[Federal Register Volume 63, Number 83 (Thursday, April 30, 1998)]
[Proposed Rules]
[Pages 23695-23703]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-11153]


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DEPARTMENT OF THE TREASURY

Fiscal Service

31 CFR Parts 317, 351, 353, and 370


Regulations Governing Agencies for the Issue and Offering of 
United States Savings Bonds, Including Sales by Electronic Means

AGENCY: Bureau of the Public Debt, Fiscal Service, Treasury.

ACTION: Proposed rule.

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SUMMARY: The Department of the Treasury hereby publishes a proposed 
rule governing the issue and offering of United States Savings Bonds. 
This document proposes changes to create new categories of savings bond 
issuing agents and to clarify and expand the means by which bonds may 
be sold, including electronic means.

DATES: Submit comments on or before June 1, 1998.

ADDRESSES: Comments should be sent to the attention of Wallace L. 
Earnest, Director, Division of Staff Services, Room 507, Bureau of the 
Public Debt, 200 3rd St., Parkersburg, WV 26106-1328. Additionally, 
comments may be sent by e-mail to the following address: 
[email protected]>. When sending comments by e-mail, please 
provide your full name and mailing address, and send the comments in 
ASCII format. Comments received will be available for public inspection 
and copying at the Treasury Department Library, Freedom of Information 
Act (FOIA) Collection, Room 5030, Main Treasury Building, 1500 
Pennsylvania Ave. NW, Washington, D.C. 20220. Individuals wishing to 
visit the library should call (202) 622-0990 for an appointment. Copies 
of this proposed rule can be downloaded from the Bureau of the Public 
Debt at the following World Wide Web address: <http://
www.savingsbonds.gov>.

FOR FURTHER INFORMATION CONTACT: Wallace L. Earnest, Director, Division 
of Staff Services, at (304) 480-6319 or by e-mail at 
<[email protected]>; Troy D. Martin, Senior Program Analyst, 
Division of Staff Services, at (304) 480-6545 or by e-mail at 
<[email protected]>; Edward C. Gronseth, Deputy Chief Counsel, at 
(304) 480-5192 or by e-mail at <[email protected]>; or Gregory J. 
Till, Attorney-Adviser, Office of the Chief Counsel, at (202) 219-3320 
or by e-mail at <[email protected]>.

SUPPLEMENTARY INFORMATION:

I. Background

    The growth of electronic commerce and the World Wide Web have led 
to a flourishing of financial service providers and new payment 
methods. However, the Bureau of the Public Debt has been unable to take 
full advantage of these developments in the sale of United States 
Savings Bonds because of apparent restrictions in existing regulations. 
This document proposes changes to create new categories of savings bond 
issuing agents and to clarify and expand the means by which bonds may 
be sold, including electronic means.
    The most important proposed changes are directed at four areas in 
title 31 of the Code of Federal Regulations. First, changes in 
Secs. 317.2 and 317.3 would amend the rules used to determine which 
organizations may serve as issuing agents and the procedures used to 
qualify these organizations as issuing agents. Second, changes to 
Sec. 351.5 would expand the means by which issuing agents may sell 
savings bonds. Third, a new subpart in part 370 would address the use 
of Automated Clearing House debit entries for the sale of bonds issued 
through the Bureau of the Public Debt. Fourth, another new subpart in 
part 370 would address the electronic submission of purchase 
applications and remittances for the sale of bonds issued through the 
Bureau of the Public Debt. This second new subpart in part 370 would 
facilitate Treasury's intention to sell savings bonds through 
remittances by credit cards at the World Wide Web site of the Bureau of 
the Public Debt.

