that 

report, despite not having made a prior report 

publicly accessible, provided that it meets the other 

required conditions. 

113Rule 30e–3(b)(1)(iii). In a change from the 

proposal, this provision provides that a fund’s 

complete portfolio holdings for its most recent 

second and fourth fiscal quarters must be posted at 

the specified website if a report required to be 

posted at the specified website (i.e., a current report 

to be transmitted pursuant to rule 30e–3 or the 

report for the prior fiscal period) includes a 

summary schedule of investments. 

114SBICs are unique investment companies that 

operate differently and are subject to a different 

regulatory regime than other management 

companies. They are ‘‘privately owned and 

managed investment funds, licensed and regulated 

by the Small Business Administration (‘‘SBA’’), that 

use their own capital plus funds borrowed with an 

SBA guarantee to make equity and debt investments 

in qualifying small businesses.’’ See SBA, SBIC 

Program Overview, available at https://

www.sba.gov/content/sbic-program-overview. 

115Rule 30e–3(b)(1)(iv). Under this requirement, 

the portfolio holdings as of the fiscal quarter 

following the period of the report will be required 

to be posted at the specified website when 

available. For example, a fund with a December 31 

fiscal year end wishing to rely on rule 30e–3 to 

transmit its annual report to shareholders will also 

be required to ensure that its complete portfolio 

holdings for the first quarter of the next year is 

made similarly available within 60 days after the 

end of the first quarter. 

116See rule 2a–7(h)(10). 

117See rule 30b1–9; see also supra note 14. Until 

they are required to submit reports on Form N– 

PORT, management companies other than SBICs are 

required to file portfolio schedules as of the end of 

the first and third fiscal quarters on Form N–Q. See 

rule 30b1–5. See also Investment Company 

Reporting Modernization, Investment Company Act 

Release No. 32936 (Dec. 8, 2017) [82 FR 58731 (Dec. 

14, 2017)] (delaying rescission of Form N–Q and 

certain other effective dates for final rules and other 

amendments adopted as part of the Reporting 

Modernization Adopting Release). 

118Rule 30e–3(b)(1). 

119Rule 30e–3(b)(1)(iii)–(iv); 17 CFR 210.12–12 

through 12–14. These materials are required to be 

filed as exhibits to Form N–PORT, regardless of 

whether the fund intends to rely on the rule to 

satisfy its shareholder report transmission 

obligations. See Part F of Form N–PORT [referenced 

in 17 CFR 274.150]. 

120 In lieu of providing a complete schedule of 

portfolio investments as part of the financial 

statements included in its shareholder report, a 

fund may provide a summary schedule of portfolio 

investments. See, e.g., Instruction 1 to Item 27(b)(1) 

of Form N–1A. Pursuant to rule 12–12B of 

Regulation S–X, the summary schedule generally 

must list separately the 50 largest issuers and any 

other issuer the value of which exceeded one 

percent of the net asset value of the fund at the 

close of the period. See rule 12–12B, n.3 of 

Regulation S–X [17 CFR 210.12–12B]. 

121Rule 30e–3(b)(1)(iii). Similarly to the other 

quarterly portfolio holdings required to be posted 

to the website, the portfolio holdings for the second 

and fourth quarters must be presented in 

accordance with rules 12–12 through 12–14 of 

Regulation S–X, but need not be audited. 

122We noted, for example, that a fund currently 

using the summary schedule as a means to reduce 

fund printing and mailing costs may decide instead 

to include a complete portfolio schedule in the 

shareholder report due to more limited cost savings 

if the report is posted on its website in reliance on 

the proposed rule. Proposing Release, supra note 

14, at 33631. 

123We noted, for example, that under the 

proposed rule, an investor that wishes to view the 

complete portfolio holdings would first receive a 

notice of the availability of the report, then take the 

Continued 

a. Availability of Shareholder Report 

and Other Materials 

We are adopting generally as 

proposed, except as indicated below, 

certain requirements relating to the 

availability of the shareholder report 

and other materials for funds relying on 

rule 30e–3. Specifically, in order to 

satisfy transmission obligations under 

rule 30e–1 or rule 30e–2, the current 

report to shareholders must be publicly 

accessible, free of charge, at a specified 

website address.109 In a change from the 

proposal, the final rule requires that the 

report must be accessible from the date 

the fund transmits the report as required 

by rule 30e–1 or 30e–2, at least until the 

date the fund next transmits a 

shareholder report required by rule 30e– 

1 or rule 30e–2.110 This requirement is 

intended to provide investors with the 

opportunity for ongoing access to the 

shareholder report until, at a minimum, 

the date that the next report is 

transmitted.111

Funds are not currently required to 

send first- and third-quarter portfolio 

holdings information to investors or 

make that information accessible on 

their websites. To provide investors 

with convenient access to the most 

recent four quarters of portfolio 

holdings, the rule requires that, in 

addition to posting the most current 

shareholder report, the following fund 

documents must also be posted at the 

specified website: (1) Any report with 

respect to the fund for the prior 

reporting period that was transmitted to 

shareholders of record pursuant to rule 

30e–1 or rule 30e–2, if any; 112 (2) the 

fund’s complete portfolio holdings as of 

the close of the period covered by the 

current or prior report if the report 

includes a summary schedule of 

investments; 113 and (3) for funds other 

than money market funds and small 

business investment companies 

(‘‘SBICs’’),114 the complete portfolio 

holdings as of the close of the fund’s 

most recent first and third fiscal 

quarters, if any, after the date on which 

its registration statement became 

effective, within 60 days after the close 

of that period.115 Money market funds 

and SBICs are expressly excluded from 

the rule’s posting requirement 

provisions for fiscal quarter-specific 

portfolio holdings schedules because 

money market funds are required 

currently to post certain portfolio 

holdings and other information on their 

websites pursuant to rule 2a–7,116 and 

because SBICs are not required to file 

reports on Form N–Q today and are not 

required to file reports on Form N– 

PORT.117

The fund’s prior shareholder report 

and portfolio holdings information for 

its first and third fiscal quarters are 

required to be publicly accessible in the 

same manner and for the same time 

period as the current shareholder 

report.118 We are adopting this 

requirement to provide investors with 

easy access to a full year of complete 

portfolio holdings information in one 

location (i.e., the website on which the 

report transmitted under the rule is 

made accessible), rather than requiring 

investors to access the fund’s reports on 

Form N–PORT (or Form N–Q) for those 

periods separately. 

To conform the format and content of 

the portfolio holdings schedules for the 

first and third quarters to those 

schedules presented in the fund’s 

shareholder reports for the second and 

fourth quarters, the rule requires the 

schedules for the first and third quarters 

to be presented in accordance with the 

schedules set forth in §§ 210.12–12 

through 12–14 of Regulation S–X, which 

need not be audited.119

In a change from the proposal, the 

final rule requires that if a report 

required to be posted includes a 

summary schedule of investments,120

the fund’s complete portfolio holdings 

as of the close of the period covered by 

the report must also be posted at the 

specified website.121 In the Proposing 

Release, we stated that for funds relying 

on the proposed rule, use of the 

summary schedule may be 

unnecessary,122 and in particular, may 

be potentially confusing or cumbersome 

to investors seeking to access the fund’s 

complete portfolio holdings.123 For 


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step to access the report on the fund’s website, only 

to have to take a subsequent step to request or 

otherwise access the complete schedule. Proposing 

Release, supra note 14, at 33631. Currently, for 

funds using the summary schedule of investments, 

unless voluntarily posted on the fund’s website, the 

fund’s complete portfolio holdings are only 

available by telephonic request, or by accessing the 

fund’s report on Form N–CSR for that period on the 

Commission’s EDGAR system. See, e.g., Instruction 

1 to Item 27(b) of Form N–1A; Item 6(a) of Form 

N–CSR. 

124See proposed amendments to Item 27(b) of 

Form N–1A; Item 24, Instruction 7 of Form N–2; 

Item 28(a), Instruction 7(i) of Form N–3. 

125See ICI Comment Letter I. 

126See id. The Commission adopted rules 

permitting the use of a summary schedule of 

investments in 2004. See Shareholder Reports and 

Quarterly Portfolio Disclosure of Registered 

Management Investment Companies, Investment 

Company Act Release No. 26372 (Feb. 27, 2004) [69 

FR 11244 (Mar. 9, 2004)]. In that release, the 

Commission stated that the summary schedule was 

‘‘designed to streamline shareholder reports and 

help investors to focus on a fund’s principal 

holdings, and thereby better evaluate the fund’s risk 

profile and investment strategy.’’ Id. at 11248. 

127Rule 30e–3(b)(1)(iii). 

128See supra note 117 and accompanying text. 

The information reported on Form N–PORT for the 

third month of each fund’s fiscal quarter will be 

made publicly available 60 days after the end of the 

fund’s fiscal quarter. The Commission does not 

intend to make public the information reported on 

Form N–PORT for the first and second months of 

each fund’s fiscal quarter that is identifiable to any 

particular fund or adviser; however, the 

Commission may use information reported on Form 

N–PORT in its regulatory programs, including 

examinations, investigations, and enforcement 

actions. Form N–Q will be rescinded May 1, 2020. 

Larger fund groups will begin submitting reports on 

Form N–PORT by April 30, 2019, and smaller fund 

groups by April 30, 2020. See Reporting 

Modernization Adopting Release, supra note 14; 

Investment Company Reporting Modernization, 

Investment Company Act Release No. 32936, supra 

note 117. 

129See Items 1 and 6 of Form N–CSR; Item 1 of 

Form N–Q; Part F of Form N–PORT. 

130These requirements are largely similar to the 

accessibility requirements of rule 498 under the 

Securities Act, which allows funds to use a 

summary prospectus, and rule 14a–16 under the 

Exchange Act, which requires issuers and other 

soliciting persons to furnish proxy materials by 

posting these materials on a public website and 

notifying shareholders of the availability of these 

materials and how to access them. See rule 14a–16 

under the Exchange Act [17 CFR 240.14a–16]. 

131Rule 30e–3(b)(2). The Commission’s electronic 

filing system for fund documents is EDGAR. Rule 

498 under the Securities Act sets forth a similar 

requirement. See 17 CFR 230.498(b)(1)(v)(A). 

132Rule 30e–3(b)(3)–(4). 

133See rule 30e–3(b)(5). The rule provides that 

the conditions in paragraphs (b)(1) through (b)(4) of 

the rule (i.e., the posting requirements) shall be 

deemed to be met, notwithstanding the fact that the 

materials required by paragraph (b)(1) of the rule 

are not available for a period of time in the manner 

required by the posting requirements, so long as 

certain conditions are met. See id. Four commenters 

supported the safe harbor provision of the proposed 

rule. See BlackRock Comment Letter; ICI Comment 

Letter I, Comment Letter of OppenheimerFunds 

(Aug. 11, 2015) (‘‘OppenheimerFunds Comment 

Letter’’); State Street Comment Letter. Moreover, we 

did not receive any comment letters objecting to the 

safe harbor provision. 

134See rule 30e–3(b)(5)(i) and (ii). 

these reasons, we proposed 

amendments to our registration forms 

that would have restricted funds relying 

on proposed rule 30e–3 from providing 

a summary schedule in their 

shareholder reports in lieu of a complete 

schedule.124 We requested comment, 

however, as to whether the final rule 

should restrict funds relying on the 

proposed rule from using a summary 

schedule. 

One commenter recommended that 

funds retain the ability to use the 

summary schedule of investments if 

they rely on the proposed rule.125 This 

commenter noted that it understood the 

Commission’s concern that investors 

may have to take additional steps to 

access the complete portfolio schedule, 

but believed the policy rationale 

supporting allowing the summary 

schedule remained the same as when 

the Commission first implemented the 

summary schedule.126

We continue to be concerned that use 

of a summary schedule of investments 

with rule 30e–3 would be potentially 

confusing or cumbersome for investors 

seeking access to the complete portfolio 

schedule. At the same time, we 

acknowledge that a fund may choose to 

use a summary schedule for cost 

considerations or otherwise, and we 

continue to believe that the summary 

schedule can help investors focus on a 

fund’s principal holdings and thereby 

better evaluate the fund’s risk profile 

and investment strategy. The restriction 

contained in proposed rule 30e–3 

effectively would have required a fund 

using the summary schedule to create 

and distribute two separate reports to 

shareholders (i.e., one containing the 

summary schedule for investors 

receiving the report in paper, and 

another containing a complete schedule 

of portfolio investments for purposes of 

rule 30e–3). 

To avoid the related administrative 

cost and other burdens associated with 

such a scenario, and at the same time 

help to provide investors with easy 

access to the complete portfolio 

schedule, the final rule requires, in a 

change from the proposal, that if a 

report required to be posted at the 

specified website (i.e., a current report 

to be transmitted pursuant to rule 30e– 

3 or the report for the prior fiscal 

period) includes a summary schedule of 

investments, the fund’s complete 

portfolio holdings as of the close of the 

period covered by the report must also 

be posted at the specified website.127

This will provide investors with a year 

of complete portfolio schedules on the 

specified website, regardless of whether 

the fund chooses to utilize a summary 

schedule of investments in its reports. 

Like the schedule of investments 

required to be included with 

shareholder reports (and filed as part of 

reports on Form N–CSR), quarterly 

schedules of portfolio holdings 

currently required to be reported on 

Form N–Q, and monthly schedules of 

portfolio holdings that will be required 

to be reported on Form N–PORT,128 the 

portfolio holdings schedules specified 

by the rule are required to be presented 

in accordance with schedules set forth 

under Regulation S–X.129 Accordingly, 

we anticipate that most funds have 

established procedures in place to 

update and monitor the website posting 

of similar types of portfolio schedule 

disclosures. These requirements are also 

intended to provide disclosures that are 

easily understood and familiar to 

investors, because these disclosures will 

contain similar information and be 

presented in a similar manner as those 

currently included in shareholder 

reports. 

As proposed, the final rule also 

requires compliance with certain 

conditions designed to ensure the 

accessibility of shareholder reports and 

other required materials.130 First, the 

website address at which the 

shareholder reports and other required 

portfolio information are made 

accessible may not be the address of the 

Commission’s electronic filing 

system.131 Second, the materials 

required to be posted on the website 

must be presented in a format or formats 

convenient for both reading online and 

printing on paper, and persons 

accessing the materials must be able to 

permanently retain (free of charge) an 

electronic copy of the materials in this 

format.132 These conditions are 

designed to ensure that shareholder 

reports and other information posted on 

a website pursuant to the rule are userfriendly and allow investors the same 

ease of reference and retention abilities 

they would have with paper copies of 

the information. 

The rule includes a safe harbor 

provision that would allow a fund to 

continue relying on the rule even if it 

did not satisfy the posting condition of 

the rule for a temporary period of 

time.133 In order to rely on this safe 

harbor, a fund must have reasonable 

procedures in place to ensure that the 

required materials are posted on the 

specified website in the manner 

required by the rule and take prompt 

action to correct noncompliance with 

these posting requirements.134 The rule 

requires prompt action as soon as 


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135Compare rule 498(e)(4) under the Securities 

Act (providing a similar safe harbor under the 

summary prospectus rule for the same reasons) [17 

CFR 230.498(e)(4)], with rule 30e–3(b)(5). Providing 

for this safe harbor by rule may obviate the need 

to provide exemptive relief by order from the rule’s 

conditions under catastrophic circumstances, as 

from time to time we have done. See, e.g., Exchange 

Act Release No. 81760 (Sept. 28, 2017) [82 FR 

46335 (Oct. 4, 2017)] (exemptive relief for 

individuals and entities affected by Hurricanes 

Harvey, Irma, or Maria); Securities Act Release No. 

10416 (Sept. 27, 2017) [82 FR 45722 (Oct. 2, 2017)] 

(Regulation Crowdfunding and Regulation A relief 

and assistance for individuals and entities affected 

by Hurricanes Harvey, Irma, or Maria). 

136See SIFMA Comment Letter. 

137See rule 30e–3(b)(1). 

138See rule 498(e)(1) under the Securities Act 

(requiring in the case of the summary prospectus, 

that the required documents be available at the 

website specified on the cover page or beginning of 

the summary prospectus) [17 CFR 230.498(e)(1)]. 

139See rule 30e–3(c). As discussed above, funds 

relying on the rule to satisfy delivery obligations 

with respect to investors who currently receive 

paper shareholder reports would not have to rely 

on rule 30e–3 with respect to those shareholders 

who have elected to receive reports electronically. 

See supra note 18 and accompanying text. 

140See rule 14a–16 under the Exchange Act [17 

CFR 240.14a–16]. 

141See BlackRock Comment Letter. 

142See OppenheimerFunds Comment Letter. 

143See State Street Comment Letter. 

144See Simpson Thacher Comment Letter. 

145Rule 30e–3(c). 

146 Id. 

147See Proposing Release, supra note 14; rules 

30e–1(c), 30e–2(a). 

148See, e.g., Comment Letter of Charles Schwab 

Investment Management, Inc. (Aug. 12, 2015) 

(‘‘Schwab Comment Letter’’); Dreyfus Comment 

Letter. 

149For example, pursuant to rule 30e–1, a fund 

would be required to transmit a report for a period 

ended March 31 by May 30. Permitting the fund 70 

days to transmit a Notice would enable the fund, 

if it so chose, to combine it with the investor’s May 

account statement mailing. 

150Reports on Form N–CSR must be filed within 

10 days after the shareholder report is sent to 

shareholders, and the shareholder report must be 

sent within 60 days after the close of the period 

covered by the report. See rule 30b2–1(a) [17 CFR 

270.30b2–1(a)]; rule 30e–1(c). 

151Rule 30e–3(c)(1), (d). 

practicable following the earlier of the 

time at which the fund knows or 

reasonably should have known that the 

required documents are not available in 

the manner prescribed by the posting 

requirements of the rule. We are 

adopting this safe harbor because, as we 

explained in the Proposing Release, 

there may be times when, due to events 

beyond a fund’s control, such as system 

outages or other technological issues, 

natural disasters, acts of terrorism, 

pandemic illnesses, or other 

circumstances, a fund may be 

temporarily not in compliance with the 

posting requirements of the rule.135

One commenter recommended that 

the final rule clarify that the materials 

required to be posted could be posted 

on a third-party website or landing page, 

similar to what is allowed under the 

current process for notice and access for 

proxy materials.136 The rule as 

proposed, and as adopted today, does 

not require that the website be 

maintained by any particular party. 

Instead, the rule requires that the 

required materials be posted at the 

website specified in the Notice.137

Similar flexibility regarding the website 

on which required materials must be 

posted exists in our current rules 

relating to the use of a summary 

prospectus.138

b. Notice 

Rule 30e–3 requires funds relying on 

the rule with respect to an investor to 

send a paper Notice notifying the 

investor of the availability of the 

report.139 The requirements for a Notice 

largely mirror the notice requirements 

under the Commission’s rules 

mandating the posting of proxy 

materials online.140 We are adopting the 

Notice requirement generally as 

proposed, but with certain 

modifications in response to issues 

raised by commenters. In particular, the 

final rule permits the Notice to include 

additional content beyond what would 

have been permitted under the proposed 

rule. 

While most commenters focused on 

technical aspects of the Notice, one 

commenter encouraged the Commission 

to consider eliminating the Notice 

requirement altogether, which the 

commenter believed would lead to 

additional cost savings and 

environmental benefits.141 Another 

commenter recommended that the 

Notice be sent annually, rather than 

semi-annually, and that the final rule 

permit the Notice to be sent to investors 

90 days after the fiscal year end rather 

than 60 days as proposed.142 A third 

commenter recommended requiring that 

the Notice be sent by email.143 Finally, 

another commenter recommended that 

the rule allow investors to elect to 

receive notices by email.144

We continue to believe that it is 

important for all investors to receive the 

Notice, as it will contemporaneously 

alert them to the availability of a 

shareholder report online and will 

provide them with information on how 

to obtain a paper copy of the report. 

Therefore, we are adopting as proposed 

the Notice requirements as to format 

(i.e., the Notice must be paper).145 We 

are requiring the Notice to be in paper 

because, even though an investor may 

have provided an email address (e.g., as 

part of opening an account), there may 

be instances where that investor 

provided his or her email address for 

certain limited purposes without 

necessarily opting to receive 

shareholder reports or notices of reports 

through email. 

In a change from the proposal, the 

final rule extends from 60 days to 70 

days the period of time in which the 

Notice must be sent to investors after 

the close of the period covered by the 

related report.146 We proposed a 60-day 

period because, as we explained in the 

Proposing Release, that is the period 

currently required for transmission of 

reports, whether in paper or 

electronically.147 After consideration of 

the comments we received, including 

comments recommending that we 

permit the Notice to accompany other 

important account materials,148 we 

believe a 70-day period will 

accommodate such changes to the 

Notice in the final rule and achieve 

additional cost savings and operational 

efficiencies. 

First, in a change from the proposal 

and as discussed below, we are 

permitting the Notice to accompany 

other materials, including a 

shareholder’s account statement. 

Because shareholder reports are 

generally prepared at or shortly before 

the end of the 60 days following the 

close of the reporting period, and 

account statements (whether monthly, 

quarterly, or annual) are typically 

prepared and mailed within a few days 

after the close of the applicable month 

end, a Notice would generally not be 

able to accompany an account statement 

mailing if the Notice is sent out within 

60 days following the close of the 

reporting period.149

Second, as also discussed below, we 

are permitting the Notice to include 

content from the shareholder report, and 

also requiring any such Notices to be 

filed with the Commission as part of a 

fund’s report on Form N–CSR. 

Extending the time period to 70 days 

permits funds additional time to prepare 

Notices after finalizing their related 

shareholder reports, and matches up 

with the 70-day filing period for reports 

on Form N–CSR.150

i. Information That Must Be Included in 

the Notice 

As under the proposal, the Notice 

must be in plain English so that 

investors can easily understand it.151

The final rule also requires funds to 

include certain statements and 

information in the Notice, if applicable, 

and permits funds to include certain 


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29170 Federal Register / Vol. 83, No. 121 / Friday, June 22, 2018 / Rules and Regulations 

152Rule 30e–3(c)(1)(i). We have modified this 

requirement to provide more flexibility to funds in 

recognition of the fact that investors can acquire 

interests in funds through a variety of distribution 

channels. 

153Rule 30e–3(c)(1)(ii). 

154 Id. 

155Rule 30e–3(c)(1)(iii). 

156Rule 30e–3(c)(1)(iv). The website address must 

be specific enough to lead investors directly to the 

documents that are required to be posted online 

under the rule. The website address could be a 

central site with prominent links to each document, 

but could not be a home page or section of the 

website other than where the documents are posted. 

In addition to the website address, the Notice may 

contain any other equivalent method or means to 

access the documents. See id. 

157Rule 30e–3(c)(1)(v). 

158Rule 30e–3(c)(1)(v)(A). 

159Rule 30e–3(c)(1)(v)(B). 

160Rule 30e–3(c)(1)(v)(C). 

161Rule 30e–3(c)(2). For example, this 

information could include a control number unique 

to that shareholder. 

162Although the final rule does not require a 

reply card as a method of communication, a fund 

could choose to use reply cards. 

163See Comment Letter of Fidelity Investments 

(Aug. 10, 2015) (‘‘Fidelity Comment Letter I’’); see 

also Investment Advisory Committee 

Recommendation; Broadridge Meeting Memo I. 

164Rule 30e–3(c)(1)(ii). Similar statements are 

required for other documents. For example, Form 

N–1A requires the back cover page of the statutory 

prospectus of an open-end fund to include a 

statement to the effect that the fund’s annual report 

contains a discussion of the market conditions and 

investment strategies that significantly affected the 

fund’s performance during its last fiscal year. See 

Item 1(b)(1) of Form N–1A. 

165Rule 30e–3(c)(1)(ii). As discussed below, the 

final rule separately permits the Notice to include 

content from the related shareholder report. See 

infra Section II.B.2.b.ii. 

166See Fidelity Comment Letter I. 

167See SIFMA Comment Letter I. 

168Rule 30e–3(c)(1)(iv). 

additional information, generally as 

follows: 

• As was proposed, the Notice must 

contain a prominent legend in bold-face 

type stating that an important report to 

shareholders is available online and in 

paper by request, and in a change from 

the proposal, the Notice may include 

information identifying the fund, its 

sponsor (including any investment 

adviser or sub-adviser to the fund), a 

variable annuity or variable life 

insurance contract or insurance 

company issuer thereof, or a financial 

intermediary through which shares of 

the fund are held; 152

• as was generally proposed (but with 

certain modifications), the Notice must 

state that the report contains important 

information about the fund, including as 

proposed its portfolio holdings and, in 

a change from the proposal, its financial 

statements;153

• in a change from the proposal, the 

Notice may include a brief listing of 

other types of information contained in 

the report; 154

• as was proposed, the Notice must 

state that the report is available on the 

internet or, upon request, by mail, and 

encourage shareholders to access and 

review the report; 155

• as was proposed, the Notice must 

include the website address where the 

shareholder report and other required 

portfolio information is posted (i.e., the 

‘‘landing page’’ to those materials), but 

in a change from the proposal, the final 

rule eliminates the proposed 

requirement that the Notice include the 

website address for individual 

reports; 156

• as was generally proposed (with 

certain modifications), the Notice must 

include a toll-free (or collect) telephone 

number to contact the fund or the 

shareholder’s financial intermediary 157

and (A) provide instructions describing 

how a shareholder may request, at no 

charge, a paper or email copy of the 

shareholder report or other materials 

required to be made accessible online, 

and an indication that the shareholder 

will not receive a paper copy of the 

report unless requested,158 (B) explain 

that the shareholder can at any time in 

the future elect to receive paper reports 

and provide instructions describing how 

a shareholder may make that election 

(e.g., by contacting the fund or the 

shareholder’s financial intermediary),159

and (C) if applicable, include 

instructions describing how a 

shareholder can elect to receive 

shareholder reports or other documents 

and communications by electronic 

delivery; 160

• in a change from the proposal, the 

Notice may include other methods by 

which a shareholder can contact the 

fund or the shareholder’s financial 

intermediary (e.g., by email or through 

a website) and may include information 

needed to identify the shareholder; 161

and 

• in a change from the proposal, the 

Notice is not required to be 

accompanied by a reply card.162

We requested comment on whether 

the proposed disclosures in the Notice, 

including the required statement that 

the report contains important 

information about the fund, were 

appropriate. One commenter suggested 

that the content of the Notice be 

enhanced to require disclosures relating 

to ‘‘important information, such as 

[f]und performance and portfolio 

manager insights,’’ noting that enhanced 

disclosures could encourage investors to 

access their shareholder reports.163 We 

agree that such additional disclosures 

could encourage investors to access 

their reports, so we have modified and 

expanded the proposed required 

statement in the Notice that the report 

to shareholders contains important 

information about the fund, including 

its portfolio holdings, to add a reference 

to the fund’s financial statements.164 In 

addition, the final rule permits the 

statement to also include a brief listing 

of other types of information contained 

in the report. For example, the 

statement could also note that the report 

contains fund performance and portfolio 

manager insights as suggested by the 

commenter, or other types of 

information such as expense 

information.165

Some commenters recommended 

modifications to the proposed website 

address requirements. One commenter 

suggested that the rule not require the 

Notice to include a specific website 

address, which would allow the 

industry more flexibility in 

implementing the rule.166 Another 

commenter suggested that the rule not 

require website addresses for individual 

reports.167 That commenter stated that: 

(1) Such a requirement was too complex 

and costly to administer, as new reports 

are posted and old ones are taken down; 

(2) website addresses would be long and 

difficult to key in from the paper Notice; 

and (3) such requirement was 

inconsistent with our rules regarding 

the internet availability of proxy 

materials, which only requires a website 

address for a landing page and with 

which investors may already be 

familiar. 

After consideration of these 

comments, we have determined to 

eliminate from the final rule the 

proposed requirement that the Notice 

include the website address for 

individual reports. We agree with those 

commenters suggesting that such a 

requirement could result in unnecessary 

administrative burdens, and believe that 

limiting the website link to the landing 

page, where the shareholder report and 

other required materials are available, 

meets our objective of directing 

investors to the shareholder report in an 

easily accessible manner. The address 

used must be specific enough to lead 

investors directly to the documents that 

are required to be accessible under the 

rule’s conditions, but may be a central 

site with prominent links to each 

document. The website may not be the 

home page or section of the website 

other than on which the documents are 

posted.168 Thus, an investor must be 

able to navigate from the landing page 

to each of the required documents with 

a single click or tap. 

To access their reports, investors will 

be required to key in the website 

address provided in the Notice. Some 


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169 Id. 

170A QR code is a two-dimensional barcode 

containing information that is machine-readable. 

For example, some smartphones could scan a QR 

code with information of a specific Uniform 

Resource Locator (‘‘URL’’) and then be directed to 

that website. Although the final rule eliminates the 

requirement that the Notice include the direct 

website address for the report itself, a fund, could, 

pursuant to this provision, choose to include a link 

that takes an investor directly to the report. 

171See proposed rule 30e–3(d)(1)(vi). As 

proposed, the reply card would have been required 

to include the information that the fund would 

need to identify the investor. 

172See ICI Comment Letter I (estimating return 

rates as low as 2%). 

173One commenter indicated that eliminating 

reply cards would reduce aggregate printing and 

mailing costs associated with rule 30e–3 from $127 

million per mailing (of Notices or Initial 

Statements) to between $81 million (if funds elect 

to use postcards) and $118 million (if funds elect 

to use envelopes), which represents a reduction of 

7% to 36%. See ICI Comment Letter I. 

Another commenter indicated that including a 

reply form that is pre-addressed with postage paid 

would cost approximately $1,325,000 in the 

aggregate per year. See T. Rowe Price Comment 

Letter I. 

Another commenter estimated cost savings from 

the elimination of reply cards to be approximately 

$10 million. See Broadridge Meeting Memo II. 

174See, e.g., Comment Letter of Dechert LLP (Aug. 

12, 2015) (‘‘Dechert Comment Letter’’); ICI 

Comment Letter I; Comment Letter of Mediant 

Communications (Aug. 12, 2015) (‘‘Mediant 

Comment Letter’’); SIFMA Comment Letter; T. 

Rowe Price Comment Letter I; Capital Research 

Comment Letter I. 

175See rule 30e–3(c)(1)(v). 

176See rule 30e–3(c)(2). In lieu of the reply card, 

some commenters suggested that the rule permit 

flexibility in how shareholders could express their 

delivery preference and/or require alternative 

means of shareholders expressing this preference, 

such as by email (see, e.g., Dechert Comment Letter; 

State Street Comment Letter) or fax (see, e.g., State 

Street Comment Letter). See Dechert Comment 

Letter; State Street Comment Letter; BlackRock 

Comment Letter; CAI Comment Letter I, ICI 

Comment Letter I; MFS Comment Letter; SIFMA 

Comment Letter. 

177See rule 30e–3(c)(2). 

178See, e.g., ICI Comment Letter I; 

OppenheimerFunds Comment Letter; SIFMA 

Comment Letter. 

179See rule 30e–3(c)(1)(v)(C). This provision 

would require, if applicable, instructions not only 

on how to elect electronic delivery of regulatory 

documents like a shareholder report, but on how to 

elect electronic delivery of other types of 

communications (e.g., announcements, news 

Continued 

investors could have difficulty accessing 

their reports if, for example, the address 

to the landing page is made up of a long 

string of unrelated or special characters. 

Short and intuitive website links to the 

landing page and other innovative 

solutions could mitigate this problem. 

In a change from the proposal, the 

final rule also provides that the Notice 

may include, in addition to a website 

address, other equivalent methods or 

means to facilitate shareholder access to 

the shareholder report and other 

required materials.169 Such methods or 

means could include, for example, 

inclusion of a Quick Response Code (QR 

code) or similar means to access the 

required website address or link.170

We proposed that the Notice not only 

be required to include a toll-free 

telephone number that an investor can 

use to notify the fund that he or she 

wishes to receive paper reports in the 

future, but also a reply form that is preaddressed with postage-paid as an 

alternative means by which the investor 

can notify the fund of his or her 

preference.171 Commenters generally 

opposed the reply card requirement, 

asserting that reply cards have a low 

response rate 172 that does not justify 

their cost.173 Commenters urged that a 

toll-free telephone number would be an 

equally effective means for an investor 

to express his or her preference and 

would be more cost-effective than a 

reply card.174

After considering the comments we 

received, we have determined not to 

require funds to include a reply card.175

We have been persuaded by 

commenters that the low response rates 

experienced from this means of 

communication coupled with the 

expense associated with this method do 

not justify the inclusion of a reply card. 

However, the final rule permits the 

Notice to include additional means by 

which an investor can contact the fund 

or the investor’s financial 

intermediary.176 Because funds and 

financial intermediaries have extensive 

direct experience with the types of 

communication methods preferred by 

their investors, we believe that the rule 

should provide flexibility to permit 

additional methods of communication, 

and we encourage the inclusion of 

additional means besides the required 

toll-free (or collect) telephone number, 

such as email addresses, dedicated web 

pages, etc. To further facilitate the use 

of other means of communication, the 

final rule permits the Notice to include 

any information needed to identify the 

shareholder so that shareholders may 

express their shareholder report 

transmission preference with ease.177

This information could include, for 

example, control numbers, account 

numbers, etc. As noted earlier, if a fund 

were to choose to include this 

information in a Notice, the fund should 

take appropriate measures to protect 

this information just as funds do today 

regarding other mailings, like account 

statements, that may contain sensitive 

information. 

In providing the required toll-free (or 

collect) telephone number and other 

means, we encourage the use of 

methods that allow shareholders to 

express their preference as conveniently 

as possible, such as by limiting the need 

for investors to speak with multiple 

representatives or navigate through 

multiple telephone menus or web pages, 

or otherwise minimizing the steps 

necessary to express a preference. To 

record investor preferences, a fund 

might, for example, provide an 

automated system, live representatives, 

a toll-free (or collect) telephone number 

that is dedicated solely for this purpose, 

or a prompt for investors when they 

access their shareholder account 

information online, such as through the 

use of a pop-up. 

In light of the principle that effective 

rulemaking should not end with rule 

adoption, the staff will review, and 

report to the Commission on, the 

implementation of rule 30e–3 to 

evaluate whether funds are employing 

processes that effectively facilitate 

investor election of delivery 

preferences, including the ease through 

which investors may elect delivery 

preferences, taking into account, among 

other things, the continued 

development of delivery mechanisms 

and the evolving array of retail investor 

preferences. For example, the staff’s 

review would include an evaluation of 

the number of investors who have 

elected paper delivery, whether such 

election is on an ad hoc basis or 

permanent basis, the means through 

which the election was made 

(telephone, online or otherwise), and 

the overall investor experience relating 

to the election of delivery preferences. 

The purpose of such review would be to 

better inform the Commission and the 

staff on whether funds are 

implementing processes that effectively 

facilitate investors making elections 

consistent with investors’ preferences 

and on whether any further action 

should be taken to facilitate investor 

election of delivery preferences. 

Some commenters recommended that 

the final rule permit the Notice to 

include disclosures informing investors 

how they can affirmatively consent to 

electronic delivery of shareholder 

reports and other documents.178 After 

further consideration of these 

comments, we believe that the Notice 

should provide the recipient investor 

with information on how to obtain 

shareholder reports in the investor’s 

preferred format (i.e., in paper or by 

email via electronic delivery). 

Therefore, the final rule requires the 

Notice to include, if applicable, 

instructions describing how an investor 

can elect to receive shareholder reports 

or other documents or communications 

by electronic delivery.179


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articles, and other ‘‘investor relations’’ 

communications). 

180See rule 30e–3(c). 

181See rule 14a–16(g)(3) under the Exchange Act 

[17 CFR 240.14a–16(g)(3)]; see also rule 421(d)(3) 

under the Securities Act [17 CFR 230.421(d)(3)]. 

182While not expressly recommending this 

modification to the proposal in its comment letters, 

one commenter designed a sample ‘‘enhanced 

notice’’ that included design elements such as 

pictures and logos that would be consistent with 

this modification. See Broadridge Meeting Memo I. 

183See proposed rule 30e–3(d)(3). 

184See, e.g., Fidelity Comment Letter I 

(recommending that the legend be expanded to alert 

shareholders that the report contains information 

such as fund performance and holdings information 

and portfolio manager’s insights). 

185See Broadridge Meeting Memo I 

(recommending an ‘‘enhanced notice,’’ which this 

commenter suggests could be preceded by a 

Commission pilot to ‘‘accelerate benefits and be 

made available to any and all investment 

companies that wish to use [the enhanced notice]’’); 

Broadridge Meeting Memo II. 

186See Comment Letter of Consumer Action (Dec. 

1, 2017); see also Investment Advisory Committee 

Recommendation (‘‘[T]he [Investor Advisory 

Committee] recommends that the Commission 

explore development of a summary disclosure 

document for annual shareholder reports that 

incorporates key information from the report along 

with prominent notice regarding how to obtain a 

copy of the full report. The summary document 

should be designed to be delivered either by mail 

or by email, depending on the investors’ delivery 

preferences. It should also incorporate a layered 

disclosure approach, including the ability of those 

getting the document electronically to click through 

to more detailed disclosure on a particular topic.’’). 

187Similarly, in cases where shareholder reports 

are delivered electronically via email, we note that 

such emails would not be precluded from including 

content from the related report under the 

Commission’s electronic delivery guidance. See 

1995 Release, supra note 18; 1996 Release, supra 

note 18; 2000 Release, supra note 18. 

188See rule 30e–3(c)(3). UITs subject to rule 

30e–2 are principally separate accounts offering 

variable annuities and variable life insurance 

policies that do not prepare or transmit shareholder 

reports for the separate accounts themselves. 

Rather, under rule 30e–2 they are required to 

transmit the shareholder reports of the underlying 

funds in which they invest, which may be 

numerous and in many cases are unaffiliated. 

