WASHINGTON, (Reuters Breakingviews) - Washington lobbyists are reopening mutual funds’ $2 billion paper cut. That’s what a recent Securities and Exchange Commission rule shifting printed and mailed shareholder reports online could save the corner of the money-management business responsible for $19 trillion of Americans’ savings. The paper industry, though, is suing to shred the plan – the latest chapter in a years-long saga.

The likes of Fidelity and BlackRock still have to send their annual and semi-annual reports by regular mail. That’s despite plenty of other financial transactions routinely being conducted electronically, from bank and credit-card statements to paying bills – and even signing up to invest in mutual funds. So allowing investment firms to default to posting their publications online seemed like a no-brainer when it was first proposed in 2015.

But the American Forest & Paper Association, the Envelope Manufacturers Association and the Printing Industries Alliance, among others, teamed up with some consumer groups to successfully stymie the proposal for the next three years.

In an added twist, some environmental groups avoided getting involved, despite how many trees could be saved and carbon emissions cut, because of alliances they had with unions tied to the industry.

There are some genuine concerns. The elderly, those on a lower income and others who may lack easy access to the internet could lose access to the information. And making the shareholder reports more user-friendly – another tack those lined up against the proposal have taken – could reduce the amount of paper needed.

When the SEC finally pushed through the proposal in June, though, it stipulated that funds have to send a paper notice in the mail to clients informing them whenever a new report is available electronically. Those who still want to receive a printed copy can then request one at no charge.

But the watchdog approved the measure in a closed-door meeting instead of the public forum normally used for regulatory votes. Opponents responded by filing a lawsuit in early August. It’s understandable that they want to preserve some jobs. But the fight is a sorry example of how D.C. dysfunction can stand in the way of economic and environmental common sense.

CONTEXT NEWS

- Several paper-industry and consumer groups on Aug. 3 filed a lawsuit to block implementation of a new U.S. rule allowing mutual-fund companies to eliminate automatic mailings of shareholder reports and instead post them online.

- On June 4, the Securities and Exchange Commission approved the measure allowing investment firms to send investors a paper notice of each report’s availability online, instead of mailing the report itself. Investors who want to receive the paper version of the reports have the option to do so at no cost.

- The Coalition for Paper Options, Consumer Action, the American Forest & Paper Association, the Printing Industries Alliance and Twin Rivers Paper filed their petition in the U.S. Appeals Court in Washington, D.C.

- “Despite the concerns raised, which included lack of access to the Internet by vulnerable populations, exposure to online fraud and difficulty of reading reports on mobile devices, the SEC chose to vote on its proposal behind closed doors and ignore feedback from consumer groups and the investing public,” Linda Sherry of Consumer Action said.

(Editing by Antony Currie and Amanda Gomez)

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