[House Report 106-341]
[From the U.S. Government Publishing Office]
106th Congress Rept. 106-341
HOUSE OF REPRESENTATIVES
1st Session Part 1
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ELECTRONIC SIGNATURES IN GLOBAL AND NATIONAL COMMERCE ACT
_______
September 27, 1999.--Ordered to be printed
_______
Mr. Bliley, from the Committee on Commerce, submitted the following
R E P O R T
[To accompany H.R. 1714]
[Including cost estimate of the Congressional Budget Office]
The Committee on Commerce, to whom was referred the bill
(H.R. 1714) to facilitate the use of electronic records and
signatures in interstate or foreign commerce, having considered
the same, report favorably thereon with an amendment and
recommend that the bill as amended do pass.
CONTENTS
Page
Amendment........................................................ 2
Purpose and Summary.............................................. 5
Background and Need for Legislation.............................. 6
Hearings......................................................... 10
Committee Consideration.......................................... 10
Committee Votes.................................................. 10
Committee Oversight Findings..................................... 11
Committee on Government Reform Oversight Findings................ 11
New Budget Authority, Entitlement Authority, and Tax Expenditures 11
Committee Cost Estimate.......................................... 11
Congressional Budget Office Estimate............................. 11
Federal Mandates Statement....................................... 12
Advisory Committee Statement..................................... 12
Constitutional Authority Statement............................... 13
Applicability to Legislative Branch.............................. 13
Section-by-Section Analysis of the Legislation................... 13
Changes in Existing Law Made by the Bill, as Reported............ 19
Amendment
The amendment is as follows:
Strike out all after the enacting clause and insert in
lieu thereof the following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Electronic Signatures in Global
and National Commerce Act''.
TITLE I--VALIDITY OF ELECTRONIC RECORDS AND SIGNATURES FOR COMMERCE
SEC. 101. GENERAL RULE OF VALIDITY.
(a) General Rule.--With respect to any contract or agreement entered
into in or affecting interstate or foreign commerce, notwithstanding
any statute, regulation, or other rule of law, the legal effect,
validity, or enforceability of such contract or agreement shall not be
denied--
(1) on the ground that the contract or agreement is not in
writing if the contract or agreement is an electronic record;
or
(2) on the ground that the contract or agreement is not
signed or is not affirmed by a signature if the contract or
agreement is signed or affirmed by an electronic signature.
(b) Autonomy of Parties in Commerce.--With respect to any contract or
agreement entered into in or affecting interstate or foreign commerce--
(1) the parties to such contract or agreement may establish
procedures or requirements regarding the use and acceptance of
electronic records and electronic signatures acceptable to such
parties; and
(2) the legal effect, validity, or enforceability of such
contract or agreement shall not be denied because of the type
or method of electronic record or electronic signature selected
by the parties in establishing such procedures or requirements.
SEC. 102. AUTHORITY TO ALTER OR SUPERSEDE GENERAL RULE.
(a) Procedure To Alter or Supersede.--Except as provided in
subsection (b), a State statute, regulation, or other rule of law
enacted or adopted after the date of enactment of this Act may modify,
limit, or supersede the provisions of section 101 if such statute,
regulation, or rule of law--
(1)(A) constitutes an enactment or adoption of the Uniform
Electronic Transactions Act as reported to the State
legislatures by the National Conference of Commissioners on
Uniform State Laws; or
(B) specifies the alternative procedures or requirements for
the use or acceptance of electronic records or electronic
signatures to establish the legal effect, validity, or
enforceability of contracts or agreements;
(2) is enacted or adopted within 4 years after the date of
enactment of this Act; and
(3) makes specific reference to the provisions of section
101.
(b) Limitations on Alteration or Supersession.--A State statute,
regulation, or other rule of law (including an insurance statute,
regulation, or other rule of law), regardless of its date of enactment
or adoption, that modifies, limits, or supersedes section 101 shall not
be effective to the extent that such statute, regulation, or rule--
(1) discriminates in favor of or against a specific
technology, method, or technique of creating, storing,
generating, receiving, communicating, or authenticating
electronic records or electronic signatures;
(2) discriminates in favor of or against a specific type or
size of entity engaged in the business of facilitating the use
of electronic records or electronic signatures;
(3) is based on procedures or requirements that are not
specific or that are not publicly available; or
(4) is otherwise inconsistent with the provisions of section
101.
(c) Actions To Enjoin.--Whenever it shall appear to the Secretary of
Commerce that a State has enacted or adopted a statute, regulation, or
other rule of law that is prohibited by subsection (b), the Secretary
may bring an action to enjoin the enforcement of such statute,
regulation, or rule, and upon a proper showing a permanent or temporary
injunction or restraining order shall be granted without bond.
SEC. 103. SPECIFIC EXCLUSIONS.
The provisions of section 101 shall not apply to--
(1) a statute, regulation, or other rule of law governing the
creation and execution of wills, codicils, or testamentary
trusts; or
(2) a statute, regulation, or other rule of law governing
adoption, divorce, or other matters of family law.
SEC. 104. DEFINITIONS.
For purposes of this title:
(1) Electronic record.--The term ``electronic record'' means
a writing, document, or other record created, stored,
generated, received, or communicated by electronic means.
(2) Electronic signature.--The term ``electronic signature''
means information or data in electronic form, attached to or
logically associated with an electronic record by a person or
an electronic agent, that is intended by a party to signify
agreement to a contract or agreement.
(3) Electronic.--The term ``electronic'' means of or relating
to technology having electrical, digital, magnetic, optical,
electromagnetic, or similar capabilities regardless of medium.
(4) Electronic agent.--The term ``electronic agent'' means a
computer program or an electronic or other automated means used
independently to initiate an action or respond to electronic
records in whole or in part without review by an individual at
the time of the action or response.
TITLE II--DEVELOPMENT AND ADOPTION OF ELECTRONIC SIGNATURE PRODUCTS AND
SERVICES
SEC. 201. TREATMENT OF ELECTRONIC SIGNATURES IN INTERSTATE AND FOREIGN
COMMERCE.
(a) Inquiry Regarding Impediments to Commerce.--
(1) Inquiries required.--Within 90 days after the date of the
enactment of this Act, and annually thereafter, the Secretary
of Commerce, acting through the Assistant Secretary for
Communications and Information, shall complete an inquiry to--
(A) identify any domestic and foreign impediments to
commerce in electronic signature products and services
and the manners in which and extent to which such
impediments inhibit the development of interstate and
foreign commerce;
(B) identify constraints imposed by foreign nations
or international organizations that constitute barriers
to providers of electronic signature products or
services; and
(C) identify the degree to which other nations and
international organizations are complying with the
principles in subsection (b)(2).