Because of this two-tier structure, the final rule 

limits the provision permitting inclusion of 

additional content from shareholder reports to 

reports required by rule 30e–1. 

189 Id. 

190This approach draws from certain aspects of 

the Investor Advisory Committee Recommendation. 

For example, the Investor Advisory Committee 

recommended that ‘‘the Commission explore 

development of a summary disclosure document for 

annual shareholder reports that incorporates key 

information from the report along with prominent 

notice regarding how to obtain a copy of the full 

report.’’ See IAC Recommendation, supra note 40. 

While the final rule does not require a summary 

disclosure document, and does not mandate any 

particular content, it permits funds to add to the 

Notice content from the shareholder report and 

similarly requires that the Notice include a 

prominent legend regarding how to obtain a copy 

of the report. 

Additionally, the Investor Advisory Committee 

recommended that ‘‘the Commission engage in 

investor testing of the proposed [summary 

document and layered] disclosure, or encourage 

testing by industry members, to ensure that the 

proposed approach delivers the expected benefits of 

reducing costs for funds and distributors without 

sacrificing disclosure quality.’’ Id. 

Consistent with the Investor Advisory Committee 

Recommendation, we note that the Fund Retail 

Investor Experience and Disclosure Request for 

Comment, as well as investor testing of disclosure 

alternatives, are two key initiatives the Commission 

is using to assess our current disclosure framework 

for funds and to consider possible changes to that 

framework. See Disclosure Request for Comment, 

supra note 20. Regarding this investor testing, the 

Commission’s Office of the Investor Advocate 

(‘‘OIAD’’) is engaging in investor testing through its 

Policy Oriented Stakeholder and Investor Testing 

for Innovative and Effective Regulation 

(‘‘POSITIER’’) initiative. See Disclosure Request for 

Comment, supra note 20. 

Finally, in a change from the 

proposal, the final rule permits a Notice 

to include pictures, logos, or similar 

design elements so long as the design is 

not misleading and the information is 

clear.180 A similar provision exists in 

the rules governing the content of the 

Notice of internet Availability of Proxy 

Materials.181 While we did not receive 

any comments that suggested this 

modification to the proposal,182 we 

believe that this provision promotes our 

general goal of highlighting the Notice 

for investors’ attention by permitting the 

addition of content that alerts investors 

to the Notice itself, and by extension the 

shareholder report, without obscuring 

important information contained in the 

Notice. 

ii. Option To Include Content From 

Report in Notice 

The Notice is designed to alert 

investors to the availability of a 

shareholder report online and to 

provide investors with information on 

how to obtain paper reports if that is 

their preference. As we noted in the 

Proposing Release, we believe it is 

important to limit the total information 

included in the Notice, in order to 

ensure that information regarding the 

availability of a shareholder report does 

not become obscured. Therefore, we 

proposed that the rule limit the 

information contained in the Notice to 

the information required by the rule, but 

requested comment on whether we 

should require that the Notice not 

contain any additional information 

other than that specified by the rule.183

In addition to the comments 

described above regarding types of 

additional information that should be 

permitted in the Notice (e.g., 

instructions on how to elect electronic 

delivery of documents), we received 

comments recommending that the final 

rule should expand the legend in the 

Notice to include additional information 

about the fund.184 One commenter 

recommended that the Notice should 

require in a standardized format certain 

additional content found in the report 

(for example, a fund’s top ten holdings, 

performance line graph, total return 

performance, expense information, and/ 

or portfolio composition).185 Other 

commenters recommended that the 

Commission should explore the 

development of a document more akin 

to a ‘‘summary shareholder report’’ that 

incorporates layered disclosure 

principles.186

After consideration of these 

comments, we believe that permitting— 

but not requiring as a condition to use 

this optional method—the inclusion of 

certain additional information in the 

Notice is appropriate so long as it is 

limited to content from the shareholder 

report for which Notice is being 

given.187 We have modified the final 

rule accordingly to permit registered 

management companies (but not UITs) 

to include content from the report in a 

Notice.188 To avoid obscuring the 

information required to be in the Notice 

(i.e., the required legends, website 

address, etc.), under the final rule, 

additional content from the shareholder 

report included in the Notice must be 

placed after the information specified by 

paragraph (c)(1) of the rule.189

We are persuaded that permitting 

additional flexibility regarding the 

content of the Notice is appropriate, and 

may result in funds crafting Notices that 

convey to investors certain key content 

from the shareholder report, while also 

encouraging investors to access the 

shareholder report for more detailed 

information.190 Information contained 

in shareholder reports that we believe 

may be communicative and 

appropriate—albeit not required—for 

inclusion in the Notice could be, for 

example: One or more graphical 

representations of holdings; a list of the 

fund’s top holdings (e.g., top five or ten 

holdings); performance information; the 

type of fund; a brief statement of the 

fund’s investment objectives and 

strategies; the expense ratio or an 

expense example; and the name and 

title of the fund’s portfolio manager(s). 

Providing funds the flexibility to 

include in the Notice certain 

information from the shareholder report 

is intended to allow them to identify 

and provide content they believe is 

particularly informative to their 

investors. Funds that decide to include 

additional information from the report 

in their Notices generally should 

consider the appropriateness of such 

information, the benefits to investors, 

and the cost impacts associated with 

adding information to the Notice. When 

including content from the report in a 

Notice, funds have obligations with 

respect to the antifraud provisions of the 


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Federal Register / Vol. 83, No. 121 / Friday, June 22, 2018 / Rules and Regulations 29173 

191See, e.g., Section 17(a) under the Securities 

Act [15 U.S.C. 77q]; Section 10(b) under the 

Exchange Act [15 U.S.C. 78j(b)] and rule 10b–5 

thereunder [17 CFR 240.10b–5]; and Section 34(b) 

of the Investment Company Act [15 U.S.C. 80a– 

33(b)]. 

192For example, a fund could include either the 

complete line graph or complete performance table 

required by the applicable form (see, e.g., Item 

27(b)(7)(ii) of Form N–1A requiring an open-end 

management company’s report to include (A) a line 

graph, and (B) annual total returns table). 

193See Item 1(b) of Form N–CSR. 

194See proposed rule 30e–3(d)(2). 

195See proposed rule 30e–3(d)(4). 

196See CAI Comment Letter I; Fidelity Comment 

Letter I; ICI Comment Letter I; OppenheimerFunds 

Comment Letter; Schwab Comment Letter. 

197See ICI Comment Letter I. 

198See ICI Comment Letter I; OppenheimerFunds 

Comment Letter. 

199See Fidelity Comment Letter I. 

200See CAI Comment Letter I. This commenter 

also recommended that the consolidated Notice be 

permitted to specify either a single website or 

multiple websites at which required documents 

were available for different funds. 

201See, e.g., Capital Research Comment Letter I; 

State Street Comment Letter. 

202See.,e.g., Dreyfus Comment Letter; ICI 

Comment Letter I; Invesco Comment Letter; MFS 

Comment Letter; OppenheimerFunds Comment 

Letter; Schwab Comment Letter; T. Rowe Price 

Comment Letter I. 

203See, e.g., ICI Comment Letter I. 

204See, e.g., ICI Comment Letter I; Invesco 

Comment Letter; MFS Comment Letter; 

OppenheimerFunds Comment Letter; T. Rowe Price 

Comment Letter I. 

205See, e.g., Capital Research Comment Letter I; 

ICI Comment Letter I. 

206See, e.g., ICI Comment Letter I; Invesco 

Comment Letter; MFS Comment Letter; 

OppenheimerFunds Comment Letter; T. Rowe Price 

Comment Letter I. 

207See, e.g., T. Rowe Price Comment Letter I. 

208See, e.g., CAI Comment Letter I; ICI Comment 

Letter I. 209See, e.g., ICI Comment Letter I; MFS Comment 

Letter; T. Rowe Price Comment Letter I. 210See, e.g., Dreyfus Comment Letter; ICI 

Comment Letter I; T. Rowe Price Comment 

Letter I. 211See rule 30e–3(c)(4). 212See rule 30e–3(c)(5)(i), (ii). Under the final 

rule, a Notice for a fund may accompany a summary 

prospectus, statutory prospectus or statement of 

additional information for other funds because (1) 

rule 498 under the Securities Act does not prohibit 

a summary prospectus for one fund from 

accompanying a summary prospectus, statutory 

prospectus or statement of additional information 

for another fund, and (2) the final rule permits the 

Notice for one fund to accompany a Notice for 

another fund, and for a Notice to incorporate or 

combine one or more other Notices. See rule 498 

under the Securities Act [17 CFR 230.498]; rule 

30e–3(c)(5)(i), (ii). 

federal securities laws.191 In this regard, 

inclusion of only certain elements of 

performance information required to be 

included in reports raises certain 

considerations. If a fund chooses to 

include in the Notice performance 

information from the report, the content 

should include all information required 

with respect to the particular 

performance item in accordance with 

applicable presentation 

requirements.192

While the final rule does not prescribe 

a specific page limit, funds generally 

should limit optional content to a 

relatively brief amount to avoid 

detracting from the primary purpose of 

the Notice and to encourage investors to 

access the shareholder report itself. As 

discussed further below, we are 

requiring funds that choose to transmit 

Notices with additional information 

from the shareholder report to file such 

Notices as part of their reports on Form 

N–CSR.193 As discussed above, we 

believe it is important that information 

regarding the availability of a 

shareholder report does not become 

obscured, and to address this concern, 

we are requiring that the information 

that is required to be in the Notice (i.e., 

the required legends, website address, 

etc.) must be presented before any 

additional content from the shareholder 

report is included in the Notice to 

ensure that the required legends and 

website address are positioned 

prominently in the Notice. 

iii. Materials That May Be Combined 

With or Accompany the Notice 

To further ensure that the information 

contained in the Notice would not be 

obscured, the rule as proposed would 

have prohibited the Notice from being 

incorporated into or combined with 

another document,194 or sent along with 

other shareholder communications 

(with the exception of the fund’s current 

summary prospectus, prospectus, 

statement of additional information, or 

Notice of internet Availability of Proxy 

Materials under rule 14a–16 under the 

Exchange Act).195 We received a 

number of comments on this aspect of 

the proposed rule, with commenters 

requesting additional flexibility in what 

materials or documents could be 

combined with, or accompany, the 

Notice. 

Some commenters recommended that 

the final rule permit the use of a single, 

consolidated Notice for funds within the 

same fund complex or for funds held in 

the same intermediary contract or 

account.196 Commenters noted that such 

an approach would have the benefits of 

increasing the likelihood of investor 

review 197 and reductions in costs.198

One commenter recommended that a 

consolidated Notice be permitted for 

funds from different fund complexes,199

while another recommended that the 

final rule permit consolidated Notices 

for funds held through a variable 

insurance product.200

Some commenters recommended that 

the final rule permit the Notice to be 

incorporated into the summary 

prospectus and account statements, 

stating it would provide additional 

visibility due to investor interest in 

those documents.201 A number of 

commenters recommended that other 

materials should be permitted to 

accompany the Notice, including 

account statements,202 new account 

applications,203 new account welcome 

kits,204 notices from other funds with 

the same fiscal year end,205 dividend 

checks,206 transaction confirmations,207

and in the case of variable insurance 

products, the variable annuity contract 

or life insurance policy and the related 

contract prospectuses or statements of 

additional information.208 Commenters 

stated that investors would be more 

likely to read Notices bundled with 

other materials,209 and that additional 

cost savings would result.210

After consideration of the comments, 

we have modified the final rule to 

permit the use of consolidated 

Notices.211 In addition to reduced costs, 

we believe that a single, consolidated 

Notice could be effective in alerting a 

shareholder to the online availability of 

shareholder reports for multiple funds. 

We note that if a consolidated Notice is 

used, a fund must draft the Notice to 

incorporate all elements required by the 

rule with respect to each report covered 

by the Notice. For example, if the 

website address for one report covered 

by the Notice does not include the 

materials required for one or more other 

funds covered by the Notice, then 

additional website addresses would be 

required so that all required materials 

for the funds covered by the Notice are 

made appropriately accessible. In such 

case, we believe it should be clear to 

investors which website address is 

associated with each report covered by 

the consolidated Notice. 

We have also modified the final rule 

to permit the Notice to accompany 

additional materials beyond a current 

summary prospectus, statutory 

prospectus, statement of additional 

information, or Notice of internet 

Availability of Proxy Materials. As with 

consolidated Notices, we believe that 

permitting Notices to accompany other 

documents not only could result in 

additional cost savings (i.e., reduced 

mailing expenses), but could be 

effective in alerting a shareholder to the 

Notice if the other documents are likely 

to be read by investors. Under the final 

rule, a Notice may accompany one or 

more Notices for other funds.212 In the 

case of a fund that is available as an 

investment option in a variable annuity 

or variable life insurance contract, the 


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29174 Federal Register / Vol. 83, No. 121 / Friday, June 22, 2018 / Rules and Regulations 

213Rule 30e–3(c)(5)(iii). Thus, Notices for 

underlying funds offered under a contract may 

(either as individual Notices or as a consolidated 

Notice) accompany (1) the contract, (2) the 

contract’s statutory prospectus and statement of 

additional information, and (3) summary 

prospectuses, statutory prospectuses, statements of 

additional information, and Notices of internet 

Availability of Proxy Materials for one or more 

underlying funds. See also rule 498(c) under the 

Securities Act (permitting, under certain 

conditions, a summary prospectus for a fund that 

is available as an investment option in a variable 

annuity or a variable life insurance contract to be 

bound together with the statutory prospectus for the 

contract and summary prospectuses and statutory 

prospectuses for other investment options available 

in the contract) [17 CFR 230.498(c)]. 

214Rule 30e–3(c)(5)(iv). 215See, e.g., rule 498(c) under the Securities Act 

[17 CFR 230.498(c)]. 216See, e.g., rule 154 under the Securities Act 

(permitting householding of prospectuses) [17 CFR 

230.154]; rules 30e–1(f) and 30e–2(b) (permitting 

householding of shareholder reports); rules 14a–3(e) 

and 14c–3(c) under the Exchange Act (permitting 

householding of annual reports to security holders, 

proxy statements and information statements, and 

Notices of internet Availability of Proxy Statements) 

[17 CFR 240.14a–3(e); 17 CFR 240.14c–3(c)]. See 

generally Delivery of Disclosure Documents to 

Households, Investment Company Act Release No. 

24123 (Nov. 4, 1999) [64 FR 62540 (Nov. 16, 1999)] 

(adopting householding rules with respect to 

prospectuses and shareholder reports); Delivery of 

Proxy Statements and Information Statements to 

Households, Investment Company Act Release No. 

24715 (Oct. 27, 2000) [65 FR 65736 (Nov. 2, 2000)] 

(adopting householding rules with respect to proxy 

statements and information statements). 

217Rule 30e–3(c)(6). 

218See proposed rule 30e–3(d)(6). 

219See, e.g., Dechert Comment Letter; ICI 

Comment Letter I; T. Rowe Price Comment 

Letter I. 

220See, e.g., Dechert Comment Letter; Invesco 

Comment Letter; SIFMA AMG Comment Letter. 

221We expect this to be the case given the nature 

of the information required in the Notice, along 

with the general restriction on including 

information other than that required by the rule. 

222 Item 1(b) of Form N–CSR (requiring the filing 

of a copy of each notice transmitted to stockholders 

in reliance on rule 30e–3 that contains disclosures 

specified by paragraph (c)(3) of that rule). 

223Proposed rule 30e–3(f). One commenter 

questioned fund firm practices regarding delivery of 

paper shareholder reports upon request. See 

Broadridge Comment Letter II. A second commenter 

disputed the premise and sampling methodology 

conducted by the first commenter, stating that fund 

firms have ‘‘specific, highly effective processes in 

place to handle requests under Rule 498.’’ See ICI 

Comment Letter III. The Commission is not aware 

of investors having systemic issues related to fund 

firm practices regarding delivery of paper 

shareholder reports upon request. 

224See, e.g., 1995 Release, supra note 18 (stating 

‘that ‘‘as a matter of policy, where a person has a 

right to receive a document under the federal 

securities laws and chooses to receive it 

electronically, that person should be provided with 

a paper version of the document if any consent to 

receive documents electronically were revoked or 

the person specifically requests a paper copy 

(regardless of whether any previously provided 

consent was revoked).’’). A similar requirement is 

found in rule 498 under the Securities Act 

governing the use of a summary prospectus. See 

rule 498(f) [17 CFR 230.498(f)]. 

225See rule 30e–3(e), (i); proposed rule 30e–3(f); 

infra Section II.C. For clarity, the final paragraph (e) 

of rule 30e–3 operates independently of final 

paragraph (f) of rule 30e–3. Compare rule 30e–3(e) 

(requiring funds to deliver a paper report in 

response to a shareholder’s ad hoc request) and rule 

30e–3(f) (requiring funds to deliver paper reports to 

a shareholder, who has elected a shareholder 

preference to receive paper reports). See also infra 

Section II.B.2.d. 

Notice may accompany the contract or 

the contract’s statutory prospectus and 

statement of additional information.213

We have also modified the final rule to 

permit the Notice to accompany the 

investor’s account statement. Like 

consolidated Notices, we believe that 

permitting Notices to accompany 

account statements could result in 

additional cost savings. Moreover, we 

believe that an investor who is likely to 

read account statements would also be 

likely to become aware of the 

accompanying Notice and the content 

therein.214 We believe that the Notice 

would not be unduly obscured if 

accompanied by these materials because 

it is accompanying materials 

personalized to the receiver,215 but 

decline to permit the Notice to 

accompany other materials suggested by 

commenters. 

iv. Householding 

Similar to the Commission’s rules on 

householding prospectuses, shareholder 

reports, and proxy statements and 

information statements,216 as proposed, 

final rule 30e–3 allows one Notice to be 

sent to shareholders who share an 

address so long as the conditions set 

forth in rule 30e–1(f), rule 30e–2(b), rule 

14a–3(e) under the Exchange Act, or 

rule 14c–3(c) under the Exchange Act 

are satisfied.217 We received no 

comments on this requirement, and are 

adopting the requirement as proposed. 

v. Requirement To File Form of Notice 

We proposed to require that a form of 

the Notice be filed with the Commission 

not later than 10 days after the Notice 

is sent to shareholders.218 We 

anticipated that this filing would have 

occurred on a new EDGAR submission 

type that would have been created by 

the Commission, and stated our belief 

that the Notice filing requirement would 

have assisted us in overseeing 

compliance with the rule. 

Commenters generally opposed filing 

the Notice semi-annually as part of a 

separate filing. Some commenters 

recommended that the Notice be filed 

instead as an exhibit to Form N–CEN or 

Form N–CSR.219 Commenters also 

recommended eliminating the filing 

requirement, and indicated that the 

Commission could ensure compliance 

in a less costly manner using its 

examination program.220

After further consideration of these 

comments, we have modified the final 

rule as follows. Notices that do not 

contain content from the report (as 

permitted by paragraph (c)(3)) would 

not be required to be filed with the 

Commission because we do not expect 

those Notices to change significantly 

from period to period.221 We also 

believe that our staff can evaluate for 

compliance with the Notice provisions 

of the rule through the Commission’s 

examination program. 

On the other hand, Notices that 

contain content from the report as 

permitted by paragraph (c)(3) would be 

required to be filed with the 

Commission as part of the fund’s report 

on Form N–CSR.222 We believe it is 

appropriate for the Commission to 

review the disclosure in these Notices in 

conjunction with its overall review of 

shareholder reports and other disclosure 

filings. In requiring that they be filed 

with the Commission, the staff will be 

able to monitor for compliance with the 

rule, as well as for general industry 

trends in the use of these Notices as part 

of its ongoing disclosure review and 

other activities. 

c. Delivery of Paper Copy Upon Request 

As a condition to reliance on the rule, 

we proposed to require that the fund or 

UIT (or a financial intermediary through 

which shares of the fund or UIT may be 

purchased or sold) must send, at no cost 

to the requestor and by U.S. first class 

mail or other reasonably prompt means, 

a paper copy of the most recent annual 

and semi-annual reports of the fund (or 

underlying fund in the case of a UIT), 

and portfolio holdings of the fund (or 

underlying fund in the case of a UIT) as 

of its most recent first and third fiscal 

quarters, to any person ad hoc 

requesting copies of any such 

documents within three business days 

after receiving a request for a paper 

copy.223 This requirement is intended to 

allow investors to receive shareholder 

reports and portfolio information in 

paper, if they prefer, even if they are 

receiving Notices under the rule,224 and 

we are adopting it generally as 

proposed. However, we have modified 

the final rule from the proposal to 

eliminate the reference in this provision 

to financial intermediaries given the 

guidance in this release regarding the 

operation of the rule in the context of 

financial intermediaries.225

d. Investor Elections To Receive Future 

Reports in Paper 

While we believe that many investors 

would prefer internet availability of 

shareholder reports based on investor 


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226See supra notes 96–97 and accompanying text. 227Rule 30e–3(f)(1). 228Proposed rule 30e–3(c). These proposed 

conditions are substantially similar to certain of the 

conditions relating to the Commission’s rules on 

‘‘householding’’ prospectuses, shareholder reports, 

and proxy statements and information statements to 

investors who share an address. See, e.g., rule 154 

under the Securities Act [17 CFR 230.154]; rules 

30e–1 and 30e–2 under the Investment Company 

Act [17 CFR 270.30e–1; 17 CFR 270.30e–2]; rules 

14a–3 and 14c–3 under the Exchange Act [17 CFR 

240.14a–3; 17 CFR 240.14c–3]. For purposes of the 

householding rules, consent may be written or 

implied. 

While the householding rules require that 

consent (other than implied consent) be ‘‘in 

writing,’’ we did not propose a similar ‘‘in writing’’ 

requirement because, consistent with the 

Commission’s guidance on electronic delivery, 

consent may be provided in a number of ways, 

including in writing, electronically, or 

telephonically. See 1995 Release, supra note 18 

(noting that one method for satisfying evidence of 

delivery is to obtain informed consent from an 

investor to receive information through a particular 

medium); 1996 Release, supra note 18 (stating that 

informed consent should be made by written or 

electronic means); 2000 Release, supra note 18 

(stating Commission’s view that an issuer or market 

intermediary may obtain an informed consent 

telephonically, as long as a record of that consent 

is retained). 

229Proposed rule 30e–3(c)(1). The proposed rule 

defined ‘‘Initial Statement’’ as the statement 

described in paragraph (c)(1) of the rule. See 

proposed rule 30e–3(h)(2). 

230Proposed rule 30e–3(c)(4). 

231See SIFMA Comment Letter (further noting 

that ‘‘[t]he current system of notice and access for 

the delivery of proxy materials relies entirely on an 

implied consent approach, and in our experience 

that approach has been successful in accurately 

capturing the preferences of clients, who have the 

option of requesting paper copies on either a onetime or on-going basis’’); Comment Letter of 

InveShare, Inc. (Feb. 11, 2016) (‘‘InveShare 

Comment Letter’’). 

232See SIFMA Comment Letter. 

233See supra notes 54–59 and accompanying text. 

234See, e.g., American Forest and Paper Comment 

Letter. 

235See Fidelity Comment Letter I. 

236 Id. 

237See infra Section II.B.2.f. 

238See rule 30e–3(f)(1). In the Proposing Release, 

we requested comment as to whether funds should 

be able to re-solicit implied consent for 

shareholders who had previously elected paper 

delivery and if we should prescribe a minimum 

time period for doing so. One commenter believed 

we should, but did not suggest a particular waiting 

period. See State Street Comment Letter. Given that 

the final rule eliminates the Initial Statement 

requirement to obtain implied consent, we no 

Continued 

testing and internet usage trends, we 

also acknowledge that there will be 

investors who continue to prefer 

receiving shareholder reports in 

paper.226 In order to maintain the ability 

of those investors to receive paper 

copies of their shareholder reports, the 

final rule prohibits reliance on the rule 

to transmit a report to a shareholder if 

such shareholder has notified the fund 

(or the shareholder’s financial 

intermediary) that the shareholder 

wishes to receive paper copies of 

shareholder reports at any time after the 

fund has notified the shareholder of its 

intent to rely on the rule or provided a 

Notice to the shareholder.227

Under the proposal, rule 30e–3 would 

have permitted use of the rule as to a 

particular investor only if the investor 

either previously affirmatively 

consented to this method of 

transmission, or was determined to have 

provided implied consent (if affirmative 

consent was not received) by sending an 

Initial Statement to investors.228 To 

obtain implied consent, the proposed 

rule would have required that the Initial 

Statement inform the investor that 

future shareholder reports would be 

made available on a website until the 

investor provided notification that he or 

she wished to receive paper copies of 

the reports in the future.229 If such 

notification was not received within 60 

days after sending the Initial Statement, 

the rule could be relied upon with 

respect to that investor provided that 

the other conditions of the rule were 

met.230

Comments were mixed regarding the 

Initial Statement and the proposal’s use 

of both affirmative and implied consent. 

Some commenters recommended 

removing provisions of the proposed 

rule that allow affirmative consent and 

provide solely for implied consent.231

One of these commenters stated that 

these affirmative consent provisions 

would add cost and complexity in 

tracking affirmative consents ‘‘as an 

additional step separate from the 

notice’’ and noted that the current 

‘‘notice and access’’ system for the 

delivery of proxy materials does not 

contain such a feature.232 In contrast, 

other commenters expressed concerns 

about permitting internet availability of 

shareholder reports to be the default 

method of satisfying transmission 

obligations to investors for those funds 

that elect to rely on the rule based on 

implied consent.233 Some of these 

commenters suggested that affirmative 

consent would be a more appropriate 

means to assess investor preferences for 

internet availability or paper 

transmission of shareholder reports.234

One commenter suggested that the 

final rule eliminate the Initial Statement 

requirement altogether.235 That 

commenter argued that the Initial 

Statement is unnecessary because both 

the Initial Statement and the Notice 

serve to inform investors of report 

availability and the right to receive 

paper reports. The commenter further 

argued that elimination of the Initial 

Statement requirement would 

streamline customer communications 

regarding delivery preferences, reduce 

unnecessary fund and investor 

expenses, and align the requirements of 

the rule with the Commission’s rule 

regarding internet availability of proxy 

materials (rule 14a–16 under the 

Exchange Act).236

After considering comments, we have 

eliminated the proposed Initial 

Statement from the final rule. Instead, 

we are adopting an extended transition 

period. During the extended transition 

period, an investor in a mutual fund, for 

example, that seeks to begin relying on 

the rule before January 1, 2022 would 

receive approximately six notices of the 

upcoming change over a two-year 

period (each year, investors will receive 

notice on the summary prospectus or 

prospectus, as well as the semi-annual 

and annual report to shareholders.). The 

extended transition period is an 

appropriate, effective, and cost-efficient 

method of funds informing shareholders 

of the change in transmission format in 

lieu of the proposed Initial Statement 

provisions.237

In addition, the extended transition 

period will provide time for funds, 

financial intermediaries, and 

Commission staff to undertake efforts to 

raise investor awareness of the change 

in transmission method before funds are 

permitted to begin relying on the rule. 

These efforts, combined with the 

requirement that Notices be transmitted 

in lieu of paper reports informing 

investors of their ability to receive paper 

reports, will help ensure that all 

investors—including those who hold 

only funds that first choose to rely on 

the rule on or after January 1, 2022— 

nonetheless are made aware of the 

change in transmission method and the 

option to receive reports in the manner 

they prefer. We believe that upon the 

completion of this extended transition 

period it is appropriate to begin 

allowing all funds to rely on the rule. 

Permanent Elections for Paper Reports 

Although the final rule replaces the 

proposed provisions relating to the 

Initial Statement with the extended 

transition period, the final rule also 

includes provisions enabling an investor 

to elect to receive future shareholder 

reports in paper after making a one-time 

election. Specifically, the rule provides 

that a fund may not rely on rule 30e– 

3 to satisfy its obligations to transmit a 

report if at any time after the fund has 

notified the investor of its intent to rely 

on the rule or provided a Notice to the 

investor, the investor has notified the 

fund (or the investor’s financial 

intermediary) that the investor wishes to 

receive paper copies of shareholder 

reports.238


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longer need to consider a minimum waiting period 

for re-soliciting implied consent. 

One commenter suggested that the current system 

of notice and access for the delivery of proxy 

materials relies entirely on an implied consent 

approach. See SIFMA Comment Letter. While the 

commenter is correct that rule 14a–16 under the 

Exchange Act does not require delivery of a notice 

similar to the Initial Statement, the rule also does 

not incorporate the concept of implied consent. See 

rule 14a–16(j)(4) under the Exchange Act (requiring 

the registrant to maintain records of security holder 

requests to receive materials in paper or via email 

for future solicitations, and to provide copies of the 

materials to a security holder who has made such 

a request until the security holder revokes such 

request rule 30e–1(f)) [17 CFR 240.14a–16(j)(4)]. 

239We discuss these operational considerations 

and others with respect to financial intermediaries 

below in Section II.C. 

240For most investors, this period before January 

1, 2022 will result in an extended opportunity to 

notify their fund of their preference for paper 

reports and receive them in that format without 

interruption as compared to the proposed rule. 

Under the proposed rule, there would not have 

been an extended transition period during which 

prominent disclosures would have been included in 

shareholder documents notifying investors of the 

upcoming change in transmission format. A fund 

would have been permitted under the proposed rule 

to send Notices to an investor 60 days after sending 

an Initial Statement to that investor. See proposed 

rule 30e–3(c). 

241See Proposing Release, supra note 14, at 

33632. 

242See, e.g., BlackRock Comment Letter; Schwab 

Comment Letter; ICI Comment Letter I; Invesco 

Comment Letter; MFS Comment Letter; 

OppenheimerFunds Comment Letter; State Street 

Comment Letter. 

243See, e.g., BlackRock Comment Letter; Schwab 

Comment Letter; Fidelity Comment Letter I; ICI 

Comment Letter I; Invesco Comment Letter; 

Mediant Comment Letter; OppenheimerFunds 

Comment Letter; SIFMA Comment Letter. 

244See CAI Comment Letter I. 

245See ICI Comment Letter I. 

246See State Street Comment Letter. 

247See MFS Comment Letter. 

248See Fidelity Comment Letter I (recommending 

that account level preferences, and not fund level 

preferences, should be adopted in the final rule, 

noting that ‘‘most funds and broker dealers 

maintain shareholder delivery preferences at the 

account level (account or multiple accounts under 

the same SSN or TIN) and not at the fund level. 

Delivery preference requirements at the fund level 

is inconsistent with existing account level 

preference management requirements under the 

Proxy Rule, electronic delivery and other account 

level preferences (e.g., letters and alerts).’’); SIFMA 

AMG Comment Letter (recommending that consents 

be permitted at the customer or account level rather 

than on a fund-by-fund basis in noting that 

‘‘[c]urrent consent collection databases used for 

electronic delivery of disclosure and other 

documents generally collect information at the 

account level. For example, an account holder with 

the same name and address would be solicited to 

consent to electronic delivery of shareholder reports 

with respect to all funds held in the account of the 

account holder. The requirement of sub-section (c) 

of proposed Rule 30e–3 to collect consents on a 

fund-by-fund basis would require reprogramming or 

completely new consent collection techniques and 

databases. We believe the cost of implementing 

these changes may be a significant impediment to 

funds relying on Rule 30e–3 to transmit reports to 

shareholders who have not yet provided affirmative 

consent to electronic delivery over the 

Commission’s existing electronic delivery 

guidance.’’). 

249The election could be applied, for example, if 

fund shares are held by an investor in one or more 

accounts with the same registration (i.e., names, 

social security numbers, and/or tax identification 

numbers). 

250 17 CFR 270.0–10. 

251Rule 30e–3(f)(2). See also infra Section II.C. 

252See rule 30e–1(d). 

Beginning as early as January 1, 2019, 

funds will track investor preferences for 

paper copies of reports. We have 

adopted this date for two reasons. First, 

this date provides funds, financial 

intermediaries, and other service 

providers with a period of time to 

update systems to begin tracking 

investor paper preferences for 

shareholder reports.239 Second, this 

approach will allow investors who 

currently receive paper copies of reports 

to continue to receive them in that 

format without interruption. Therefore, 

if a fund intends to rely on the rule to 

transmit reports before January 1, 2022, 

the fund’s investors will generally have 

a two year period to notify their fund of 

their preference and avoid any 

interruption of their paper deliveries.240

Funds that newly offer their shares to 

the public after January 1, 2019, but 

include the notice in the relevant 

disclosure documents from the date of 

their first public offering will be able to 

rely on the rule beginning January 1, 

2021. Although this may result in a 

shorter notice period to shareholders of 

these funds, we believe this is 

appropriate because these funds will 

have been offered to investors solely 

with the expectation that the fund will 

rely on the rule. 

Application of Investor Elections for 

Paper Reports Across Multiple Positions 

Under the proposed rule, each fund, 

including each series of a registrant 

offering multiple series, would have 

needed to obtain separate consent as to 

an investor, regardless of whether 

consent was obtained from that investor 

by other series offered by that registrant. 

An investor preferring paper copies also 

would have needed to deny or revoke 

consent for each fund, including each 

series, for which the shareholder 

preferred to receive paper copies of 

reports. In the Proposing Release we 

requested comment on whether consent 

should be obtained separately as to each 

fund, or whether consent that is applied 

to one fund could be inferred as to other 

funds held by the investor. We also 

requested comment on whether there 

were any special considerations relating 

to investors who invest through 

intermediaries.241

Commenters who addressed this issue 

uniformly recommended that consent 

should be permitted to be inferred with 

respect to all funds held by an investor 

within a fund complex 242 or with a 

financial intermediary,243 including 

funds held by contract owners through 

a variable insurance product.244 These 

commenters noted that requiring 

consent for each individual fund 

position could cause investor confusion 

and possibly overwhelm investors if 

separate Initial Statements per fund 

position were required to be sent.245

Another commenter stated that tracking 

consents on a fund-by-fund basis might 

be too burdensome for funds, especially 

in the case of funds offering exchange 

privileges.246 Some commenters stated 

that applying investor preferences 

across all funds held within a fund 

complex or held in a particular account 

or financial intermediary would provide 

regulatory consistency with the 

Commission’s electronic delivery 

guidance 247 and with the Commission’s 

e-proxy rules.248

After consideration of the issues 

raised by commenters, we agree that 

applying the investor’s election for 

paper reports at the investor account 

level,249 rather than the fund position 

level, is consistent with other delivery 

preference requirements with which 

investors, intermediaries, and funds are 

already familiar. Therefore, the final 

rule provides that if an investor has 

notified a fund complex or UIT (or the 

investor’s financial intermediary) that 

the investor wishes to receive paper 

copies of shareholder reports, the 

investor will be deemed to have 

requested paper copies with respect to 

(i) any and all current and future funds 

held through an account or accounts 

with (A) the fund’s transfer agent or 

principal underwriter or agent thereof 

for the same ‘‘group of related 

investment companies’’ as such term is 

defined in rule 0–10 under the 

Investment Company Act; 250 or (B) a 

financial intermediary; and (ii) any and 

all funds held currently and in the 

future in a separate account funding a 

variable annuity or variable life 

insurance contract.251

e. Prospectuses and Statements of 

Additional Information Transmitted 

Under Rule 30e–1(d) 

Rule 30e–1(d) permits an open-end 

management investment company to 

transmit a copy of its prospectus or 

statement of additional information in 

place of its shareholder report, if it 

includes all of the information that 

would otherwise be required to be 

contained in the shareholder report.252

Under rule 30e–3 as proposed, the rule 

would not be available to a fund seeking 


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253See proposed rule 30e–3(g). 254Rule 30e–3(g). 255See rule 30e–1(j). 256For purposes of paragraph (i) of the rule, a 

‘‘required statement’’ means the statement regarding 

a fund’s intent to rely on rule 30e–3 specified by 

(i) its applicable registration form, and (ii) in the 

case of a fund that uses a summary prospectus, rule 

498. See rule 30e–3(i)(2). See also infra Section 

II.B.3 for a discussion of the related disclosure 

amendments. 

257See supra Section II.B.2.d. 

258Rule 30e–3(i)(1)(ii). 

259 Id. We believe it is appropriate to permit such 

funds to rely on the rule on January 1, 2021 because 

investors in such funds will be alerted to the change 

in transmission method both when they purchased 

shares in the fund and each time a shareholder 

report is delivered to them other than in reliance 

on rule 30e–3. 

260Rule 30e–3(i)(1)(i)(B). 

261Rule 30e–3(i)(1)(ii). 

262See rule 498 under the Securities Act [17 CFR 

230.498]. 

263See rule 498(b)(1)(v)(A) under the Securities 

Act [17 CFR 230.498(b)(1)(v)(A)]. 

264See id. 

265See rule 498(b)(1)(vi) under the Securities Act 

[17 CFR 230.498(b)(1)(vi)]. 

266See supra Section II.A.1. 

267See supra Sections II.B.2.c, II.B.2.d. Similarly, 

Notices under final rule 30e–3 would include 

instructions describing how a shareholder can elect 

to receive shareholder reports or other documents 

and communications by electronic delivery. See 

rule 30e–3(c)(1)(v)(C). 

268Rule 498(f)(2) under the Securities Act [17 

CFR 230.498(f)(2)]. 

to transmit a copy of its currently 

effective statutory prospectus or 

statement of additional information, or 

both, as permitted by rule 30e–1(d).253

We received no comments on this 

aspect of the proposed rule and are 

adopting it as proposed.254

f. Extended Transition Period 

Rather than making the rule effective 

immediately and requiring an Initial 

Statement, as proposed, we are adopting 

an extended transition period with 

staged effective dates.255 During the 

extended transition period, the earliest 

that Notices may be transmitted to 

investors in lieu of paper reports is 

January 1, 2021. In general, funds will 

be required to provide two years of 

notice to shareholders before relying on 

the rule, if relying on the rule before 

January 1, 2022.256 Therefore, funds that 

begin providing notice at the start of 

2019 will complete the two-year notice 

period, and may begin relying on the 

rule, on January 1, 2021. Funds that are 

newly offered during the period from 

January 1, 2019 through December 31, 

2020 may rely on the rule starting 

January 1, 2021, if they provide notice 

to shareholders starting with their first 

public offering. Funds that are newly 

offered beginning January 1, 2021 and 

thereafter may rely on the rule 

immediately without providing advance 

notice. All other funds may not rely on 

the rule until they have completed the 

full two year notice period or until 

January 1, 2022, whichever comes first. 