II. Summary of Amendments

A. Regulations Governing Agencies for Issue of Savings Bonds (31 CFR 
Part 317)

(1) Definitions (Sec. 317.1)
    The revised definition of ``issuing agent'' would note the 
authority of the Commissioner of the Public Debt or the Commissioner's 
designee to qualify issuing agents, as explained in Sec. 317.2. The 
definition also would clarify that an issuing agent acts as an agent of 
the purchaser in handling the remittance. The proposed language 
addressing the handling of the remittance is consistent with current 
practice. The Secretary of the Treasury collects purchase funds from 
issuing agents, not the public. If an issuing agent discovers that the 
remittance is uncollectible or must be returned after the issuance of a 
bond, the Secretary is nonetheless entitled to payment from the issuing 
agent. The issuing agent bears the risk of loss for non-collection or 
return of the remittance.
(2) Organizations Eligible to Serve as Issuing Agents (Sec. 317.2)
    Currently, issuing agent eligibility is limited to financial 
institutions (such as banks and credit unions), agencies of the United 
States and state and local governments, and employers operating payroll 
savings plans. This document proposes to expand the types of 
organizations that are eligible to serve as issuing agents.
    One proposed change, in Sec. 317.2(c), would allow organizations 
that operate payroll savings plans on behalf of employers to serve as 
issuing agents. The proposed change is designed to bolster payroll 
savings plan sales from small businesses, which often do not have the 
resources to maintain such plans themselves. As is the case with 
employer organizations, an organization operating a payroll service 
plan on behalf of an employer organization would be eligible for 
issuing agent fees under the proposed rule only if it inscribes savings 
bonds.
    Another proposed addition, set out in Sec. 317.2(d), would give the 
Commissioner of the Bureau of the Public Debt or the Commissioner's 
designee the authority to qualify issuing agents when to do so would be 
in the public interest. The Commissioner or the Commissioner's designee 
could use such process as deemed to be appropriate in selecting the 
issuing agent. The selected issuing agent would also be subject to such 
conditions as deemed to be appropriate.
    The new Sec. 317.2(d) would be used for the selection of entities 
to sell bonds in unique ways as new methods of sales emerge. In 
particular, this provision would facilitate the qualification of 
issuing agents to sell savings bonds through electronic methods, such 
as those offered by financial services providers through World Wide Web 
access.

[[Page 23696]]

    In qualifying issuing agents under this provision, the Commissioner 
or the Commissioner's designee would balance the convenience and cost-
effectiveness of using new purchase methods against the need to insure 
the security and reliability of those methods.
(3) Procedures for Qualifying and Serving as an Issuing Agent 
(Sec. 317.3)
    All organizations currently must apply to a designated Federal 
Reserve Bank to receive issuing agent qualification. The section would 
be amended to state that an organization that seeks qualification under 
Sec. 317.2(d) or because of its status as an organization operating a 
payroll savings plan on behalf of an employer under Sec. 317.2(c) would 
be approved by the Commissioner of the Bureau of the Public Debt or the 
Commissioner's designee, though application still would be made through 
a designated Federal Reserve Bank.
(4) Issuance of Bonds (Sec. 317.6)
    The issuing agent fee provision would be simplified and continue to 
emphasize that fee schedules are set out not in the regulations, but 
through a separate publication in the Federal Register. The proposed 
changes would have no effect on the current fee structure, though the 
Bureau of the Public Debt would reserve the right to create new 
categories of fees as new ways of selling bonds develop.
(5) Appendix to Sec. 317.8--Remittance of Sales Proceeds and 
Registration Records, Department of the Treasury Circular, Public Debt 
Series No. 4-67 (Third Revision), Fiscal Service, Bureau of the Public 
Debt
    The appendix would be revised, primarily for changes in 
terminology. For instance, the definition of ``issuing agent'' would be 
redefined to reflect the changes to that term in Sec. 317.2. The term 
``over-the-counter'' would be redefined to reflect the expanded meaning 
given to that term in Sec. 351.5 of this chapter. Among other minor 
changes, paragraph (3) of subpart B would be removed because that 
provision no longer has application.