(2) Submission.--The Secretary shall submit a report to the
Congress regarding the results of each such inquiry within 90
days after the conclusion of such inquiry.
(b) Promotion of Electronic Signatures.--
(1) Required actions.--The Secretary of Commerce, acting
through the Assistant Secretary for Communications and
Information, shall promote the acceptance and use, on an
international basis, of electronic signatures in accordance
with the principles specified in paragraph (2) and in a manner
consistent with section 101 of this Act. The Secretary of
Commerce shall take all actions necessary in a manner
consistent with such principles to eliminate or reduce, to the
maximum extent possible, the impediments to commerce in
electronic signatures, including those identified in the
inquiries under subsection (a) for the purpose of facilitating
the development of interstate and foreign commerce.
(2) Principles.--The principles specified in this paragraph
are the following:
(A) Free markets and self-regulation, rather than
government standard-setting or rules, should govern the
development and use of electronic records and
electronic signatures.
(B) Neutrality and nondiscrimination should be
observed among providers of and technologies for
electronic records and electronic signatures.
(C) Parties to a transaction should be permitted to
establish requirements regarding the use of electronic
records and electronic signatures acceptable to such
parties.
(D) Parties to a transaction--
(i) should be permitted to determine the
appropriate authentication technologies and
implementation models for their transactions,
with assurance that those technologies and
implementation models will be recognized and
enforced; and
(ii) should have the opportunity to prove in
court or other proceedings that their
authentication approaches and their
transactions are valid.
(E) Electronic records and electronic signatures in a
form acceptable to the parties should not be denied
legal effect, validity, or enforceability on the ground
that they are not in writing.
(F) De jure or de facto imposition of standards on
private industry through foreign adoption of
regulations or policies with respect to electronic
records and electronic signatures should be avoided.
(G) Paper-based obstacles to electronic transactions
should be removed.
(c) Followup Study.--Within 5 years after the date of enactment of
this Act, the Secretary of Commerce, acting through the Assistant
Secretary for Communications and Information, shall conduct an inquiry
regarding any State statutes, regulations, or other rules of law
enacted or adopted after such date of enactment pursuant to section
102(a), and the extent to which such statutes, regulations, and rules
comply with section 102(b). The Secretary shall submit a report to the
Congress regarding the results of such inquiry by the conclusion of
such 5-year period and such report shall identify any actions taken by
the Secretary pursuant to section 102(c) and subsection (b) of this
section.
(d) Consultation.--In conducting the activities required by this
section, the Secretary shall consult with users and providers of
electronic signature products and services and other interested
persons.
(e) Privacy.--Nothing in this section shall be construed to require
the Secretary or the Assistant Secretary to take any action that would
adversely affect the privacy of consumers.
(f) Definitions.--As used in this section, the terms ``electronic
record'' and ``electronic signature'' have the meanings provided in
section 104 of the Electronic Signatures in Global and National
Commerce Act.
TITLE III--USE OF ELECTRONIC RECORDS AND SIGNATURES UNDER FEDERAL
SECURITIES LAW
SEC. 301. GENERAL VALIDITY OF ELECTRONIC RECORDS AND SIGNATURES.
Section 3 of the Securities Exchange Act of 1934 (15 U.S.C. 78c) is
amended by adding at the end the following new subsection:
``(h) References to Written Records and Signatures.--
``(1) General validity of electronic records and
signatures.--Except as otherwise provided in this subsection--
``(A) if a contract, agreement, or record (as defined
in subsection (a)(37)) is required by the securities
laws or any rule or regulation thereunder (including a
rule or regulation of a self-regulatory organization),
and is required by other Federal or State statute,
regulation, or other rule of law to be in writing, the
legal effect, validity, or enforceability of such
contract, agreement, or record shall not be denied on
the ground that the contract, agreement, or record is
not in writing if the contract, agreement, or record is
an electronic record;
``(B) if a contract, agreement, or record is required
by the securities laws or any rule or regulation
thereunder (including a rule or regulation of a self-
regulatory organization), and is required by other
Federal or State statute, regulation, or other rule of
law to be signed, the legal effect, validity, or
enforceability of such contract, agreement, or record
shall not be denied on the ground that such contract,
agreement, or record is not signed or is not affirmed
by a signature if the contract, agreement, or record is
signed or affirmed by an electronic signature; and
``(C) if a broker, dealer, transfer agent, investment
adviser, or investment company enters into a contract
or agreement with, or accepts a record from, a customer
or other counterparty, such broker, dealer, transfer
agent, investment adviser, or investment company may
accept and rely upon an electronic signature on such
contract, agreement, or record, and such electronic
signature shall not be denied legal effect, validity,
or enforceability because it is an electronic
signature.
``(2) Implementation.--
``(A) Regulations.--The Commission may prescribe such
regulations as may be necessary to carry out this
subsection consistent with the public interest and the
protection of investors.
``(B) Nondiscrimination.--The regulations prescribed
by the Commission under subparagraph (A) shall not--
``(i) discriminate in favor of or against a
specific technology, method, or technique of
creating, storing, generating, receiving,
communicating, or authenticating electronic
records or electronic signatures; or
``(ii) discriminate in favor of or against a
specific type or size of entity engaged in the
business of facilitating the use of electronic
records or electronic signatures.
``(3) Exceptions.--Notwithstanding any other provision of
this subsection--
``(A) the Commission, an appropriate regulatory
agency, or a self-regulatory organization may require
that records be filed in a specified electronic format
or formats if the records are required to be submitted
to the Commission, an appropriate regulatory agency, or
a self-regulatory organization, respectively; and
``(B) the Commission may require that contracts,
agreements, or records relating to purchases and sales,
or establishing accounts for conducting purchases and
sales, of penny stocks be manually signed, and may
require such manual signatures with respect to
transactions in similar securities if the Commission
determines that such securities are susceptible to
fraud and that such fraud would be deterred or
prevented by requiring manual signatures.
``(4) Relation to other law.--The provisions of this
subsection apply in lieu of the provisions of title I of the
Electronic Signatures in Global and National Commerce Act to a
contract, agreement, or record (as defined in subsection
(a)(37)) that is required by the securities laws.
``(5) Definitions.--As used in this subsection:
``(A) Electronic record.--The term `electronic
record' means a writing, document, or other record
created, stored, generated, received, or communicated
by electronic means.