The extended transition period is 

designed so that investors will receive 

disclosures to alert them to the change 

in the transmission method and allow 

them to express their delivery 

preference while also providing funds 

and financial intermediaries a period of 

time to educate investors of the coming 

change through disclosures on 

prospectuses and certain other fund 

documents and through other means. It 

will also provide funds and financial 

intermediaries with time to implement 

any necessary operations and systems 

changes. Finally, the Commission staff 

will also use this extended transition 

period to engage in educational and 

investor outreach efforts. As discussed 

above, after consideration of comments 

received on the proposal, we believe 

that the enhanced disclosure 

requirements during this extended 

transition period are a more appropriate 

and effective method of providing 

investors with advance notice of a 

fund’s intent to rely on rule 30e–3 than 

the proposed Initial Statement 

requirement.257

Except as specified below, a fund 

generally may rely on rule 30e–3 to 

transmit a report to an investor before 

January 1, 2022, only after providing 

required statements over a two-year 

period as follows: 

Beginning January 1, 2021 

• Existing funds with public 

shareholders prior to January 1, 2019— 

if the fund includes the required 

statements on each applicable document 

required to be delivered or transmitted 

to shareholders for the period beginning 

on January 1, 2019 and ending on 

December 31, 2020.258

• Funds that begin offering shares 

publicly during period January 1, 2019 

through December 31, 2020—if the fund 

includes the required statements on 

each applicable document required to 

be delivered or transmitted to 

shareholders for the period beginning 

on the date the fund first publicly offers 

its shares and ending on December 31, 

2020.259

• Funds that begin offering shares 

publicly January 1, 2021 and 

thereafter—would not be subject to the 

condition and could therefore rely on 

the rule immediately without providing 

any advance notice through required 

statements.260

Between January 1, 2021 and January 1, 

2022 

A fund may otherwise begin to rely on 

rule 30e–3 before January 1, 2022 if the 

fund includes the required statement on 

the applicable disclosure documents for 

a period of two years prior to beginning 

to rely on the rule.261

3. Related Amendments 

In connection with our adoption of 

rule 30e–3, we are also adopting related 

amendments to certain of our rules and 

forms. First, we are adopting, as 

proposed, amendments to rule 498 

under the Securities Act, which 

concerns the use of a summary 

prospectus,262 to require funds relying 

on rule 30e–3 to include as part of the 

legend on the cover page or beginning 

of the fund’s summary prospectus the 

website address required to be included 

in the Notice.263 We received no 

comments on this aspect of the 

proposal. The website address that leads 

to shareholder report information could 

be the same as the website address that 

leads to prospectus information, 

provided that the other conditions of 

each rule are met, or different so long 

as both addresses are provided as part 

of the legend.264 This requirement is 

intended to provide investors an 

additional reminder of the website 

availability of shareholder reports. 

Second, in a change from the 

proposal, the final rule permits a 

summary prospectus to include 

instructions describing how a 

shareholder can elect to receive 

prospectuses or other documents and 

communications by electronic 

delivery.265 We received a number of 

comments on fund investors’ increasing 

internet usage and receipt of 

electronically delivered materials.266

We are persuaded by these comments. 

Accordingly, the final rule will permit 

a summary prospectus to include 

electronic delivery election instructions, 

consistent with our belief that this 

provision will promote our general goal 

of providing investors with their 

preferred format of materials, and is 

parallel and consistent with conditions 

set forth in rule 30e–3 that ensure 

investors who prefer paper copies have 

instructions regarding how to 

communicate that preference.267

Third, we are amending rule 498 

under the Securities Act, as proposed, to 

include a Notice required by rule 

30e–3 among the materials that are 

permitted to have equal or greater 

prominence when accompanying a 

summary prospectus prepared in 

reliance on rule 498.268 Similarly, we 

are amending rule 14a–16 under the 

Exchange Act, generally as proposed, to 

include a Notice required by rule 30e– 

3 among the materials that are permitted 


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269Rule 14a–16(f)(2)(iii) under the Exchange Act 

[17 CFR 240.14a–16(f)(2)(iii)]. The final amendment 

to rule 14a–16(f)(2)(iii) excludes the proposed 

reference to the Initial Statement. See id. See also 

rule 30e–3(c)(5) (permitting a Notice to accompany 

a Notice of Internet Availability of Proxy Materials). 

270See new paragraphs (b)(1)(vi) and (b)(1)(vii) of 

rule 498; new paragraph (a)(5) to Item 1 of Form 

N–1A; new paragraph (d)(8) to Item 27 of Form N– 

1A; new paragraph 1.l to Item 1 of Form N–2; new 

instruction 6.g to Item 24 of Form N–2; new 

paragraph (a)(xi) to Item 1 of Form N–3; new 

instruction 6(vii) to Item 28(a) of Form N–3; new 

paragraph (a)(x) to Item 1 of Form N–4; new 

paragraph (a)(6) to Item 1 of Form N–6. 

271 17 CFR 270.8b–16(b) (providing an exemption 

for closed-end funds from the requirement to 

annually update their registration statement, so long 

as certain disclosures are included in their annual 

report to shareholders, or for dividend reinvestment 

plan descriptions, transmitted as permitted under 

rule 8b–16). 

272Most issuers of variable annuities and variable 

life insurance policies amend their registration 

statements annually and hence send updated 

prospectuses to their contract owners at least once 

per year. Issuers of variable annuity and variable 

life insurance contracts that no longer amend their 

registration statements and do not distribute 

updated prospectuses to contract owners rely on 

staff no-action letters issued by the Division of 

Investment Management (see, e.g., Great-West Life 

& Annuity Insurance Co., SEC Staff No-Action 

Letter (pub. avail. Oct. 23, 1990)). Consistent with 

this no-action position, such issuers may rely on 

rule 30e–3 prior to January 1, 2022 if comparable 

notice is provided to contract owners during the 

extended transition period when providing them 

with prospectuses and shareholder reports for 

underlying funds in which the separate account 

invests. 

In addition, we understand that a small number 

of issuers of variable life insurance policies 

continue to register their securities on Form S–6 [17 

CFR 239.16]. Such issuers may rely on rule 30e–3 

prior to January 1, 2022 if comparable notice is 

provided on prospectuses (or supplements thereto) 

delivered to policyholders during the extended 

transition period. 

273For purposes of this Section II.C., in using the 

term ‘‘financial intermediaries’’ we are referring to 

intermediaries such as banks, brokers, and dealers 

who maintain securities accounts for others. See, 

e.g., Exchange Act rule 17Ad–20 (defining the term 

‘‘securities intermediary’’ to mean a clearing agency 

registered under Exchange Act Section 17A [15 

U.S.C. 78q–1] or a person, including a bank, broker, 

or dealer, that in the ordinary course of its business 

maintains securities accounts for others in its 

capacity as such). 

274The discussion in this section of ‘‘beneficial 

owners’’ refers to beneficial owners whose names 

and addresses do not appear directly in issuers’ 

stock registers (e.g., on fund transfer agent 

recordkeeping systems) because their securities are 

held in street name accounts registered in the name 

of the intermediary. ‘‘Street name’’ accounts are 

also known as ‘‘omnibus accounts.’’ 

275 In the Proposing Release, we requested 

comment on the impact of the proposed rule 

regarding shareholders holding fund shares through 

intermediated accounts. See Proposing Release, 

supra note 14, at Section II.D.6. By one estimate, 

approximately 75% of accounts are currently held 

through brokers and other intermediaries, excluding 

positions held in employer-sponsored plans. See 

SIFMA Comment Letter (citing estimate provided 

by Broadridge Financial Services, Inc.). 

276See NYSE rule 465(2); NYSE rule 451(a)(1)– 

(2); Financial Industry Regulatory Authority 

(‘‘FINRA’’) rule 2251(e)(1)(C); FINRA rule 2251.01. 

As discussed above, today we approved 

amendments to NYSE rules that provide additional 

clarification with respect to the application of 

certain processing fees that may be charged in the 

transmission of shareholder reports, including fees 

that may be applied for reports provided 

electronically pursuant to a notice and access rule 

such as rule 30e–3. See supra notes 32–36 and 

accompanying text. 

277See e.g., SIFMA Comment Letter (stating that 

the proposed rule did not address the role and 

obligations of broker-dealers to administer the 

notice process for clients, and would present 

logistical challenges and some components would 

unnecessarily increase complexity and cost without 

sufficient benefit to mutual funds and their 

investors; also recommending that the Commission 

set an effective date for the new rule that provides 

sufficient time for broker-dealers to develop new 

infrastructure and internal procedures, and 

suggesting a transition period of at least 24 months 

following the effective date of the new rule); 

Broadridge Comment Letter I (stating that the 

proposed rule did not acknowledge the essential 

role broker-dealers would play in making the rules 

work in practice and that an additional method of 

delivery for fund reports would add cost and 

complexity to processing; further noting that the 

processing complexities of the proposed rule are 

similar to those of proxies and opining that the 

proposal did not appropriately contemplate or 

measure these extra costs). 

to accompany a Notice of Internet 

Availability of Proxy Materials.269 We 

received no comment on these proposed 

amendments. 

Fourth, to notify investors of the 

upcoming change in transmission 

format, and in a change from the 

proposal, we are also amending rule 498 

and certain fund registration forms to 

require that funds intending to rely on 

rule 30e–3 prior to January 1, 2022 

include prominent disclosures on the 

cover page or beginning of their 

summary prospectuses; on the front 

cover page of their statutory 

prospectuses; and on the front cover 

page or beginning of their annual and 

semi-annual reports, for two years 

during the three-year period between 

January 1, 2019 and December 31, 

2021.270 With the exception of newlyformed funds, funds would generally 

provide these disclosures as follows: 

• Open-End Funds. Open-end funds 

would be required to provide the cover 

page disclosure on at least six 

documents sent to investors during this 

time: One per year on the fund’s 

summary prospectus or statutory 

prospectus, at least one per year on the 

fund’s annual report to shareholders, 

and one per year on the fund’s semiannual report to shareholders. 

• Closed-End Funds. Closed-end 

funds would be required to provide the 

cover page disclosure on at least four 

documents during this time: One per 

year on the fund’s annual report to 

shareholders and one per year on the 

fund’s semi-annual report to 

shareholders, as well as on their 

prospectuses unless the fund relies on 

rule 8b–16(b) under the Investment 

Company Act.271

• Variable Insurance Products. 

Variable annuity and variable life 

insurance contracts registered on Forms 

N–4 and N–6, respectively, would be 

required to provide the cover page 

disclosure on at least two contract 

prospectuses during this time.272

In addition to providing advance 

notice to investors of their fund’s 

expected use of the rule, these 

disclosures are intended to provide 

important information to both current 

and prospective investors that gives 

them an overview of the change in 

delivery format options, including the 

fact that reports will be made available 

on a website and that they will be able 

to retain delivery of their reports in 

paper if they should so desire. We 

believe that these disclosure 

requirements help to mitigate 

commenters’ concerns regarding the use 

of the Initial Statements as a condition 

to reliance on the rule. We encourage 

the use of graphical indicators such as 

flags or other design elements to further 

draw investor attention to these 

disclosures. Beginning January 1, 2022, 

these cover page disclosures will no 

longer be required. 

C. The Role of Certain Financial 

Intermediaries 273

As acknowledged in our proposal and 

stated by commenters, most fund 

investors are not direct shareholders of 

record, but instead engage an 

investment professional and hold their 

fund investments as beneficial 

owners 274 through accounts with 

intermediaries such as brokerdealers.275 As a result, today 

intermediaries commonly assume 

responsibility for distributing issuer 

materials to beneficial owners, 

including shareholder reports. In the 

case of broker-dealers, distribution of 

shareholder reports to beneficial owners 

is generally governed by self-regulatory 

organization (‘‘SRO’’) rules, which state 

that broker-dealer member firms are 

required to distribute annual reports, as 

well as ‘‘interim reports,’’ to beneficial 

owners on behalf of issuers, so long as 

an issuer (i.e., the fund) provides 

satisfactory assurance that the brokerdealer will be reimbursed for expenses 

(as defined in SRO rules) incurred by 

the broker-dealer for distributing the 

materials.276

Certain commenters expressed 

concerns regarding potential 

complexities and costs for brokerdealers to administer proposed rule 

30e–3.277 As discussed above and in 

response to these commenter concerns, 


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278See supra note 225 and accompanying text. 279See, e.g., ICI Comment Letters I and II; 

Broadridge Comment Letter I; CSIM Comment 

Letter; Fidelity Comment Letter I; Invesco Comment 

Letter; MFS Comment Letter; OppenheimerFunds 

Comment Letter; SIFMA Comment Letter. 

280See SIFMA Comment Letter; Schwab 

Comment Letter; Broadridge Comment Letter I; ICI 

Comment Letter I. 

281See SIFMA Comment Letter; ICI Comment 

Letter I. 

282See, e.g., ICI Comment Letter I; Invesco 

Comment Letter; SIFMA Comment Letter. 

283See, e.g., SIFMA Comment Letter; Broadridge 

Comment Letter I; InveShare Comment Letter; see 

also infra note 307 (detailing commenters’ 

discussion and requests for clarification about 

intermediary website hosting). 

284See Note to rule 30e–3. 

285Two commenters suggested that the 

framework for rule 30e–3 as proposed was similar 

to that for the notice and access framework for the 

delivery of proxy materials. See SIFMA Comment 

Letter, Broadridge Comment Letter I. Although both 

frameworks involve a notice and access framework, 

the proxy framework involves additional 

complexities relating to the process of voting 

security holdings—considerations not applicable in 

the case of rule 30e–3, particularly after the 

modifications we have made to the final rule as 

discussed above. Instead, we believe that the 

existing framework for the delivery of fund 

documents other than proxy materials (e.g., 

prospectuses, summary prospectuses, shareholder 

reports, ad hoc requests for paper documents, etc.) 

is the more appropriate analogous framework. 

286See supra note 276 and accompanying text. 

287Funds and broker-dealers could work together 

to establish or modify their plans and parameters. 

Such discussions also may prompt changes to 

existing servicing arrangements and/or compliance 

and oversight activities, particularly where funds 

determine that broker-dealers will prepare and 

transmit consolidated Notices in lieu of those 

prepared by funds (see infra notes 291–293 and 

accompanying text) or establish or use their own 

website in lieu of funds’ (or a third party’s) to 

provide access to the shareholder materials for their 

customers (see infra paragraph accompanying note 

307). 

288See rule 30e–3(c)(4). 

289See rule 30e–3(c)(5). 

290 In the case of fund-generated Notices that do 

not have a telephone number or other contact 

information for the broker-dealer, a broker-dealer 

could include a cover page or other similar 

communication that provides the beneficial owner 

with contact and other information for the brokerdealer, as is often done today when annual reports 

or other fund documents are forwarded to beneficial 

owner customers. This contact information could be 

used by the beneficial owner to, for example, elect 

to receive all future reports in paper or elect 

electronic delivery of the report and other 

documents or communications. 

291For example, because the final rule permits a 

Notice to accompany other materials (e.g., an 

account statement), a combined mailing could 

reduce mailing costs relative to sending the Notice 

in a separate mailing without any accompanying 

documents. 

we have modified the final rule 30e–3(e) 

to eliminate the proposed reference to 

financial intermediaries in that 

provision given the guidance we are 

providing today regarding the operation 

of the rule in the context of financial 

intermediaries.278

Multiple commenters requested that 

the Commission clarify intermediaries’ 

role with respect to delivering Initial 

Statements and Notices under proposed 

rule 30e–3, as well as their role in 

delivering paper copies of shareholder 

reports to fund beneficial owners upon 

request.279 Commenters also requested 

clarity on how beneficial owners who 

hold fund shares through accounts with 

intermediaries can communicate their 

election to receive paper copies of 

shareholder reports.280 With respect to 

beneficial owners holding fund 

positions from more than one fund 

complex in intermediated accounts, 

commenters further requested whether 

beneficial owners would be able to 

communicate their preferences on an 

account-level basis instead of on a fundby-fund basis.281 Commenters also 

asked that the Commission clarify how 

intermediaries will be reimbursed by 

funds for the services they would 

provide,282 as well as confirm that an 

intermediary or other third party service 

provider could host the website on 

which the materials would be 

accessible.283

After consideration of the comments 

we received, including concerns raised 

regarding the role of financial 

intermediaries, we have made several 

modifications to the rule designed to 

respond to investor protection concerns, 

streamline and clarify the operation of 

the transmission regime, provide 

additional flexibility, and further 

increase cost savings for investors. For 

example, we have eliminated the 

requirement to send an Initial Statement 

and reply cards under the final rule. In 

addition, the final rule permits 

flexibility with respect to the 

preparation and mailing of Notices, and 

requires that elections to receive paper 

reports apply on an account-level basis, 

instead of a fund by fund basis. 

In response to commenters’ concerns 

regarding broker-dealer activities under 

the new rule 30e–3 framework, below 

we provide guidance addressing the 

processes that could be followed by 

broker-dealers and other intermediaries 

that deliver shareholder reports to 

beneficial owners. To remind funds and 

others of the guidance provided in this 

release, we have added a note to final 

rule 30e–3 indicating that this release 

contains a discussion of how the 

conditions and requirements of the rule 

may apply in the context of investors 

holding fund shares through financial 

intermediaries.284

Financial intermediaries already 

perform many functions similar to those 

outlined in rule 30e–3. For example, 

intermediaries currently forward to 

beneficial owners a variety of materials 

from funds and other issuers of 

securities, including shareholder 

reports. Many intermediaries operate 

websites that host shareholder reports 

and other materials relating to a 

beneficial owner’s investments. 

Intermediaries today also collect and 

maintain investor preferences as to 

delivery format (i.e., whether a 

beneficial owner receives reports or 

other documents—including materials 

prepared by the intermediary such as 

account statements and confirmations— 

in paper or has elected electronic 

delivery of some or all of those 

materials), and monitor for potential 

householding arrangements and collect 

related consents for their customers. As 

a result, we believe many intermediaries 

generally may be able to leverage 

existing infrastructure and adapt 

systems and processes currently used 

for the delivery of documents and other 

information to their customers.285

1. Distribution of Notices to Beneficial 

Owners 

SRO rules require broker-dealers to 

distribute shareholder reports to 

beneficial owners.286 We believe that a 

broker-dealer, at the fund’s request, 

could also distribute Notices required 

under rule 30e–3 if the broker-dealer 

distributes the materials in a manner 

consistent with the rule. We understand 

that today, funds and broker-dealers 

routinely develop detailed 

implementation plans and other 

parameters for fulfillment of paper and 

electronic delivery of fund materials 

(such as shareholder reports, 

prospectuses, and proxy materials) and 

other shareholder servicing and 

compliance-related matters for 

beneficial owners. We believe that such 

plans and parameters also could provide 

a basic framework for the delivery of 

Notices under rule 30e–3.287

The rule permits flexibility in the 

preparation and delivery of Notices. For 

example, a Notice could relate solely to 

an individual fund, or multiple Notices 

can be combined together to create a 

consolidated Notice.288 In addition, the 

rule permits a Notice to be sent with 

other documents, including other 

Notices and account statements.289 As 

with funds, a broker-dealer could 

likewise forward Notices to beneficial 

owners in any of the aforementioned 

scenarios.290

A fund may determine that for cost or 

other reasons, it would be preferable for 

the broker-dealer to prepare and 

distribute a consolidated Notice for 

beneficial owners who may be invested 

in multiple funds offered by one or 

more fund complexes.291 In addition, a 


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292Commenters stated that the ability for brokerdealers to prepare their own Initial Statements, 

including incorporating their own contact 

information, may assist beneficial owners in 

communicating their delivery preferences in the 

manner in which they are generally accustomed. 

We believe the same may be true of Notices. See, 

e.g., ICI Comment Letter I (stating that ‘‘investors 

are used to receiving consolidated communications 

from intermediaries’’); SIFMA Comment Letter (‘‘As 

a practical matter, for accounts held in street name 

through brokers . . . proposed Rule 30e–3 would 

necessarily have to be carried out by such 

brokers.’’); InveShare Comment Letter (‘‘Clients 

furthermore expect that each brokerage firm will 

provide a consolidated and uniform source of 

information and support with respect to multiple 

securities included in a given client account.’’). 

293See supra notes 274–275 and accompanying 

text. 

294See infra Section II.C.2. 

295We also believe that a broker-dealer should 

generally specify that a request to receive paper 

copies of reports will be deemed to be a request 

with respect to each fund whose shares are held in 

the beneficial owner’s account. 

296See rule 30e–3(f)(1). 

297See, e.g., State Street Comment Letter. 

298See rule 30e–3(f)(2). 

299As discussed above in Section II.B.3., we 

believe that beneficial owner ad-hoc requests for 

paper reports or other required materials would 

continue to be fulfilled by funds when requested (as 

they are today) or such customer requests could be 

fulfilled directly by the broker-dealer. 

300See, e.g., SIFMA Comment Letter (describing 

operation execution of proposed rule 30e–3 in 

terms of re-tooling established systems or creating 

new systems); Broadridge Comment Letter I 

(describing ongoing systems development in light of 

proposed rule 30e–3 including potentially adding 

new control number and consent systems). 

301For example, this information could be 

provided on a cover sheet to the delivered Notice, 

or on an account statement delivered with the 

Notice. See rule 30e–3(c)(5)(iv) (permitting Notices 

to accompany a shareholder’s account statement). 

302See SIFMA Comment Letter. 

303See Section II.B.2.d. As discussed, the final 

rule has been streamlined and simplified, in an 

effort to reduce complexity and related 

implementation burdens and costs. Broker-dealers 

also will have an extended transition period of an 

additional two years to coordinate with funds on 

the design and implementation of Notices, which 

may be transmitted beginning January 1, 2021. 

304See rule 30e–3(b)(1). 

305See rule 498(e)(1) under the Securities Act 

(requiring in the case of the summary prospectus, 

that the required documents be available at the 

broker-dealer may similarly prefer to 

prepare such Notices for its customers, 

given that its customers may have come 

to expect consolidated communications 

at the account level rather than the 

position level.292 Moreover, Notices 

prepared by a broker-dealer may better 

generally match fund investors’ 

expectations because a broker-dealer— 

and not the fund—typically processes a 

beneficial owner’s fund-related 

requests.293

Notices prepared by broker-dealers 

generally should be consistent with 

paragraph (c) of rule 30e–3. For 

example, as discussed in the section 

below,294 a broker-dealer preparing a 

Notice may wish to include the brokerdealer’s own toll-free telephone number, 

as well as instructions about how the 

beneficial owner could notify the 

broker-dealer regarding his or her report 

delivery preferences.295

2. Beneficial Owner Elections for Paper 

Reports 

The final rule prohibits reliance on 

the rule if a shareholder has expressed 

a preference that the shareholder wishes 

to receive paper copies of shareholder 

reports.296 Broker-dealer firms generally 

should track their customer elections to 

receive paper reports. Consistent with 

today’s framework under which brokerdealer firms facilitate delivery of 

shareholder reports to their customers, 

we believe that broker-dealer firms 

could provide information to the fund 

(or fulfillment service provider) 

regarding the number of paper copies of 

shareholder reports, and fund-prepared 

Notices, needed by the broker-dealer to 

fulfill its customers’ delivery 

preferences. 

In response to concerns raised by 

commenters regarding the burdens and 

costs of tracking elections to receive 

paper reports on a fund by fund 

basis,297 and in a change from the 

proposal, the rule has been modified so 

that an election to receive paper reports 

will apply to any and all current and 

future funds held through an account or 

accounts with a financial 

intermediary.298 We believe that 

tracking paper report elections on an 

account basis should simplify the 

operation of the rule, as well as the 

design and implementation of systems 

to track shareholder report paper 

elections for both broker-dealers and 

funds. 

Today, paper copies of statutory 

prospectuses or statements of additional 

information may be requested by 

beneficial owners on an ad hoc basis in 

cases where a fund uses a summary 

prospectus.299 Paper copies of 

disclosure documents (including 

shareholder reports) may also be 

requested where a client has elected 

electronic delivery for some, but not all 

communications. 

We note that the rule’s approach of 

delivering Notices, together with the 

option of permitting shareholders to 

request paper copies on either an ad hoc 

or ongoing basis, is generally similar to 

the operational approach currently used 

by many broker-dealers (and funds) for 

the delivery of fund materials, including 

proxy materials. We believe that 

existing systems for default electronic 

delivery could be leveraged by brokerdealers in implementing the final rules 

in order to establish new processes and 

procedures for delivery of shareholder 

reports at a lower cost than would be 

the case if such systems did not already 

exist.300 In particular, elimination of the 

proposed Initial Statement in the final 

rule reduces the operational 

complexities with respect to use of the 

rule, which we believe may make it 

easier for existing systems to be 

leveraged. We recognize, however, that 

some broker-dealers may decide instead 

to create new systems. 

To facilitate beneficial owners’ 

elections to receive future reports in 

paper, a broker-dealer firm generally 

should provide information on how to 

contact the firm (or if applicable, the 

fund) in conjunction with the delivery 

of Notices. For Notices prepared by the 

broker-dealer firm, the Notice could 

contain the toll-free telephone number 

of the firm and other methods by which 

beneficial owners could contact the 

firm. If the broker-dealer firm is 

delivering Notices prepared by a fund, 

the firm could include with the Notice 

information containing the toll-free 

telephone number of the firm and other 

methods by which beneficial owners 

could contact the firm.301

A commenter also requested a 

transition period of at least 24 months 

following the effective date of the rule 

to allow time to address new systems, 

processes and procedures required to 

comply with the rule.302 In response to 

these and other concerns raised by 

commenters, and other considerations 

discussed below on the effective date of 

the rule, we are adopting an extended 

effective date of January 1, 2019 to 

provide funds, financial intermediaries, 

and other service providers with an 

adequate period of time to modify 

systems and operations to accommodate 

the new transmission framework. 

Broker-dealers generally should track 

investor elections for paper copies of 

shareholder reports after first 

transmitting a notification of a fund’s 

intent to rely on the rule, beginning as 

early as January 1, 2019, or the first time 

a Notice is provided to the 

shareholder.303

3. Website Availability of Materials 

The final rule does not require that 

the website where the required 

materials are available be maintained by 

any particular party. Instead, the rule 

provides that the required materials 

must be posted at the website specified 

in the Notice.304 This approach is 

consistent with similar flexibility 

provided under the current rules 

relating to the use of a summary 

prospectus.305 In addition, electronic 


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website specified on the cover page or beginning of 

the summary prospectus) [17 CFR 230.498(e)(1)]. 

306Pursuant to the Commission’s existing 

electronic delivery guidance, beneficial owner 

elections for electronic delivery of shareholder 

reports and other documents continue to grow, with 

one commenter noting that electronic delivery has 

grown from 19% of fund report deliveries in 2010 

to over 50% as of June, 2018. See supra note 73 and 

accompanying text. 

307See, e.g., SIFMA Comment Letter (requesting 

clarification that the use of a single third party 

website or landing page where investors can access 

all relevant materials is permitted); Broadridge 

Comment Letter II, at Attachment B (discussing the 

ability for an investor to access shareholder reports 

on a fund’s or a broker’s website and the ability for 

such website to be customized by the fund or broker 

to provide an enhanced user experience for the 

investor); InveShare Comment Letter (noting that 

investors are used to using a single web page to 

locate documents, where documents are listed in an 

orderly manner). 

308For example, if a broker-dealer were to 

establish its own website, it should generally follow 

procedures similar to those described in rule 30e– 

3(b)(2)–(5). Use of a broker-dealer or third party 

website may be a more user friendly, efficient, and 

cost effective way to provide electronic access to 

reports and other materials. For example, a 

consolidated Notice prepared by the broker-dealer 

that directs beneficial owners to their account page 

through a single website address (rather than 

multiple website addresses for beneficial owners 

who own funds from multiple complexes) may 

make it easier for beneficial owners to access these 

reports than accessing multiple reports available on 

separate websites. We note that today, such reports 

may be accessed from a broker-dealer website, 

where they reside, or through re-direction to a 

central website, or the fund’s website. We also note 

that many broker-dealers provide beneficial owners 

with links to fund websites for accessing documents 

delivered via electronic delivery and for otherwise 

accessing these documents from their online 

accounts with their broker-dealer as noted above. 

Thus, in certain circumstances, it may be more cost 

effective for the shareholder report and other 

materials to be hosted on the fund’s website or a 

central third-party website. 

309See supra notes 169–170 and accompanying 

text. 

310See Proposing Release, supra note 14, at 

33633. 

311See, e.g., CAI Comment Letter I; Capital 

Research Comment Letter I; Fidelity Comment 

Letter; ICI Comment Letter I; Comment Letter of 

Independent Directors Council (Aug. 11, 2015); 

Invesco Comment Letter; OppenheimerFunds 

Comment Letter; Schwab Comment Letter; SIFMA 

AMG Comment Letter; State Street Comment Letter; 

Vanguard Comment Letter. 

312See Allianz Comment Letter; see also CAI 

Comment Letter I. 

313See Comment Letter of Eaton Vance 

Investment Managers (Aug. 11, 2015). 

314See Schnase Comment Letter. 

315See Allianz Comment Letter; CAI Comment 

Letter I. 

316See Disclosure Request for Comment, supra 

note 20; Processing Fees Request for Comment, 

supra note 21. 

317Proposing Release, supra note 14, at 33654. 

318See SIFMA Comment Letter. 

319See rule 30e–3(i). 

320 Id.; see supra Section II.B.2.f; infra Section 

II.E.2. 

321See rule 30e–3(f). The need to track an 

investor’s preference would be triggered by the first 

Continued 

delivery elections for shareholder 

reports and other documents can be 

fulfilled by making fund reports and 

other materials accessible on websites 

hosted by the fund, the broker-dealer 

firm, or a third-party service provider of 

the fund or intermediary.306 Thus, a 

variety of existing infrastructure 

arrangements for hosting reports and 

other materials may be leveraged in 

providing website availability of 

shareholder reports to beneficial owners 

under rule 30e–3. 

Commenters observed that it could be 

more efficient for a broker-dealer to 

establish its own website (or utilize a 

central third-party website) on which 

shareholder materials would be hosted, 

and identify this website (as opposed to 

each fund or fund family’s website) in 

any Notices prepared by the brokerdealer.307 A fund, as the party 

ultimately responsible for the content 

and delivery of shareholder reports 

under Commission rules, may agree to 

the use of a broker-dealer or third party 

website to provide electronic access to 

shareholder reports and other materials 

applicable to a beneficial owner’s 

account if the reports and others 

materials are posted in a manner 

consistent with the requirements of rule 

30e–3.308 We also acknowledge, as 

noted by commenters, that allowing the 

use of a control number or QR code (or 

similar login process) to access a brokerdealer’s website (or other central thirdparty website) could help investors to 

more efficiently access the fund reports 

and other materials relevant to them, 

rather than directing an investor that 

holds various fund positions to multiple 

fund complex websites where such 

documents are publicly available.309

D. Extension of Similar Delivery 

Framework to Other Documents 

While rule 30e–3 as proposed would 

apply only to shareholder reports, we 

also requested comment in the 

Proposing Release on whether we 

should permit a similar framework to 

satisfy delivery obligations for summary 

or statutory prospectuses.310 Citing cost 

reductions and other reasons, a number 

of commenters recommended that we 

extend a similar framework to other 

materials, including prospectuses,311

variable insurance product materials,312

and notices required under rule 19a–1 

and related exemptive orders.313 One 

commenter suggested that the 

Commission should adopt rules 

allowing funds to use the internet to 

satisfy delivery requirements across all 

investor documents.314 Some 

commenters also suggested that the 

Commission amend rule 172 under the 

Securities Act to apply the rule’s 

‘‘access equals delivery’’ framework to 

funds and variable insurance 

products.315

While we appreciate these 

recommendations, we believe that the 

appropriate incremental step is rule 

30e–3, as adopted. As discussed above, 

we are seeking comment on the content, 

delivery, and design of fund disclosure 

as well as the processing fees for 

delivering fund shareholder reports and 

other materials to investors, and may 

consider in the future an electronic or 

notice and access delivery framework 

for documents other than shareholder 

reports.316

E. Effective Dates 

1. Rule 30e–3 

In the Proposing Release, we stated 

that because the use of proposed rule 

30e–3 would be optional, we believed 

that a compliance period was 

unnecessary and expected that funds 

would be able to rely on the rule 

immediately after the effective date 

provided they first transmit an Initial 

Statement.317 We requested comment on 

the proposed compliance dates, and a 

commenter suggested that the 

Commission set an effective date six 

months after date of publication in the 

Federal Register and allow for a 

transition period of 24 months from the 

rule’s effective date to allow the 

conditions of the rule to apply gradually 

(such as applying the rule first to new 

accounts, and then to existing 

accounts).318

After further consideration, we are 

adopting an extended transition period 

with staged effective dates for rule 

30e–3 and the related amendments we 

are adopting today. While rule 30e–3 

will become effective on January 1, 

2019, the rule provides that a fund may 

only begin transmitting Notices 

pursuant to the rule beginning January 

1, 2021.319 For most funds seeking to 

rely on the rule before January 1, 2022, 

a temporary condition will require the 

funds to prominently disclose 

information on the cover pages of 

certain documents prior to their reliance 

on the rule, as discussed in more detail 

in this release.320

We are adopting a delayed effective 

date of January 1, 2019 to provide funds, 

broker-dealers and other financial 

intermediaries, and service providers 

with an adequate period of time to 

modify systems and operations to 

accommodate the new transmission 

framework. Beginning as early as 

January 1, 2019, however, funds and 

intermediaries will begin to track 

investor elections for paper copies of the 

shareholder report.321


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notice the fund provides to the investor that it 

intends to rely upon the rule to transmit 

shareholder reports. Id. For example, a fund that 

intends to rely on rule 30e–3 on January 1, 2021 

would need to track investor preferences the first 

time it transmits or delivers a document that 

includes the required cover page disclosure 

discussed above. See supra Section II.B.2.f. A fund 

that will rely on rule 30e–3 on January 1, 2022 or 

thereafter would need to track investor preferences 

beginning the first time it transmits a Notice. 

322See supra Section II.B.2.f. 

323See supra Section II.B.2. 

324See id. 

325See supra Section II.A.2. 

326See supra Section II.B.2.f. 327See supra notes 39–47 and accompanying text. 

2. Disclosure Amendments 

As discussed above, we are also 

requiring funds to provide prominent 

disclosures on the cover page or 

beginning of their summary 

prospectuses, and cover pages of their 

statutory prospectuses, and annual and 

semi-annual reports, informing 

investors of the change in delivery 

format options if the funds intend to 

rely on the rule prior to January 1, 

2022.322 These amendments to rule 498 

and Forms N–1A, N–2, N–3, N–4, and 

N–6 will be effective January 1, 2019 for 

a temporary period of three years (i.e., 

between January 1, 2019 and December 

31, 2021). Effective January 1, 2022, 

these disclosures will no longer be 

required, and the related requirements 

in rule 498 and Forms N–1A, N–2, 

N–3, N–4, and N–6 will be removed. 

Additional amendments to rule 498, 

including an amendment to permit the 

inclusion of information about 

electronic delivery, will become 

effective January 1, 2019 and will 

remain effective indefinitely. 

3. Other Amendments 

As also discussed above, we are 

permitting funds to include content 

from the shareholder report in the 

Notice under rule 30e–3(c)(3), provided 

that funds that choose to transmit 

Notices with additional information 

from the shareholder report file those 

Notices as part of their reports on Form 

N–CSR.323 To that end, we are 

amending Form N–CSR to provide 

instructions for funds to file such 

Notices. The amendments to Form 

N–CSR are effective January 1, 2021. 

We are also amending rule 14a–16 

under the Exchange Act to include a 

Notice required by rule 30e–3 among 

the materials that are permitted to 

accompany a Notice of internet 

Availability of Proxy Materials.324 The 

amendments to rule 14a–16 will be 

effective January 1, 2021. 

We are amending Section 800 of 17 

CFR part 200 to display control numbers 

assigned to information collection 

requirements for rule 30e–3 by the 

Office of Management and Budget 

pursuant to the Paperwork Reduction 

Act. This amendment is effective 

January 1, 2019. 

4. Communications With Investors 

During the Extended Transition Period 

As noted earlier, we are persuaded by 

commenters that the proposed 

provisions of the rule regarding 

affirmative and implied consent through 

use of an Initial Statement would add 

unnecessary complexity to the 

implementation of the rule without a 

corresponding benefit.325 Instead, we 

believe that the extended transition 

period provides a less burdensome 

framework to alert investors to the 

change in transmission format.326

Although we are requiring most 

funds, as a condition to relying on rule 

30e–3 before January 1, 2022, to include 

the required disclosures regarding the 

upcoming change on prospectuses and 

shareholder reports, we also encourage 

funds and financial intermediaries (e.g., 

broker-dealers, insurance companies 

issuing variable insurance products) to 

take advantage of the extended 

transition period to engage with their 

investors to communicate the 

forthcoming change through additional 

appropriate means. Such engagement 

could further enhance investors’ 

awareness of the upcoming change in 

delivery method, and provide additional 

opportunity for investors to select the 

delivery method most appropriate for 

their individual circumstances. 