B. Offering of United States Savings Bonds, Series EE (31 CFR Part 351)

(1) Governing Regulations for Series EE Bonds (Sec. 351.1)
    This section would state that the regulations governing the 
transfer of funds by electronic means on account of United States 
securities in part 370 of this chapter would apply only to transactions 
for the purchase of bonds issued through the Bureau of the Public Debt. 
The regulations in part 370 would have no application to transactions 
for the purchase of bonds accomplished through issuing agents 
generally, unless and to the extent otherwise directed by the 
Commissioner of the Bureau of the Public Debt or the Commissioner's 
designee.
(2) Purchase of Bonds (Sec. 351.5)
    Currently, this section provides for four categories of savings 
bond sales: (1) ``payroll plans''; (2) ``over-the-counter/mail''; (3) 
``bond-a-month plan''; and (4) ``employee thrift, savings, vacation, 
and similar plans.'' Because some of these categories are limited and 
outdated, they may actually inhibit sales rather than facilitate them.
    Furthermore, a comparison with the appendix to Sec. 317.8 of this 
chapter (which discusses the remittance of sales proceeds and 
registration records by issuing agents) shows a lack of consistency in 
the categories and terminology used to define bond sales. In discussing 
bond sales, the appendix does not mirror Sec. 351.5 but rather combines 
the four categories of sales described in Sec. 351.5 into two 
categories: (1) ``payroll sale''; and (2) ``over-the-counter sale.'' 
The term ``payroll sale'' is not used in Sec. 351.5, which means that 
different terminology is used in the two provisions despite the fact 
that both provisions address bond sales. Also, the term ``over-the-
counter'' has an expanded meaning in the appendix to Sec. 317.8 as 
compared to its use in Sec. 351.5, making the regulations more 
difficult to understand.
    The proposed rule would revise Sec. 351.5 (as well as the appendix 
to Sec. 317.8), using the two categories in the appendix to Sec. 317.8: 
(1) ``payroll sales''; and (2) ``over-the-counter sales.'' The proposed 
payroll sales category would include sales through ``payroll savings 
plans'' and ``employee thrift, savings, vacation, and similar plans,'' 
the provisions of which are already described in the substance of the 
current Sec. 351.5. The proposed rule also states that employers and 
the organizations operating payroll savings plans on behalf of 
employers would be able to sell bonds only pursuant to payroll savings 
plans. These types of issuing agents would not be allowed to sell bonds 
over-the-counter.
    Over-the-counter sales would be all sales that are not payroll 
sales. For over-the-counter sales, the proposed rule would provide that 
``the purchase application and remittance may be submitted to an 
issuing agent by any means acceptable to the issuing agent.'' This 
broad provision would ensure that issuing agents have the flexibility 
to sell bonds through channels in addition to those currently set out 
in Sec. 351.5. For instance, the proposed rule would authorize issuing 
agents to sell savings bonds through electronic means such as the World 
Wide Web. Both the application and remittance could be submitted and 
signed through electronic methods agreed upon by the parties.
    The regulation would not impose limitations on the types of 
remittances which an issuing agent may accept. As always, however, the 
issuing agent would bear the burden of collection and risk of non-
collection for remittances it accepts. The Secretary of the Treasury 
takes payment from the issuing agent, not the purchaser. The Secretary 
of the Treasury has no obligation to return funds received from an 
issuing agent after issuance of a bond if the issuing agent cannot 
collect or must return the remittance.
    Finally, although the proposed changes would have no effect on the 
current issuing agent fee structure, the Bureau of the Public Debt 
would reserve the right to make changes to the fee structure as new 
ways of selling bonds develop.

C. Regulations Governing United States Savings Bonds, Series EE and HH 
(31 CFR Part 353)

(1) Application for Relief--Non-Receipt of Bond (Sec. 353.27)
    The regulations currently provide little guidance as to the status 
of bond purchases if the Secretary of the Treasury does not receive 
payment. While not likely, an issuing agent may fail after receiving 
the remittance from a purchaser but before the Secretary collects the 
sales proceeds from the issuing agent.
    If an issuing agent has inscribed a bond, the Secretary will honor 
the bond even if the Secretary cannot collect the sales proceeds from 
the issuing agent. This policy is consistent with existing regulations, 
which note that the registration of an issued bond is generally 
conclusive of ownership. If a bond has not been inscribed, the proposed 
rule states that the Secretary is authorized to issue bonds to preserve 
the public's confidence in dealing with issuing agents, even if the 
Secretary cannot collect the sales proceeds from the issuing agent.