``(B) Electronic signature.--The term `electronic
signature' means information or data in electronic
form, attached to or logically associated with an
electronic record, that is intended by a party to
signify agreement to a contract or agreement.
``(C) Electronic.--The term `electronic' means of or
relating to technology having electrical, digital,
magnetic, optical, electromagnetic, or similar
capabilities regardless of medium.''.
Purpose and Summary
The purpose of H.R. 1714, the Electronic Signatures in
Global and National Commerce Act, is to facilitate the use and
acceptance of electronic signatures and records in interstate
and foreign commerce. The legislation is narrowly drawn so as
to remove barriers to the use and acceptance of electronic
signatures and records without establishing a regulatory
framework that would hinder the growth of electronic commerce.
The bill adds greater legal certainty and predictability to
electronic commerce by according the same legal effect,
validity, and enforceability to electronic signatures and
records as are accorded written signatures and records. Such
certainty, in turn, will further contribute to the growth of
electronic commerce.
H.R. 1714 provides that with respect to any contract or
agreement entered into in or affecting interstate commerce, the
legal effect, validity, and enforceability of such contract or
agreement shall not be denied on the ground that: (1) the
contract or agreement is not in writing if the contract or
agreement is an electronic record; and (2) the contract or
agreement is not signed or is not affirmed by a signature if
the contract or agreement is signed or affirmed by an
electronic signature. H.R. 1714 provides broad authority to the
States to modify, limit, or supersede section 101 of the bill
within four years of enactment, provided that any modification
complies with certain minimum standards and principles
appropriate for interstate commerce.
In addition, the bill directs the Secretary of Commerce to
promote the acceptance internationally of electronic signatures
and electronic signature products.
The bill also separately addresses securities transactions.
It provides an exclusive Federal regulatory scheme for the use
of electronic signatures and records in connection with
contracts, agreements, or records that are required the
securities laws. It amends the Federal securities laws to
provide that a contract, agreement, or record that is required
by the Federal securities laws, and is required by any other
Federal or State provision to be in writing or to be signed,
shall not be denied legal effect, validity, or enforceability
on the ground that it is not in writing if it is an electronic
record or not signed if it is signed or affirmed by an
electronic signature.
Background and Need for Legislation
The creation and growth of the Internet has been one of the
most important developments of the second half of the 20th
century. The Internet has evolved from its origins as an
academic research tool in the late 1960s to a global
communications, information, entertainment, and commercial
medium. The widespread availability of inexpensive yet powerful
personal computers has made the Internet accessible to hundreds
of millions of people around the world.
Increasingly, the Internet is being used to conduct
commercial activities, not only among businesses, but between
businesses and consumers. The use of the Internet to conduct
commercial activities is often referred to as ``electronic
commerce.'' A wide range of telecommunications networks can be
used to conduct electronic commerce. However, the Internet is
the most commonly cited network used to conduct electronic
commerce. The growth of electronic commerce has been stunning.
In 1996, consumers spent just $2.6 billion in online
transactions, while in 1998, consumers spent over $32 billion
in online transactions, with over $3 billion in consumer sales
occurring during the December holiday shopping season alone. In
its infancy, electronic commerce was mostly limited to small
purchase items, such as books, music CDs, and airplane tickets.
Recently, however, online transactions are growing larger and
more complex. Individuals can now manage their retirement
portfolios, purchase an automobile or life insurance, or search
for a home mortgage online among other major transactions.
Electronic commerce transactions raise a number of new
issues. First, how does one authenticate the parties to a
transaction and then ensure that the transaction takes place in
a secure environment? Second, what is the legal status of an
online transaction?
The first issue involves determining the identity of the
parties to a transaction so that the parties are certain that
they are dealing with the correct individuals. Today, a large
percentage of electronic commerce retail transactions are
between parties that do not have a pre-existing business
relationship and do not meet face-to-face. Thus, traditional
methods of identifying a party and conducting a legally binding
transaction can be completely absent. Once the identity of the
parties has been established, it is important that the online
transaction take place in a secure environment to ensure the
authenticity and integrity of the transmission and that a
record of the transmission is retained should any dispute arise
in the future. Technology, such aselectronic signatures, is
providing a solution and resolving many of the complex issues involved
in online commercial transactions.
In discussing the greater security that electronic
signatures provides to online transactions, the General Counsel
of Charles Schwab & Co., Inc., testified that ``[o]ur belief is
that electronic signature technology is actually more secure
against forgery than pen and ink signatures.'' (Testimony of W.
Hardy Callcott, Senior Vice President and General Counsel,
Charles Schwab & Co., Inc., at the June 24, 1999, hearing
before the Subcommittee on Finance and Hazardous Materials,
Serial No. 106-33, p. 33.)
An electronic signature is the digital equivalent of a
handwritten signature. It is a generic term that describes a
variety of methods by which an individual can sign an
electronic record. Electronic signatures can range from simply
typing a name at the end of an e-mail message, to a digital
signature to a unique biometric identifier such as a
fingerprint or iris scan.1 An electronic signature,
like a written signature, is a symbol that signifies intent--
intent that varies depending on context, such as a signature on
a contract shows intent that the parties agree to be bound by
the terms of that contract. At present, no technology or model
for electronic signatures has established itself as the market
leader. Accordingly, the Committee believes it is important
that the legislation, and any State legislation as well, not
favor one technology or model over another.
---------------------------------------------------------------------------
\1\ The term digital signature, while often used interchangeably
with electronic signature, technically refers to a specific type of
electronic signature that involves the use of public-key/private-key
encryption technology.
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The issues the bill primarily addresses are whether an
electronic signature has the same legal effect as a written
signature and whether an electronic record satisfies the legal
requirement that communications be in writing. Today, the legal
effect of an electronic record or an electronic signature is
uncertain due to the lack of specific affirmative statutes
recognizing the equivalency of electronic signatures and
records to written signatures and records. Moreover, some
courts have not recognized this equivalency. See Georgia
Department of Transportation v. Norris, 222 Ga.App. 361, 474
S.E.2d (1996) and Roos v. Aloi, 127 Misc. 2d 864, 487 N.Y.S.2d
637 (Sup. Ct. 1985).
To address the legal uncertainty of an electronic signature
and an electronic record, over the past four years, States have
enacted statutes that provide for the use and acceptance of
electronic signatures in certain transactions. To date, forty-
four States have enacted some sort of electronic signature
legislation. No two States have enacted identical legislation,
however, leading to a patchwork of inconsistent and conflicting
State laws governing electronic signatures and records.