We believe that this engagement with 

investors could build upon funds’ and 

intermediaries’ existing efforts to ask 

investors to elect electronic delivery. It 

is our understanding that funds and 

intermediaries periodically solicit 

investors to opt-into electronic delivery 

of account and fund related documents, 

including shareholder reports, in lieu of 

receiving documents in paper. We are 

aware that some of these efforts have 

included: 

• Dedicated electronic delivery 

website pages that explain the benefits 

of electronic delivery (for example, 

electronic delivery is faster, economical, 

convenient, secure, and 

environmentally friendly) and provide 

instructions and website links that 

facilitate enrolling in electronic delivery 

(e.g., by obtaining online access and 

logging into an account held directly 

with the fund or through an 

intermediary and selecting 

communications preferences). These 

website pages may include frequently 

asked questions and information on 

how to contact a service representative 

(by phone or email) to facilitate 

enrollment, and may also highlight how 

to receive paper copies of materials 

upon request, how to update or cancel 

enrollment, and the procedures 

followed when an email address 

provided is invalid or otherwise fails. 

• Paper mailing campaigns that 

provide information similar to the 

above, including the mailing of inserts 

that accompany the monthly or 

quarterly account statement or other 

regulatory mailings or marketing 

materials sent to investors. 

• Email campaigns that are targeted 

to investors who have not consented to 

electronic delivery, but have provided 

email addresses to funds or their 

intermediaries on account applications 

or when obtaining online access. 

• Online account alerts or pop-ups 

that remind investors who have logged 

into their account page of the 

availability of electronic delivery and 

prompt investors to take action. 

• Engagement by phone through call 

scripts which prompt fund or 

intermediary customer service 

representatives to highlight electronic 

delivery options and guide interested 

investors through the enrollment 

process. 

• Elimination of small balance 

account service fees and other 

incentives for investors who sign up for 

electronic delivery of documents, in lieu 

of receiving paper documents. 

We believe that the levels of internet 

access and electronic availability and 

delivery of financial information will 

continue to increase 327 as a result of the 

various efforts described above and 

general trends in technology and 

demographic changes. We also continue 

to believe that electronic delivery and 

website availability of disclosures are 

methods that have the potential to 

significantly improve the 

communication of information to 

investors. For example, many fund 

websites include additional information 

aside from disclosure documents and 

other information mandated under our 

rules such as educational materials, 

interactive calculators, and investment 

research tools and materials. Funds and 

intermediaries will be able to engage 

with their investors on the benefits of 

enrolling in electronic delivery and 

accessing information online, both 

during the extended transition period 

and thereafter, and to continue to 

improve the user-friendliness and 

content of their websites. 


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328 15 U.S.C. 77b(b), 15 U.S.C. 78c(f), 15 U.S.C. 

80a–2(c), and 15 U.S.C. 80b–2(c). 

329 15 U.S.C. 78w(a)(2). 

330See supra note 18. 

331See supra notes 18, 96, and 97 and 

accompanying text. 

332We believe that the change from generally 

requiring investors to ‘‘opt-in’’ if they wish to 

receive electronic instead of paper copies of 

shareholder reports, to—as under the new rule— 

‘‘opt-out’’ if they wish to receive paper copies 

instead of electronic copies will increase the ability 

of funds to deliver shareholder reports 

electronically. Although the preferences of 

investors will not change dependent on the form of 

consent, economic theory and empirical evidence 

suggest the likelihood that investors receive 

electronic transmissions of fund reports will be 

greater under opt-out consent rather than opt-in 

consent. See, e.g., Richard H. Thaler and Shlomo 

Bernatzi, Save More TomorrowTM: Using Behavioral 

Economics to Increase Employee Saving, Journal of 

Political Economy, Vol. 112:1, S164–S187 (2004); 

Richard H. Thaler and Cass R. Sunstein, Libertarian 

Paternalism, The American Economic Review, Vol. 

93:2, 175–179 (2003). Thaler and Sunstein argue 

that a ‘‘status quo’’ bias results in the continuance 

of existing arrangements even if better options are 

available. The authors illustrate their argument with 

higher rates of initial enrollments in employee 

savings plans when enrollment is automatic as 

compared to when employees must first complete 

an enrollment form. The free-riding problem can 

also contribute to an inefficiently higher rate of 

paper use under the existing rules. The free-riding 

problem may arise because while investors must 

incur effort (albeit small) to switch from paper to 

electronic delivery under the current rules, those 

investors that fail to switch from paper still benefit 

from the aggregate printing and mailing cost savings 

due to other investors having switched to electronic 

delivery, thus, an inefficiently low proportion of 

investors may take the step to switch from paper to 

electronic delivery. 

Under the final rule, which makes website 

availability the default, some investors with a 

preference for paper reports may fail to request 

paper because of the ‘‘status quo’’ bias discussed 

above. See infra Section III.D.2. We lack the data 

to estimate the number of such investors. There is 

considerable evidence of investor preferences for 

enhanced availability of fund information on the 

internet rather than in paper form. See supra note 

19. 

333See infra note 373 and infra Section III.C.1. 

334See supra Section II.C. 

335See supra note 275. 

III. Economic Analysis 

A. Introduction 

We are mindful of the importance of 

assessing the costs and benefits of our 

rules. Section 2(b) of the Securities Act, 

Section 3(f) of the Exchange Act, and 

Section 2(c) of the Investment Company 

Act require us, when engaging in 

rulemaking that requires us to consider 

or determine whether an action is 

necessary or appropriate in (or, with 

respect to the Investment Company Act, 

consistent with) the public interest, to 

consider, in addition to the protection of 

investors, whether the action will 

promote efficiency, competition, and 

capital formation.328 Additionally, 

Exchange Act Section 23(a)(2) requires 

us, when adopting rules under the 

Exchange Act, to consider, among other 

things, the impact that any new rule 

would have on competition and not to 

adopt any rule that would impose a 

burden on competition that is not 

necessary or appropriate in furtherance 

of the Exchange Act.329

At the outset, the Commission notes 

that, where possible, it has sought to 

quantify the costs, benefits, and effects 

on efficiency, competition, and capital 

formation expected to result from new 

rule 30e–3, the amendments to various 

rules and registration forms, and their 

reasonable alternatives. The economic 

effects of new rule 30e–3 are dependent 

on a number of factors, including the 

number of funds that rely on the rule; 

for those funds that rely on the rule, the 

number of investors that ultimately 

select paper transmission; the extent to 

which funds currently rely on 

Commission guidance to transmit 

shareholder reports electronically; the 

extent to which investors currently have 

opted into electronic delivery; 330 and 

the extent to which investors become 

more aware of the website availability of 

portfolio investment and other 

information, view the information, and 

use the information to make investment 

decisions. 

New rule 30e–3 allows funds to 

satisfy shareholder report transmission 

requirements by making such reports 

publicly accessible on a website if they 

meet certain conditions. This new 

option is designed to modernize the 

manner in which periodic information 

is made available to investors. We 

believe it will improve the information’s 

overall accessibility while reducing 

expenses associated with printing and 

mailing that are borne by funds, and 

ultimately, by their investors. The rule 

also draws on the Commission’s 

investor testing efforts and other 

empirical research concerning investors’ 

preferences about methods of delivery 

for required disclosure documents and 

use of the internet for financial and 

other purposes generally.331

Further, printing and mailing 

expenses associated with shareholder 

reports are typically passed on to fund 

investors through fund expense ratios. 

Currently, if investors with a preference 

for electronic delivery do not take the 

necessary step of affirmatively electing 

electronic delivery pursuant to the 

Commission’s current guidance on 

electronic delivery, the shared costs 

associated with printing and mailing 

reports incurred by investors will be 

higher than if shareholder reports were 

delivered in paper form only to those 

investors that have a preference for 

paper delivery. The new rule, however, 

creates an optional regulatory structure 

that eliminates the need for investors to 

take the step to affirmatively elect 

electronic delivery and enables funds to 

make website availability of shareholder 

reports the default, which will reduce 

the printing and mailing costs shared by 

investors while still accommodating the 

interests of those investors who prefer 

paper copies.332

As we discuss in greater detail below, 

we estimate that aggregate cost savings, 

net of compliance costs, after the first 

year of reliance on rule 30e–3 would be 

approximately $141.4 million per year, 

or approximately 55% of the annual 

printing and mailing costs under the 

existing requirements.333 The share of 

net cost savings realized by funds that 

will be actually passed through to 

investors will affect the net impact of 

the rule on investors. Given that 

printing and mailing expenses are fund 

expenses, we expect that these savings 

will generally be fully passed along to 

investors, except perhaps in certain 

circumstances (e.g., where the fund is 

operating under an expense limitation 

arrangement). 

For purposes of the estimates below, 

we aggregate printing and mailing costs 

for positions held directly and positions 

held in street name. We assume that the 

printing and mailing costs are incurred, 

and cost savings realized, by funds. As 

discussed above, intermediaries and 

other third parties incur printing and 

mailing costs on behalf of funds in 

instances of positions held in street 

name, and such intermediaries and 

other third parties are expected to incur 

a portion of the aggregate costs and cost 

savings from rule 30e–3.334 By one 

estimate, approximately 75% of 

accounts are currently held through 

brokers and other intermediaries.335 We 

expect that intermediaries and other 

third parties will continue to pass 

through most or all shareholder report 

printing and mailing costs to funds 

under rule 30e–3, as currently 

intermediaries and other third parties 

who perform these functions on behalf 

of funds under existing requirements 

pass through printing and mailing costs 

incurred. 

Due to the optional nature of the rule, 

we expect that, in general, each fund 

will only rely on the rule if the benefits 

to that fund exceed the costs. We have 

provided estimates of the aggregate costs 

associated with printing and mailing 

shareholder reports. However, as 

discussed in further detail below, in 

certain cases the Commission is unable 

to quantify other economic effects, such 

as how the availability of shareholder 

reports online will affect investors’ use 


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336See supra note 25 and accompanying text. 

337See Reporting Modernization Adopting 

Release, supra note 14. 

338See supra notes 32–34 and accompanying text. 

339See supra Section II.A.5. 

340See 2017 ICI Fact Book, supra note 97, at 8. 

341Among mutual fund-owning households, 63% 

held funds outside employer-sponsored retirement 

accounts, with 19% owning funds only outside 

such plans. See 2017 ICI Fact Book, supra note 97, 

at 121 

342See infra note 476. 

343See Proposing Release, supra note 14, at n.800. 

See also infra note 477 and accompanying and 

following text. 

344See infra note 478. 

345See supra note 16. 

346See supra note 117 for a discussion of the 

changes recently adopted by the Commission. 

347See infra note 474 and accompanying text. 

348See Broadridge Comment Letter I. The 

commenter also estimated that the rate of electronic 

delivery of reports held in street name would reach 

54% by June 2017 and 59% by June 2018. However, 

the commenter noted that ‘‘e-delivery rates for 

direct-sold accounts lag those of the street.’’ See 

Broadridge Meeting Memo I. 

Another commenter stated that for accounts held 

directly, ‘‘an informal sampling of some of our 

members with direct-at-fund business showed an 

average e-delivery rate of about 40 percent.’’ See ICI 

Comment Letter I. 

349See supra note 275. 

350See, e.g., Broadridge Comment Letter I. 

351 $116,368,583. See Proposing Release, supra 

note 14, at n.707. Printing and mailing costs 

(inclusive of processing fees) were estimated to be 

approximately $10,354 ($31,061 ÷ 3) per fund, and 

approximately $6,667 ($20,000 ÷ 3) per UIT. See 

Proposing Release, supra note 14, nn.777, 790. 

352One commenter estimated aggregate industry 

printing and mailing costs under the existing 

requirements, providing an estimate of $344 

million. See supra note 70 and accompanying text. 

Another commenter provided an estimate of $354 

million (projected to be $382 million in 2018) for 

fund positions held in street name, which the 

of the information, because the 

Commission lacks the information 

necessary to provide a reasonable 

estimate. Where the Commission is 

unable to quantify the economic effects, 

the discussion is qualitative in nature 

and includes, where possible, 

descriptions of the direction of these 

effects. 

B. Economic Baseline and Affected 

Parties 

The baseline from which we analyze 

the economic effects of rule 30e–3, as 

well as the related rule and registration 

form amendments, is the current set of 

regulatory requirements under which 

funds transmit shareholder reports to 

investors. The baseline also includes the 

current practice of many funds to make 

some or all of these reports—or other 

materials listing portfolio investment 

information—accessible on their 

websites. The baseline reflects the fact 

that some funds transmit these materials 

electronically today, pursuant to 

Commission guidance that permits such 

a transmission method on a 

shareholder-by-shareholder ‘‘opt-in’’ 

basis, provided that certain other 

conditions are met.336 The baseline also 

reflects the recently adopted rules and 

forms and rule and form amendments 

modernizing the reporting and 

disclosure of information by registered 

investment companies,337 as well as 

rules established by exchanges related 

to the transmission of shareholder 

reports to investors, including the NYSE 

rule amendments regarding processing 

fees paid to financial intermediaries.338

The parties that could be affected by 

new rule 30e–3 are funds that currently 

are or would be required to transmit 

shareholder reports under rule 30e–1 or 

30e–2; shareholders of funds; financial 

intermediaries and other third parties 

involved in the distribution of 

shareholder reports to beneficial owners 

of funds on behalf of funds; and current 

and future users of fund portfolio 

investment information, including 

investors and third-party information 

providers. Some commenters have also 

suggested that the rule may have effects 

on the environment, the paper industry, 

and mail carriers.339

The assets of all registered investment 

companies exceeded $19 trillion at yearend 2016, having grown from about $5.8 

trillion at the end of 1998.340

Approximately 95.8 million individuals 

own shares of registered investment 

companies, representing 55.9 million or 

44.4% of U.S. households.341 Based on 

industry statistics and staff analysis of 

Commission filings, we estimate that, as 

of December 2017, the number of funds 

that could be affected by rule 30e–3 is 

12,630, including 9,360 mutual funds, 

1,821 exchange-traded funds (1,829 

ETFs less 8 UIT ETFs), 711 closed-end 

funds, 14 funds that could file 

registration statements or amendments 

to registration statements on Form N–3, 

and 724 UITs.342 For the reasons 

discussed below, we continue to 

estimate, as we did in the proposal, that 

the number of affected funds that will 

rely on rule 30e–3 comprises 90% of the 

number of all funds.343 Thus, the 

number of affected funds reflecting 

updates to the industry data figures is 

11,367.344

Rules 30e–1 and 30e–2 generally 

require funds to transmit reports to 

shareholders at least semi-annually, 

with holdings as of the end of the 

second and fourth fiscal quarters 

disclosed in the fund’s semi-annual and 

annual reports, respectively.345

Holdings as of the end of the first and 

third fiscal quarters are currently 

disclosed in reports on Form N–Q filed 

with the Commission, which are 

available on EDGAR.346 Funds are not 

required to send first- and third-quarter 

portfolio holdings information to 

investors or make that information 

accessible on their websites. 

In addition to providing paper copies 

of shareholder reports to investors, some 

funds may voluntarily, or because of 

other requirements, make some or all of 

these reports—or other materials listing 

portfolio holdings at particular times— 

accessible on websites. For example, 

rule 498 under the Securities Act, which 

concerns the use of a summary 

prospectus, requires that shareholder 

reports be made publicly available on a 

website if a summary prospectus is 

used.347

Under existing Commission guidance, 

funds can transmit shareholder reports 

or other documents electronically in 

lieu of paper delivery if they satisfy 

certain conditions relating to investor 

notice, access, and evidence of delivery. 

The Commission’s guidance indicates 

that one way evidence of delivery can 

be demonstrated as to an investor is if 

an investor has agreed to electronic 

transmission on an affirmative ‘‘opt-in’’ 

basis. 

Some shareholder reports are 

currently transmitted electronically 

under this guidance. One commenter 

estimated that 43% of reports to street 

name holders are delivered 

electronically and projected that 59% of 

reports to street name holders will be 

delivered electronically in 2018.348 By 

one estimate, approximately 75% of 

accounts are currently held through 

brokers and other intermediaries.349

While these figures demonstrate that 

electronic delivery is used for a 

significant proportion of shareholder 

reports (which affects the baseline 

printing and mailing costs across funds 

under the existing requirements), 

because a fund is not required to report 

to the Commission the extent to which 

it relies on Commission guidance, we 

lack information to estimate the 

percentage of funds that solely or 

predominantly rely on electronic 

delivery under existing Commission 

guidance. We recognize, consistent with 

the comments we have received, that 

electronic delivery of reports to some 

investors under existing Commission 

guidance may continue to reduce 

printing and mailing costs in the future, 

regardless of whether rule 30e–3 is 

adopted.350

In the Proposing Release, we 

estimated aggregate annual printing and 

mailing costs under the existing 

requirements to be approximately 

$116.4 million.351 Based on the 

estimates provided by commenters,352


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commenter estimated comprised approximately 

75% of all fund positions. See supra note 74 and 

accompanying text. If printing and mailing costs for 

fund positions held directly are similar to those for 

funds held in street name, aggregate printing and 

mailing costs would be $354 million ÷ 0.75 = $472 

million. We recognize that average printing and 

mailing costs for fund positions held directly could 

be higher if such funds rely less on electronic 

delivery. See supra note 348. The average of the 

estimate of aggregate costs provided by the first 

commenter and the estimate of aggregate costs 

based on the information provided by the second 

commenter is ($344 million + $472 million) ÷ 2 = 

$408 million. Several other commenters provided 

estimates of their own costs of printing and mailing 

shareholder reports but did not provide sufficient 

information to estimate aggregate industry costs. 

See, e.g., T. Rowe Price Comment Letter I 

(indicating that its fund group spends 

approximately $3.8 million annually to print and 

mail shareholder reports to direct fund investors); 

Schwab Comment Letter (stating that annual 

printing and mailing costs to deliver the annual and 

semi-annual shareholder reports to shareholders of 

all of its funds are approximately $4 million); MFS 

Comment Letter (stating that its annual printing and 

mailing costs were $7.2 million); Capital Research 

Comment Letter I (stating that its annual printing 

and mailing costs for semi-annual shareholder 

reports were approximately $17.7 million and for 

annual reports—approximately $28 million but 

clarifying that, since the summary prospectus is 

included with its annual shareholder reports, the 

amount attributable to annual shareholder reports is 

approximately $14.8 million); Capital Research 

Comment Letter II (estimating the cost for mailing 

production expense, postage expense, freight 

expense and print and design expense for semiannual and annual shareholder reports for the 

period from July 2016 to June 2017 at 

approximately $28 million); Blackrock Comment 

Letter (estimating its printing and distribution costs 

to be approximately $30 million per year). 

353See infra note 544 and accompanying text. 

Printing and mailing costs (inclusive of processing 

fees) were estimated to be approximately $10,354 

($31,061 ÷ 3) per fund, and approximately $6,667 

($20,000 ÷ 3) per UIT. See Proposing Release, supra 

note 14, nn.777, 790. Doubling those estimates 

results in printing and mailing costs of 

approximately $20,707.33 ($31,061 × 2⁄3) per fund 

and approximately $13,333.33 ($20,000 × 2⁄3) per 

UIT. 

Using 2017 industry figures, we estimate that 

there are 11,906 funds and 724 UITs. See infra note 

476. Thus, aggregate annual printing and mailing 

costs under the existing requirements (($31,061 × 2⁄3) × 11,906 + ($20,000 × 2⁄3) × 724) = $256,194,844. 

354 ($116.4 million + $408 million) ÷ 2 = $262.2 

million. See supra notes 351–352. 

We are unable to determine how likely it is that 

the costs would be close to the lower or upper 

bound of the range, thus, we present the midpoint 

of the range for reference. 

355See supra Section II.A.5. 

356See supra note 265 and accompanying text. 

we recognize that printing and mailing 

costs under the existing requirements 

estimated in the proposal may have 

been understated and we are doubling 

our estimated share of printing and 

mailing costs under existing 

requirements in the external costs of 

rules 30e–1 and 30e–2. Based on this 

change to the assumptions in our 

estimate and the use of updated 

industry figures on the number of funds, 

our revised estimate of aggregate annual 

printing and mailing costs under the 

existing requirements is approximately 

$256.2 million.353 The revised estimate 

is close to the average of the estimate in 

the proposal and the average of 

aggregate cost estimates based on 

commenter estimates.354

C. Benefits 

Rule 30e–3, to the extent that it is 

relied upon by funds, will likely 

provide benefits to both current and 

prospective investors. First, the rule is 

expected to benefit funds and their 

investors by reducing aggregate 

expenses related to the delivery of paper 

shareholder reports. Second, we believe 

that the rule may facilitate investor 

review of periodic information by 

increasing its overall accessibility. We 

discuss these benefits in greater detail 

below. 

The expected benefits described 

below will not necessarily be 

distributed uniformly across all funds 

that choose to rely on rule 30e–3. First, 

funds that currently have low printing 

and mailing costs—for example, because 

they have shorter shareholder reports or 

lower per-page printing costs—will 

realize smaller net cost savings from 

rule 30e–3. Similarly, funds that deliver 

many of their shareholder reports 

electronically in reliance on existing 

Commission guidance will realize 

smaller net cost savings from rule 30e– 

3, although they may still realize net 

cost savings associated with those 

investors who do not opt into electronic 

delivery. Further, even if the net cost 

savings from rule 30e–3 are small, 

investors and funds may still realize 

some benefits from website accessibility 

of first- and third-quarter portfolio 

holdings information that currently may 

be found only on EDGAR. 

Second, when funds presently rely on 

rule 498, which among its requirements 

includes website posting of shareholder 

reports when using a summary 

prospectus, the potential benefits to 

investors of having the shareholder 

report available in an electronic format 

alongside other fund information will 

likely be smaller. However, funds that 

presently rely on rule 498 may still 

realize net cost savings from no longer 

printing and mailing as many 

shareholder reports. The use of rule 

30e–3 by funds that presently rely on 

rule 498 will also result in the benefits 

to investors of website accessibility of 

fund portfolio holdings information for 

the first and third fiscal quarters. 

Funds that choose to rely on rule 30e– 

3 could be at a competitive advantage if 

investors choose funds based on their 

preference for website availability, 

either because investors prefer to view 

shareholder reports electronically or 

because funds that rely on rule 30e–3 

could have lower expense ratios due to 

savings of printing and mailing costs. 

Additionally, as discussed above, some 

commenters discussed potential benefits 

of rule 30e–3 for the environment.355

As discussed in Section II.E above, in 

a change from the proposal, we are 

adopting an extended transition period 

with staggered effective dates for new 

rule 30e–3 and the other amendments 

adopted today. This extended transition 

period would defer the realization of the 

benefits discussed above. However, it 

would provide the separate benefit of 

enabling investors more time to become 

informed of the potential forthcoming 

change in the delivery manner of their 

shareholder reports and also provide 

funds, financial intermediaries, and 

service providers with a period of time 

to modify systems and operations to 

accommodate the new shareholder 

report delivery framework. 

As discussed in Section II.B.3 above, 

in a change from the proposal, we are 

also amending rule 498 to permit a 

summary prospectus to include a 

description of how a shareholder can 

elect to receive prospectuses or other 

documents and communications by 

electronic delivery.356 This provision is 

expected to enhance investor awareness 

of how to request shareholder reports 

and related fund materials in the 

investor’s preferred format while 

enabling additional efficiencies in 

shareholder report delivery for funds. 

To the extent that the option to include 

with a summary prospectus instructions 

describing how investors may elect 

electronic delivery will increase the 

likelihood that investors with a 

preference for electronic delivery 

communicate their preference to the 

fund, this amendment to rule 498 is 

expected to contribute to increased 

reliance on electronic delivery under 

the existing Commission guidance. 

Consistent with the printing and 

mailing cost savings, this would result 

in benefits to funds, and in turn, 

investors, from the final rules. Further, 

if electronic delivery facilitates 

increased investor access to, and review 

of, fund information, this amendment to 

rule 498 may result in better informed 

investor decisions and more efficient 

allocation of investor capital. If 

investors increasingly elect electronic 

delivery as a result of this amendment 

to rule 498, the magnitude of the 

benefits incremental to reliance on rule 

30e–3 from printing and mailing cost 

savings and increased investor review 

will decrease. We lack the information 

to quantify the increase in electronic 

delivery use that would be incremental 


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29186 Federal Register / Vol. 83, No. 121 / Friday, June 22, 2018 / Rules and Regulations 

357See Investment Company Act Release No. 

22884 (Nov. 13, 1997) [62 FR 61933, 61935 (Nov. 

20, 1997)] (concerning implied consent to delivery 

of disclosure documents to households); see also 

supra note 332. 

358 $104,731,725. See Proposing Release, supra 

note 14, at n.815. 

359 $31,531,880. See Proposing Release, supra 

note 14, at n.717. 

360 $104,731,725 ¥ $31,531,880 = $73,199,845. 

$73,199,845 ÷ $116,368,583 = 63%. See supra note 

351. 

361See also supra note 352 for a discussion of 

printing and mailing expenses provided by 

commenters. 

362See Broadridge I Comment Letter. This dollar 

estimate of cost savings, however, likely understates 

potential cost savings since it was calculated using 

processing fees expected to be charged by 

intermediaries prior to the Commission approval of 

the NYSE rule that modifies processing fees. 

363 Id. The commenter projected costs to be $382 

million in fiscal year 2018 under the baseline. $18 

million ÷ $382 million = 4.7%. 

364See ICI Comment Letter I; Fidelity Comment 

Letter II (citing the ICI estimate). 

365 ICI Comment Letter I. The commenter 

estimated current costs at $344 million. $89 million 

÷ $344 million = 25.9%. 

366 ICI Comment Letter I. The commenter 

estimated current costs at $344 million. $182 

million ÷ $344 million = 52.9%. 

367See T. Rowe Price Comment Letter I. 

368See Schwab Comment Letter. 

369See supra note 358 and accompanying text. 

370See supra Section III.B and supra note 353 and 

accompanying and following text. 

371See supra note 353 and accompanying text. 

to this amendment to rule 498 and thus 

how the magnitude of the benefits 

expected from this amendment to rule 

498 will compare to the reduction in the 

benefits incremental to the reliance of 

funds on rule 30e–3. 

1. Cost Savings 

We anticipate that funds relying on 

rule 30e–3, and their investors, will 

benefit from gains in the efficiency and 

a reduction in the expenses related to 

the distribution of paper shareholder 

reports. Although the rule will have 

minimal effect, if any, on the expenses 

associated with the preparation of 

reports, we expect that the expenses 

associated with printing and mailing of 

shareholder reports will be substantially 

reduced. By reducing fund expenses, 

printing and mailing cost savings are 

expected to increase the portion of 

investor money that is retained in the 

fund rather than used to cover expenses, 

resulting, over time, in a net positive 

effect on the level of capital invested in 

funds. Furthermore, to the extent that 

reductions in fund expenses due to 

printing and mailing cost savings have 

a positive effect on fund performance 

and attract new investors or additional 

capital from existing investors, the rule 

may result in further capital formation 

benefits. We are unable to precisely 

estimate the magnitude of capital 

formation effects that may result from 

our projected cost savings under the 

rule because the magnitude of such 

effects may be affected by the extent of 

pass-through of cost savings and by 

other factors that affect the flow of 

investor capital into mutual funds, 

including other components of fund 

returns, overall market returns, and 

returns on investments other than 

funds. 

Specifically, because the new rule 

provides a structure for making website 

accessibility of shareholder reports and 

other materials the default delivery 

method, funds relying on rule 30e–3 

will only incur printing and mailing 

costs as necessary to accommodate 

those investors opting for paper, and 

printing and mailing costs associated 

with Notices delivered to investors who 

have not made such an election. 

As we have recognized in the past, 

affirmative shareholder consent can be 

difficult to obtain even for practices that 

many shareholders may prefer,357

resulting, under the existing regime, in 

more investors receiving paper copies 

than may be truly reflective of 

preferences and thus higher shared costs 

associated with that excess paper 

distribution. While it is still possible 

under the new rule that some investors 

may not take the affirmative steps 

necessary to express their transmission 

preference—in this case, to request 

paper delivery—investors in the fund 

will not share any unnecessary printing 

and mailing costs for those investors, as 

the default is website accessibility. 

Under the new rule, funds relying on 

rule 30e–3 will only incur costs of 

distribution of paper reports and other 

materials for those investors who 

request delivery in that format. 

In the Proposing Release, we 

estimated approximately $105 million 

in annual (gross) cost savings if the 

proposed rule were adopted.358 Net of 

annual costs of compliance with rule 

30e–3, which we estimated to be 

approximately $32 million after the first 

year,359 annual net savings were 

estimated to be approximately $73 

million in the aggregate, or 

approximately 63% of printing and 

mailing costs under the existing 

requirements, as estimated in the 

Proposing Release.360

Several commenters provided 

alternative estimates of potential cost 

savings associated with the printing and 

mailing of shareholder reports under the 

proposed rule.361 For example, one 

commenter asserted that electronic 

delivery is already common and thus 

concluded that fund companies would 

only save about $18 million 362 in 2018, 

which would represent approximately a 

4.7% net reduction in ongoing printing 

and mailing costs projected by the 

commenter under the existing rules.363

Another commenter estimated savings 

over the first three years after 

implementation, netting out initial 

costs, of $140 million.364 This 

commenter also projected ongoing 

annual savings after the first year of $89 

million, which would represent 

approximately a 25.9% reduction in 

existing costs as estimated by the 

commenter.365 This commenter also 

suggested that, should the Commission 

remove the postage-paid reply form 

requirement, net savings could reach 

$465 million over the first three years 

and ongoing annual savings could reach 

$182 million after the first year, or 

approximately a 53% reduction in 

existing costs as estimated by the 

commenter.366

Another commenter estimated that 

the proposed rule would result in 

savings of up to 50%.367 Another 

commenter stated that the commenter’s 

annual printing and mailing costs to 

deliver the annual and semi-annual 

shareholder reports to shareholders of 

all of its funds are approximately $4 

million and projected annual cost 

savings under the proposed rule to be 

$1.7 million,368 which would amount to 

a reduction of approximately 43%. We 

note that commenter methodologies 

with regard to projected cost savings 

varied, and thus, commenter estimates 

may not be directly comparable to each 

other or to our estimates. 

After considering the estimates and 

information provided by commenters 

about the potential factors that may 

affect net cost savings on an ongoing 

basis, and after considering the changes 

made in the final rule from the proposal, 

we have revised the estimates of annual 

gross cost savings and annual costs of 

relying on rule 30e–3. 

First, we have revised our estimate of 

gross annual cost savings for the funds 

that rely on rule 30e–3, estimated to be 

$105 million in the proposal.369 We 

continue to estimate, as we did in the 

proposal, that 90% of funds will rely on 

rule 30e–3,370 resulting in gross annual 

cost savings of 90% of the annual 

printing and mailing costs under the 

existing requirements. However, as 

discussed in greater detail in Section 

III.B above, after considering 

commenters’ estimates and updated 

industry figures on the number of funds, 

we have revised our estimate of printing 

and mailing costs under the existing 

requirements to approximately $256.2 

million.371 As a result, we now estimate 


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372We continue to estimate, as we did in the 

proposal, that the number of affected funds that will 

rely on rule 30e–3 comprises 90% of the number 

of all funds. See supra note 343 and accompanying 

text. As discussed above, we estimate aggregate 

annual printing and mailing costs under the 

existing requirements to be approximately $256.2 

million. See supra note 353 and accompanying text. 

Thus, we estimate gross aggregate annual savings of 

printing and mailing costs as the aggregate annual 

printing and mailing costs multiplied by the 

percentage of funds expected to rely on rule 30e– 

3: 90% × $256,194,844 = $230,575,360. We 

recognize that these cost savings represent a small 

fraction of assets under management of registered 

management companies. See supra note 340 and 

accompanying text. 

373Annual printing and mailing costs under the 

existing requirements were estimated to be 

$256,194,844. See supra note 353. We estimated 

that 90% of funds will rely on rule 30e–3, which 

would result in an estimated annual gross savings 

of $230,575,360. See supra note 372. 

After the first year of reliance on rule 30e–3, the 

aggregate annual compliance cost of rule 30e–3 is 

estimated to be $89,202,128. See infra note 393. 

Annual savings from rule 30e–3, net of 

compliance costs, as a share of annual printing and 

mailing costs under the existing requirements are 

estimated to be: $230,575,360 ¥ $89,202,128 = 

$141,373,232. $141,373,232 ÷ $256,194,844 = 55%. 

The revised estimates also reflect revised 

estimates of the number of funds updated to reflect 

industry figures and revised requirements of the 

final rule. 

374See infra notes 419–420. 

375See supra note 372. 

376See infra notes 392 and 393. 

377 $13.0 million = $8.2 million + $4.8 million. 

See infra notes 419–420 and infra Section III.D.1.d. 

378See infra note 396 and infra Section III.D.1.a. 

379See infra note 402 and infra Section III.D.1.b. 

380See infra note 408 and infra Section III.D.1.c 

381 $136.7 million = $230.6 million ¥ $93.9 

million. $141.4 million = $230.6 million ¥ $89.2 

million. Rounding may affect totals. 

382See supra note 348 and accompanying and 

following text. 

gross annual cost savings to be 

approximately $230.6 million.372

Second, after considering comments 

regarding printing and mailing costs for 

funds that rely on rule 30e–3, and after 

considering modifications to the final 

rule from the proposal, we have revised 

the estimated costs of relying on rule 

30e–3. As we discuss in greater detail in 

Section III.D.1 below, we now estimate 

that, after the first year of reliance on 

rule 30e–3, aggregate annual costs of 

relying on the rule will be 

approximately $89.2 million, yielding 

aggregate annual net cost savings of 

approximately $141.4 million, or 

approximately 55% of the annual 

printing and mailing costs under the 

existing requirements.373 In addition, 

prior to the effectiveness of rule 30e–3, 

we expect funds to incur aggregate costs 

of compliance with the disclosure 

amendments of the final rule of 

approximately $8.2 million in the first 

year and $4.8 million in the second 

year.374

POTENTIAL AGGREGATE COST SAVINGS FROM RELIANCE ON RULE 30e–3 

Source of cost/cost savings 

Transition 

period 

($ million) 

Year 1 

($ million 

per year) 

Year 2 + 

($ million 

per year) 

Gross savings from rule 30e–3 375 .............................................................................................. ........................ 230.6 230.6 

Costs of complying with rule 30e–3 376 ....................................................................................... ¥13.0 ¥93.9 ¥89.2 

Prominent disclosures 377 ............................................................................................................ ¥13.0 ........................ ........................

Website accessibility requirements 378 ........................................................................................ ........................ ¥3.2 ¥2.7 

Notice preparation 379 .................................................................................................................. ........................ ¥14.3 ¥10.2 

Printing and mailing costs (Notices and paper requests) 380 ...................................................... ........................ ¥76.3 ¥76.3 

Net savings from rule 30e–3 381 .................................................................................................. ¥13.0 136.7 141.4 

If a smaller percentage of funds than 

the 90% we estimate ultimately rely on 

rule 30e–3, the aggregate net cost 

savings from rule 30e–3 will 

accordingly be lower. Further, as 

discussed above, some commenters 

have indicated that funds can presently 

rely on electronic delivery of 

shareholder reports pursuant to 

Commission guidance.382 We note that 

funds that choose to rely on rule 30e– 

3 may continue to use electronic 

delivery pursuant to Commission 

guidance for some of their shareholder 

reports. We estimate cost savings 

relative to the baseline of the average 

printing and mailing costs under the 

requirements that exist today, which 

factors in the current use of electronic 

delivery under Commission guidance 

for reports to some investors. If 

aggregate printing and mailing costs 

incurred by funds that do not rely on 

rule 30e–3 continue to decrease over 

time, for instance as a result of growth 

of electronic delivery, either as part of 

broad industry trends or as a result of 

the amendments to rule 498 permitting 

funds to include electronic delivery 

instructions with a summary 

prospectus, annual printing and mailing 

cost savings under rule 30e–3 in future 

years may be lower than estimated. 

There likely is variation across 

individual funds both in existing 

printing and mailing costs and in cost 

savings and compliance costs that are 

expected on an initial or ongoing basis 

from rule 30e–3, depending on the 

extent of reliance on electronic delivery 

under Commission guidance. Although 

we cannot comprehensively quantify 

such differences, for instance, because 

of uncertainty about the future rate of 

growth in the use of electronic delivery 

under Commission guidance by funds 

that choose to rely on rule 30e–3, we 

recognize that funds that rely on rule 

30e–3 may realize smaller net cost 

savings if they rely to a greater extent on 

electronic delivery of shareholder 

reports under existing Commission 

guidance. 

2. Increased Access to and Review of 

Portfolio Information and Shareholder 

Reports 

To the extent that funds elect to rely 

on rule 30e–3, the rule will also increase 

the electronic accessibility to investors 

of portfolio investment information 

from the first and third fiscal quarters 

(or from the second and fourth fiscal 

quarters if a shareholder report 

contained a summary schedule of 

portfolio holdings) that might otherwise 

be only available on EDGAR, which in 

turn may result in greater investor 

review of that information. In addition, 

because the portfolio information must 

be publicly available on a website in the 

same location as the shareholder reports 

required to be posted on the website, the 

rule could further increase the 

likelihood that both existing investors 

and potential future fund investors 

review the portfolio information for the 

first and third quarters when they 

review the shareholder reports. To the 

extent that investors seeking 

information about an individual fund 

are likely to visit the specified website, 

having many of a fund’s important 

shareholder documents in a single 

location on the fund’s website could 

increase the visibility of, and facilitate 

access to, that information for current 

and future investors. 

Importantly, the rule will increase 

website accessibility of shareholder 


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29188 Federal Register / Vol. 83, No. 121 / Friday, June 22, 2018 / Rules and Regulations 

383See infra note 557 and accompanying text. 

