[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 921 Introduced in Senate (IS)]







106th CONGRESS
  1st Session
                                 S. 921

      To facilitate and promote electronic commerce in securities 
transactions involving broker-dealers, transfer agents, and investment 
                               advisers.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             April 29, 1999

  Mr. Abraham (for himself, Mr. McCain, and Mr. Lott) introduced the 
 following bill; which was read twice and referred to the Committee on 
                  Banking, Housing, and Urban Affairs

_______________________________________________________________________

                                 A BILL


 
      To facilitate and promote electronic commerce in securities 
transactions involving broker-dealers, transfer agents, and investment 
                               advisers.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Electronic Securities Transactions 
Act''.

SEC. 2. FINDINGS.

    Congress finds that--
            (1) the growth of electronic commerce and electronic 
        transactions represent a powerful force for economic growth, 
        consumer choice and creation of wealth;
            (2) inefficient transaction procedures impose unnecessary 
        costs on investors and persons who facilitate transactions on 
        their behalf;
            (3) new techniques in electronic commerce create 
        opportunities for more efficient and safe procedures for 
        effecting securities transactions; and
            (4) because the securities markets are an important 
        national asset which must be preserved and strengthened, it is 
        in the national interest to establish a framework to facilitate 
        the economically efficient execution of securities 
        transactions.

SEC. 3. PURPOSES.

    The purposes of this Act are--
            (1) to permit and encourage the continued expansion of 
        electronic commerce in securities transactions; and
            (2) to facilitate and promote electronic commerce in 
        securities transactions by clarifying the legal status of 
        electronic signatures for signed documents and records used in 
        relation to securities transactions involving broker-dealers, 
        transfer agents and investment advisers.

SEC. 4. DEFINITIONS.

    For purposes of this subsection--
            (1) ``document'' means any record, including without 
        limitation any notification, consent, acknowledgment or written 
        direction, intended, either by law or by custom, to be signed 
        by a person;
            (2) ``electronic'' means of or relating to technology 
        having electrical, digital, magnetic, wireless, optical, 
        electromagnetic, or similar capabilities;
            (3) ``electronic record'' means a record created, stored, 
        generated, received, or communicated by electronic means;
            (4) ``electronic signature'' means an electronic 
        identifying sound, symbol or process attached to or logically 
        connected with an electronic record;
            (5) ``record'' or ``records'' means the same information or 
        documents defined or identified as ``records'' under the 
        Securities Exchange Act of 1934 and the Investment Advisers Act 
        of 1940, respectively;
            (6) ``transaction'' means an action or set of actions 
        relating to the conduct of business affairs that involve or 
        concern activities conducted pursuant to or regulated under the 
        Securities Exchange Act of 1934 or the Investment Advisers Act 
        of 1940 and occurring between two or more persons; and
            (7) ``signature'' means any symbol, sound, or process 
        executed or adopted by a person or entity, with intent to 
        authenticate or accept a record.

SEC. 5. SECURITIES MODERNIZATION PROVISIONS.