These State laws vary in a number of ways. Some State
statutes, such as those in Utah and Washington, provide legal
validity only to electronic documents that were signed using
digital signature technology, while other State statutes, such
as that in Virginia, provide legal validity to an electronic
document that was signed using any type of electronic signature
technology. Other States, such as Maryland and Indiana, only
permit the use and acceptance of electronic signatures and
records between government agencies or between an individual
and a government agency.
In an attempt to bring uniformity to the legal status of
electronic signatures and records, in late July 1999, the
National Conference of Commissioners on Uniform State Laws
(NCCUSL) adopted the Uniform Electronic Transactions Act
(UETA). The purpose of this model legislation is to provide for
a uniform, nationwide standard for the use and acceptance of
electronic records and electronic signatures. Efforts will now
be made to have State legislatures adopt UETA.
Past efforts to enact uniform laws have yielded uneven
results. The Uniform Partnership Act, adopted in 1996, has been
enacted by just nineteen States. Only four States have enacted
the Uniform Limited Liability Company Act, adopted in 1995. In
contrast, the Uniform Limited Partnership Act, adopted in 1976,
has been enacted by all but one State.
The Committee commends NCCUSL's work on the UETA. Both UETA
and H.R. 1714 share many of the same basic principles. The
Committee remains concerned, however, about the prospects for
adoption of UETA by the States. Failure to adopt UETA by a
substantial majority of the States in a short time period will
perpetuate the patchwork of inconsistent and conflicting State
laws. Further, some States will inevitably choose not to follow
the work of NCCUSL on electronic signatures and will develop
their own standards, which may or may not be compatible with
UETA or may even be harmful to the development of electronic
signatures if designed or implemented incorrectly.
There is, therefore, a clear need for a uniform, nationwide
legal standard to be in place until States have the opportunity
to enact their own laws or to ensure that there is a nationwide
legal standard in case States fail to or refuse to enact their
own electronic signature legislation. H.R. 1714 fills this
need. By removing the uncertainty over the legal effect,
validity, or enforceability of electronic signatures and
records, electronic commerce will have the opportunity to reach
its full potential. By adding greater legal certainty and
predictability to electronic transactions, consumers'
understanding and confidence in and use of those transactions
will grow. Further, companies now developing electronic
signatures and structures for their use will have the necessary
legal framework in place to focus their attention on proving
their technology in the marketplace.
In stressing the importance of uniformity, the General
Counsel of Charles Schwab & Co., Inc., testified that
``[t]oday's securities markets are national in scope and
involve transactions that are entirely interstate in nature. *
* * For that reason consistent uniform Federal standards are
really imperative if brokers and others in the securities
industry are going to be able to engage in electronic commerce
with certainty or liability.'' (Testimony of W. Hardy
Callcott,Senior Vice President and General Counsel, Charles Schwab &
Co., Inc., at the June 24, 1999, hearing before the Subcommittee on
Finance and Hazardous Materials, Serial No. 106-33, p. 9.)
The legal uncertainty regarding electronic records and
signatures is significant in the securities industry today as
investors turn increasingly to the Internet to conduct their
financial transactions. As online securities transactions are
almost exclusively interstate in nature, the need for
uniformity in electronic signature laws becomes clear. Title
III of the bill addresses these issues. Recent statistics have
shown that online trading now accounts for nearly one of every
seven equity trades (about 14 percent) and is growing rapidly,
with an increase of over 34 percent in online activity in the
last quarter over the previous quarter. Market participants
such as brokers and investors would like to eliminate the need
for any paper documents to complete their electronic
transactions in order to improve the efficiency and convenience
of online securities investing. Under current law, the Federal
Arbitration Act generally requires that arbitration agreements
need to be in writing to be enforceable. This requirement means
that, when trying to set up an account at an electronic broker,
the online broker has to mail or fax the account agreement
(which usually contains an arbitration agreement) to the
customer for physical signature. H.R. 1714 eliminates the need
for such a physical signature by making it possible to execute
a valid account agreement electronically. Customers who wish to
do business electronically would also like certainty that State
law will recognize the validity of electronic contracts,
agreements, or records (and signatures thereon) in connection
with securities activities such as opening a brokerage account.
H.R. 1714 provides that legal certainty in the context of
securities transactions by providing a uniform Federal law
governing the use of electronic contracts, agreements, and
records, and signatures thereon, preempting contrary State law.
Increasingly, online transactions are not just interstate
but international in nature. The Committee recognizes the need
for international recognition of electronic signatures and
records that will not create barriers to international trade.
Unfortunately, international developments on recognizing
electronic signatures are troubling. The German Digital
Signature Law of July 1997 runs counter to many of the widely
accepted principles of electronic signature law in the United
States. For example, the German law provides legal recognition
only to signatures generated using digital signature
technology, establishes licensing for certificate authorities,
and sets a substantial role for the government in establishing
technical standards. Further, a position paper on international
recognition of electronic signatures released by the German
government (International Legal Recognition of Digital
Signatures, August 28, 1998) seeks to apply these principles
internationally. This policy statement reemphasizes the
principle that uniform security standards are necessary for all
uses of digital signatures regardless of their use, supports
mutual recognition of digital signatures only to those nations
which have a similar regulatory structure for certification
authority, and fails to provide legal effect to electronic
signatures generated by other technologies. In addition, the
Committee is concerned that the European Union's draft
Electronic Signature Directive, while not as narrowly drawn as
the German legislation, still favors digital signature
technology and provides a regulatory framework for the
licensing of certification authorities.
Hearings
The Subcommittee on Telecommunications, Trade and Consumer
Protection held a hearing on H.R. 1714 on June 9, 1999. The
Subcommittee received testimony from the following witnesses:
Mr. Andrew J. Pincus, General Counsel, United States Department
of Commerce; The Honorable Donald W. Upson, Secretary of
Technology, Commonwealth of Virginia; Mr. Jeffery Skogen,
Internet Market Manager, Ford Motor Credit Company; Mr. Daniel
J. Greenwood, Esq., Deputy General Counsel, Information
Technology Division, Commonwealth of Massachusetts; Mr. Ari
Engelberg, Vice President, Stamps.com, Inc.; Mr. John E.
Siedlarz, President and CEO, IriScan, Inc., testifying on
behalf of the International Biometric Industry Association; and
Mr. Christopher T. Curtis, Associate General Counsel, Capital
One Financial Corporation.