11,367 funds estimated to rely on rule 30e–3 ¥ 

9,057 funds estimated to rely on rule 498 = 2,310 

funds estimated to rely on rule 30e–3 and do not 

rely on rule 498. 

384See supra Section II.B.2.d. 385See rule 30e–3(c)(3). 

reports to investors. Although among 

the funds expected to rely on rule 30e– 

3, approximately 90% of funds are 

estimated to make their shareholder 

reports publicly available online 

(consistent with the proportion of funds 

estimated to rely on rule 498, which 

requires the posting of shareholder 

reports on the fund’s website), for the 

remaining funds that do not currently 

rely on rule 498, relying on rule 30e–3 

may make shareholder reports more 

accessible to the public, to the extent 

that they do not already post 

shareholder reports on their websites, 

which may result in greater investor 

review of the information contained 

therein.383 Funds that presently rely on 

rule 498 will likely experience smaller 

benefits of increased access and review 

of fund information by investors. 

However, such funds may still 

experience net cost savings from no 

longer printing and mailing shareholder 

reports, as well as the benefits of 

website accessibility of fund portfolio 

holdings information. 

Greater use of shareholder reports and 

portfolio information by current and 

potential future investors could result in 

more informed investment decisions 

and an increase in competition among 

funds for investor capital. A better 

understanding of fund investment 

strategies, portfolio composition, and 

investment risks could also result in a 

more efficient allocation of capital 

across funds and other investments. An 

increase in the ability of investors to 

access and review information about 

different funds also could increase the 

competition among funds for investor 

capital. 

Furthermore, during the extended 

transition period, funds intending to 

rely on rule 30e–3 will be required to 

include prominent disclosures on the 

cover page or beginning of their 

summary, and cover pages of their 

statutory prospectuses, and annual and 

semi-annual shareholder reports for up 

to two years before beginning to deliver 

Notices under the rule.384 These 

prominent disclosures during the 

extended transition period are expected 

to enhance investors’ overall awareness 

of the upcoming changes in the 

shareholder report delivery format 

options under rule 30e–3, including the 

fact that investors will be able to retain 

delivery of their reports in paper if they 

should so desire. The prominent 

disclosures are also expected to notify 

investors if their fund intends to rely on 

the rule and provide investors wishing 

to continue to receive paper shareholder 

reports additional opportunities to make 

that election. Some funds that intend to 

rely on the rule may decide not to 

include these temporary prominent 

disclosures. For example, for existing 

funds that delay to make the election to 

rely on rule 30e–3 until 2021, the 

earliest these funds would be able to 

rely on the rule would be January 1, 

2022. Although such funds would not 

be required to include prominent 

disclosures during the last year of the 

extended transition period as a 

condition of reliance on the rule, their 

investors may realize some of the 

benefit of increased awareness of the 

changes in the shareholder report 

delivery regime under rule 30e–3 to the 

extent that these investors hold 

positions in other funds, including 

funds with the same sponsor, that had 

made such prominent disclosures 

during the extended transition period. 

Further, as discussed in Section II.B.3 

above, in a change from the proposal, 

we are permitting funds that elect to 

rely on rule 30e–3 to incorporate in the 

Notice, in addition to a website address, 

other equivalent methods or means to 

facilitate shareholder access to the 

website address. Such methods or 

means could include, for example, a 

Quick Response Code (QR code) or 

similar information that leads to the 

required website address. This change is 

expected to provide additional optional 

methods by which investors can access 

shareholder reports on the website, 

which, depending on the method, could 

result in a reduction in the effort and 

time required for investors to access the 

shareholder report. 

Finally, as discussed in Section II.B.3 

above, in a change from the proposal, 

the final rule permits a Notice to 

include pictures, logos, or similar 

design elements so long as the design is 

not misleading and the information is 

clear, as well as additional information 

about the fund, so long as it is limited 

to information contained in the 

shareholder report for which Notice is 

being given.385 This provision could 

facilitate the addition of content by 

funds that attracts additional investor 

attention to the Notice, yet by its terms 

does not obscure important information 

contained in the Notice. Further, the 

flexibility provided to funds to include 

content from the shareholder report in 

the Notice may result in investors who 

may otherwise not review the 

shareholder report seeing useful 

information from such reports. 

D. Costs 

Funds that rely on rule 30e–3 will 

incur costs to comply with the rule’s 

conditions. These and other costs are 

discussed below. Because reliance on 

rule 30e–3 will be optional, a particular 

fund is not expected to rely on the rule 

if the costs to the fund to rely on the 

rule exceed its benefits. Funds that 

deem the costs of meeting the 

conditions of rule 30e–3 to exceed the 

benefits of this optional rule are 

expected to elect not to rely on the rule 

and therefore not incur any compliance 

costs associated with rule 30e–3. Among 

investors in funds that elect to rely on 

the rule, investors with a preference for 

paper delivery that fail to express it may 

be less likely to review the information 

in the reports because it is not presented 

in their preferred format. 

As we discussed in Section II.E above, 

we are adopting an extended transition 

period with staged effective dates. This 

will defer the time when the costs of 

compliance with rule 30e–3 discussed 

in Sections III.D.1.a through III.D.1.c 

below will be incurred. 

1. Compliance Costs 

Relative to the baseline, funds relying 

on the new rule will incur compliance 

costs associated with satisfying the 

conditions of the rule, as discussed 

below. To the extent possible, we have 

attempted to quantify these costs. 

We have made various modifications 

to the requirements of the final rule 

from the proposal, as described in 

Section II above, in part to address 

issues raised by commenters. To 

increase investor awareness of a fund’s 

intention to rely on rule 30e–3 and to 

inform investors of the upcoming 

changes in the transmission method, in 

a change from the proposal, we are 

adopting an extended transition period 

with staged effective dates and a 

temporary condition requiring funds to 

include during the extended transition 

period certain disclosures on summary 

prospectuses, statutory prospectuses 

and shareholder reports for up to two 

years prior to the date a fund would 

begin sending Notices in reliance on the 

rule. As a result of this provision, the 

compliance costs for funds that rely on 

rule 30e–3 will be higher than the 

compliance costs that would have been 

incurred under the proposal, as 

discussed in Sections III.D.1.c and 

III.D.1.d below. 

However, we have also made 

modifications from the proposal as a 

result of which the compliance costs 

will be lower than the compliance costs 


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Federal Register / Vol. 83, No. 121 / Friday, June 22, 2018 / Rules and Regulations 29189 

386We estimate that requiring an Initial Statement 

would have resulted in additional preparation, 

printing, mailing, and processing costs of 

approximately $41.5 million in the aggregate in the 

first year and $13.8 million in the aggregate in each 

subsequent year. 

In the Proposing Release, preparing one Initial 

Statement was estimated to require 1.5 burden 

hours in the first year and 0.5 burden hours in each 

subsequent year, with 25% of that burden carried 

by outside counsel. See Proposing Release, supra 

note 14, at 33679. We retain this estimate. Using 

updated salary figures, we monetize internal 

personnel time at $353 per hour and outside 

counsel time at $401 per hour. See infra notes 404, 

509. Using updated salary figures, preparing the 

Initial Statement would have cost approximately 

$548 (1.5 × (0.75 × $353 + 0.25 × $401)) in the first 

year and $183 (0.5 × (0.75 × $353 + 0.25 × $401)) 

in each subsequent year. 

In the Proposing Release, we estimated printing 

and mailing costs for one Notice or Initial Statement 

to be $1,000. See Proposing Release, supra note 14, 

at 33680. In light of the comments on the proposal, 

we have revised our estimate of the printing and 

mailing costs for one Notice to $3,106. See infra 

note 525. Thus, we are similarly revising the 

estimated printing and mailing cost for the first 

Initial Statement to $3,106. In the Proposing 

Release, we estimated that the cost in each 

subsequent year would be one-third of the cost for 

the first year because Initial Statements would only 

be sent to new shareholders. See Proposing Release, 

supra note 14, 33680. We retain this estimate. 

Based on updated industry figures, we now 

estimate that 11,367 funds will elect to rely on rule 

30e–3. See infra note 478. Thus, the aggregate cost 

is estimated to be $41,535,018 (11,367 × ($548 + 

$3,106)) in the first year and $13,848,795 (11,367 

× ($183 + $3,106 × 1⁄3)) in each subsequent year. 

One commenter estimated cost savings from the 

elimination of the Initial Statement to be 

approximately $60 million. See Broadridge Meeting 

Memo II, at 6. 

387Similar to the proposal, the Notice is 

permitted to accompany a current summary 

prospectus, statutory prospectus, statement of 

additional information, or Notice of internet 

Availability of Proxy Materials under rule 14a–16. 

As proposed, rule 14a–16 is amended to permit the 

bundling of Notices with Notices of internet 

Availability of Proxy Materials. In addition, the 

final rule also permits the Notice to accompany one 

or more Notices for other funds; the investor’s 

account statement; and in the case of a fund that 

is available as an investment option in a variable 

annuity or variable life insurance contract, the 

contract, the contract’s statutory prospectus, or the 

contract’s statement of additional information. 

388See supra note 173 and accompanying text. 

389See supra note 344 and accompanying text; 

infra note 478. 

390See ICI Comment Letter III; Broadridge 

Comment Letter I. As noted above, we approved 

amendments to NYSE rules that clarify the 

application of certain processing fees paid to 

financial intermediaries. See supra notes 32 to 36 

and accompanying text. 

391See Proposing Release, supra note 14, at 

nn.717–718. 

392The estimate of $93,867,993 is based upon the 

following calculations: $3,231,520 associated with 

website accessibility requirements + $14,341,169 

associated with Notice preparation + $76,295,304 in 

printing, mailing, and processing costs. See infra 

notes 396, 402, 408. 

393The estimate of $89,202,128 is based upon the 

following calculations: $2,711,680 associated with 

website accessibility requirements + $10,195,144 

associated with Notice preparation + $76,295,304 in 

printing, mailing, and processing costs. See infra 

notes 396, 402, 408. 

394See infra note 419. 

395See infra note 420. 

that would have been incurred under 

the proposal. In particular, in a change 

from the proposal, we are no longer 

requiring funds to provide the Initial 

Statement. Therefore, the cost estimates 

are revised from the proposal to reflect 

the elimination of the burden of 

preparing the Initial Statement.386

Further, we are permitting the 

combination of Notices with other 

Notices, expanding documents that may 

accompany Notices, and eliminating 

reply cards with respect to Notices. 

Permitting Notices to be bundled with 

additional types of materials under the 

final rules may result in lower postage 

costs, compared to the postage costs that 

would have been incurred under the 

proposal, by reducing the need for a 

separate mailing, although other costs 

associated with the Notice would still 

be incurred.387 Eliminating reply cards 

for Notices is also expected to result in 

lower costs compared to the costs that 

would have been incurred under the 

proposal.388

As we discuss in Section II.B.3 above, 

in a modification from the proposal, we 

are permitting funds to incorporate 

content from the shareholder report in 

Notices relating to shareholder reports 

required to be transmitted under rule 

30e–1. However, funds may incur 

additional costs for incorporating 

content from the shareholder report into 

the Notice and filing such Notices with 

reports on Form N–CSR, as well as 

potentially increase their printing and 

mailing costs, depending on the length 

of the Notice. We expect that funds will 

only elect to include content from 

shareholder reports in Notices if they 

believe the benefits to funds and 

investors outweigh the increase in their 

costs of preparing and distributing 

Notices with additional content. 

Likewise, funds may choose to deploy 

certain additional optional methods to 

facilitate access of shareholder reports 

(e.g., QR codes) if they believe the 

benefits to funds and investors outweigh 

the additional costs to do so. 

As discussed in Section IV.C below, 

we have reflected these modifications, 

as well as commenter input, in the 

revised burden estimates for the Notice 

for purposes of the Paperwork 

Reduction Act of 1995, which we 

incorporate in the cost analysis below. 

We have also specified that the 

schedule of portfolio investment 

information as of the end of the first and 

third fiscal quarters must be presented 

in a manner consistent with the 

reporting requirements of Regulation 

S–X. As most funds have established 

procedures in place to prepare and 

review such disclosures and familiarity 

with the disclosure requirements, this 

provision should not result in 

significant compliance costs. 

As we discuss below, we have also 

revised certain assumptions underlying 

our estimates. First, we have revised our 

estimate of the number of funds that 

will rely on rule 30e–3 upward to 

11,367 to reflect updates to the industry 

data figures that were utilized in the 

Proposing Release.389 We note that, 

similar to our discussion of the benefits 

in Section III.C.1, if a smaller number of 

funds choose to rely on rule 30e–3 than 

we estimate, the above estimates would 

overstate the actual costs incurred in the 

aggregate by the funds that rely on rule 

30e–3. 

Second, where applicable, we have 

attempted to address comments related 

to our estimates. Two commenters 

stated that the proposal underestimated 

the costs under rule 30e–3 (for instance, 

processing fees for broker-held 

accounts) and thus overestimated the 

net cost savings expected under rule 

30e–3.390 However, to be conservative 

in our estimates, we have revised 

upward our estimate of the printing and 

mailing costs that funds will incur 

under rule 30e–3, as discussed in 

Sections III.D.1.c and IV.B below. 

In the Proposing Release, we 

estimated that compliance costs of rule 

30e–3 would be, in the aggregate, 

approximately $32 million each year, 

with approximately $16 million in 

additional one-time costs being incurred 

in the first year following the effective 

date (resulting in aggregate compliance 

costs of approximately $48 million in 

the first year).391 We now estimate that 

these compliance costs will be, in the 

aggregate, approximately $93.9 million 

in the first year following the effective 

date 392 and approximately $89.2 

million each following year on an 

ongoing basis.393 Individual 

components of these aggregate estimated 

costs are analyzed in Sections III.D.1.a 

through III.D.1.c below. In addition, 

as discussed in Section III.D.1.d below, 

during the approximately two years 

before the effective date of rule 30e–3, 

we estimate that the disclosure 

requirements related to rule 498 and 

amendments to registration statements 

will result in aggregate costs to funds 

that intend to rely upon rule 30e–3 of 

approximately $8.2 million in the first 

year 394 and $4.8 million in the second 

year.395


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29190 Federal Register / Vol. 83, No. 121 / Friday, June 22, 2018 / Rules and Regulations 

396See infra notes 399, 400. In the first year: 

$3,003,520 + $228,000 = $3,231,520. In each 

subsequent year: $2,711,680. 

397See infra notes 488–489. 

398The Commission estimates the wage rate 

associated with these burden hours based on salary 

information for the securities industry compiled by 

the Securities Industry and Financial Markets 

Association. The estimated wage figure is based on 

published rates for senior programmers, modified to 

account for an 1,800-hour work-year and multiplied 

by 5.35 to account for bonuses, firm size, employee 

benefits, and overhead, and adjusted to account for 

the effects of inflation, yielding an effective hourly 

rate of $320. See Securities Industry and Financial 

Markets Association, Report on Management & 

Professional Earnings in the Securities Industry 

2013. 

399 $3,003,520 = 9,386 burden hours × $320 per 

hour. $2,711,680 = 8,476 burden hours × $320 per 

hour. 

400 $228,000 = 114 funds × $2,000 per fund. See 

infra note 492 (estimating, as we did in the 

Proposing Release, that each fund that does not 

currently have a website will incur a one-time 

external cost of $2,000 to develop a website) and 

infra note 495 (estimating 114 funds do not 

currently have websites). In the Proposing Release 

we also estimated that no cost would be incurred 

in subsequent years by funds that do not currently 

have a website. See Proposing Release, supra note 

14, at 33678, nn.811–812 and accompanying text. 

We did not receive comments on these estimates 

and are therefore retaining these assumptions. 

401See infra note 494 and accompanying text. 

402See infra notes 405–407. In the first year: 

$14,341,169 ($9,028,328 + $3,421,467 + 

$1,891,374). In each following year: $10,195,144 

($6,019,003 + $2,284,767 + $1,891,374). 

403See infra notes 504 (estimating 2.25 hours in 

the first year) and 505 (estimating 1.5 hours for each 

following year). 2.25 hours in the first year × 11,367 

funds = 25,576 hours. 1.5 hours each following year 

× 11,367 funds = 17,051 hours. 

404 In the Proposing Release, we estimated that 

the internal hour burden required to comply with 

the requirements concerning preparation of the 

Initial Statement and Notice would be incurred at 

the rate of $334 per hour. This estimate was based 

on the rate for compliance attorneys in SIFMA’s 

Management and Professional Earnings in the 

Securities Industry 2013, modified by Commission 

staff to account for an 1,800-hour work year and 

multiplied by 5.35 to account for bonuses, firm size, 

employee benefits, and overhead. See Proposing 

Release, supra note 14, at n.717. 

We did not receive any comments on our 

proposed estimate of the proportion of the time 

required to prepare Initial Statements and Notices 

that would be carried out by outside counsel, and 

we are maintaining that estimate today. We are, 

however, updating our estimate of the hourly rate 

for the work carried out by compliance attorneys 

based on updated salary estimates to $353 per hour. 

405 25,576 hours × $353 per hour = $9,028,328. 

17,051 hours × $353 per hour = $6,019,003. 

406The aggregate internal burden is estimated as 

5,358 hours. See infra note 579. We monetize it at 

the rate of $353 for compliance attorneys. See supra 

note 404. The aggregate cost is estimated to be 

$1,891,374 (5,358 hours × $353). 

407See infra note 512 (estimating outside counsel 

costs associated with the Notice of about $301 in 

the first year and about $201 in subsequent years). 

$301 in the first year for the Notice × 11,367 funds 

= $3,421,467 in the first year. $201 each following 

year for the Notice × 11,367 funds = $2,284,767 

each following year. 

408See infra notes 414 and 530. $70,611,804 + 

$5,683,500 = $76,295,304. 

409See infra Section IV.C. 

410See infra note 544 and accompanying text. 

a. Website Accessibility of Shareholder 

Reports and Other Materials 

Funds that rely on rule 30e–3 in the 

aggregate are expected to incur costs of 

approximately $3.2 million in the first 

year of relying on rule 30e–3 and $2.7 

million in each subsequent year to make 

the shareholder reports and portfolio 

information publicly accessible at a 

specified website.396

We estimate that funds that elect to 

rely on rule 30e–3 will incur, in the 

aggregate, approximately 9,386 burden 

hours during the first year of relying on 

rule 30e–3 and 8,476 burden hours each 

following year to comply with the 

website posting requirements of the 

rule.397 Based on an estimated wage rate 

of about $320 per hour,398 we estimate 

the aggregate paperwork related 

expenses for funds associated with the 

internal hour burden imposed by the 

website accessibility conditions of rule 

30e–3 to be approximately $3.0 million 

during the first year and $2.7 million 

each following year.399

In the aggregate, we estimate that the 

total external cost for funds to comply 

with the website posting requirements 

of the rule will be approximately 

$228,000 during the first year, with the 

external cost in subsequent years likely 

to be negligible.400 With respect to those 

funds that currently have websites, we 

estimate that the website posting 

requirements of the rule will not result 

in incremental external costs.401 If funds 

that do not currently have websites 

incur ongoing external website 

development costs, aggregate costs of 

website accessibility will be higher than 

we estimate. 

b. Notice Preparation 

We estimate that funds will incur, in 

the aggregate, approximately $14.3 

million in the first year of relying on 

rule 30e–3 and approximately $10.2 

million in each subsequent year in costs 

to prepare and review Notices and to 

file Notices with additional content 

with reports on Form N–CSR.402

We estimate that funds that elect to 

rely on rule 30e–3 will incur, in the 

aggregate, an internal hour burden of 

approximately 25,576 hours in the first 

year and 17,051 hours each following 

year in connection with the Notice 

conditions of the rule.403 Based on an 

estimated wage rate of about $353 per 

hour for compliance attorneys,404 we 

estimate the total paperwork related 

expenses for funds associated with the 

internal hour burden imposed by the 

Notice conditions of rule 30e–3 will be 

approximately $9.0 million in the first 

year of relying on rule 30e–3 and $6.0 

million each following year.405 These 

estimates reflect the changes we are 

making to the Notice requirements 

relative to the proposal, including 

eliminating the requirement of 

including a direct URL to the 

shareholder report, eliminating the 

reply card requirement, permitting 

Notices to be incorporated into or 

combined with other Notices, 

expanding the ability to combine 

Notices with other mailings, as well as 

removing the filing requirement, except 

for Notices that contain content from the 

shareholder report, and allowing funds 

to include optional content from the 

shareholder report in the Notice. 

The incremental annual costs of filing 

Notices with additional content with 

reports on Form N–CSR are estimated to 

be approximately $1.9 million, using 

burden estimates for purposes of the 

PRA.406

Finally, we estimate that external 

costs related to the Notice requirements 

of rule 30e–3 will be, in the aggregate, 

approximately $3.4 million in the first 

year and $2.3 million each following 

year.407

c. Printing and Mailing Costs 

We estimate that funds that rely on 

rule 30e–3 will incur, in the aggregate, 

approximately $76.3 million per year in 

printing and mailing costs for Notices 

and costs of delivery of shareholder 

reports in paper form upon shareholder 

request.408 These estimates are inclusive 

of processing fee costs, and have been 

adjusted in response to comments 

received on these estimates and other 

considerations.409

In a change from the proposal, funds 

will not be required to prepare and mail 

the Initial Statement. Therefore, the cost 

estimates are revised from the proposal 

to reflect the elimination of the Initial 

Statement printing, mailing and 

processing costs. The cost estimates are 

further revised to reflect changes we are 

making to the Notice requirements 

relative to the proposal, including 

eliminating the reply card requirement, 

permitting Notices to be incorporated 

into or combined with other Notices, as 

well as expanding the ability to combine 

Notices with other mailings. The 

estimates further incorporate certain 

revisions to the assumptions, relative to 

the proposal, based on the input we 

have received from commenters. In 

particular, we have revised the baseline 

assumption about the magnitude of 

printing and mailing costs as a share of 

the total external cost of compliance 

with rules 30e–1 and 30e–2, from onethird in the proposal, to two-thirds, as 

explained below.410


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411See supra notes 32–36 and accompanying text; 

infra note 521. 

412See infra note 517 and accompanying and 

following text and infra Section IV.B. 

413See infra notes 525–526 and accompanying 

text. 

414 Id. $3,106 × 2 Notices per year × 11,367 funds 

= $70,611,804. 

415See infra note 530. 

416See supra note 239 and accompanying text. 

417See supra Section II.C.2. We note that the 

rule’s approach to provide shareholders the option 

to request paper copies is generally similar to the 

operational approach currently used by many funds 

and intermediaries for the delivery of other fund 

materials. For example, paper copies of disclosure 

documents (including shareholder reports) may 

currently be requested when some shareholders 

have elected electronic delivery for some, but not 

all communications. 

418See new paragraph (b)(1)(vii) of rule 498; new 

paragraph (a)(5) to Item 1 of Form N–1A; new 

paragraph (d)(8) to Item 27 of Form N–1A; new 

paragraph 1.l to Item 1 of Form N–2; new 

instruction 6.g to Item 24 of Form N–2; new 

paragraph (a)(xi) to Item 1 of Form N–3; new 

instruction 6(vii) to Item 28(a) of Form N–3; new 

paragraph (a)(x) to Item 1 of Form N–4; new 

paragraph (a)(6) to Item 1 of Form N–6. 

419 $8,151,936 = $7,144,872 associated with 

amendments to rule 498 and Form N–1A + 

$454,400 associated with amendments to Form 

N–2 + $9,372 associated with amendments to Form 

N–3 + $422,592 associated with amendments to 

Form N–4 + $120,700 associated with amendments 

to Form N–6. See infra notes 430, 437, 442, 445, and 

448. 

420 $4,837,088 = $4,286,980 associated with 

amendments to rule 498 and Form N–1A + 

$272,640 associated with amendments to Form 

N–2 + $5,680 associated with amendments to Form 

N–3 + $211,296 associated with amendments to 

Form N–4 + $60,492 associated with amendments 

to Form N–6. See infra notes 430, 437, 442, 445, and 

448. 

421See supra Sections II.B.2.f and II.B.3. 

422 Id. 

Further, in light of the above 

comments on the estimates in the 

Proposing Release and the modifications 

we are making today (including 

eliminating the reply card requirement 

for Notices, permitting Notices to 

accompany other Notices and other 

types of documents, and permitting 

funds to include optional content from 

the shareholder report in the Notice),411

we have determined to increase our 

estimate of the percentage of annual 

printing and mailing costs (including 

processing fees) associated with 

shareholder reports that will be 

associated with the printing and mailing 

of each Notice from 10% in the proposal 

to 15%, as explained below.412

We now estimate that each fund that 

relies upon rule 30e–3 will incur an 

external cost of approximately $6,212 

per year for printing and mailing 

Notices.413 In the aggregate, funds are 

estimated to incur approximately $70.6 

million per year to print and mail 

Notices.414

In addition, under rule 30e–3, 

investors will have the option to request 

shareholder reports and other materials 

to be delivered in paper form and also 

to request paper copies for individual 

documents even if they do not request 

paper delivery for all documents. Funds 

that rely on rule 30e–3 will therefore 

incur expenses related to printing and 

mailing shareholder reports and other 

materials for those shareholders. We 

estimate that funds that elect to rely on 

rule 30e–3 will incur, in the aggregate, 

annual external costs of approximately 

$5.7 million to comply with the rule’s 

requirements to print and mail 

shareholder reports upon request.415

In connection with tracking 

shareholder requests for paper under 

rule 30e–3, funds and intermediaries 

may incur costs to implement and 

maintain systems to record shareholder 

preferences for paper delivery and 

requests for paper copies of shareholder 

reports under rule 30e–3.416 As 

discussed above, we believe that 

existing systems for electronic delivery 

could generally be leveraged in order to 

establish new processes and procedures 

for delivery of shareholder reports 

under rule 30e–3.417 The costs 

associated with implementing these 

systems may depend on funds’ and 

intermediaries’ existing systems for 

tracking investor preferences for 

electronic delivery. Given this variation, 

we do not have data on the extent of 

potential system updates that funds and 

intermediaries would need to 

implement. 

The modifications made from the 

proposal, including the elimination of 

the Initial Statement, the tracking of 

delivery preferences at the account 

rather than position level, and the 

permanent nature of the opt-in to paper 

delivery, are expected to reduce 

operational complexities and make it 

easier for existing systems to be 

leveraged for purposes of tracking 

investor preferences for paper delivery 

under rule 30e–3. Further, the extended 

transition period, added in a change 

from the proposal, is expected to 

provide funds and intermediaries 

additional time to implement the 

necessary system changes. 

We recognize that certain changes 

from the proposal, such as eliminating 

the requirement to mail the Initial 

Statement, eliminating the reply card, 

and adding required prominent 

disclosures on summary and statutory 

prospectuses and shareholder reports, 

may affect the number of investors who 

elect paper delivery due to changes to 

investor awareness regarding the option 

to request paper delivery under rule 

30e–3, resulting in different printing 

and mailing costs under rule 30e–3 than 

estimated above. However, we are not 

able to quantify these effects due to 

uncertainty about the number of 

investors who may elect paper delivery 

as a result of these changes. 

d. Disclosure Amendments to Rule 498 

and Registration Forms 

In a modification from the proposal, 

we are amending rule 498 and certain 

fund registration forms setting forth a 

temporary condition requiring funds to 

include during the extended transition 

period certain disclosures on summary 

prospectuses, statutory prospectuses, 

and shareholder reports for up to two 

years prior to the date a fund would 

begin sending Notices in reliance on the 

rule. During the extended transition 

period, funds intending to rely on rule 

30e–3 as early as permitted will include 

prominent disclosures on the cover page 

or beginning of their summary 

prospectuses, and cover pages of their 

statutory prospectuses and shareholder 

reports for a period of up to two 

years.418 We estimate that these 

disclosures will result in aggregate 

incremental costs prior to the effective 

date of rule 30e–3 of approximately $8.2 

million in the first year 419 and 

approximately $4.8 million in the 

second year.420

As described above, the condition 

will take effect on January, 1, 2019 and 

expire on January 1, 2022.421 Depending 

on when existing funds make the 

election to rely on rule 30e–3 and begin 

incorporating prominent disclosures in 

their summary and statutory 

prospectuses and shareholder reports, 

the number of fund documents on 

which individual funds will be required 

to include prominent disclosures, the 

time when funds are required to begin 

tracking investor opt-outs, and the 

associated cost, as well as the time that 

will elapse before the fund is allowed to 

begin delivering Notices in reliance on 

rule 30e–3, will vary, as detailed 

above.422 Differences in the timing of 

when funds may begin to realize cost 

savings under rule 30e–3 may 

potentially have competitive effects 

during the extended transition period. 

However, for existing funds, the 

application of these provisions during 

the extended transition period and the 

associated costs and benefits will be 

determined by the timing of the fund’s 

own decision to rely on rule 30e–3 and 

to begin informing investors of the 

fund’s intent to rely on rule 30e–3 by 

including prominent disclosures on 

fund documents during the extended 

transition period (e.g., whether to begin 

informing investors of the fund’s intent 

to rely on rule 30e–3 immediately after 


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423See infra note 556. 

424See infra note 557 and accompanying text. 

425See infra note 559 and accompanying text. 

426See infra note 558. 

427See infra note 559. 

428See infra note 560. 

429The estimated wage figure is based on 

published rates for intermediate accountants and 

attorneys, modified to account for an 1,800-hour 

work-year and multiplied by 5.35 to account for 

bonuses, firm size, employee benefits, and 

overhead, and adjusted to account for the effects of 

inflation. See supra note 398. Based on adjusted 

industry data, we estimate a rate of $166 per hour 

for intermediate accountants and $401 per hour for 

attorneys. We further estimate that work would be 

divided equally between intermediate accountants 

and attorneys, yielding a rate of $284 per hour 

(($166 + $401) ÷ 2). 

430 (9,057 + 1,006 + 15,095) hours × $284 per hour 

= $7,144,872. (4,529 + 503 + 10,063) hours × $284 

per hour = $4,286,980. 

431See infra note 562 and accompanying text. 

432See infra note 563. 

433See infra note 564. 

434See infra note 565. 

435See supra note 429. 

436 (640 + 960 hours) × $284 per hour = $454,400. 

(320 + 640 hours) × $284 per hour = $272,640. 

437See infra note 567 and accompanying text. 

438See infra note 568. 

439See infra note 569. 

440See infra note 570. 

441See supra note 429. 

442 (13 + 20 hours) × $284 per hour = $9,372. 

(7 + 13 hours) × $284 per hour = $5,680. 

443See infra notes 572–573 and accompanying 

and following text. 

the rule becomes effective on January 1, 

2019, or for new funds from the date the 

fund first publicly offers its shares; or 

whether to postpone relying on rule 

30e–3 and informing investors of the 

fund’s intent to rely on rule 30e–3 

through prominent disclosures on fund 

documents). Similarly, an existing 

fund’s decision to postpone relying on 

rule 30e–3 during the extended 

transition period will reduce the 

number of prominent disclosures that 

the fund will need to include on fund 

documents during the extended 

transition period before being able to 

rely on rule 30e–3, thus potentially 

reducing the cost of related disclosure 

amendments to the fund. For existing 

funds, the incremental reduction in the 

cost of compliance with the requirement 

to include prominent disclosures on an 

additional fund document mailing is 

expected to be small relative to the 

opportunity cost of delaying the 

realization of cost savings from reliance 

on rule 30e–3. Overall, we anticipate 

that existing funds that are considering 

whether to rely on rule 30e–3 will 

weigh the costs and benefits of doing so 

early versus late during the extended 

transition period and will select the 

option that provides the most benefit. 

The final rule provides funds the 

flexibility to make the election to rely 

on rule 30e–3 at the time that is most 

appropriate for the fund’s specific 

circumstances while including 

prominent disclosure requirements 

during the extended transition period to 

enhance investor awareness of the 

upcoming changes in the shareholder 

report delivery framework. Such 

flexibility is expected to enable funds to 

select the most efficient manner of 

shareholder report delivery and for 

funds that elect to rely on the rule, the 

most efficient approach to transition to 

rule 30e–3. 

The final rule allows new funds that 

enter the industry in January 2021 or 

later to begin relying on rule 30e–3 

immediately from the date the fund first 

publicly offers its shares without having 

to provide prominent disclosures, 

which is different from the application 

of the rule to funds in existence during 

2019–2020 that will have had to provide 

up to two years of prominent 

disclosures, and incur the associated 

cost, as a condition of relying on rule 

30e–3 beginning on January 1, 2021. In 

this respect, existing funds wishing to 

rely on the rule beginning on January 1, 

2021 will incur a cost that funds newly 

formed on or after that date will not. 

Moreover, those existing funds that 

delay their decision to rely on the rule 

(that is, those that decide after January 

1, 2019) may incur the opportunity cost 

due to not being able to begin relying on 

the rule starting January 1, 2021. 

Although in that respect, existing and 

new funds are treated differently, we 

note that all funds that decide to rely on 

the rule as early as possible—either 

before January 1, 2019 or at their 

inception—will be treated similarly. 

Rule 498 and Form N–1A Estimates 

We estimate that there are 11,181 

funds that file Form N–1A,423 including 

10,063 funds that will rely on rule 30e– 

3, of which 9,057 funds also rely on rule 

498.424 We estimate that the remaining 

1,006 funds do not rely on rule 498.425

We estimate that funds will incur, in 

the aggregate, 9,057 hours in the first 

year and 4,529 hours in the second year 

to satisfy the disclosure requirements 

associated with the amendments to rule 

498.426 We further estimate that the 

funds that rely on rule 30e–3 but not 

rule 498 will incur, in the aggregate, 

1,006 hours in the first year and 503 

hours in the second year to comply with 

the amendments to Form N–1A relating 

to prospectuses.427 In addition, we 

estimate that funds that will rely on rule 

30e–3 and that file Form N–1A will 

incur, in the aggregate, 15,095 hours in 

the first year and 10,063 in the second 

year to comply with the amendments to 

Form N–1A relating to annual and semiannual reports.428

Based on an estimated wage rate of 

about $284 per hour,429 we estimate the 

total paperwork related expenses for 

funds relying upon rule 30e–3 and 

associated with the amendments to rule 

498 and Form N–1A will be 

approximately $7.1 million in the first 

year and approximately $4.3 million in 

the second year.430

Form N–2 Estimates 

We estimate that there are 711 closedend funds that file Form N–2,431

including 640 funds that will rely on 

rule 30e–3.432 We estimate that these 

funds will incur, in the aggregate, 640 

hours in the first year and 320 hours in 

the second year to satisfy the disclosure 

requirements associated with the 

amendments to Form N–2 relating to 

statutory prospectuses.433 In addition, 

we estimate these funds will incur, in 

the aggregate, 960 hours in the first year 

and 640 hours in the second year to 

comply with the amendments to Form 

N–2 relating to annual and semi-annual 

reports.434 Based on an estimated wage 

rate of about $284 per hour,435 we 

estimate the total paperwork related 

expenses for funds relying upon rule 

30e–3 and associated with the 

amendments to Form N–2 will be 

approximately $0.5 million in the first 

year and approximately $0.3 million in 

the second year.436

Form N–3 Estimates 

We estimate that there are 14 funds 

that file Form N–3,437 including 13 

funds that will rely on rule 30e–3.438

We estimate that these funds will incur, 

in the aggregate, 13 hours in the first 

year and 7 hours in the second year to 

satisfy the disclosure requirements 

associated with the amendments to 

Form N–3 relating to statutory 

prospectuses.439 In addition, we 

estimate that these funds will incur, in 

the aggregate, 20 hours in the first year 

and 13 hours in the second year to 

comply with the amendments to Form 

N–3 relating to annual and semi-annual 

reports.440 Based on an estimated wage 

rate of about $284 per hour,441 we 

estimate the total paperwork related 

expenses for these funds will be 

approximately $9,372 in the first year 

and $5,680 in the second year.442

Form N–4 Estimates 

As we discuss below, we estimate 

funds that will rely on rule 30e–3 will 

make 1,488 filings of Form N–4, with 

the total annual hour burden associated 

with the amendments to Form N–4 of 

1,488 hours in the first year and 744 

hours in the second year.443 Based on an 

estimated wage rate of about $284 per 


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444See supra note 429. 

445 1,488 × $284 = $422,592. 744 × $284 = 

$211,296. 

446See infra notes 574–575 and accompanying 

and following text. 

447See supra note 429. 

448 425 × $284 = $120,700. 213 × $284 = $60,492. 

449See, e.g., supra notes 43, 96, and 97, and 

accompanying text. 

450See supra Section III.C.2. 

451See supra note 98; supra Section II.A.2. 

452See supra note 49. But see supra notes 41–42 

and accompanying text (discussing increasing 

internet usage, including among previously 

underserved demographic groups). 

453Commission staff lacks data to assess the 

extent to which investors review information 

provided in either paper or electronic format. One 

commenter provided survey evidence, suggesting 

that, less than half of the respondents read all of 

the disclosure but a significant portion of 

respondents read or skim some of the disclosure. 

See Broadridge Meeting Memo I, at 9 (citing the 

2016 True North Market Insights Study, according 

to which (1) 21% of respondents reported reading 

paper reports thoroughly and 53% reported 

skimming the reports, and (2) 36% of respondents 

reported always looking at the annual and semiannual reports received in the mail, 31% of 

respondents reported doing so most of the time, and 

26% of respondents reported doing so some of the 

time; the 2015 FINRA National Financial Capability 

Study, according to which 28% of respondents 

reported reading disclosure documents regarding 

investments and 58% of respondents reported 

skimming the disclosure documents; the 2015 

Forrester Research and Broadridge Custom Survey, 

according to which 24% of respondents reported 

looking at shareholder reports always, 26% of 

respondents most of the time, and 37% of 

respondents sometimes; and the 2006 ICI Study: 

Understanding Investor Preferences for Mutual 

Fund Information, according to which 10% of 

respondents reported reading all shareholder 

reports, 17% of respondents reported reading most, 

24% of respondents reported reading some, and 

26% of respondents reported reading very little of 

the shareholder reports they receive). 