    (a) Section 15 of the Securities Exchange Act of 1934 (15 U.S.C. 
78o) is amended by adding the following new subsection thereto:
    ``(i) Reliance on Electronic Signatures.--
            ``(1) A registered broker or registered dealer may accept 
        and rely upon an electronic signature on any application to 
        open an account or on any other document submitted to it by a 
        customer or counterparty, and such electronic signature shall 
        not be denied legal effect, validity or enforceability solely 
        because it is an electronic signature, except as the Commission 
        shall otherwise determine pursuant to section 23 of this Act 
        (15 U.S.C. 78w) or section 36 of this Act (15 U.S.C. 78mm).
            ``(2) Where any provision of this Act or any regulation, 
        rule, or interpretation promulgated by the Commission 
        thereunder, including any rule of a self-regulatory 
        organization approved by the Commission, requires a signature 
        to be provided on any record such requirement shall be 
        satisfied by an electronic record containing an electronic 
        signature, except as the Commission shall otherwise determine 
        pursuant to section 23 of this Act (15 U.S.C. 78w) or section 
        36 of this Act (15 U.S.C. 78mm).
            ``(3) A registered broker or registered dealer may use 
        electronic signatures in the conduct of its business with any 
        customer or counterparty, and such electronic signature shall 
        not be denied legal effect, validity or enforceability solely 
        because it is an electronic signature.
            ``(4) With regard to the use of or reliance on electronic 
        signatures, no registered broker or registered dealer shall be 
        regulated by, be required to register with, or be certified, 
        licensed, or approved by, or be limited by or required to act 
        or operate under standards, rules, or regulations promulgated 
        by, a State government or agency or instrumentality thereof.''.
    (b) Section 17A of the Securities Exchange Act of 1934 (15 U.S.C. 
78q-1) is amended by adding the following new subsection thereto:
    ``(g) Reliance on Electronic Signatures.--
            ``(1) A registered transfer agent may accept and rely upon 
        an electronic signature on any application to open an account 
        or on any other document submitted to it by a customer or 
counterparty, and such electronic signature shall not be denied legal 
effect, validity or enforceability solely because it is an electronic 
signature, except as the Commission shall otherwise determine pursuant 
to section 23 of this Act (15 U.S.C. 78w) or section 36 of this Act (15 
U.S.C. 78mm).
            ``(2) Where any provision of this Act or any regulation or 
        rule promulgated by the Commission thereunder, including any 
        rule of a self-regulatory organization approved by the 
        Commission, requires a signature to be provided on any record 
        such requirement shall be satisfied by an electronic record 
        containing an electronic signature, except as the Commission 
        shall otherwise determine pursuant to section 23 of this Act 
        (15 U.S.C. 78w) or section 36 of this Act (15 U.S.C. 78mm).
            ``(3) A registered transfer agent may use electronic 
        signatures in the conduct of its business with any customer or 
        counterparty, and such electronic signature shall not be denied 
        legal effect, validity or enforceability solely because it is 
        an electronic signature.
            ``(4) With regard to the use of or reliance on electronic 
        signatures, no registered transfer agent shall be regulated by, 
        be required to register with, or be certified, licensed, or 
        approved by, or be limited by or required to act or operate 
        under standards, rules, or regulations promulgated by, a State 
        government or agency or instrumentality thereof.''.
    (c) Section 215 of the Investment Advisers Act of 1940 (15 U.S.C. 
80b-15) is amended by adding the following new subsection thereto:
    ``(c) Reliance on Electronic Signatures.--
            ``(1) A registered investment adviser may accept and rely 
        upon an electronic signature on any investment advisory 
        contract or on any other document submitted to it by a customer 
        or counterparty, and such signature shall not be denied legal 
        effect, validity or enforceability solely because it is an 
        electronic signature, except as the Commission shall determine 
        pursuant to section 206A of this Act (15 U.S.C. 80b-6a) or 
        section 211 of this Act (15 U.S.C. 80b-11).
            ``(2) Where any provision of this Act or any regulation or 
        rule promulgated by the Commission thereunder, including any 
        rule of a self-regulatory organization approved by the 
        Commission, requires a signature to be provided on any record 
        such requirement shall be satisfied by an electronic record 
        containing an electronic signature, except as the Commission 
        shall otherwise determine pursuant to section 206A of this Act 
        (15 U.S.C. 80b-6a) or section 211 of this Act (15 U.S.C. 80b-
        11).
            ``(3) A registered investment adviser may use electronic 
        signatures in the conduct of its business with any customer or 
        counterparty, and such electronic signature shall not be denied 
        legal effect, validity or enforceability solely because it is 
        an electronic signature.
            ``(4) With regard to the use of or reliance on electronic 
        signatures no registered investment adviser shall be regulated 
        by, be required to register with, or be certified, licensed, or 
        approved by, or be limited by or required to act or operate 
        under standards, rules, or regulations promulgated by, a State 
        government or agency or instrumentality thereof.

SEC. 6. RULEMAKING AUTHORITY.

    The Commission is authorized to provide guidance on the acceptance 
of, reliance on and use of electronic signatures by any registered 
broker, dealer, transfer agent or investment adviser, as provided in 
section 5 above.
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