The Subcommittee on Finance and Hazardous Materials held a
hearing on H.R. 1714 on June 24, 1999. The Subcommittee
received testimony from the following witnesses: Mr. W. Hardy
Callcott, Senior Vice President and General Counsel, Charles
Schwab & Co., Inc.; Mr. Michael J. Hogan, Senior Vice President
and General Counsel, DLJdirect Inc.; and Mr. Thomas C. Quick,
President and Chief Operating Officer, Quick & Reilly/Fleet
Securities, Inc..
Committee Consideration
On July 21, 1999, the Subcommittee on Finance and Hazardous
Materials met in open markup session and approved H.R. 1714,
the Electronic Signatures in Global and National Commerce Act,
for Full Committee consideration, amended, by a voice vote. On
July 29, 1999, the Subcommittee on Telecommunications, Trade,
and Consumer Protection met in open markup session and approved
H.R. 1714, the Electronic Signatures in Global and National
Commerce Act, for Full Committee consideration, amended, by a
voice vote.
On August 5, 1999, the Full Committee met in open markup
session and ordered H.R. 1714 reported to the House, amended,
by a voice vote, a quorum being present.
Committee Votes
Clause 3(b) of rule XIII of the Rules of the House requires
the Committee to list the record votes on the motion to report
legislation and amendments thereto. There were no record votes
taken in connection with ordering H.R. 1714 reported. An
Amendment in the Nature of a Substitute offered by Mr. Bliley,
No. 1, to: (1) clarify the party autonomy provision so that a
contract or agreement by parties is provided legal effect,
validity and enforceability; (2) further clarify the definition
of an electronic signature; (3) include the concept of
electronic agents in the definition of electronic signature;
and (4) expand the principles for international negotiations
contained in Title II to include (a) removal of paper-based
obstacles to electronic transactions and (b) a provision that
parties should have the opportunity to prove in court that
their authentication methods and transactions are valid, was
agreed to by a voice vote. A motion byMr. Bliley to order H.R.
1714 reported to the House, amended, was agreed to by a voice vote, a
quorum being present.
Committee Oversight Findings
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the Committee held two legislative
hearings and made findings that are reflected in this report.
Committee on Government Reform Oversight Findings
Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
House of Representatives, no oversight findings have been
submitted to the Committee by the Committee on Government
Reform.
New Budget Authority, Entitlement Authority, and Tax Expenditures
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee finds that H.R.
1714, the Electronic Signatures in Global and National Commerce
Act, would result in no new or increased budget authority,
entitlement authority, or tax expenditures or revenues.
Committee Cost Estimate
The Committee adopts as its own the cost estimate prepared
by the Director of the Congressional Budget Office pursuant to
section 402 of the Congressional Budget Act of 1974.
Congressional Budget Office Estimate
Pursuant to clause 3(c)(3) of rule XIII of the Rules of the
House of Representatives, the following is the cost estimate
provided by the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, August 20, 1999.
Hon. Tom Bliley,
Chairman, Committee on Commerce,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 1714, the
Electronic Signatures of Global and National Commerce Act.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contacts are Shelley
Finlayson (for the state and local impact), and Mark Hadley
(for federal costs).
Sincerely,
Barry B. Anderson
(For Dan L. Crippen, Director).
Enclosure.
H.R. 1714--Electronic Signatures in Global and National Commerce Act
H.R. 1714 would preempt state laws that regulate interstate
commercial transactions conducted via electronic means (such as
contracts with electronic signatures), unless states enact
uniform standards equivalent to those specified in the bill.
Such a preemption constitutes an intergovernmental mandate as
defined in the Unfunded Mandates Reform Act (UMRA), but CBO
estimates that the costs would not be significant and would not
exceed the threshold established by the act ($50 million in
1996, adjusted annually for inflation). The bill contains no
new private-sector mandates as defined in UMRA.
The bill also would require the Department of Commerce to
submit an annual report detailing foreign and domestic
impediments to commerce in products using electronic
signatures. The bill would direct the department to promote the
international acceptance and use of electronic signatures, and
to submit a report within three years regarding actions by
states to allow electronic signatures in commerce. Finally,
H.R. 1714 would amend the Securities and Exchange Act of 1934
to address the use of electronic signatures under federal
securities law.
Based on information from the Department of Commerce and
the Securities and Exchange Commission, CBO estimates
implementing the bill would cost about $1 million a year,
subject to the availability of appropriated funds. H.R. 1714
would not affect direct spending or receipts; therefore, pay-
as-you-go procedures would not apply.
On June 30, 1999, CBO transmitted a cost estimate for S.
761, the Third Millennium Digital Commerce Act, as ordered
reported by the Senate Committee on Commerce, Science, and
Transportation on June 23, 1999. CBO estimated that
implementing S. 761 would cost about $500,000 a year. The lower
cost is largely a result of the difference in the scope and
length of the study that the Department of Commerce would be
required to prepare and submit to the Congress.
The CBO staff contacts are Shelley Finlayson (for the state
and local impact), and Mark Hadley (for federal costs). This
estimate was approved by Robert A. Sunshine, Deputy Assistant
Director for Budget Analysis.
Federal Mandates Statement
The Committee adopts as its own the estimate of Federal
mandates prepared by the Director of the Congressional Budget
Office pursuant to section 423 of the Unfunded Mandates Reform
Act.
Advisory Committee Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Constitutional Authority Statement
Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee finds that the
Constitutional authority for this legislation is provided in
Article I, section 8, clause 3, which grants Congress the power
to regulate commerce with foreign nations, among the several
States, and with the Indian tribes.
Applicability to Legislative Branch
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(b)(3) of the Congressional Accountability Act.
Section-by-Section Analysis of the Legislation
Section 1. Short title
Section 1 establishes the short title of the bill as the
``Electronic Signatures in Global and National Commerce Act.''
TITLE I--VALIDITY OF ELECTRONIC RECORDS AND SIGNATURES FOR COMMERCE
Section 101. General rule of validity
Section 101(a) establishes a general rule that, with
respect to any contract or agreement affecting interstate
commerce, notwithstanding any statute, regulation or other rule
of law, the legal effect, validity, and enforceability of such
contract or agreement shall not be denied on the ground that:
(1) the contract or agreement is not in writing if the contract
or agreement is an electronic record; and (2) the contract or
agreement is not signed or affirmed by a written signature if
the contract or agreement is signed or affirmed by an
electronic signature.
Section 101(b) provides that with respect to contracts or
agreements affecting interstate commerce, the parties to such
contracts or agreements may establish procedures or
requirements regarding the use and acceptance of electronic
records and electronic signatures acceptable to such parties.