However, another commenter suggested that 

surveys about readership may be unreliable because 

respondents may misstate their readership, because 

surveys did not ask respondents specifically about 

whether they read the reports, and because surveys 

often have methodological problems that lead to a 

likely overstatement of the baseline readership. The 

commenter also expressed skepticism that ‘‘large 

number[s] of individual investors are avid readers 

of their paper shareholder reports’’ due to the 

length and technical nature of the reports, 

especially when published on a consolidated basis, 

and argued that it is thus not possible to conclude 

that fewer investors would read reports online. See 

ICI Comment Letter III. In another letter, this 

commenter stated that, based on an investor survey, 

‘‘fewer than half of mutual fund shareholders still 

review some printed materials for information 

about their fund investments, and over two-thirds 

of these individuals likewise access online 

materials to gather information on their fund 

investments.’’ See Comment Letter of Investment 

Company Institute (Jul. 8, 2016) (‘‘ICI Comment 

Letter IV’’). 

454See supra note 174. 

455See supra Section II.B.2.b. 

456See supra Section II.B.2. 

457See supra Section II.B.2.b. 

458See supra Sections II.B.2.f and II.B.3. 

459See supra Section II.B.2.d. 

460See supra Section II.B.2.b.ii. 

hour,444 we estimate the total 

paperwork related expenses for these 

funds will be approximately $422,592 in 

the first year and $211,296 in the second 

year.445

Form N–6 Estimates 

As we discuss below, we estimate 

funds that will rely on rule 30e–3 will 

make 425 filings of Form N–6, with the 

total annual hour burden associated 

with the amendments to Form N–6 of 

425 hours in the first year and 213 hours 

in the second year.446 Based on an 

estimated wage rate of about $284 per 

hour,447 we estimate the total 

paperwork related expenses for these 

funds will be approximately $120,700 in 

the first year and $60,492 in the second 

year.448

2. Other Costs 

Although we believe that the 

provisions of the final rule enable 

investors to receive shareholders reports 

in the format they prefer, that website 

availability of shareholder reports and 

portfolio information is consistent with 

many investors’ preferences,449 and that 

the final rule may promote improved 

access to and consumption of portfolio 

information, as discussed above,450 we 

acknowledge that there may be some 

investors who would prefer to receive 

paper copies but may not notify their 

fund of that preference.451 To this end, 

several commenters pointed out that 

internet access and use among 

Americans was not universal.452 Those 

investors without home internet access, 

depending on their ability and 

preference to access shareholder reports 

and portfolio investment information 

electronically, might experience a 

reduction in their ability to access 

shareholder reports and portfolio 

investment information if they do not 

elect to receive paper reports. Further, 

some commenters have asserted that 

some investors with internet access may 

be less likely to review their shareholder 

reports made available online than 

shareholder reports delivered in paper 

form.453

To the extent that a reduction in the 

review of shareholder reports by such 

investors decreases how informed they 

are about funds, it could potentially 

decrease their ability to efficiently 

allocate capital across funds and other 

investments. A decrease in the ability of 

investors to access and review 

information about different funds could 

also decrease the competition among 

funds for investor capital. However, 

these potential effects will be attenuated 

to the extent that investors rely on other 

sources of information and disclosures, 

in addition to shareholder reports, to 

obtain information about funds. 

In a change from the proposal, after 

considering the input from commenters, 

we are not requiring pre-paid reply 

cards to be sent together with 

Notices,454 nor are we requiring funds to 

mail an Initial Statement.455 These 

changes may reduce the likelihood, 

compared to the proposal, that investors 

who prefer to access reports in paper 

form will elect to receive reports in that 

form, which in turn would potentially 

reduce the likelihood that investors will 

review the information in reports, and 

similarly may result in less wellinformed investment decisions and 

potential adverse effects on the 

efficiency of capital allocation across 

funds. 

However, we have sought to mitigate 

such potential adverse effects in the 

final rule.456 For example, the final rule 

contains a Notice requirement and 

permits the Notice to include multiple 

means through which an investor can 

elect paper reports.457 To help ensure 

that current investors that may be 

accustomed to receiving shareholder 

reports in paper through the mail have 

advance notice of a fund’s intent to rely 

on rule 30e–3, the final rule also 

includes an extended transition period 

with a temporary condition that requires 

funds to include prominent disclosures 

during the extended transition period in 

various fund documents prior to 

sending Notices pursuant to the rule.458

In addition, to further simplify the 

process for investors with a preference 

for paper delivery to make such an 

election, under the final rule, an 

investor’s election for paper reports is 

required to be applied at the investor 

account level, rather than the fund 

position level.459

In a change from the proposal, the 

final rule permits a Notice to include 

additional information about the fund, 

so long as it is limited to information 

contained in the shareholder report for 

which Notice is being given.460 To the 

extent that investors only review 

Notices and to the extent that investors 

do not find the additional content from 

the report included in the Notice to be 

a sufficient description of fund 

operations, it may result in a less 

complete investor review of information 

about the fund. However, the 

requirement that the Notice describe 

means by which investors may access 

the complete shareholder report and the 

requirement that additional content 

included in the Notice be limited to 

information from the shareholder report 


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29194 Federal Register / Vol. 83, No. 121 / Friday, June 22, 2018 / Rules and Regulations 

461See Shareholder Choice Regarding Proxy 

Materials Release, supra note 18, at 42231, 42234. 

The Shareholder Choice Regarding Proxy Materials 

Release estimated that approximately 10% of all 

shareholders print out proxy materials at home at 

a unit cost that was approximately 25% higher than 

the average cost of printing and mailing each copy 

under the paper delivery regime ($7.05 ÷ $5.64 = 

1.25). Printing costs for shareholder reports and 

proxy materials may differ and printing costs in 

absolute terms have decreased over time. According 

to one commenter, the cost to the fund of printing 

and mailing a shareholder report under the existing 

requirements is $0.70 per report. See ICI Comment 

Letter I. However, it remains likely that individual 

shareholders who manually print reports will incur 

a higher cost per report relative to the cost incurred 

by a fund due to the economies of scale. It is not 

clear how many shareholders will manually print 

shareholder reports, and thus, what the aggregate 

incremental cost impact on shareholders will be. 

462See, e.g., Baesman Comment Letter; Sandstrom 

Comment Letter; Gherman Comment Letter; Snader 

Comment Letter; Jaffe Comment Letter. 

463See supra Section II.B.2.b. 

464See supra notes 402 and 408: $86,767,898 

($75,993,264 + $10,774,634) in the first year and 

$83,797,114 ($75,993,264 + $7,803,850) in each 

following year. 

465See supra Section III.D.1. 

466See supra notes 141–144. 

467See supra 408. 

468See supra note 145 and accompanying 

paragraph. 

are expected to partly mitigate this 

concern. 

In addition, although we expect 

investors to benefit from a reduction in 

printing and mailing costs borne by 

their funds, we recognize that some 

investors may incur printing costs due 

to manually printing specific documents 

of their choosing.461 Investors that print 

out their own materials would likely 

incur greater costs than they would 

otherwise indirectly bear if the printing 

and mailing costs of those materials 

were borne collectively by all investors 

of the fund. We note, however, that 

investors have the option to request 

paper copies directly instead of 

manually printing materials, and we 

expect investors who regularly print out 

their own copies of shareholder reports 

and for whom such printing is 

burdensome or costly to elect paper 

delivery. 

It is possible that funds that choose to 

rely on rule 30e–3 could be at a 

competitive disadvantage if investors 

choose funds based on their preference 

for the default of paper delivery. Funds 

for which such competitive effects 

outweigh the cost savings from reliance 

on rule 30e–3 can choose not to rely on 

rule 30e–3. 

Rule 30e–3 and related rule and form 

amendments could also potentially have 

costs extending beyond the asset 

management industry. Some 

commenters expressed concern about 

the long-term effects of rule 30e–3 on 

other industries, including the paper 

industry.462 The commenters, however, 

did not provide specific data on or 

estimates of the rule’s potential impact 

on those industries. Even in the absence 

of rule 30e–3 and related amendments 

to rule 498 and registration forms, 

continued future growth of electronic 

delivery in reliance on existing 

Commission guidance might result in a 

continued decrease in the number of 

shareholder reports being delivered in 

paper form, so the potential future 

effects on the paper industry may be 

influenced by factors outside of rule 

30e–3 and related rule and form 

amendments. Furthermore, 

notwithstanding these potential 

impacts, we continue to believe that 

rule 30e–3 will modernize and enhance 

the manner in which shareholder 

reports are made available to investors, 

resulting in savings in printing and 

mailing costs that are borne by funds, 

and ultimately, by fund shareholders, 

and overall greater accessibility of 

shareholder reports and other related 

information. Moreover, under rule 30e– 

3 investors will have the ability to 

request delivery of shareholder reports 

and other materials in paper form. 

E. Alternatives 

Commission staff has also examined 

different ways in which the information 

that funds provide to investors could be 

made more accessible while still 

promoting the ability of investors to 

receive these important documents via 

their preferred method. Some of these 

alternatives are discussed throughout 

the release to explain why the 

Commission ultimately chose to adopt 

the rule in its current state. We discuss 

below several additional alternatives 

that the Commission considered. 

As an alternative, we considered 

whether we should eliminate the Notice 

requirement, as suggested by one 

commenter.463 Eliminating the Notice 

would provide greater cost savings to 

funds and their investors than the final 

rule we are adopting today. We estimate 

that this alternative would result in 

additional aggregate savings of Notice 

preparation, printing, and mailing costs 

of approximately $86.8 million in the 

first year and approximately $83.8 

million in each subsequent year.464

However, we believe that doing so 

would reduce investor awareness of the 

online shareholder reports, which 

would run counter to our objective of 

promoting the accessibility of these 

important fund documents. While funds 

will necessarily incur costs to distribute 

Notices, as discussed above,465 we 

continue to believe that it is important 

for investors to receive the Notice, as it 

will alert them to the availability of a 

shareholder report online and will 

provide them with information on how 

to obtain a paper copy of the report. 

As another alternative, we could have 

required or permitted the Notice, which 

meets the content requirements in the 

final rule, or alternatively, additional 

content requirements as described 

below, to be sent via email, as suggested 

by some commenters.466 This 

alternative would result in savings of 

printing and mailing costs for funds of 

up to approximately $76.0 million per 

year if all Notices are sent by email 

instead of in paper form.467 The email 

manner of delivery of the Notice under 

this alternative would not be expected 

to affect the costs of preparing the 

Notice content. However, for investors 

that have not opted into electronic 

delivery, information on email 

addresses that a fund can use to deliver 

Notices may be missing or out of date, 

and we are unable to estimate the costs 

to an average fund of updating and 

compiling email lists under the 

alternative of email distribution of 

Notices to all shareholders. We lack data 

on the percent of fund investors that 

have not opted into electronic delivery 

for whom funds have up-to-date email 

contact information because funds are 

not required to disclose such 

information and it is not available to us 

from other sources. 

Nevertheless, as discussed above, we 

continue to believe that it is important 

for investors to receive the Notice, as it 

will contemporaneously alert them to 

the availability of a shareholder report 

online. A Notice will also provide 

investors with information on how to 

obtain a paper copy of the report, which 

makes it easier for investors with a 

preference for paper to request 

shareholder reports in paper. The 

benefits from requiring the Notice to be 

in paper form include, for example, that 

there may be instances where an 

investor provided his or her email for 

certain limited purposes without 

necessarily intending to receive 

shareholder reports or notices of reports 

through email.468

In a modification from the proposal, 

we are permitting funds to incorporate 

content from their shareholder reports 

into Notices relating to shareholder 

reports required to be transmitted under 

rule 30e–1, as discussed in greater detail 

in Section II.B.2.b.ii above. As 

alternatives, we considered, as a 

condition of reliance on rule 30e–3, 

either (1) limiting the types of content 

from the shareholder report that is 


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469For an additional discussion of the reasons for 

the approach chosen for the Notice, see supra 

Section II.B.2.b.ii. 470 44 U.S.C. 3501–3521. 471See rule 30e–3. 

permitted to be incorporated into the 

Notice, or (2) specifying additional 

types of content from the shareholder 

report that are required to be 

incorporated into the Notice.469 Relative 

to the final rule, both alternatives could 

result in greater standardization of 

additional Notice content, potentially 

facilitating investor review and 

comparison of information in such 

Notices across funds and thus 

potentially enabling better informed 

investment decisions, to the extent that 

investors rely on information from 

shareholder reports relative to other 

sources of information and disclosures. 

The second alternative also could make 

information from shareholder reports 

more accessible to those investors that 

may otherwise not review shareholder 

reports. 

However, both alternatives would 

limit the flexibility of funds to tailor 

Notice content to include the types of 

information from shareholder reports 

that may be more relevant and valuable 

for investors in the specific fund, 

potentially affecting how useful the 

Notice content is to those investors. 

Further, if the additional information 

required to be included in Notices 

under the second alternative is more 

extensive than the information that 

funds would otherwise elect to include 

in Notices under the final rule, the 

second alternative could increase Notice 

preparation, printing, and mailing costs, 

which would be passed on to fund 

investors, relative to the final rule. 

We also recognize that the number of 

funds that rely on rule 30e–3 may 

decrease under this alternative in the 

event that funds find rule 30e–3 to be 

less advantageous as a result of 

increased Notice preparation, printing, 

and mailing costs. Overall, we believe 

that the Notice provisions of the final 

rule permit sufficient flexibility for 

funds to present additional information 

from the shareholder report in Notices 

sent to investors without imposing 

additional burdens and costs on those 

funds that would not expect their 

investors to find such information to be 

of added value. 

We are adopting a temporary 

condition of reliance on rule 30e–3 that 

requires funds intending to rely on rule 

30e–3 to provide prominent disclosures 

on certain fund documents for up to two 

years during the extended transition 

period. As an alternative, we could 

require all funds, including funds that 

elect to rely on rule 30e–3 after the 

temporary condition expires, to provide 

two years of prominent disclosures on 

certain fund documents prior to being 

able to rely on rule 30e–3. This 

alternative may benefit some investors 

in funds that elect to rely on rule 

30e–3 in the future by increasing their 

awareness of the fund’s intent to rely on 

rule 30e–3. However, this benefit is 

likely to decrease as time elapses since 

the rule’s effective date and an 

increasing number of investors becomes 

aware of the industry-wide changes in 

the shareholder report delivery 

framework under rule 30e–3, including 

as a result of receiving prominent 

disclosures on fund documents and 

Notices under rule 30e–3 sent by other 

funds in which investors hold positions. 

This alternative likely would reduce the 

benefits to funds, and in turn, to fund 

investors, relative to the final rule, by 

retaining on an indefinite basis a twoyear delay in the ability of funds to 

realize printing and mailing cost savings 

from rule 30e–3. This alternative also 

would result in higher costs of 

prominent disclosures being incurred by 

funds, and in turn, fund investors, 

beyond the end of the extended 

transition period. 

IV. Paperwork Reduction Act 

New rule 30e–3 contains a ‘‘collection 

of information’’ within the meaning of 

the Paperwork Reduction Act of 1995 

(the ‘‘PRA’’).470 In addition, the new 

rule and other amendments will impact 

the collections of information under 

rules 30e–1 and 30e–2, rule 498 under 

the Securities Act, and Forms N–1A, 

N–2, N–3, N–4, N–6, and N–CSR. 

The titles for the existing collections 

of information are: ‘‘Rule 30e–1 under 

the Investment Company Act of 1940, 

Reports to Stockholders of Management 

Companies’’ (OMB Control No. 3235– 

0025); ‘‘Rule 30e–2 (17 CFR 270.30e–2) 

pursuant to Section 30(e) of the 

Investment Company Act of 1940 (15 

U.S.C. 80a–29(e)), Reports to 

Shareholders of Unit Investment Trusts’’ 

(OMB Control No. 3235–0494); ‘‘Rule 

498 under the Securities Act of 1933, 

Summary Prospectuses for Open-End 

Management Investment Companies’’ 

(OMB Control No. 3235–0648); ‘‘Form 

N–1A under the Securities Act of 1933 

and under the Investment Company Act 

of 1940, Registration Statement of OpenEnd Management Investment 

Companies’’ (OMB Control No. 3235– 

0307); ‘‘Form N–2 under the Investment 

Company Act of 1940 and Securities Act 

of 1933, Registration Statement of 

Closed-End Management Investment 

Companies’’ (OMB Control No. 3235– 

0026); ‘‘Form N–3 under the Securities 

Act of 1933 and under the Investment 

Company Act of 1940, Registration 

Statement of Separate Accounts 

Organized as Management Investment 

Companies’’ (OMB Control No. 3235– 

0316); ‘‘Form N–4 under the Securities 

Act of 1933 and under the Investment 

Company Act of 1940, Registration 

Statement of Separate Accounts 

Organized as Unit Investment Trust’’ 

(OMB Control No. 3235–0318); ‘‘Form 

N–6 under the Securities Act of 1933 

and under the Investment Company Act 

of 1940, Registration Statement of 

Separate Accounts Organized as Unit 

Investment Trust’’ (OMB Control No. 

3235–0503); and ‘‘Form N–CSR under 

the Securities Exchange Act of 1934 and 

under the Investment Company Act of 

1940, Certified Shareholder Report of 

Registered Management Investment 

Companies’’ (OMB Control No. 3235– 

0570). The title for the new collection of 

information is: ‘‘Rule 30e–3 under the 

Investment Company Act of 1940, 

internet Availability of Reports to 

Shareholders’’ (OMB Control No. 3235– 

0758). 

We published notice soliciting 

comments on the collection of 

information requirements in the 

Proposing Release and submitted the 

proposed collection of information to 

the Office of Management and Budget 

(‘‘OMB’’) for review in accordance with 

44 U.S.C. 3507(d) and 5 CFR 1320.11. 

An agency may not conduct or sponsor, 

and a person is not required to respond 

to, a collection of information unless it 

displays a currently valid control 

number. 

The Commission is adopting new rule 

30e–3 under the Investment Company 

Act and certain related amendments. 

This reform is designed to modernize 

the manner in which periodic 

information is transmitted to investors, 

which we believe will improve 

investors’ experience while reducing 

expenses associated with printing and 

mailing shareholder reports that are 

borne by investment companies and 

ultimately their investors. We discuss 

below the collection of information 

burdens associated with this reform. 

New rule 30e–3 will provide certain 

funds with an optional method to satisfy 

requirements to transmit shareholder 

reports by making such reports and 

certain other materials publicly 

accessible on a website, provided that 

certain other conditions are satisfied.471

Reliance on the rule is voluntary; 

however, compliance with the rule’s 

conditions is mandatory for funds 

relying on the rule. Responses to the 


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472Rule 30e–3(b)(1)(i)–(iii). While we are 

modifying Exchange Act rule 14a–16 to include the 

Notice with respect to fund documents that may 

accompany the Notice of Internet Availability of 

Proxy Materials, the incidental burden that this may 

impose is covered under the existing Paperwork 

Reduction Act for ‘‘Proxy Statements—Regulation 

14(A) (Commission Rules 14a–1 through 14a–21 

and Schedule 14A)’’ (OMB Control No. 3235-0059). 

Accordingly, we are not modifying those estimates 

at this time. 

473Proposing Release, supra note 14, at 33678. 

This estimate included 9,259 mutual funds 

(including money market funds), 1,403 ETFs (1,411 

ETFs less 8 UIT ETFs), 568 closed-end funds, and 

727 UITs (including UIT ETFs) based on Investment 

Company Institute (‘‘ICI’’) statistics, Form N–SAR 

filings, and internal SEC data as of December 31, 

2014. See ICI statistics available at http://

www.ici.org/research/stats. 

474Proposing Release, supra note 14, at 33678. 

Open-end funds relying on the summary prospectus 

rule, rule 498 under the Securities Act, are required 

to post their annual and semi-annual reports online. 

See rule 498(e)(1) [17 CFR 230.498(e)(1)]. 

475Because each of these funds was already 

required to have a website and to post its annual 

and semi-annual shareholder reports on this 

website, we estimated that proposed rule 30e–3 

would only result in each of these funds incurring 

a half hour burden per year to post their first and 

third quarter portfolio holdings on their websites, 

including in the first year of compliance with the 

rule. 

476We estimate that there are 9,360 mutual funds, 

1,821 exchange-traded funds (1,829 ETFs less 8 UIT 

ETFs), 711 closed-end funds, 14 funds that could 

file registration statements or amendments to 

registration statements on Form N–3, and 724 UITs. 

This estimate is based on data reported on Form N– 

SAR filed with the Commission as well as 

Investment Company Institute statistics as of 

December 31, 2017, available at http://www.ici.org/ 

research/stats. 9,360 + 1,821 + 711 + 14 + 724 = 

12,630. 

477 Generally consistent with this estimate, one 

commenter stated that Summary Prospectuses were 

used in 2014 by over 82% of the fund CUSIPs for 

distributions comprising over 90% of the mailed 

volume. See Broadridge Comment Letter I. 

478See supra note 476. We continue to estimate, 

similar to the proposal, that 90% of funds will rely 

on the final rule. 12,630 funds that could rely × 0.90 

proportion estimated to rely = 11,367 funds 

estimated to rely. 

479 11,367 funds relying on the rule × 0.90 = 

10,230 funds that are estimated to rely on rule 30e– 

3 and already post shareholder reports on their 

websites. 

480Proposing Release, supra note 14, at 33678. 

481 Id. 

482This estimate is based on the following 

calculation: (10,761 funds and ¥ 9,634 open-end 

funds relying on the summary prospectus rule) × 

10% = 113 funds. 

483 Id. 

484 Id. 

485 11,367 funds relying on the rule ¥ 10,230 

funds using a summary prospectus that are 

estimated to rely on rule 30e–3 = 1,137 funds. 

486 (11,367 funds estimated to rely ¥ 10,230 

funds relying on summary prospectus rule) × 0.90 

proportion estimated to have a website = 1,023 

funds. 

487 11,367 funds estimated to rely ¥ 10,230 funds 

relying on summary prospectus rule ¥ 1,023 funds 

with a website = 114 funds. 

488 ((10,230 funds relying on the summary 

prospectus rule × 0.5 hours per fund per year) + 

(1,023 funds with a website but not relying on the 

summary prospectus rule × 1.5 hours per fund or 

UIT per year) + (114 funds without a website × 24 

hours in the first year)) ÷ (11,367 funds estimated 

information collections will not be kept 

confidential. 

A. Availability of Shareholder Report 

and Other Materials 

Rule 30e–3 provides that a fund may 

satisfy its obligations to transmit a 

report to shareholders if certain 

conditions set forth in the rule are 

satisfied. Among these conditions are 

the requirements that the fund’s 

shareholder report, any report with 

respect to the fund for the prior 

reporting period that was transmitted to 

shareholders of record pursuant to rule 

30e–1 or rule 30e–2, and in the case of 

a report relating to a fund other than a 

money market fund or an SBIC, the 

fund’s complete portfolio holdings as of 

the close of its most recent first and 

third fiscal quarters, be publicly 

accessible, free of charge, at a specified 

website address.472

Internal Hours Burden 

In the Proposing Release, we 

estimated that 11,957 funds could rely 

on proposed new rule 30e–3.473 Of these 

funds, we estimated that 90% of these 

entities (or 10,761 funds) would rely on 

proposed rule 30e–3.474 Of these 10,761, 

we estimated that approximately 90% of 

these entities (or 9,634 funds) are 

currently posting shareholder reports on 

their websites (similar to the 

approximate proportion of funds 

expected to rely on rule 30e–3 that rely 

on the summary prospectus rules and 

thus already post shareholder reports on 

their websites). With respect to these 

entities, we estimated that annual 

compliance with the posting 

requirements of proposed rule 30e–3 

would require a half hour burden per 

entity.475

We have revised our estimate of the 

number of funds that may rely on rule 

30e–3 upward from 11,957 to 12,630 to 

reflect updates to the industry data 

figures that were utilized in the 

Proposing Release.476 We did not 

receive any comments on our proposed 

estimate of the proportion of funds that 

would rely on the new rule, or on our 

proposed estimate of the burden hours 

associated with the posting 

requirements of rule 30e–3 for funds 

that already post shareholder reports on 

their websites. We received one 

comment consistent with our proposed 

estimate that 90% of funds currently 

post shareholder reports on their 

websites.477 Therefore, we are 

maintaining those estimates today, with 

adjustments to reflect the updated 

industry data figures since the 

Proposing Release. Thus, we estimate 

that 11,367 funds will rely on rule 30e– 

3,478 and, of those, 10,230 are funds that 

already post shareholder reports on 

their websites.479 Accordingly, with 

respect to these 10,230 funds, we 

estimate that annual compliance with 

the posting requirements of rule 30e–3 

will require a half hour burden per 

fund. 

In the Proposing Release, of the 

remaining funds estimated to rely on 

proposed rule 30e–3, we further 

estimated that approximately 90% of 

those funds (or 1,014 funds) already had 

a website.480 With respect to these 

funds, we estimated that the posting 

requirements of proposed rule 30e–3 

would require a burden of one and a 

half hours per fund to post the required 

documents online, both in the first year 

and annually thereafter.481 For the 

remaining 10% of funds (or 113 funds) 

that we estimated would rely on the 

proposed rule but that do not have a 

website,482 we estimated initial 

compliance with the posting 

requirements would require 

approximately 24 hours per fund of 

internal staff time to develop a web page 

and post the required documents on the 

web page.483 In addition, we estimated 

that each of these funds would spend 

approximately four hours of 

professional time to maintain and 

update a web page with the required 

information on a quarterly basis.484

We did not receive any comments on 

our estimates in the Proposing Release 

of the proportion of those funds that 

would rely on the proposed rule and 

already have a website but that do not 

rely on the summary prospectus rule 

today, the burden of the website posting 

requirements for funds not relying on 

the summary prospectus rule that have 

a website, and the burden of the website 

posting requirements for funds that do 

not have a website, and we are 

maintaining those estimates today, with 

adjustments to reflect the updated 

industry figures since the Proposing 

Release. Thus, we estimate that, of the 

1,137 funds estimated to rely on the 

new rule but that do not rely on the 

summary prospectus rule,485 1,023 

funds already have a website and each 

such fund will incur 1.5 burden hours 

per year as a result of the posting 

requirement,486 and that 114 do not 

have a website and each such fund will 

incur 24 burden hours as a result of the 

posting requirement.487

Accordingly, we estimate that the 

posting requirements will result in an 

average annual hour burden of about 

0.83 hours per fund in the first year of 

compliance 488 and about 0.75 hours per 


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to rely) = (5,115 hours for funds relying on the 

summary prospectus rule + 1,535 hours for funds 

with a website but not relying on the summary 

prospectus rule + 2,728 hours for funds without a 

website) ÷ (11,367 funds estimated to rely) = 9,378 

total hours ÷ 11,367 funds estimated to rely = 0.83 

hours per fund. 

489 ((10,230 funds relying on the summary 

prospectus rule × 0.5 hours per fund per year) + 

(1,023 funds with a website but not relying on the 

summary prospectus rule × 1.5 hours per fund or 

UIT per year) + (114 funds without a website × 4 

hours per fund per quarter × 4 quarters per year)) 

÷ (11,367 funds estimated to rely) = (5,115 hours for 

funds relying on the summary prospectus rule + 

1,534 hours for funds with a website but not relying 

on the summary prospectus rule + 1,818 hours for 

funds without a website) ÷ (11,367 funds estimated 

to rely) = 8,468 total hours ÷ 11,367 funds estimated 

to rely = 0.75 hours per fund. 

490 (0.83 hours per fund in the first year + (0.75 

hours per fund each year thereafter × 2 years)) ÷ 3 

years = 0.78 hours per fund per year. 

491 0.78 hours per fund per year × 11,367 funds 

estimated to rely = 8,866 hours. 

492Proposing Release, supra note 14, at 33678. 

493 Id. 

494 Id. 

495 114 funds without a website × $667 per fund 

= $76,038. 

496See proposed rule 30e–3(c). 

497Proposing Release, supra note 14, at 33679–80. 

498See proposed rule 30e–3(d); rule 30e–3(c). 

499See proposed rule 30e–3(d)(7). 

500 Item 1(b) of Form N–CSR; see also infra 

Section IV.G. 

501See supra note 478 and accompanying text. 

502Proposing Release, supra note 14, at 33679. 

503 Id. 

504 (2 hours per first Notice + 1 hour per 

subsequent Notice × 1 subsequent Notice in the first 

year) × 0.75 proportion internal hour burden = 2.25 

hours per fund. 

505 (1 hour per subsequent Notice × 2 subsequent 

Notices in subsequent years) × 0.75 proportion 

internal hour burden = 1.5 hours per fund. 

506 (2.25 hours per fund in the first year + (1.5 

hours each year thereafter × 2 years)) ÷ 3 years = 

1.75 hours per fund. 

fund for each of the next two years.489

Amortized over three years, the average 

annual hour burden will be about 0. 78 

hours per fund.490 In sum, we estimate 

that the posting requirements of rule 

30e–3 will impose an average total 

annual hour burden of about 8,866 

hours on applicable funds.491

External Cost Burden 

In the Proposing Release, we 

estimated that certain funds would bear 

an external cost burden in complying 

with the rule. The external cost burden 

is the cost of goods and services 

purchased in connection with 

complying with the rule, which, with 

respect to the posting requirements, will 

include costs associated with 

development of a website. With respect 

to those funds that would rely on 

proposed rule 30e–3 but that do not 

currently have a website, we estimated 

that the posting requirements of the 

proposed rule would result in an 

external cost burden of $2,000 per fund 

in the first year to develop a website but 

no cost burden in subsequent years.492

We further estimated that the amortized 

annual external cost burden associated 

with developing a website would be 

$667.493 With respect to those funds 

that currently have websites, we 

estimated that the posting requirements 

of the proposed rule would not result in 

any external costs.494 We did not 

receive any comments on these 

proposed estimates, and we are 

maintaining them today, with 

adjustments to reflect the updated 

industry data figures since the 

Proposing Release. Accordingly, in the 

aggregate, we estimate that the annual 

total external cost burden with respect 

to these funds will be $76,038.495

B. Proposed Initial Statement 

As proposed, rule 30e–3 would have 

permitted an optional method to satisfy 

requirements to transmit shareholder 

reports by posting reports online with 

respect to a particular investor only if 

either the investor previously consented 

to this optional method of website 

availability or the investor’s consent 

could be inferred under certain 

conditions specified in the rule.496 One 

of the proposed conditions for inferring 

consent would have provided that an 

Initial Statement be transmitted to an 

investor at least 60 days before reliance 

on the rule with respect to that investor 

informing the investor that future 

shareholder reports available on a 

website until the investor provides 

notification that he or she wished to 

receive paper copies of reports in the 

future. As discussed above, we have 

modified the proposed rule to eliminate 

the Initial Statement requirement, 

which will affect the aggregate 

estimated burdens associated with rule 

30e–3. In the Proposing Release, we 

estimated that the Initial Statement 

would result in 0.69 average annual 

burden hours per fund and $555 in 

average annual cost burden per fund,497

which is eliminated by the modification 

in the final rule to not adopt the 

proposed Initial Statement requirement. 

C. Notice 

Proposed rule 30e–3 would have 

required a Notice be sent to investors 

within 60 days of the close of the 

reporting period covered by the related 

report. Under the final rule, a Notice is 

required to be sent to investors within 

70 days of the close of the reporting 

period to which the report relates.498

The proposed rule would have also 

required that the form of the Notice be 

filed with the Commission not later than 

10 days after the Notice is sent to 

investors.499 However, the final rule 

will require that only if a fund’s Notice 

includes any content from the report to 

which it relates, a copy of the Notice 

must be filed as part of the fund’s report 

on Form N–CSR.500

As discussed in Section IV.A above 

and as we estimated in the proposal, we 

estimate that 90% of all eligible funds 

(or 11,367 funds) will choose to rely on 

new rule 30e–3.501

Internal Hours Burden 

For those funds relying on the rule, in 

the Proposing Release we estimated that 

each fund will require two hours to 

prepare and file the first Notice in the 

first year and an hour for each 

subsequent notice.502 Of this time, we 

estimated that 75% of the preparation 

time required would be incurred by the 

fund internally and that 25% of the 

burden would be carried out by outside 

counsel retained by the fund.503

We did not receive any comments on 

our proposed estimates of the time 

required to prepare Notices, or on the 

estimated proportion of the preparation 

time required to prepare Notices that 

would be carried out internally or by 

outside counsel. As discussed above, 

the requirements regarding the Notice in 

the final rule, including removing the 

direct URL to the shareholder report and 

the reply card requirement, permitting 

Notices to be incorporated into or 

combined with other Notices, 

expanding the ability to combine 

Notices with other mailings, as well as 

removing the filing requirement (other 

than for Notices that include content 

from the report to which it relates as 

discussed in Section IV.F below), will 

collectively affect the estimated burden 

associated with the preparation of 

Notices. We are maintaining our 

estimate of the 75% preparation time 

that would be incurred by the fund 

internally, the first Notice in the first 

year required hours of two hours, and 

our estimate of subsequent Notice 

required hours of one hour to account 

for an increase in some funds that may 

include content from the shareholder 

report in the Notice. 

Accordingly, we estimate that the 

Notice will result in an average annual 

hour burden of about 2.25 hours per 

fund in the first year 504 and about 1.5 

hours per fund in each subsequent 

year.505 Amortized over three years, the 

average annual hour burden associated 

with the Notice would be about 1.75 

hours per fund.506 We have also made 

adjustments to these estimates to reflect 

the updated industry data figures since 


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507 1.75 hours per fund per year for the Notice × 

11,367 funds estimated to rely = 19,892 hours per 

year. 

508Proposing Release, supra note 14, at 33679. 

This estimate was based on the rate for attorneys 

in SIFMA’s Management and Professional Earnings 

in the Securities Industry 2013, modified by 

Commission staff to account for an 1,800-hour work 

year and multiplied by 5.35 to account for bonuses, 

firm size, employee benefits, and overhead. We note 

that, in the Proposing Release, we considered the 

external cost burden of the notice and initial 

statement requirements jointly. See Proposing 

Release, supra note 14, at 33679–80. In this release, 

we have discussed the effect of the eliminated 

initial statement requirement on the burden 

estimates separately above. See supra Part IV.B. 

509This estimate is from SIFMA’s Management & 

Professional Earnings in the Securities Industry 

2013, modified by the Commission staff to account 

for an 1,800-hour work-year and inflation, and 

multiplied by 5.35 to account for bonuses, firm size, 

employee benefits, and overhead. 

510 (2 hours per first Notice + 1 hour per 

subsequent Notice × 1 subsequent Notice in the first 

year) × 0.25 proportion external cost × $401 per 

hour = $301 per fund in the first year. 

511 (1 hour per subsequent Notice × 2 subsequent 

Notices in subsequent years) × 0.25 proportion 

external cost × $401 per hour = $201 per fund in 

subsequent years. 

512 ($301 per fund in the first year + ($201 per 

fund in subsequent years × 2 years)) ÷ 3 years = 

$234 per fund. 

513 $234 per fund per year for the Notice × 11,367 

funds estimated to rely = $2,659,878 per year. 

514Proposing Release, supra note 14, at 33680. 

515 Id. 

516See infra note 544 and accompanying text. 

517Proposing Release, supra note 14, at 33680. 

518See, e.g., ICI Comment Letter II. 

519See supra notes 32–36 and accompanying text. 

520See, e.g., ICI Comment Letter II. 

521See supra notes 221–222 and accompanying 

text. If the Notice includes content from the report 

to which it relates, a copy of the Notice must be 

filed as an exhibit to Form N–CSR, as discussed 

below. See infra Section IV.F. 

522Proposing Release, supra note 14, at 33680. 

523 $31,061 ÷ 3 = $10,354. 

524Proposing Release, supra note 14, at 33680. 

525 $31,061 external costs per shareholder report 

× 2⁄3 share of external costs attributable to printing 

the Proposing Release. In sum, we 

estimate that the Notice requirements of 

rule 30e–3 will impose an average total 

annual hour burden of about 19,892 

hours on applicable funds.507

External Cost Burden 

In addition, we estimate that funds 

will incur external costs if they rely on 

rule 30e–3. The external cost burden is 

the cost of goods and services purchased 

in connection with complying with the 

rule, which, with respect to the Notice, 

we have estimated would include the 

costs associated with outside counsel 

and printing and mailing costs. 