Further, the legal effect, validity, or enforceability of such
contracts or agreements shall not be denied because of the type
or method of electronic record or electronic signature selected
by the parties.
The Committee intends that section 101(b) cover a broad
range of interstate commercial transactions and that Federal
agencies cooperate in that effort. It is the Committee's intent
that, under section 101(b), a Federal agency not enforce or
adopt a regulation that denies legal effect to a contract or
agreement between private parties in a regulated industry or an
industry that benefits from Federal support on the ground that
the contract or agreement is an electronic record or is signed
by an electronic signature. Similarly, a Federal agency should
not require the use of a particular technology or provider for
electronic records or electronic signatures on documents
between private parties in a regulated industry or an industry
that benefits from Federal support. In general, however, the
Committee does intend for section 101(b) to have an impact on
legitimate regulatory recordkeeping requirements of Federal
agencies, such as ensuring the accuracy of, and access to,
electronic records.
One example of a transaction that is covered under section
101(b) is the use of the Internet by individuals to change
their pre-subscribed telecommunications carrier. The Federal
Communications Commission should consider allowing the use of
electronic signatures as an additional method of verifying a
Primary Interexchange Carrier (PIC) change. Use of electronic
signatures to presubscribe voluntarily to basic
telecommunications services can benefit both consumers and
telecommunications providers.
In addition, the Committee intends that the parties may
enter into a contract or agreement to receive any records
related to such contract or agreement, including but not
limited to notices, disclosures, booklets, or other information
required under applicable Federal or State law.
Nothing in section 101(b) requires a party to enter into
any contract or agreement utilizing electronic signatures or
electronic records. Rather, it gives the parties the option to
enter freely into online contracts and agreements. Many
individuals do not have Internet access or do not understand or
choose to use electronic authentication technologies with which
they are unfamiliar. Nothing in H.R. 1714 should be interpreted
as requiring parties to consent to or use electronic signatures
or electronic records if they choose not to.
Section 102. Authority to alter or supersede general rule
Section 102(a) provides that a State statute, regulation or
other rule of law enacted or adopted after the date of
enactment of H.R. 1714 may modify, limit, or supersede the
provisions of section 101 (except as provided in section
102(b)) if that State action: (1) is an adoption or enactment
of the UETA as reported by the NCCUSL or specifies alternative
procedures or requirements recognizing the legal effect,
validity and enforceability of electronic signatures; and(2) is
enacted by a State within four years after the date of enactment of
H.R. 1714; and (3) makes specific reference to the provisions of
section 101.
The Committee believes that the four year time frame will
provide States with the opportunity and the incentive to adopt
UETA or another legal framework in a timely manner for the
acceptance of electronic signatures. The forty-three State
legislatures that meet annually will have four sessions to
enact UETA while the remaining seven State legislatures that
meet biennially will have two sessions to enact UETA.
Section 102(b) provides that no State statute, regulation,
or rule of law (including those pertaining to insurance),
regardless of date of enactment, that modifies, limits, or
supersedes section 101 shall be effective to the extent that
such statute, regulation, or rule of law: (1) discriminates in
favor of or against a specific technology, method, or
technique; (2) discriminates in favor of or against a specific
type or size of entity engaged in the business of facilitating
the use of electronic signatures and electronic records; (3) is
based on procedures or requirements that are not specific and
that are not publicly available; and (4) is otherwise
inconsistent with the provisions of section 101. Subsection
(b)(3) requires States to provide specific, unambiguous, and
transparent requirements for the use and acceptance of
electronic signatures. Further, the Committee intends that
subsection (b)(4) be read with a degree of reason. This
provision is intended to prevent a State from enacting a
statute that violates section 101, such as denying legal
validity for electronic signatures, but does not limit the
ability of States to modify or supersede section 101.
Section 102(c) provides the Secretary of Commerce (the
Secretary) the authority to bring an action to enjoin the
enforcement of a State statute, regulation, or rule that was
enacted in violation of section 102(b). The Committee expects
the Secretary to use this authority as necessary, especially in
instances where smaller companies are unable to legally
challenge a poorly tailored or potentially harmful State law.
The Secretary's failure to use such authority in a particular
instance should not be construed as validating a State statute,
regulation, or rule of law being challenged on the grounds that
it violates section 102. The Secretary's lack of action may be
due to many reasons that should not prejudice a case for or
against the validity of a particular State statute, regulation,
or other rule of law.
The Committee wishes to emphasize that nothing in section
102 preempts any State consumer protection law or in any way
inhibits or prevents a State from taking action to protect
consumers against fraud, forgery, or any unfair or deceptive
practices.
Section 103. Specific exclusions
Section 103 excludes from the application of section 101
any statute, regulation, or other rule of law governing: (1)
the creation and execution of wills, codicils, or testamentary
trusts; or (2) adoption, divorce, or other matters of family
law.
Section 104. Definitions
Section 104 defines the following terms: ``electronic
record'', ``electronic signature'', ``electronic'' and
``electronic agent''. The Committee intends that the definition
of electronic signature cover a broad range of electronic
signature technologies that can be used to sign an electronic
record. This includes, but is not limited to, digital signature
technology, a personal identification number (PIN), biometric
technologies (such as fingerprints, iris scans, or signature
dynamics), and any new electronic signature technologies that
may be developed or used in the future.
The definition of electronic signature clarifies that a
contract or agreement signed or affirmed by an electronic
signature will be afforded the same legal recognition whether
signed by a person or electronic agent. A contract or agreement
electronically signed by an electronic agent may not be denied
legal effect because it was formed by the interaction of
electronic agents of the parties, or by the interaction of an
electronic agent of a party and an individual acting on the
individual's own behalf, or on behalf of another person who is
party to the transaction. The Committee believes that by
ensuring that contracts and agreements formed through the use
of electronic agents are not denied legal effect, section
104(2) seeks to facilitate the growth and development of
electronic commerce.
TITLE II--DEVELOPMENT AND ADOPTION OF ELECTRONIC SIGNATURE PRODUCTS AND
SERVICES
Section 201. Treatment of electronic signatures in interstate and
foreign commerce
Section 201(a) directs the Secretary of Commerce, acting
through the Assistant Secretary for Communications and
Information, to conduct an annual inquiry identifying: (1) any
domestic or foreign impediments to commerce in electronic
signature products and services and the manner and extent to
which such impediments inhibit the development of interstate
and foreign commerce; (2) constraints imposed by foreign
nations or international organizations that constitute barriers
to providers of electronic signature products and services; and
(3) the degree to which other nations and international
organizations are complying with the principles in section
201(b)(2). Under subsection (a)(2), the Secretary is required
to report to Congress the findings of each inquiry 90 days
after completion of such inquiry.