In the Proposing Release, we 

estimated that 25% of the time required 

to comply with the requirements 

concerning preparation of the Notice 

would be carried out by outside counsel 

retained by the fund at a rate of $380 per 

hour.508 We did not receive any 

comments on our proposed estimate of 

the proportion of the time required to 

prepare Notices that would be carried 

out by outside counsel, and we are 

maintaining that estimate today. We are, 

however, updating our estimate of the 

hourly rate for the work carried out by 

outside counsel based on updated 

industry data to $401 per hour.509

Accordingly, we estimate that outside 

counsel costs associated with the Notice 

will result in an average cost burden per 

fund of about $301 in the first year,510

about $201 in subsequent years,511 and 

amortized over three years, about 

$234.512 In sum, we estimate that the 

outside counsel costs related to the 

Notice requirements of rule 30e–3 will 

impose an annual average total cost 

burden of about $2,659,878 on 

applicable funds.513

We estimated in the Proposing 

Release that the external costs 

associated with rules 30e–1 and 30e–2 

(the rules relating to shareholder 

reports) would be $31,061 and $20,000, 

respectively.514 These costs account for 

preparation and transmission of 

shareholder reports twice a year in 

paper to investors. We also estimated 

that one-third of these external costs 

would be attributed to printing and 

mailing shareholder reports.515

Although commenters did not opine on 

the estimated proportion of total 

external costs associated with rules 30e– 

1 and 30e–2 associated with printing 

and mailing expenses, as discussed 

below, some did provide estimates of 

the total costs of print and mail delivery 

that suggest that our estimated 

proportion of those costs may have been 

understated. Therefore, we have 

determined to revise our estimate 

upwards to two-thirds, which yields 

overall printing and mailing expenses 

that are more similar to those estimated 

by commenters compared to the 

estimates in the Proposing Release.516

We estimated in the Proposing 

Release that the Notice would require 

lower printing and mailing costs given 

the significantly smaller size of the 

documents. Specifically, we estimated 

that each Notice would require 10% of 

the annual printing and mailing costs 

associated with paper shareholder 

reports.517

We note that some commenters 

specifically discussed the processing 

fees for broker-held accounts separately 

from other printing and mailing costs, 

while, in the Proposing Release, our 

estimates for printing and mailing were 

meant to encompass all of those costs 

more broadly.518 Some commenters 

indicated that the total reduction in 

external cost burden may depend on the 

amount of processing fees incurred by 

funds in connection with the print and 

mail delivery costs associated with the 

conditions of rule 30e–3. As discussed 

above, NYSE rule amendments clarify 

the processing fees applicable to 

transmission of Notices under rule 30e– 

3.519

Some commenters also suggested that 

the costs associated with the proposed 

reply card requirements may have been 

understated.520 The final rule reflects 

modifications from the proposed rule to 

eliminate the reply card requirement for 

Notices and have made other 

modifications in light of public 

comments—such as permitting Notices 

to accompany other Notices and other 

types of documents—that we believe 

will reduce the printing and mailing 

costs of the final rule’s conditions 

relative to the proposal. The final rule 

also reflects modifications from the 

proposal to permit the inclusion of 

content from the shareholder report in 

the Notice and eliminated the Notice 

filing requirement except when the 

Notice includes such content.521

In light of the above comments on the 

estimates in the Proposing Release and 

the modifications we are making today, 

we have determined to increase our 

estimate of the percentage of annual 

printing and mailing costs (including 

processing fees) associated with 

shareholder reports that will be 

associated with the printing and mailing 

of each Notice from the 10% that we 

had originally proposed to 15%. 

We also estimate, as we did in the 

Proposing Release, that there would be 

no other external costs attributable to 

the Notice.522 As we explained in the 

Proposing Release, in estimating the 

external costs, we took a conservative 

approach by using 10% of the $10,000 

estimated costs for printing and mailing 

shareholder reports 523 (which, as 

discussed above is approximately onethird of the estimated external costs 

associated with management 

companies’ shareholder reports) to 

calculate the external cost of preparing 

and mailing a Notice as compared to a 

shareholder report. As noted in the 

Proposing Release, these estimated costs 

for fund shareholder reports are higher 

than the estimated external costs 

associated with UITs’ shareholder 

reports.524

We did not receive any comments on 

this proposed estimate, and we are 

maintaining it today, except that we are 

revising the share of expenses upward 

from one-third to two-thirds. Thus, we 

estimate that the external cost burden 

associated with each Notice will be 

about $3,106.525


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and mailing (including processing fees) × 0.15 

proportion of complete report printing and mailing 

costs (including processing fees) applicable to 

Notices = $3,106 external costs per Notice. 

526 $3,106 external costs per Notice × 2 Notices 

in the first year = $6,212 per fund in external costs 

in the first year. 

527 $6,212 per year per fund for the Notice × 

11,367 funds expected to rely = $70,611,804 per 

year. 

528 $2,659,878 outside counsel expenses + 

$70,611,804 per year printing and mailing expenses 

(including processing fees) = $73,271,682 per year. 

529Proposing Release, supra note 14, at 33678. 

530 $500 per fund × 11,367 funds estimated to rely 

= $5,683,500. 

531 8,718 hours for the posting requirements + 

19,892 hours for the Notice requirements = 28,610 

hours. 

532 $76,038 for posting + $73,271,682 for the 

Notice requirements + $5,683,500 for the printing 

and mailing upon request requirements = 

$79,031,220. 

533Rule 30e–1(a). 

534Rule 30e–2(a). 

535Proposing Release, supra note 14, at 33680. 

536 Id. 

537Reporting Modernization Adopting Release, 

supra note 14, at text following n.1562. We did not 

estimate any changes to the external cost burden in 

connection with those amendments. Id. 

538Reporting Modernization Adopting Release, 

supra note 14, at text accompanying n.1579. 

539See supra note 501 and accompanying text. 

540Proposing Release, supra note 14, at 33680. 

541 Id. 

542 $31,061 per fund (excluding UITs) per year in 

external costs × 2⁄3 proportion not attributable to 

printing and mailing expenses = $20,707 per fund 

per year in external costs. 

543 $20,000 per UIT per year in external costs × 2⁄3 proportion not attributable to printing and 

mailing expenses = $13,333. 

544See, e.g., ICI Comment Letter I. 

545 $31,061 per fund (excluding UITs) per year in 

external costs × 1⁄3 proportion not attributable to 

printing and mailing expenses = $10,354 per fund 

(excluding UITs) per year in external costs. 

546 $20,000 per UIT per year in external costs × 1⁄3 proportion not attributable to printing and 

mailing expenses = $6,667 per UIT per year in 

external costs. 

547 10,715 funds expected to rely × $10,354 

external costs per fund expected to rely = 

$110,943,110 in external costs for funds expected 

to rely. 

Because each fund relying on rule 

30e–3 will be required, in the final rule, 

to send two Notices in the first year, we 

estimate that the external costs for the 

first year on a per fund will be 

$6,212.526 Likewise, we estimate that in 

subsequent years, annual external costs 

on a per fund will be $6,212 as each 

fund will continue to be required to 

send two Notices per year. As such, 

amortized over three years, we estimate 

that the Notice will be $6,212 annual 

cost burden per fund. In sum, we 

estimate that the printing and mailing 

costs related to the Notice requirements 

of rule 30e–3 will impose an average 

annual total cost burden of $70,611,804 

on applicable funds.527 Accordingly, 

together with the costs associated with 

outside counsel, we estimate that the 

Notice requirements of the rule will 

impose an average annual total cost 

burden of $73,271,682.528

D. Delivery Upon Request 

We estimated in the Proposing 

Release that funds may incur external 

costs in connection with the 

requirement to provide a shareholder 

report upon request of an investor. We 

estimated that the annual costs 

associated with printing and mailing 

these reports would be $500 per 

fund.529 We did not receive any 

comments on this proposed estimate, 

and we are maintaining it today, with 

adjustments to reflect the updated 

industry data figures since the 

Proposing Release. Accordingly, we 

estimate that the aggregate annual 

external costs associated with printing 

and mailing shareholder reports upon 

request will be $5,683,500.530

In total, rule 30e–3 will impose an 

average total annual hour burden of 

28,610 hours on applicable funds 531

and a total annual external cost burden 

of $79,031,220 on applicable funds.532

E. Impact on Information Collections for 

Rules 30e–1 and 30e–2 

We estimate, as we did in the 

Proposing Release, that rule 30e–3 will 

have the effect of reducing the external 

cost burden associated with rules 30e– 

1 and 30e–2. Rule 30e–1 requires a fund 

to transmit shareholder reports to its 

investors.533 Rule 30e–2 requires UITs 

that invest substantially all of their 

assets in shares of a fund to send their 

investors shareholder reports containing 

applicable information and financial 

statements required to be included in 

reports for the underlying fund.534

In the Proposing Release, we 

estimated, with respect to rule 30e–1, 

that each fund currently incurs an 

annual hourly burden of 84 hours and 

an annual external cost burden of 

$31,061 per fund.535 Additionally, with 

respect to rule 30e–2, we estimated that 

each UIT currently incurs an annual 

hourly burden of 121 hours per UIT and 

an annual external cost burden of 

$20,000 per UIT.536

In connection with recent 

amendments to Regulation S–X, which 

prescribes the form and content of fund 

financial statements, we estimated that 

each fund would incur 2.5 additional 

burden hours per year after the first year 

to comply with rule 30e–1.537 In 

connection with those amendments to 

Regulation S–X, we also estimated that 

each UIT to which the amendments 

apply would incur 2.5 additional 

burden hours per year after the first year 

to comply with rule 30e–2.538

As discussed above, we continue to 

estimate that 90% of all funds will rely 

on rule 30e–3.539 In the Proposing 

Release, we estimated that the hourly 

burden associated with rule 30e–1 or 

rule 30e–2 would not change as a result 

of proposed rule 30e–3.540 We did not 

receive any comments on this proposed 

estimate, and we are maintaining it 

today. However, in the Proposing 

Release we estimated that, for those 

funds that rely on proposed rule 30e–3, 

the external cost burden would 

decrease.541 Specifically, we estimated 

that for funds relying on rule 30e–3, 

one-third of the external costs currently 

attributed to rule 30e–1 relate to 

printing and mailing costs, which 

would not be applicable to funds 

(excluding UITs) relying on the rule, 

and thus their annual cost burden 

related to rule 30e–1 would decrease 

from $31,061 to about $20,707.542

Additionally, we similarly estimated 

that for UITs relying on the rule, onethird of the external costs currently 

attributed to rule 30e–2 relate to 

printing and mailing costs, which 

would not be applicable to UITs relying 

on proposed rule 30e–3, and thus their 

annual cost burden related to rule 30e– 

2 would decrease from $20,000 to about 

$13,333.543

Although commenters did not opine 

on the proposed estimate of the 

proportion of total external costs 

associated with rules 30e–1 and 30e–2 

associated with printing and mailing 

expenses, some did provide estimates of 

the current total costs of print and mail 

delivery that suggest that our estimated 

proportion of those costs may have been 

understated, and we have determined to 

revise our estimate upwards to twothirds, which yields overall printing and 

mailing expenses that are more similar 

to those estimated by commenters 

compared to the estimates in the 

Proposing Release.544 Therefore, we 

estimate that, for the 90% of funds 

estimated to rely on rule 30e–3, the 

annual external burden associated with 

rule 30e–1 will decrease from $31,061 to 

$10,354 per fund (excluding UITs),545

and the annual external burden 

associated with rule 30e–2 will decrease 

from $20,000 to $6,667 per UIT.546

We have also made adjustments to 

these estimates to reflect updated 

industry data since the Proposing 

Release regarding the number of funds. 

Accordingly, we estimate that for the 

90% of funds estimated to rely on rule 

30e–3 the total annual external cost 

burden for rule 30e–1 will be 

$110,943,110,547 and the total annual 

external cost burden for all funds under 


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548 ((11,906 total funds ¥ 10,715 funds expected 

to rely) × $31,061 in external costs for funds not 

expected to rely) + $110,943,110 in external costs 

for funds expected to rely = $147,936,761 in 

external costs. 

549 652 UITs expected to rely × $6,667 external 

costs per UIT expected to rely = $4,346,884 in 

external costs for UITs expected to rely. 

550 ((724 total UITs ¥ 652 UITs expected to rely) 

× $20,000 in external costs for UITs not expected 

to rely) + $4,346,884 in external costs for UITs 

expected to rely = $5,786,884 in external costs. 

551See new paragraphs (b)(1)(vi) and (b)(1)(vii) of 

rule 498. Similar statements will be required in 

other shareholder materials. See new paragraph 

(a)(5) to Item 1 of Form N–1A; new paragraph (d)(8) 

to Item 27 of Form N–1A; new paragraph 1.l to Item 

1 of Form N–2; new instruction 6.g to Item 24 of 

Form N–2; new paragraph (a)(xi) to Item 1 of Form 

N–3; new instruction 6(vii) to Item 28(a) of Form 

N–3; new paragraph (a)(x) to Item 1 of Form N–4; 

new paragraph (a)(6) to Item 1 of Form N–6. 

552See supra Section II.B.2.f. 

553This estimate of 12,630 funds includes 9,360 

mutual funds, 1,821 exchange-traded funds (1,829 

ETFs less 8 UIT ETFs), 711 closed-end funds, 14 

funds that could file registration statements or 

amendments to registration statements on Form 

N–3, and 724 UITs and is based on data from 

Commission filings as well as Investment Company 

Institute statistics as of December 31, 2017, 

available at http://www.ici.org/research/stats. 

554See supra note 478 and accompanying and 

following text (estimating that 90% of funds that 

could rely on rule 30e–3 will do so). 11,367 funds 

= 12,630 funds × 0.90. 

555 14,272 hours = 13,401 hours for amendments 

to rule 498 and Form N–1A + 853 hours for 

amendments to Form N–2 + 18 hours for 

amendments to Form N–3. See infra notes 561, 566, 

571. 

556 11,181 funds = 9,360 mutual funds + 1,821 

ETFs (1,829 ETFs less 8 UIT ETFs). See supra note 

553. 

557See supra note 478 and accompanying and 

following text. 10,063 funds × 0.9 = 9,057 funds. We 

estimate that for funds that would rely on rule 

30e–3 and rely upon rule 498, that the incremental 

burden hours associated with relying on rule 

30e–3 in preparing and filing on Form N–1A would 

also include any burden change associated with 

rule 498. 

558 9,057 funds × 1 hour in the first year = 9,057 

hours. 9,057 funds × 0.5 hours in the second year 

= 4,529 hours. 9,057 funds × 0 hours in the third 

year = 0 hours. (9,057 + 4,529 + 0 hours) ÷ 3 years 

= 4,529 hours per year on an amortized basis. 

559 10,063 funds ¥ 9,057 funds = 1,006 funds. 

1,006 funds × 1 hour in the first year = 1,006 hours. 

1,006 funds × 0.5 hours in the second year = 503 

hours. 503 funds × 0 hours in the third year = 0 

hours. (1,006 + 503 + 0 hours) ÷ 3 years = 503 hours 

per year on an amortized basis. 

560 10,063 funds × (1 hour for the first report in 

the first year + 0.5 hours for the second report in 

the first year) = 15,095 hours. 10,063 funds × 0.5 

hours × 2 reports in the second year = 10,063 hours. 

10,063 funds × 0 hours in the third year = 0 hours. 

(15,095 + 10,063 + 0 hours) ÷ 3 years = 8,386 hours 

per year on an amortized basis. 

561 8,889 hours = 503 hours + 8,386 hours. 

562See supra note 553. 

563See supra note 478 and accompanying and 

following text. 711 funds × 0.9 = 640 funds. 

564 640 funds × 1 hour in the first year = 640 

hours. 640 funds × 0.5 hours in the second year = 

320 hours. 640 funds × 0 hours in the third year 

= 0 hours. (640 + 320 + 0) ÷ 3 years = 320 hours 

per year on an amortized basis. The Commission 

notes that this is a conservative estimate because 

funds registered on Form N–2, in reliance of 

Investment Company Act rule 8b–16(b), on average 

rule 30e–1 will be $147,936,761.548

Additionally, we estimate that for the 

90% of UITs estimated to rely on rule 

30e–3 the total annual external cost 

burden for rule 30e–2 will be 

$4,346,884,549 and the total annual 

external cost burden for all UITs under 

rule 30e–2 will be $5,786,884.550

F. Related Disclosure Amendments 

In a change from the proposal, as 

discussed above, we are amending rule 

498 under the Securities Act and certain 

fund registration forms to require that 

funds intending to rely on rule 30e–3 

prior to January 1, 2022 include 

prominent disclosures on the cover page 

or beginning of their summary 

prospectuses, and cover pages of their 

statutory prospectuses, and annual and 

semi-annual reports, for two years 

during the three-year period between 

January 1, 2019 and December 31, 

2021.551 With the exception of newlyformed funds, funds would generally 

provide these disclosures as described 

above.552 We believe that these 

disclosures will provide important 

information to both current and 

prospective investors in advance of the 

rule’s effective date that not only 

notifies them of the intent of their fund 

to rely on the rule, but will also provide 

them with an overview of the rule’s 

operation, including the fact that reports 

will be made available on a website and 

that they will be able to retain delivery 

of their reports in paper if they should 

so desire. Beginning January 1, 2022, 

these cover page disclosures will no 

longer be required. 

Currently, we estimate that funds 

have the following total annual burdens 

for compliance with: Rule 498 (15,798 

hours), Form N–1A (1,596,749 hours), 

Form N–2 (73,250 hours), Form N–3 

(2,500 hours), Form N–4 (343,117 

hours), and Form N–6 (85,269 hours). 

Based on updated industry data figures 

and the amendments to rule 498 and the 

registration statements being adopted 

today, we have revised these estimates 

as follows. 

As discussed above, we estimate that 

there are 12,630 funds that could rely on 

rule 30e–3.553 Of this group, we 

estimate that 11,367 funds will rely on 

rule 30e–3 and, of those, 10,230 are 

funds relying on the summary 

prospectus rule (rule 498 under the 

Securities Act).554 Pursuant to the 

amendments being adopted today, we 

further estimate that these funds will 

incur 1 burden hour for the first 

summary prospectus, statutory 

prospectus, or shareholder report 

reflecting these requirements and 0.5 

hours for each additional summary 

prospectus, statutory prospectus, or 

annual and semi-annual report 

reflecting these requirements. These 

related disclosure requirements will 

only apply during the extended 

transition period, as described above. In 

light of the short period during which 

these additional requirements will be 

effective and the modest impact they are 

likely to have on external service 

providers such as website hosting 

services, outside counsel and auditors, 

and printing and mailing services, we 

do not expect them to result in 

additional expenses passed on to funds 

by their service providers in the form of 

additional external cost burden. Thus, 

we do not estimate there will be any 

external costs to comply with these 

disclosure requirements. In total, as 

discussed in more detail below, we 

estimate that the aggregate hour burden 

for all funds to comply with these 

disclosure requirements will be 14,272 

hours per year.555

Form N–1A and Rule 498 

We estimate that there are 11,181 

funds that could file registration 

statements or amendments to 

registration statements on Form 

N–1A.556 Of this group, we estimate that 

10,063 funds will rely on rule 30e–3, 

and, of those, 9,057 are funds relying on 

the summary prospectus rule.557

Consequently, we estimate that the 

amortized aggregate annual hour burden 

associated with the amendments to rule 

498 is 4,529 hours.558 We further 

estimate that 1,006 funds will rely on 

rule 30e–3 but not the summary 

prospectus rule, and thus the amortized 

aggregate annual hour burden associated 

with the amendments to Form N–1A 

and relating to prospectuses is 503 

hours.559 In addition, we estimate that 

the total annual hour burden associated 

with the amendments to Form N–1A 

and relating to shareholder reports is 

8,386 hours.560 In total, we estimate that 

the aggregate annual hour burden 

associated with the amendments to rule 

498 will be 4,529 hours, while the 

aggregate annual hour burden associated 

with the amendments to Form N–1A 

will be 8,889 hours per year.561

Form N–2 

We estimate that there are 711 funds 

that could file registration statements or 

amendments to registration statements 

on Form N–2.562 Of this group, we 

estimate that 640 funds will rely on rule 

30e–3.563 Consequently, we estimate 

that the total annual hour burden 

associated with the amendments to 

Form N–2 and relating to prospectuses 

is 320 hours.564 In addition, we estimate 


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prepare and file prospectuses less frequently than 

funds registered on Form N–1A. 

565 640 funds × (1 hour for the first report in the 

first year + 0.5 hours for the second report in the 

first year) = 960 hours. 640 funds × 0.5 hours × 2 

reports in the second year = 640 hours. 640 funds 

× 0 hours in the third year = 0 hours. (960 + 640 

+ 0 hours) ÷ 3 years = 533 hours per year on an 

amortized basis. 

566 853 hours = 320 hours + 533 hours. 

567See supra note 553. 

568See supra note 478 and accompanying and 

following text. 14 funds × 0.9 = 13 funds. 

569 13 funds × 1 hour in the first year = 13 hours. 

13 funds × 0.5 hours in the second year = 7 hours. 

13 funds × 0 hours in the third year = 0 hours. (13 

+ 7 + 0 hours) ÷ 3 years = 7 hours per year on an 

amortized basis. 

570 13 funds × (1 hour for the first report in the 

first year + 0.5 hours for the second report in the 

first year) = 20 hours. 13 funds × 0.5 hours × 2 

reports in the second year = 13 hours. 13 funds × 

0 hours in the third year = 0 hours. (20 + 13 + 0 

hours) ÷ 3 years = 11 hours per year on an 

amortized basis. 

571 18 hours = 7 hours + 11 hours. 

572See supra note 478 and accompanying and 

following text. 1,653 responses × 0.9 = 1,488 

responses. 

573 1,488 responses × 1 hour in the first year = 

1,488 hours. 1,488 responses × 0.5 hours in the 

second year = 744 hours. 1,488 responses × 0 hours 

in the third year = 0 hours. (1,488 + 744 + 0 hours) 

÷ 3 years = 744 hours per year on an amortized 

basis. 

574See supra note 478 and accompanying and 

following text. 472 responses × 0.9 = 425 responses. 

575 425 responses × 1 hour in the first year = 425 

hours. 425 responses × 0.5 hours in the second year 

= 213 hours. 425 responses × 0 hours in the third 

year = 0 hours. (425 + 213 + 0 hours) ÷ 3 years = 

213 hours per year on an amortized basis. 

576See supra Section II.B.2.b.ii. 

577 11,906 funds = 9,360 mutual funds + 1,821 

ETFs (1,829 ETFs less 8 UIT ETFs) + 711 closedend funds + 14 funds that could file registration 

statements or amendments to registration 

statements on Form N–3. See supra note 553. 

11,906 funds relying on the rule × 0.90 = 10,715 

funds estimated to rely on rule 30e-3. See supra 

note 478 and accompanying and following text. 

578 10,715 funds × 0.5 = 5,358 funds. 

579 5,358 funds × 1 hour per year = 5,358 hours. 

580 5 U.S.C. 604(a). 

581See Proposing Release, supra note 14, at 

Section VI. 

that the total annual hour burden 

associated with the amendments to 

Form N–2 and relating to annual and 

semi-annual reports is 533 hours.565 In 

total, we estimate that the aggregate 

annual hour burden associated with the 

amendments to Form N–2 will be 853 

hours per year.566

Form N–3 

We estimate that there are 14 funds 

that could file registration statements or 

amendments to registration statements 

on Form N–3.567 Of this group, we 

estimate that 13 funds will rely on rule 

30e–3.568 Consequently, we estimate 

that the total annual hour burden 

associated with the amendments to 

Form N–3 and relating to statutory 

prospectuses is 7 hours.569 In addition, 

we estimate that the total annual hour 

burden associated with the amendments 

to Form N–3 and relating to annual and 

semi-annual reports is 12 hours.570 In 

total, we estimate that the aggregate 

annual hour burden associated with the 

amendments to Form N–3 will be 18 

hours per year.571

Form N–4 

We estimate that there are 1,653 

responses on Form N–4 each year. Of 

this group, we estimate that 1,488 of the 

responses will be made by funds that 

will rely on rule 30e–3.572

Consequently, we estimate that the total 

annual hour burden associated with the 

amendments to Form N–4 and relating 

to statutory prospectuses is 744 

hours.573

Form N–6 

We estimate that there are 472 

responses on Form N–6 each year. Of 

this group, we estimate that 425 of the 

responses will be made by funds that 

will rely on rule 30e–3.574

Consequently, we estimate that the total 

annual hour burden associated with the 

amendments to Form N–6 and relating 

to statutory prospectuses is 213 

hours.575

G. Form N–CSR 

In a modification from the proposal, 

as discussed above, we are amending 

Form N–CSR to require that for fund 

Notices that include content from the 

report to which it relates, a copy of the 

Notice must be filed as part of the fund’s 

report on Form N–CSR.576 Under the 

existing collection of information, we 

estimate 172,899 aggregate annual 

burden hours to comply with Form 

N–CSR. Based on updated industry data 

figures and the amendments to Form N– 

CSR being adopted today, we have 

revised this estimate as follows. 

We estimate that there are 10,715 

funds that will rely on rule 30e–3 and 

could prepare Notices that include 

content from the report to which it 

relates.577 The decision to include 

content from the report in the Notice is 

optional, and at the fund’s election, but 

if the fund decides to include such 

content, then the Notice must be filed 

with the Commission in reports on 

Form N–CSR. We believe that many 

funds—we estimate about half of those 

relying on rule 30e–3—will wish to 

include content from the shareholder 

report in the Notice that they believe is 

particularly informative to their 

investors. However, we also believe that 

many funds—we estimate about half— 

will wish to preserve the maximum cost 

savings allowed under the rule and will 

therefore wish to include in the Notice 

only that information that is required by 

the rule. We therefore estimate that 50% 

of fund Notices will include content 

from the shareholder report. Pursuant to 

the amendment being adopted today, we 

estimate that each of these funds would 

incur one annual burden hour to file the 

Notice as part of their reports on Form 

N–CSR (not including preparation of the 

Notice). 

We estimate that of the 10,715 funds 

to rely on rule 30e–3 that could add 

content to the Notice from the report to 

which it relates, that 5,358 funds would 

add content from the shareholder Report 

to the Notice and would therefore be 

required to file such Notices with 

reports on Form N–CSR.578

Consequently, we estimate that the 

aggregate annual hour burden associated 

with the amendments to Form N–CSR is 

5,358 hours.579

V. Final Regulatory Flexibility Analysis 

This Final Regulatory Flexibility 

Analysis (‘‘FRFA’’) has been prepared in 

accordance with Section 4(a) of the 

Regulatory Flexibility Act (‘‘RFA’’).580 It 

relates to new rule 30e–3, amendments 

to Forms N–1A, N–2, N–3, N–4, N–6, 

and N–CSR, amendments to rule 498 

under the Securities Act, and 

amendments to rule 14a–16 under the 

Exchange Act. An Initial Regulatory 

Flexibility Analysis (‘‘IRFA’’) was 

prepared in accordance with the RFA 

and included in the Proposing 

Release.581 The Proposing Release 

included, and solicited comment on, the 

IRFA. 

A. Need For and Objectives of the Rule, 

Rule Amendments and Form 

Amendments 

Rule 30e–3 is designed to modernize 

the manner in which periodic 

information is transmitted to investors. 

Rule 30e–3 will provide certain funds 

with an optional method to satisfy 

shareholder transmission requirements 

by making the reports and other 

materials publicly accessible on a 

website, provided that certain other 

conditions are satisfied. We believe the 

rule will improve investors’ experience 

while reducing expenses associated 

with printing and mailing shareholder 

reports that are borne by investment 

companies and ultimately their 

investors. 

In connection with our adoption of 

rule 30e–3, we are also adopting related 

amendments to certain of our rules and 

forms. We are amending rule 498 and 

certain fund registration forms to 

require that funds intending to rely on 

rule 30e–3 include during the extended 


daltland on DSKBBV9HB2PROD with RULES2
29202 Federal Register / Vol. 83, No. 121 / Friday, June 22, 2018 / Rules and Regulations 

582See new paragraph (b)(1)(vii) of rule 498; new 

paragraph (a)(5) to Item 1 of Form N–1A; new 

paragraph (d)(8) to Item 27 of Form N–1A; new 

paragraph 1.l to Item 1 of Form N–2; new 

instruction 6.g to Item 24 of Form N–2; new 

paragraph (a)(xi) to Item 1 of Form N–3; new 

instruction 6(vii) to Item 28(a) of Form N–3; new 

paragraph (a)(x) to Item 1 of Form N–4; new 

paragraph (a)(6) to Item 1 of Form N–6. See also 

supra Section II.B.2.f. 

583See supra Section II.A.1. 

584 17 CFR 270.0–10(a). 

585This estimate is derived from an analysis of 

data obtained from Morningstar Direct as well as 

data reported on Form N–SAR filed with the 

Commission for the period ending December 31, 

2017. 

586See supra Sections II.A and II.B.2. 

587The Commission’s estimate is based on data 

obtained from registrants’ filings with the 

Commission on Form N–SAR. 

588See supra notes 372 (estimating aggregate 

annual gross savings to funds relying on rule 

30e–3 of $230,575,360), 393 (estimating aggregate 

annual gross costs of $89,202,128), 344 (estimating 

11,367 funds will rely upon rule 30e–3) and 

accompanying text. See generally Sections III.C and 

III.D. $230,575,360 ÷ 11,367 funds = $20,285 per 

fund. $89,202,128 ÷ 11,367 funds = $7,847 per 

fund. 

589See generally Sections II, III.B–D, IV.C, and 

IV.E. 

590See supra Section II.B.2.f. 

591See id. 

transition period prominent disclosures 

on the cover page or beginning of their 

summary prospectuses and cover pages 

of their statutory prospectuses and 

shareholder reports as discussed 

above.582 We believe that these 

disclosures will provide important 

information to both current and 

prospective investors in advance of the 

rule’s effective date that not only 

notifies them of the intent of their fund 

to rely on the rule, but will also provide 

them with an overview of the rule’s 

operation, including the fact that reports 

will be made available on a website and 

that they will be able to retain delivery 

of their reports in paper if they should 

so desire. Beginning January 1, 2022, 

these cover page and other prominent 

disclosures will no longer be required. 

We are also amending Form N–CSR to 

require the filing of fund Notices that 

include content from the shareholder 

report to enable Commission review of 

disclosure in the Notices in conjunction 

with its overall review of shareholder 

reports and other disclosure filings. 

B. Significant Issues Raised by Public 

Comments 

In the Proposing Release, we 

requested comment on each aspect of 

the IRFA, including the number of small 

entities that would be affected by the 

proposed amendments, the existence or 

nature of the potential impact of the 

proposals on small entities discussed in 

the analysis and how to quantify the 

impact of the proposed rules. As 

discussed above, we received extensive 

comments regarding the potential costs 

and benefits of the proposals.583

However, we did not receive comments 

specifically addressing the impact of 

proposed rule 30e–3 and related 

amendments on small entities subject to 

the rule. 

C. Small Entities Subject to the Rule 

An investment company is a small 

entity if, together with other investment 

companies in the same group of related 

investment companies, it has net assets 

of $50 million or less as of the end of 

its most recent fiscal year.584

Commission staff estimates that, as of 

December 31, 2017, approximately 88 

registered investment companies, 

including 54 open- and 34 closed-end 

funds and 6 UITs are small entities.585

D. Projected Reporting, Recordkeeping, 

and Other Compliance Requirements 

The amendments will create, amend, 

and eliminate current reporting, 

recordkeeping and other compliance 

requirements for small entities. 

Rule 30e–3 is designed to provide 

funds with an optional method to satisfy 

requirements to transmit shareholder 

reports by posting reports online if they 

meet certain conditions.586 Funds that 

do not maintain websites or that 

otherwise wish to transmit shareholder 

reports in paper or pursuant to the 

Commission’s existing electronic 

delivery guidance would continue to be 

able to satisfy their transmission 

requirements by those transmission 

methods. 

We estimate that approximately 88 

registered investment companies are 

small entities that will rely on the 

rule.587 Because funds generally already 

maintain websites and send materials to 

shareholders, for most funds, no 

additional professional skills beyond 

those currently possessed by funds are 

generally needed to comply with the 

rule’s conditions. However, some funds, 

including funds that are small entities, 

that do not currently have a website, 

would require professional skills to 

develop a web page and post the 

required documents, and as discussed 

above, we estimate for such funds an 

external burden cost of $2,000 per fund 

in the first year to develop a website and 

an initial 24 hours internal burden for 

staff to develop a web page and post the 

required documents on the web page. 

To the extent possible, we have 

attempted to quantify the costs and 

savings that will be experienced by 

small entities relying upon rule 30e–3. 

However, we note that the average costs 

and savings incurred by such small 

entities may in some cases be lower or 

higher than the costs and savings 

incurred by the average fund relying 

upon rule 30e–3. 

As discussed above, we estimate that 

reliance on rule 30e–3 will result in 

certain costs and benefits related to the 

website availability of shareholder 

reports for each fund, including small 

entities, with savings of approximately 

$20,285 per year for each fund with 

respect to their regulatory obligation to 

deliver shareholder reports to investors 

in savings related to printing and 

mailing costs for shareholder reports, 

and costs of $7,847 per year for each 

fund to implement new rule 30e–3 in 

costs related to website accessibility 

requirements, Notice preparation, and 

printing, mailing, and processing fees 

for the Notices.588

We received no direct comments on 

the IRFA analysis of rule 30e–3 but as 

discussed above, we received comments 

on the rule and projected expense 

savings from the rule. We have 

discussed these comments in our 

discussion of the final rule and our cost/ 

benefit and PRA estimates above.589

We are amending rule 498 under the 

Securities Act and certain fund 

registration forms to require that funds 

intending to rely on rule 30e–3 include 

prominent disclosures on the cover page 

(or beginning) of their summary 

prospectuses, statutory prospectuses, 

and shareholder reports in advance of 

the date on which funds could begin to 

rely upon the rule.590 We believe that 

these disclosures will provide important 

information to both current and 

prospective investors in advance of a 

fund’s use of the rule that not only 

notifies them of the intent of their fund 

to rely on the rule, but also provides an 

overview of the rule’s operation, 

including the fact that reports will be 

made available on a website and that 

they will be able to preserve delivery of 

their reports in paper if they should so 

desire. Beginning January 1, 2022, these 

cover page disclosures will no longer be 

required. Similarly, we are amending 

rule 14a–16 under the Exchange Act, as 

proposed, to include a Notice required 

by rule 30e–3 among the materials that 

are permitted to accompany a Notice of 

internet Availability of Proxy 

Materials.591

We estimate that the costs of these 

related disclosures will be $284–$721 in 

the first year and $142–$437 in each of 

the second and third years for each fund 

that relies upon rule 30e–3 and that 

could file registration statements or 

amendments to registration statements 

on Form N–1A (including funds that 

rely upon rule 498), Form N–2, Form 


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Federal Register / Vol. 83, No. 121 / Friday, June 22, 2018 / Rules and Regulations 29203 

592See supra notes 425 (estimating 10,063 funds 

that could file registration statements or 

amendments to registration statements on Form 

N–1A and that will rely upon rule 30e–3), 430 

(estimating disclosure costs related to rule 30e–3 in 

the first year of $7,144,872 and in the each of the 

second and third years of $4,286,980). $7,144,872 

÷ 10,063 funds = $710. $4,286,980 ÷ 10,063 funds 

= $426; see supra notes 432 (estimating 640 funds 

that could file registration statements or 

amendments to registration statements on Form 

N–2 and that will rely upon rule 30e–3), 436 

(estimating disclosure costs related to rule 30e–3 in 

the first year of $454,400 and in each of the second 

and third years of $272,640. $454,400 ÷ 640 funds 

= $710. $272,640 ÷ 640 funds = $426; supra note 

438 (estimating 13 funds that could file registration 

statements or amendments to registration 

statements on Form N–3 and that will rely upon 

rule 30e–3), 442 (estimating disclosure costs related 

to rule 30e–3 in the first year of $9,372 and in each 

of the second and third years of $5,680). $9,372 ÷ 

13 funds = $721. $5,680 ÷ 13 funds = $437; 443 

(estimating 1,488 funds that could file registration 

statements or amendments to registration 

statements on Form N–4 and that will rely upon 

rule 30e–3), 445 (estimating disclosure costs related 

to rule 30e–3 in the first year of $422,592 and in 

the each of the second and third years of $211,296). 

$422,592 ÷ 1,488 funds = $284. $211,296 ÷ 1,488 

funds = $142; 446 (estimating 425 funds that could 

file registration statements or amendments to 

registration statements on Form N–6 and that will 

rely upon rule 30e–3), 448 (estimating disclosure 

costs related to rule 30e–3 in the first year of 

$120,700 and in the each of the second and third 

years of $60,492). $120,700 ÷ 425 funds = $284. 

$60,492 ÷ 425 funds = $142. 593See supra Section II.B.2.b.ii. 

594See supra notes 578 (estimating 5,358 funds 

that will file a Notice with content from the report 

it relates), 402 (estimating Form N–CSR preparation 

and filing costs related to rule 30e–3 in the first year 

of $14,341,169 and each following year of 

$10,195,144). $14,341,169 ÷ 5,358 funds = $2,677. 

$10,195,144 ÷ 5,358 funds = $1,903. 

N–3, Form N–4, and Form N–6 

(including 88 small entities).592

We are amending Form N–CSR to 

require that for fund Notices that 

include content from the shareholder 

report to which it relates, a copy of the 

Notice must be filed as part of the fund’s 

report on Form N–CSR.593 We estimate 

that the costs for each such report that 

is filed (including those by 88 small 

entities) will be $2,677 in the first year 

and $1,903 in each subsequent year.594

E. Agency Action To Minimize Effect on 

Small Entities 

The RFA directs the Commission to 

consider significant alternatives that 

would accomplish our stated objective, 

while minimizing any significant 

economic impact on small entities. The 

Commission considered the following 

alternatives for small entities in relation 

to our forms and form amendments and 

rules and rule amendments: (i) 

Establishing different reporting 

requirements or timetables that take into 

account resources available to small 

entities; (ii) the clarification, 

consolidation, or simplification of 

compliance and reporting requirements 

under the rule for such small entities; 

(iii) using performance rather than 

design standards; and (iv) exempting 

small entities from all or part of the 

proposal. 

Regarding the first alternative, we 

note that small entities currently follow 

the same requirements that larger 

entities do when delivering reports to 

shareholders. The Commission believes 

that establishing different reporting 

requirements or timetables for small 

entities to deliver reports to 

shareholders would not be consistent 

with the Commission’s overarching goal 

of industry oversight and investor 

protection. We note that, because 

reliance on rule 30e–3 will be optional, 

similar to the proposal, a particular fund 

is not expected to rely on the rule if the 

costs to the fund to rely on the rule to 

that fund exceeds its benefits. Funds 

that do not rely on the rule will 

therefore not incur compliance costs. 