Section 201(b) directs the Secretary of Commerce, acting
through the Assistant Secretary for Communications and
Information, to promote the acceptance and use of electronic
signatures on an international basis in accordance with section
101 of the bill and with the principles listed below. In
addition, the Secretary of Commerce is directed to take all
actions to eliminate or reduce impediments to commerce in
electronic signatures, including those resulting from the
inquiries required pursuant to subsection (a).
The principles are as follows:
1. Free-markets and self-regulation, rather than government
standard-setting or rules, should govern the development and
use of electronic signatures and electronic records.
2. Neutrality and nondiscrimination should be observed
among providers of and technologies for electronic records and
electronic signatures.
3. Parties to a transaction should be allowed to establish
requirements regarding the use of electronic records and
electronic signatures acceptable to the parties.
4. Parties to a transaction should be permitted to
determine the appropriate authentication technologies and
implementation for their transactions with the assurance that
the technology and implementation will be recognized and
enforced. Further, the parties should have the opportunity to
prove in court that their authentication approaches and
transactions are valid.
5. Electronic records and signatures in a form acceptable
to the parties should not be denied legal effect, validity, or
enforceability because they are not in writing.
6. De jure or de facto imposition of electronic signature
and electronic record standards on the private sector through
foreign adoption of regulations or policies should be avoided.
7. Paper-based obstacles to electronic transactions should
be removed.
In light of the consideration and adoption by foreign
governments of electronic signature legislation which runs
contrary to the principles of electronic signatures widely
accepted in the United States, the Committee believes that it
is critically important for the United States to promote
American principles on electronic signatures internationally. A
highly regulatory structure for electronic signatures, or the
refusal to provide mutual recognition of alternate electronic
signature regimes, will hinder the development of global
electronic commerce. The Committee is also concerned that such
laws will create barriers to American companies providing
electronic signature technologies or services in foreign
countries.
Section 201(c) directs the Secretary of Commerce, acting
through the Assistant Secretary for Communications and
Information, to submit a report to Congress, within five years
after the date of enactment of the bill, regarding any State
statute, regulation, or rule of law enacted or adopted after
enactment on the extent to which such statute, regulation, or
rule of law complies with section 102(b). Subsection (c) also
requires the Secretary to include in the report the actions
taken pursuant to section 102(c) and subsection (b).
Section 201(d) requires the Secretary of Commerce to
consult with users and providers of electronic signatures and
products and other interested parties in carrying out actions
under this section.
Section 201(e) clarifies that nothing requires the
Secretary or Assistant Secretary to take any action that would
adversely affect the privacy of consumers.
Section 201(f) provides that the definitions in section 104
apply to this title.
TITLE III--USE OF ELECTRONIC RECORDS AND SIGNATURES UNDER FEDERAL
SECURITIES LAW
Section 301. General validity of electronic records and signatures
Title III of the bill amends section 3 of the Securities
Exchange Act of 1934 (the Exchange Act) to add a new subsection
(h), ``References to Written Records and Signatures.'' In
general, subsection (h) provides that a contract, agreement, or
record that is required by the Federal securities laws, and is
required by any other Federal or State provision to be in
writing or to be signed, shall not be denied legal effect,
validity, or enforceability on the ground that it is not in
writing if it is an electronic record or on the ground that it
is not signed or affirmed by a signature if it is signed or
affirmed by an electronic signature. The Committee intends that
this subsection preempt State law to the contrary. The
Committee notes that the purpose of this bill is to facilitate
commerce in the ``information age,'' and not to interfere with
legitimate regulatory requirements. Title III is not intended
to affect the Securities and Exchange Commission's (the
Commission's) regulatory recordkeeping requirements, such as
ensuring the accuracy of, and access to, electronic records of
securities firms. This legislation does not change any existing
Federal or State statute or rule requiring the production of
records to regulators.
Paragraph (1) provides for general rules of validity for
electronic records and signatures in the securities context.
Subparagraphs (A) and (B) apply to documents required under the
Federal securities laws. Specifically, if a contract,
agreement, or record (as defined by section 3(a)(37) of the
Exchange Act) that is required by the securities laws is also
required by other Federal or State statute, regulation, or
other rule of law to be in writing or to be signed, the legal
effect, validity, or enforceability of such contract,
agreement, or record shall not be denied on the ground that the
contract, agreement, or record is an electronic record or is
signed or affirmed by an electronic signature.
Subparagraph (C) relates to other documents that may be
used in securities transactions but arise out of commercial
practice or custom rather than a Federal securities law
requirement. Specifically, if a broker, dealer, transfer agent,
investment adviser, or investment company enters into a
contract or agreement with, or accepts a record from, a
customer or other counterparty, such broker, dealer, transfer
agent, investment adviser, or investment company may accept and
rely upon an electronic signature on such contract, agreement,
or record, andsuch electronic signature shall not be denied
legal effect, validity, or enforceability because it is an electronic
signature.
Paragraph (2) provides for the implementation of the law.
The paragraph gives the Commission authority to prescribe
rules, if necessary, to effect this subsection, consistent with
the public interest and the protection of investors. The
Committee notes that this paragraph authorizes, but does not
require, the Commission to prescribe regulations in this area.
Paragraph (2) further defines the parameters for any rulemaking
the Commission should undertake pursuant to this subsection. It
requires that such rules must not discriminate in favor of or
against (1) a specific technology, method, or technique of
creating, storing, generating, receiving, communicating, or
authenticating electronic records or electronic signatures; or
(2) a specific type or size of entity engaged in the business
of facilitating the use of electronic records or electronic
signatures. These parameters are subject, however, to the
exceptions of paragraph (3).
Paragraph (3) provides for certain exceptions. The first
exception, in subparagraph (A), permits the Commission,
appropriate regulatory agencies, and self-regulatory
organizations (SROs) to require that records that are to be
submitted to the Commission, a regulatory agency, or an SRO be
filed in a specified electronic format. The exception provided
in subparagraph (A) is designed to preserve the existing
ability of these entities to ``discriminate,'' notwithstanding
the prohibition of paragraph (2) against discrimination, by
requiring particular software or other electronic formats for
documents that are submitted to them for filing. The term
``electronic format'' is not defined in the statute; the
Committee intends this term to be interpreted flexibly to
maximize the ability of the Commission and SROs to specify the
technical formatting and similar requirements for materials
that are filed with them. The Committee expects that the SEC
will use this exception consistent with the legislation's
general goal to promote and facilitate the use of electronic,
rather than written, mechanisms of commerce.
For example, under this provision, the Commission or SROs
could: (1) continue to maintain filing requirements that
specify particular software formats, such as the formats
required under the EDGAR system or the central registration
depository for broker-dealers, without change; (2) specify
certain types of security features (such as access codes,
passwords, back-up paper copies or digital signatures) that
must be incorporated into filings; (3) include ``tagging''
requirements to facilitate automated processing of filings; (4)
limit the permitted types of formats acceptable for filing, in
order to facilitate making information available to the public;
or (5) require or prohibit the use of other technological
filing means, such as electronic transmission, magnetic tape,
diskettes, CD-ROMs, video cassette, streamed video, and
graphics. This list is meant to be illustrative, rather than
exhaustive; the Committee provides this list of examples of the
discretion retained by the Commission and SROs under the
legislation only to illustrate the broad range of authority the
provision is designed to preserve for the Commission and SROs
for materials that are submitted to them for filing.
Subparagraph (B) of paragraph (3) preserves the authority
of the Commission to require manual signatures for contracts,
agreements, or records relating to purchases and sales, or
establishing accounts for conducting purchases and sales, of
penny stocks or similar securities, if the Commission
determines that those securities are susceptible to fraud and
that such fraud would be deterred or prevented by requiring
manual signatures. Thus, the Commission's existing rules
requiring manual signatures in connection with certain of its
penny stock rules continue unchanged after enactment of this
bill. See SEC Release No. 33-7288, n.50 (May 9, 1996).
Paragraph (4) establishes the relationship between title I
and title III of the bill. To avoid overlap, the bill provides
that contracts, agreements, or records required by the
securities laws are governed exclusively by the provisions of
title III. This paragraph ensures that any State statute,
regulation, or other rule of law enacted or adopted after the
date of enactment of this bill (including the UETA) will not
modify, limit, or supersede the provisions of title III for
contracts, agreements, or records required by the securities
laws.
Paragraph (5) provides the definitions for certain terms
that are not otherwise defined in the Exchange Act. These
definitions are for purposes of section 3(h) only and are not
generally applicable to the Exchange Act or other Federal
securities laws or the rules promulgated thereunder.
The term ``electronic record'' is defined to mean a
writing, document, or other record created, stored, generated,
received, or communicated by electronic means.
The term ``electronic signature'' is defined to mean
information or data in electronic form, attached to or
logically associated with an electronic record, that is
intended by a party to signify agreement to a contract or
agreement.
Finally, the term ``electronic'' is defined to mean of or
relating to technology having electrical, digital, magnetic,
optical, electromagnetic, or similar capabilities regardless of
medium.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
SECTION 3 OF THE SECURITIES EXCHANGE ACT OF 1934
definitions and application of title
Sec. 3. (a) * * *
* * * * * * *
(h) References to Written Records and Signatures.--
(1) General validity of electronic records and
signatures.--Except as otherwise provided in this
subsection--
(A) if a contract, agreement, or record (as
defined in subsection (a)(37)) is required by
the securities laws or any rule or regulation
thereunder (including a rule or regulation of a
self-regulatory organization), and is required
by other Federal or State statute, regulation,
or other rule of law to be in writing, the
legal effect, validity, or enforceability of
such contract, agreement, or record shall not
be denied on the ground that the contract,
agreement, or record is not in writing if the
contract, agreement, or record is an electronic
record;
(B) if a contract, agreement, or record is
required by the securities laws or any rule or
regulation thereunder (including a rule or
regulation of a self-regulatory organization),
and is required by other Federal or State
statute, regulation, or other rule of law to be
signed, the legal effect, validity, or
enforceability of such contract, agreement, or
record shall not be denied on the ground that
such contract, agreement, or record is not
signed or is not affirmed by a signature if the
contract, agreement, or record is signed or
affirmed by an electronic signature; and
(C) if a broker, dealer, transfer agent,
investment adviser, or investment company
enters into a contract or agreement with, or
accepts a record from, a customer or other
counterparty, such broker, dealer, transfer
agent, investment adviser, or investment
company may accept and rely upon an electronic
signature on such contract, agreement, or
record, and such electronic signature shall not
be denied legal effect, validity, or
enforceability because it is an electronic
signature.
(2) Implementation.--
(A) Regulations.--The Commission may
prescribe such regulations as may be necessary
to carry out this subsection consistent with
the public interest and the protection of
investors.
(B) Nondiscrimination.--The regulations
prescribed by the Commission under subparagraph
(A) shall not--
(i) discriminate in favor of or
against a specific technology, method,
or technique of creating, storing,
generating, receiving, communicating,
or authenticating electronic records or
electronic signatures; or
(ii) discriminate in favor of or
against a specific type or size of
entity engaged in the business of
facilitating the use of electronic
records or electronic signatures.
(3) Exceptions.--Notwithstanding any other provision
of this subsection--
(A) the Commission, an appropriate regulatory
agency, or a self-regulatory organization may
require that records be filed in a specified
electronic format or formats if the records are
required to be submitted to the Commission, an
appropriate regulatory agency, or a self-
regulatory organization, respectively; and
(B) the Commission may require that
contracts, agreements, or records relating to
purchases and sales, or establishing accounts
for conducting purchases and sales, of penny
stocks be manually signed, and may require such
manual signatures with respect to transactions
in similar securities if the Commission
determines that such securities are susceptible
to fraud and that such fraud would be deterred
or prevented by requiring manual signatures.
(4) Relation to other law.--The provisions of this
subsection apply in lieu of the provisions of title I
of the Electronic Signatures in Global and National
Commerce Act to a contract, agreement, or record (as
defined in subsection (a)(37)) that is required by the
securities laws.
(5) Definitions.--As used in this subsection:
(A) Electronic record.--The term ``electronic
record'' means a writing, document, or other
record created, stored, generated, received, or
communicated by electronic means.
(B) Electronic signature.--The term
``electronic signature'' means information or
data in electronic form, attached to or
logically associated with an electronic record,
that is intended by a party to signify
agreement to a contract or agreement.
(C) Electronic.--The term ``electronic''
means of or relating to technology having
electrical, digital, magnetic, optical,
electromagnetic, or similar capabilities
regardless of medium.