Regarding the second and third 

alternatives, we do not believe that 

clarification, consolidation, or 

simplification of compliance and 

reporting requirements, or performance 

rather than design standards, are 

appropriate in this context. In order to 

promote comparability and 

transparency, we believe that 

shareholder reports should be delivered 

to shareholders in a manner that will 

allow investors to better review and 

compare their investments across funds, 

including small entities. Therefore, we 

believe that it is appropriate in this 

context for shareholder reports to be 

delivered pursuant to uniform design, 

compliance, and reporting standards 

and requirements designed by the 

Commission. Further regarding 

clarification of compliance and 

reporting requirements for small 

entities, we note that we will publish a 

small entity compliance guide that will 

be posted on our website following 

adoption of rule 30e–3. 

Regarding the fourth alternative, we 

note that in addition to providing funds 

with an optional method to satisfy their 

obligations to deliver shareholder 

reports by posting reports online if they 

meet certain conditions, rule 30e–3 is 

designed with certain safeguards to 

respond to investor protection concerns. 

For example, the rule requires that the 

shareholder reports and other required 

materials are publicly accessible free of 

charge at a website address specified in 

the Notice, and includes provisions 

designed to preserve the ability of 

investors to elect to receive paper 

reports free of charge. Therefore, we 

believe that exempting small entities 

from all or part of the proposal would 

not be consistent with the Commission’s 

overarching goal of industry oversight 

and investor protection. 

VI. Statutory Authority 

We are adopting the rule and rule and 

form amendments contained in this 

document under the authority set forth 

in the Securities Act, particularly 

Sections 5, 6, 7, 10, and 19 thereof [15 

U.S.C. 77a et seq.], the Exchange Act, 

particularly, Sections 3(b), 10, 13, 14, 

15, and 36 thereof [15 U.S.C. 78a et 

seq.], the Investment Company Act, 

particularly, Sections 6, 8, 20, 24, 30, 

and 38 thereof [15 U.S.C. 80a et seq.], 

and 44 U.S.C. 3506, 3507. 

List of Subjects 

17 CFR Part 200 

Administrative practice and 

procedure, Organization and functions 

(Government agencies). 

17 CFR Parts 230, 239, 240, 249, 270, 

and 274 

Investment companies, Reporting and 

recordkeeping requirements, Securities. 

For reasons set forth in the preamble, 

title 17, chapter II of the Code of Federal 

Regulations is amended as follows: 

PART 200—ORGANIZATION; 

CONDUCT AND ETHICS; AND 

INFORMATION AND REQUESTS 

Subpart N—Commission Information 

Collection Requirements Under the 

Paperwork Reduction Act: OMB 

Control Numbers 

■ 1. The authority citation for subpart N 

of part 200 continues to read as follows: 

Authority: 44 U.S.C. 3506; 44 U.S.C. 3507. 

■ 2. Effective January 1, 2019, amend 

§ 200.800 in paragraph (b) by adding an 

entry in numerical order by part and 

section number for ‘‘Rule 30e–3’’, to 

read as follows: 

§ 200.800 OMB control numbers assigned 

pursuant to the Paperwork Reduction Act. 

* * * * * 

(b) * * * 

Information 

collection 

requirement 

17 CFR part 

or section 

where 

identified 

and 

described 

Current 

OMB 

control No. 

* * * * * 

Rule 30e–3 ....... 270.30e–3 3235–0758 

* * * * * 


daltland on DSKBBV9HB2PROD with RULES2
29204 Federal Register / Vol. 83, No. 121 / Friday, June 22, 2018 / Rules and Regulations 

PART 230—GENERAL RULES AND 

REGULATIONS, SECURITIES ACT OF 

1933 

■ 3. The authority citation for part 230 

continues to read, in part, as follows: 

Authority: 15 U.S.C. 77b, 77b note, 77c, 

77d, 77f, 77g, 77h, 77j, 77r, 77s, 77z–3, 77sss, 

78c, 78d, 78j, 78l, 78m, 78n, 78o, 78o–7 note, 

78t, 78w, 78ll(d), 78mm, 80a–8, 80a–24, 80a– 

28, 80a–29, 80a–30, and 80a–37, and Pub. L. 

112–106, sec. 201(a), sec. 401, 126 Stat. 313 

(2012), unless otherwise noted. 

* * * * * 

■ 4. Effective January 1, 2019, amend 

§ 230.498 by revising paragraph (b)(1)(v) 

and adding paragraphs (b)(1)(vi) and 

(vii) to read as follows. 

§ 230.498 Summary Prospectuses for 

open-end management investment 

companies. 

* * * * * 

(b) * * * 

(1) * * * 

(v) The following legend: 

Before you invest, you may want to 

review the Fund’s prospectus, which 

contains more information about the 

Fund and its risks. You can find the 

Fund’s prospectus, reports to 

shareholders, and other information 

about the Fund online at [lll]. You 

can also get this information at no cost 

by calling [lll] or by sending an 

email request to [lll]. 

(A) The legend must provide a 

website address, other than the address 

of the Commission’s electronic filing 

system; toll free (or collect) telephone 

number; and email address that 

investors can use to obtain the Statutory 

Prospectus and other information. The 

website address must be specific enough 

to lead investors directly to the 

Statutory Prospectus and other materials 

that are required to be accessible under 

paragraph (e)(1) of this section, rather 

than to the home page or other section 

of the website on which the materials 

are posted. The website could be a 

central site with prominent links to each 

document. The legend may indicate, if 

applicable, that the Statutory Prospectus 

and other information are available from 

a financial intermediary (such as a 

broker-dealer or bank) through which 

shares of the Fund may be purchased or 

sold. 

(B) If a Fund incorporates any 

information by reference into the 

Summary Prospectus, the legend must 

identify the type of document (e.g., 

Statutory Prospectus) from which the 

information is incorporated and the date 

of the document. If a Fund incorporates 

by reference a part of a document, the 

legend must clearly identify the part by 

page, paragraph, caption, or otherwise. 

If information is incorporated from a 

source other than the Statutory 

Prospectus, the legend must explain that 

the incorporated information may be 

obtained, free of charge, in the same 

manner as the Statutory Prospectus. A 

Fund may modify the legend to include 

a statement to the effect that the 

Summary Prospectus is intended for use 

in connection with a defined 

contribution plan that meets the 

requirements for qualification under 

section 401(k) of the Internal Revenue 

Code (26 U.S.C. 401(k)), a tax-deferred 

arrangement under section 403(b) or 457 

of the Internal Revenue Code (26 U.S.C. 

403(b) or 457), or a variable contract as 

defined in section 817(d) of the Internal 

Revenue Code (26 U.S.C. 817(d)), as 

applicable, and is not intended for use 

by other investors. 

(vi) The Summary Prospectus may 

provide instructions describing how a 

shareholder can elect to receive 

prospectuses or other documents and 

communications by electronic delivery. 

(vii) A statement to the following 

effect, if applicable: 

Beginning on [date], as permitted by 

regulations adopted by the Securities 

and Exchange Commission, paper 

copies of the Fund’s shareholder reports 

will no longer be sent by mail, unless 

you specifically request paper copies of 

the reports from the Fund [or from your 

financial intermediary, such as a brokerdealer or bank]. Instead, the reports will 

be made available on a website, and you 

will be notified by mail each time a 

report is posted and provided with a 

website link to access the report. 

If you already elected to receive 

shareholder reports electronically, you 

will not be affected by this change and 

you need not take any action. You may 

elect to receive shareholder reports and 

other communications from the Fund 

[or your financial intermediary] 

electronically by [insert instructions]. 

You may elect to receive all future 

reports in paper free of charge. You can 

inform the Fund [or your financial 

intermediary] that you wish to continue 

receiving paper copies of your 

shareholder reports by [insert 

instructions]. Your election to receive 

reports in paper will apply to all funds 

held with [the fund complex/your 

financial intermediary]. 

* * * * * 

■ 5. Effective January 1, 2021, amend 

§ 230.498 by: 

■ a. Adding a sentence to the end of 

paragraph (b)(1)(v)(A); and 

■ b. In paragraph (f)(2), adding the 

phrase ‘‘a Notice under § 270.30e–3 of 

this chapter,’’ after ‘‘Statutory 

Prospectuses,’’. 

The addition reads as follows: 

§ 230.498 Summary Prospectuses for 

open-end management investment 

companies. 

* * * * * 

(b) * * * 

(1) * * * 

(v) * * * 

(A) * * * If a Fund relies on 

§ 270.30e–3 of this chapter to transmit a 

report, the legend must also include the 

website address required by § 270.30e– 

3(c)(1)(iii) of this chapter if different 

from the website address required by 

this paragraph (b)(1)(v)(A). 

* * * * * 

§ 230.498 [Amended] 

■ 6. Effective January 1, 2022, amend 

§ 230.498 by removing paragraph 

(b)(1)(vii). 

PART 239—FORMS PRESCRIBED 

UNDER THE SECURITIES ACT OF 1933 

■ 7. The authority citation for part 239 

continues to read, in part, as follows: 

Authority: 15 U.S.C. 77c, 77f, 77g, 77h, 

77j, 77s, 77z–2, 77z–3, 77sss, 78c, 78l, 78m, 

78n, 78o(d), 78o–7 note, 78u–5, 78w(a), 78ll, 

78mm, 80a–2(a), 80a–3, 80a–8, 80a–9, 80a– 

10, 80a–13, 80a–24, 80a–26, 80a–29, 80a–30, 

and 80a–37; and sec. 107, Pub. L. 112–106, 

126 Stat. 312, unless otherwise noted. 

* * * * * 

PART 240—GENERAL RULES AND 

REGULATIONS, SECURITIES 

EXCHANGE ACT OF 1934 

■ 8. The authority citation for part 240 

continues to read, in part, as follows: 

Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 

77s, 77z–2, 77z–3, 77eee, 77ggg, 77nnn, 

77sss, 77ttt, 78c, 78c–3, 78c–5, 78d, 78e, 78f, 

78g, 78i, 78j, 78j–1, 78k, 78k–1, 78l, 78m, 

78n, 78n–1, 78o, 78o–4, 78o–10, 78p, 78q, 

78q–1, 78s, 78u–5, 78w, 78x, 78ll, 78mm, 

80a–20, 80a–23, 80a–29, 80a–37, 80b–3, 80b– 

4, 80b–11, 7201 et seq., and 8302; 7 U.S.C. 

2(c)(2)(E); 12 U.S.C. 5221(e)(3); 18 U.S.C. 

1350; Pub. L. 111–203, 939A, 124 Stat. 1376 

(2010); and Pub. L. 112–106, sec. 503 and 

602, 126 Stat. 326 (2012), unless otherwise 

noted. 

* * * * * 

§ 240.14a–16 [Amended] 

■ 9. Effective January 1, 2019, amend 

§ 240.14a–16 paragraph (f)(2)(iii) by 

adding the phrase ‘‘a Notice under 

§ 270.30e–3 of this chapter,’’ after 

‘‘§ 230.498(b) of this chapter,’’. 

PART 249—FORMS, SECURITIES 

EXCHANGE ACT OF 1934 

■ 10. The authority citation for part 249 

continues to read, in part, as follows: 


daltland on DSKBBV9HB2PROD with RULES2
Federal Register / Vol. 83, No. 121 / Friday, June 22, 2018 / Rules and Regulations 29205 

Authority: 15 U.S.C. 78a et seq. and 7201 

et seq.; 12 U.S.C. 5461 et seq.; 18 U.S.C. 1350; 

Sec. 953(b), Pub. L. 111–203, 124 Stat. 1904; 

Sec. 102(a)(3), Pub. L. 112–106, 126 Stat. 309 

(2012); Sec. 107, Pub. L. 112–106, 126 Stat. 

313 (2012), and Sec. 72001, Pub. L. 114–94, 

129 Stat. 1312 (2015), unless otherwise 

noted. 

* * * * * 

PART 270—RULES AND 

REGULATIONS, INVESTMENT 

COMPANY ACT OF 1940 

■ 11. The authority citation for part 270 

continues to read, in part, as follows: 

Authority: 15 U.S.C. 80a–1 et seq., 80a– 

34(d), 80a–37, 80a–39, and Pub. L. 111–203, 

sec. 939A, 124 Stat. 1376 (2010), unless 

otherwise noted. 

* * * * * 

■ 12. Effective January 1, 2019, add 

§ 270.30e–3 to read as follows: 

§ 270.30e–3 Internet availability of reports 

to shareholders. 

(a) General. A Company may satisfy 

its obligation to transmit a report 

required by § 270.30e–1 or § 270.30e–2 

(‘‘Report’’) to a shareholder of record if 

all of the conditions set forth in 

paragraphs (b) through (e), and (i) of this 

section are satisfied. 

(b) Availability of report to 

shareholders and other materials. (1) 

The following materials are publicly 

accessible, free of charge, at the website 

address specified in the Notice from the 

date the Company transmits the Report 

as required by § 270.30e–1 or § 270.30e– 

2 until the Company next transmits a 

report required by § 270.30e–1 or 

§ 270.30e–2 with respect to the Fund: 

(i) Current report to shareholders. The 

Report. 

(ii) Prior report to shareholders. Any 

report with respect to the Fund for the 

prior reporting period that was 

transmitted to shareholders of record 

pursuant to § 270.30e–1 or § 270.30e–2. 

(iii) Complete portfolio holdings from 

reports containing a summary schedule 

of investments. If a report specified in 

paragraph (b)(1)(i) or (b)(1)(ii) of this 

section includes a summary schedule of 

investments (§ 210.12–12B of this 

chapter) in lieu of Schedule I— 

Investments in securities of unaffiliated 

issuers (§ 210.12–12 of this chapter), the 

Fund’s complete portfolio holdings as of 

the close of the period covered by the 

report, presented in accordance with the 

schedules set forth in §§ 210.12–12 

through 210.12–14 of Regulation S–X 

(§§ 210.12–12 through 210.12–14 of this 

chapter), which need not be audited. 

(iv) Portfolio holdings for most recent 

first and third fiscal quarters. For a 

Fund other than a Fund that is regulated 

as a money market fund under § 270.2a– 

7 or a small business investment 

company registered on Form N–5 

(§§ 239.24 and 274.5 of this chapter), the 

Fund’s complete portfolio holdings as of 

the close of the Fund’s most recent first 

and third fiscal quarters, if any, after the 

date on which the Fund’s registration 

statement became effective, presented in 

accordance with the schedules set forth 

in §§ 210.12–12 through 210.12–14 of 

Regulation S–X [§§ 210.12–12 through 

210.12–14 of this chapter], which need 

not be audited. The complete portfolio 

holdings required by this paragraph 

(b)(1)(iv) must be made publicly 

available not later than 60 days after the 

close of the fiscal quarter. 

(2) The website address relied upon 

for compliance with this section may 

not be the address of the Commission’s 

electronic filing system. 

(3) The materials that are accessible in 

accordance with paragraph (b)(1) of this 

section must be presented on the 

website in a format, or formats, that are 

convenient for both reading online and 

printing on paper. 

(4) Persons accessing the materials 

specified in paragraph (b)(1) of this 

section must be able to permanently 

retain, free of charge, an electronic 

version of such materials in a format, or 

formats, that meet the conditions of 

paragraph (b)(3) of this section. 

(5) The conditions set forth in 

paragraphs (b)(1) through (b)(4) of this 

section shall be deemed to be met, 

notwithstanding the fact that the 

materials specified in paragraph (b)(1) of 

this section are not available for a time 

in the manner required by paragraphs 

(b)(1) through (b)(4) of this section, 

provided that: 

(i) The Company has reasonable 

procedures in place to ensure that the 

specified materials are available in the 

manner required by paragraphs (b)(1) 

through (b)(4) of this section; and 

(ii) The Company takes prompt action 

to ensure that the specified documents 

become available in the manner 

required by paragraphs (b)(1) through 

(b)(4) of this section, as soon as 

practicable following the earlier of the 

time at which it knows or reasonably 

should have known that the documents 

are not available in the manner required 

by paragraphs (b)(1) through (b)(4) of 

this section. 

(c) Notice. A paper notice (‘‘Notice’’) 

meeting the conditions of this paragraph 

(c) must be sent to the shareholder 

within 70 days after the close of the 

period for which the Report is being 

made. The Notice may contain only the 

information specified by paragraphs 

(c)(1), (2), and (3) of this section, and 

may include pictures, logos, or similar 

design elements so long as the design is 

not misleading and the information is 

clear. 

(1) The Notice must be written using 

plain English principles pursuant to 

paragraph (d) of this section and: 

(i) Contain a prominent legend in 

bold-face type that states ‘‘[An] 

Important Report[s] to [Shareholders] of 

[Fund] [is/are] Now Available Online 

and In Print by Request.’’ The Notice 

may also include information 

identifying the Fund, the Fund’s 

sponsor (including any investment 

adviser or sub-adviser to the Fund), a 

variable annuity or variable life 

insurance contract or insurance 

company issuer thereof, or a financial 

intermediary through which shares of 

the Fund are held. 

(ii) State that the Report contains 

important information about the Fund, 

including its portfolio holdings and 

financial statements. The statement may 

also include a brief listing of other types 

of information contained in the Report. 

(iii) State that the Report is available 

at the website address specified in the 

Notice or, upon request, by mail, and 

encourage the shareholder to access and 

review the Report. 

(iv) Include a website address where 

the Report and other materials specified 

in paragraph (b)(1) of this section are 

available. The website address must be 

specific enough to lead investors 

directly to the documents that are 

required to be accessible under 

paragraph (b)(1) of this section, rather 

than to the home page or section of the 

website other than on which the 

documents are posted. The website may 

be a central site with prominent links to 

each document. In addition to the 

website address, the Notice may contain 

any other equivalent method or means 

to access the Report or other materials 

specified in paragraph (b)(1) of this 

section. 

(v) Provide a toll-free (or collect) 

telephone number to contact the 

Company or the shareholder’s financial 

intermediary, and: 

(A) Provide instructions describing 

how a shareholder may request a paper 

or email copy of the Report and other 

materials specified in paragraph (b)(1) of 

this section at no charge, and an 

indication that he/she will not 

otherwise receive a paper or email copy; 

(B) Explain that the shareholder can at 

any time elect to receive print reports in 

the future and provide instructions 

describing how a shareholder may make 

that election (e.g., by contacting the 

Company or by contacting the 

shareholder’s financial intermediary); 

and 

(C) If applicable, provide instructions 

describing how a shareholder can elect 


daltland on DSKBBV9HB2PROD with RULES2
29206 Federal Register / Vol. 83, No. 121 / Friday, June 22, 2018 / Rules and Regulations 

to receive shareholder reports or other 

documents and communications by 

electronic delivery. 

(2) The Notice may include additional 

methods by which a shareholder can 

contact the Company or the 

shareholder’s financial intermediary 

(e.g., by email or through a website), 

which may include any information 

needed to identify the shareholder. 

(3) A Notice relating to a Report 

required by § 270.30e–1 may include 

content from the Report if such content 

is set forth after the information 

required by paragraph (c)(1) of this 

section. 

(4) The Notice may not be 

incorporated into, or combined with, 

another document, except that the 

Notice may incorporate or combine one 

or more other Notices. 

(5) The Notice must be sent separately 

from other types of shareholder 

communications and may not 

accompany any other document or 

materials; provided, however, that the 

Notice may accompany: 

(i) One or more other Notices; 

(ii) A current Summary Prospectus, 

Statutory Prospectus, Statement of 

Additional Information, or Notice of 

Internet Availability of Proxy Materials 

under § 240.14a–16 of this chapter; 

(iii) In the case of a Fund held in a 

separate account funding a variable 

annuity or variable life insurance 

contract, such contract or the Statutory 

Prospectus and Statement of Additional 

Information for such contract; or 

(iv) The shareholder’s account 

statement. 

(6) A Notice required by this 

paragraph (c) will be considered 

transmitted to a shareholder of record if 

the conditions set forth in § 270.30e– 

1(f), § 270.30e–2(b), § 240.14a–3(e), or 

§ 240.14c–3(c) of this chapter are 

satisfied with respect to that 

shareholder. 

(d) Plain English requirements. (1) To 

enhance the readability of the Notice, 

plain English principles must be used in 

the organization, language, and design 

of the Notice. 

(2) The Notice must be drafted so that, 

at a minimum, it substantially complies 

with each of the following plain English 

writing principles: 

(i) Short sentences; 

(ii) Definite, concrete, everyday 

words; 

(iii) Active voice; 

(iv) Tabular presentation or bullet 

lists for complex material, whenever 

possible; 

(v) No legal jargon or highly technical 

business terms; and 

(vi) No multiple negatives. 

(e) Delivery of paper copy upon 

request. A paper copy of any of the 

materials specified in paragraph (b)(1) of 

this section must be transmitted to any 

person requesting such a copy, at no 

cost to the requestor and by U.S. first 

class mail or other reasonably prompt 

means, within three business days after 

a request for a paper copy is received. 

(f) Investor elections to receive future 

reports in paper. (1) This section may 

not be relied upon to transmit a Report 

to a shareholder if the shareholder has 

notified the Company (or the 

shareholder’s financial intermediary) 

that the shareholder wishes to receive 

paper copies of shareholder reports at 

any time after the Company has first 

notified the shareholder of its intent to 

rely on the rule or provided a Notice to 

the shareholder. 

(2) A shareholder who has notified 

the Company (or the shareholder’s 

financial intermediary) that the 

shareholder wishes to receive paper 

copies of shareholder reports with 

respect to a Fund will be deemed to 

have requested paper copies of 

shareholder reports with respect to: 

(i) Any and all current and future 

Funds held through an account or 

accounts with: 

(A) The Fund’s transfer agent or 

principal underwriter or agent thereof 

for the same ‘‘group of related 

investment companies’’ as such term is 

defined in § 270.0–10; or 

(B) A financial intermediary; and 

(ii) Any and all Funds held currently 

and in the future in a separate account 

funding a variable annuity or variable 

life insurance contract. 

(g) Delivery of other documents. This 

section may not be relied upon to 

transmit a copy of a Fund’s currently 

effective Statutory Prospectus or 

Statement of Additional Information, or 

both, under the Securities Act of 1933 

(15 U.S.C. 77a et seq.) as otherwise 

permitted by paragraph (d) of § 270.30e– 

1. 

(h) Definitions. For purposes of this 

section: 

(1) Company means a Fund required 

to transmit a report to shareholders 

pursuant to § 270.30e–1 or a unit 

investment trust required to transmit a 

report to shareholders pursuant to 

§ 270.30e–2. 

(2) Fund means a registered 

management company and any separate 

series of the management company. 

(3) Statement of Additional 

Information means the statement of 

additional information required by Part 

B of the applicable registration form. 

(4) Statutory Prospectus means a 

prospectus that satisfies the 

requirements of section 10(a) of the 

Securities Act of 1933 (15 U.S.C. 

77(j)(a)). 

(5) Summary Prospectus means the 

summary prospectus described in 

paragraph (b) of § 230.498 of this 

chapter. 

(i) Transition period. (1) A Company 

may rely on this section to first transmit 

a Report to a shareholder: 

(i) Beginning on January 1, 2021, if: 

(A) The Company has included the 

required statement on each prospectus, 

summary prospectus, annual report to 

shareholders, and semi-annual report to 

shareholders, as applicable, required to 

be delivered or transmitted to 

shareholders for the period beginning 

on the date the Company first publicly 

offers its shares, and ending on 

December 31, 2020; or 

(B) The Company first publicly offers 

its shares on or after January 1, 2021; or 

(ii) In all other cases, after the 

Company has included the required 

statement on each prospectus, summary 

prospectus, annual report to 

shareholders, and semi-annual report to 

shareholders, as applicable, required to 

be delivered or transmitted to 

shareholders for a period of two years or 

January 1, 2022, whichever comes first. 

(2) For purposes of this paragraph (i), 

a ‘‘required statement’’ means the 

statement regarding the Company’s 

intent to rely on this section specified 

by: 

(i) Its applicable registration form, and 

(ii) In the case of a Fund that uses a 

summary prospectus, § 230.498 of this 

chapter. 

Note to § 270.30e–3: For a discussion of 

how the conditions and requirements of this 

rule may apply in the context of investors 

holding Fund shares through financial 

intermediaries, see Investment Company 

Release No. 33115 (June 5, 2018). 

■ 13. Effective January 1, 2022, amend 

§ 270.30e–3 by: 

■ a. In paragraph (a), removing ‘‘, and 

(i)’’; and 

■ b. Removing paragraph (i). 

PART 274—FORMS PRESCRIBED 

UNDER THE INVESTMENT COMPANY 

ACT OF 1940 

■ 14. The authority citation for part 274 

continues to read, in part, as follows: 

Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 

78c(b), 78l, 78m, 78n, 78o(d), 80a–8, 80a–24, 

80a–26, 80a–29, and Pub. L. 111–203, sec. 

939A, 124 Stat. 1376 (2010), unless otherwise 

noted. 

* * * * * 

■ 15. Effective January 1, 2019, Form N– 

1A (referenced in §§ 239.15A and 

274.11A) is amended by: 

■ a. In Item 1, adding paragraph (a)(5); 

and 

■ b. In Item 27, adding paragraph (d)(8). 


daltland on DSKBBV9HB2PROD with RULES2
Federal Register / Vol. 83, No. 121 / Friday, June 22, 2018 / Rules and Regulations 29207 

The additions read as follows: 

Note: The text of Form N–1A does not, and 

this amendment will not, appear in the Code 

of Federal Regulations. 

Form N–1A 

* * * * * 

Item 1. Front and Back Cover Pages 

(a) * * * 

(5) If applicable, the statement 

required by rule 498(b)(1)(vii) under the 

Securities Act. 

* * * * * 

Item 27. Financial Statements 

* * * * * 

(d) * * * 

(8) Front Cover Page or beginning of 

Annual and Semi-Annual Report. 

Include on the front cover page or at the 

beginning of the annual or semi-annual 

report a statement to the following 

effect, if applicable: 

Beginning on [date], as permitted by 

regulations adopted by the Securities 

and Exchange Commission, paper 

copies of the Fund’s shareholder reports 

like this one will no longer be sent by 

mail, unless you specifically request 

paper copies of the reports from the 

Fund [or from the your financial 

intermediary, such as a broker-dealer or 

bank]. Instead, the reports will be made 

available on a website, and you will be 

notified by mail each time a report is 

posted and provided with a website link 

to access the report. 

If you already elected to receive 

shareholder reports electronically, you 

will not be affected by this change and 

you need not take any action. You may 

elect to receive shareholder reports and 

other communications from the Fund 

[or your financial intermediary] 

electronically by [insert instructions]. 

You may elect to receive all future 

reports in paper free of charge. You can 

inform the Fund [or your financial 

intermediary] that you wish to continue 

receiving paper copies of your 

shareholder reports by [insert 

instructions]. Your election to receive 

reports in paper will apply to all funds 

held with [the fund complex/your 

financial intermediary]. 

* * * * * 

■ 16. Effective January 1, 2022, Form N– 

1A (referenced in §§ 239.15A and 

274.11A) is further amended by: 

■ a. In Item 1, removing paragraph 

(a)(5); and 

■ b. In Item 27, removing paragraph 

(d)(8). 

■ 17. Effective January 1, 2019, Form N– 

2 (referenced in §§ 239.14 and 274.11a– 

1) is amended by: 

■ a. In Item 1, adding paragraph 1.l; and 

■ b. In Item 24, adding Instruction 6.g. 

The additions read as follows: 

Note: The text of Form N–2 does not, and 

this amendment will not, appear in the Code 

of Federal Regulations. 

Form N–2 

* * * * * 

Item 1. Outside Front Cover 

1. * * * 

l. A statement to the following effect, 

if applicable: 

Beginning on [date], as permitted by 

regulations adopted by the Securities 

and Exchange Commission, paper 

copies of the Registrant’s shareholder 

reports will no longer be sent by mail, 

unless you specifically request paper 

copies of the reports from the Registrant 

[or from your financial intermediary, 

such as a broker-dealer or bank]. 

Instead, the reports will be made 

available on a website, and you will be 

notified by mail each time a report is 

posted and provided with a website link 

to access the report. 

If you already elected to receive 

shareholder reports electronically, you 

will not be affected by this change and 

you need not take any action. You may 

elect to receive shareholder reports and 

other communications from the 

Registrant [or your financial 

intermediary] electronically by [insert 

instructions]. 

You may elect to receive all future 

reports in paper free of charge. You can 

inform the Registrant [or your financial 

intermediary] that you wish to continue 

receiving paper copies of your 

shareholder reports by [insert 

instructions]. Your election to receive 

reports in paper will apply to all funds 

held with [the fund complex/your 

financial intermediary]. 

* * * * * 

Item 24. Financial Statements 

* * * * * 

Instructions 

* * * * * 

6. * * * 

g. Include on the front cover page or 

at the beginning of the annual or semiannual report a statement to the 

following effect, if applicable: 

Beginning on [date], as permitted by 

regulations adopted by the Securities 

and Exchange Commission, paper 

copies of the Registrant’s shareholder 

reports like this one will no longer be 

sent by mail, unless you specifically 

request paper copies of the reports from 

the Registrant [or from your financial 

intermediary, such as a broker-dealer or 

bank]. Instead, the reports will be made 

available on a website, and you will be 

notified by mail each time a report is 

posted and provided with a website link 

to access the report. 

If you already elected to receive 

shareholder reports electronically, you 

will not be affected by this change and 

you need not take any action. You may 

elect to receive shareholder reports and 

other communications from the 

Registrant [or your financial 

intermediary] electronically by [insert 

instructions]. 

You may elect to receive all future 

reports in paper free of charge. You can 

inform the Registrant [or your financial 

intermediary] that you wish to continue 

receiving paper copies of your 

shareholder reports by [insert 

instructions]. Your election to receive 

reports in paper will apply to all funds 

held with [the fund complex/your 

financial intermediary]. 

* * * * * 

■ 18. Effective January 1, 2022, Form N– 

2 (referenced in §§ 239.14 and 274.11a– 

1) is further amended by: 

■ a. In Item 1, removing paragraph 1.l; 

and 

■ b. In Item 24, removing Instruction 

6.g. 

■ 19. Effective January 1, 2019, Form N– 

3 (referenced in §§ 239.17a and 274.11b) 

is amended by: 

■ a. In Item 1, adding new paragraph 

(a)(xi); and 

■ b. In Item 28(a), adding new 

Instruction 6(vii). 

The additions read as follows: 

Note: The text of Form N–3 does not, and 

these amendments will not, appear in the 

Code of Federal Regulations. 

Form N–3 

* * * * * 

Item 1. Cover Pages 

(a) * * * 

(xi) A statement to the following 

effect, if applicable: 

Beginning on [date], as permitted by 

regulations adopted by the Securities 

and Exchange Commission, paper 

copies of the Registrant’s shareholder 

reports will no longer be sent by mail, 

unless you specifically request paper 

copies of the reports from the Registrant 

[or from your financial intermediary, 

such as a broker-dealer or bank]. 

Instead, the reports will be made 

available on a website, and you will be 

notified by mail each time a report is 

posted and provided with a website link 

to access the report. 

If you already elected to receive 

shareholder reports electronically, you 

will not be affected by this change and 


daltland on DSKBBV9HB2PROD with RULES2
29208 Federal Register / Vol. 83, No. 121 / Friday, June 22, 2018 / Rules and Regulations 

you need not take any action. You may 

elect to receive shareholder reports and 

other communications from the 

Registrant [or your financial 

intermediary] electronically by [insert 

instructions]. 

You may elect to receive all future 

reports in paper free of charge. You can 

inform the Registrant [or your financial 

intermediary] that you wish to continue 

receiving paper copies of your 

shareholder reports by [insert 

instructions]. Your election to receive 

reports in paper will apply to all funds 

held with [the fund complex/your 

financial intermediary]. 

* * * * * 

Item 28. Financial Statements 

(a) * * * 

Instructions 

* * * * * 

6. * * * 

(vii) Include on the front cover page 

or at the beginning of the annual or 

semi-annual report a statement to the 

following effect, if applicable: 

Beginning on [date], as permitted by 

regulations adopted by the Securities 

and Exchange Commission, paper 

copies of the Registrant’s shareholder 

reports like this one will no longer be 

sent by mail, unless you specifically 

request paper copies of the reports from 

the Registrant [or from your financial 

intermediary, such as a broker-dealer or 

bank]. Instead, the reports will be made 

available on a website, and you will be 

notified by mail each time a report is 

posted and provided with a website link 

to access the report. 

If you already elected to receive 

shareholder reports electronically, you 

will not be affected by this change and 

you need not take any action. You may 

elect to receive shareholder reports and 

other communications from the 

Registrant [or your financial 

intermediary] electronically by [insert 

instructions]. 

You may elect to receive all future 

reports in paper free of charge. You can 

inform the Registrant [or your financial 

intermediary] that you wish to continue 

receiving paper copies of your 

shareholder reports by [insert 

instructions]. Your election to receive 

reports in paper will apply to all funds 

held with [the fund complex/your 

financial intermediary]. 

* * * * * 

■ 20. Effective January 1, 2022, Form N– 

3 (referenced in §§ 239.17a and 274.11b) 

is amended by: 

■ a. In Item 1, removing paragraph 

(a)(xi); and 

■ b. In Item 28(a), removing Instruction 

6(vii). 

■ 21. Effective January 1, 2019, Form N– 

4 (referenced in §§ 239.17b and 17 CFR 

274.11c) is amended by adding new 

paragraph (a)(x) to Item 1. 

The additions read as follows: 

Note: The text of Form N–4 does not, and 

these amendments will not, appear in the 

Code of Federal Regulations. 

Form N–4 

* * * * * 

Item 1. Cover Page 

(a) * * * 

(x) A statement to the following effect, 

if applicable: 

Beginning on [date], as permitted by 

regulations adopted by the Securities 

and Exchange Commission, paper 

copies of the shareholder reports for 

portfolio companies [available under 

your contract] will no longer be sent by 

mail, unless you specifically request 

paper copies of the reports from the 

Registrant [or from your financial 

intermediary]. Instead, the reports will 

be made available on a website, and you 

will be notified by mail each time a 

report is posted and provided with a 

website link to access the report. 

If you already elected to receive 

shareholder reports electronically, you 

will not be affected by this change and 

you need not take any action. You may 

elect to receive shareholder reports and 

other communications from the 

Registrant [or your financial 

intermediary] electronically by [insert 

instructions]. 

You may elect to receive all future 

reports in paper free of charge. You can 

inform the Registrant [or your financial 

intermediary] that you wish to continue 

receiving paper copies of your 

shareholder reports by [insert 

instructions]. Your election to receive 

reports in paper will apply to all 

portfolio companies [available under 

your contract]. 

* * * * * 

■ 22. Effective January 1, 2022, Form N– 

4 (referenced in §§ 239.17b and 274.11c) 

is amended by removing paragraph 

(a)(x) of Item 1. 

■ 23. Effective January 1, 2019, Form N– 

6 (referenced in 17 CFR 239.17c and 17 

CFR 274.11d) is amended by adding 

new paragraph (a)(6) to Item 1. 

The additions read as follows: 

Note: The text of Form N–6 does not, and 

these amendments will not, appear in the 

Code of Federal Regulations. 

Form N–6 

* * * * * 

Item 1. Front and Back Cover Pages 

(a) * * * 

(6) A statement to the following effect, 

if applicable: 

Beginning on [date], as permitted by 

regulations adopted by the Securities 

and Exchange Commission, paper 

copies of the shareholder reports for 

portfolio companies [available under 

your contract] will no longer be sent by 

mail, unless you specifically request 

paper copies of the reports from the 

Registrant [or from your financial 

intermediary]. Instead, the reports will 

be made available on a website, and you 

will be notified by mail each time a 

report is posted and provided with a 

website link to access the report. 

If you already elected to receive 

shareholder reports electronically, you 

will not be affected by this change and 

you need not take any action. You may 

elect to receive shareholder reports and 

other communications from the 

Registrant [or your financial 

intermediary] electronically by [insert 

instructions]. 

You may elect to receive all future 

reports in paper free of charge. You can 

inform the Registrant [or your financial 

intermediary] that you wish to continue 

receiving paper copies of your 

shareholder reports by [insert 

instructions]. Your election to receive 

reports in paper will apply to all 

portfolio companies [available under 

your contract]. 

* * * * * 

■ 24. Effective January 1, 2022, Form N– 

6 (referenced in §§ 239.17c and 274.11d) 

is further amended by removing 

paragraph (a)(6) of Item 1. 

■ 25. Effective January 1, 2021, Form N– 

CSR (referenced in §§ 249.331 and 

274.128) is amended by: 

■ a. In Item 1, designating as paragraph 

(a) ‘‘Include a copy of the report 

transmitted to stockholders pursuant to 

Rule 30e–1 under the Act (17 CFR 

270.30e–1).’’ 

■ b. In Item 1, adding new paragraph 

(b). 

The designation and addition read as 

follows: 

Note: The text of Form N–CSR does not, 

and these amendments will not, appear in 

the Code of Federal Regulations. 

Form N–CSR 

* * * * * 

Item 1. Reports to Stockholders. 

(a) Include a copy of the report 

transmitted to stockholders pursuant to 

Rule 30e–1 under the Act (17 CFR 

270.30e–1). 

(b) Include a copy of each notice 

transmitted to stockholders in reliance 

on Rule 30e–3 under the Act (17 CFR 

270.30e–3) that contains disclosures 


daltland on DSKBBV9HB2PROD with RULES2
Federal Register / Vol. 83, No. 121 / Friday, June 22, 2018 / Rules and Regulations 29209 

specified by paragraph (c)(3) of that 

rule. 

By the Commission. Dated: June 5, 2018. 

Brent J. Fields, 

Secretary. 

[FR Doc. 2018–12423 Filed 6–21–18; 8:45 am] 

BILLING CODE 8011–01–P 


daltland on DSKBBV9HB2PROD with RULES2