D. Regulations Governing the Transfer of Funds by Electronic Means on 
Account of United States Securities (31 CFR Part 370)

(1) Scope (Sec. 370.0)
    This section would be amended to clarify that to the extent that 
the rules

[[Page 23697]]

in part 210 of this title apply to the purchase or payment of interest 
and principal on United States securities, the rules in this part 370 
would apply in the event of any inconsistencies.
(2) Definitions (Sec. 370.1)
    Several definitions would be added to or changed in this section. 
The definition of ``Automated Clearing House (ACH) entry'' would refer 
to transactions accomplished in accordance with the applicable 
Operating Rules and Operating Guidelines of the National Automated 
Clearing House Association, as modified by these and other regulations 
and law.
    Other terms would be drawn from several authorities. The definition 
of ``deposit account'' would be taken principally from Regulation E of 
the Board of Governors of the Federal Reserve (12 CFR part 205). The 
definition of ``financial institution'' would be the same as included 
in a proposed rule to amend part 208 of this title, ``Management of 
Federal Agency Disbursement,'' published in the Federal Register on 
September 16, 1997, beginning at page 48714. The definition of 
``originator'' would be derived from the Operating Rules and Operating 
Guidelines of the National Automated Clearing House Association.
(3) Definition (Sec. 370.4)
    The definition of ``payment'' would be removed from the general 
definitional section in subpart A and placed into a specific 
definitional section applying only to subpart B. The limited definition 
of a payment as a deposit from the Department to the account of the 
owner only has application in subpart B and may cause confusion by its 
application throughout part 370.
(4) Governing Law (Sec. 370.30)
    Subpart D would establish rules and the exclusive liability of the 
Bureau of the Public Debt for debit entries to a purchaser's account to 
buy bonds from the Bureau of the Public Debt. As set out in Sec. 351.1, 
part 370 would apply only to transactions for the purchase of bonds 
issued through the Bureau of the Public Debt. These rules would not 
apply to transactions for the purchase of bonds accomplished through 
issuing agents generally, unless and to the extent the Commissioner of 
the Bureau of the Public Debt or the Commissioner's designee deems 
otherwise.
    It is anticipated that a purchaser would authorize an entity named 
on an approved authorization form to be the originator for the debit 
entries. This entity would forward collected funds to Treasury in 
exchange for a fee (unless the Bureau of the Public Debt chooses to 
name itself as the originator). The Bureau of the Public Debt would 
then issue the bonds through a Federal Reserve Bank acting as a fiscal 
agent for the United States.
(5) Authorization of Purchaser (Sec. 370.31)
    This section would state that all debit authorizations must be 
accomplished through a procedure approved by the Bureau of the Public 
Debt. An authorization would have to be signed. The authorization would 
allow for recurring debit entries. The section would also provide that 
except to the extent required by the Bureau of the Public Debt, the 
originator will not be required to take additional steps to verify the 
identity of the purchaser or the authenticity of the signature.
    The Bureau of the Public Debt would retain the right to name a 
successor to the originator without additional notice to the purchaser, 
though it may ask the successor to provide such notice as a customer 
service. This provision is drawn from the official staff interpretation 
to Sec. 205.10(b) of Regulation E of the Board of Governors of the 
Federal Reserve (12 CFR part 205), which allows ``successor 
institutions'' to assume a originator's role without notice or a new 
authorization.
    Finally, a purchaser's subsequent authorization would cancel a 
previous authorization only if so noted by the purchaser on the 
subsequent authorization form. This provision would allow a purchaser 
to make additional recurring purchases of savings bonds through debit 
entries without having to list anew all the recurring purchases on a 
single form.
(6) Cancellation or Suspension by the Bureau of the Public Debt 
(Sec. 370.32)
    This section would state that the Bureau of the Public Debt could 
terminate or suspend the availability of debit entries at any time, and 
its decision to do so would be final.
(7) Cancellation or Suspension by Purchaser (Sec. 370.33)
    Under this section, a purchaser would be able to cancel or suspend 
debit ACH entries for the purchase of bonds by providing written notice 
to the originator.
(8) Changes and Error Resolution (Sec. 370.34)
    This section would provide that if a person gives an oral notice 
relating to the correctness of bond purchase information or a debit 
entry to the person's account, the originator could require a written 
notice from the person, which must be received within thirty days. In 
addition, the originator would be allowed to ignore the oral notice if 
written notice is not received within thirty days. Finally, the 
originator would be able to suspend further debit entries during a 
resolution to any notice, written or oral.
(9) Prenotification (Sec. 370.35)
    The section would leave the requirement of a prenotification, as 
well as the length of the period during which the originator must wait 
after sending a prenotification before sending a live debit entry, up 
to the discretion of the Bureau of the Public Debt.
(10) Liability (Sec. 370.36)
    This section would state that the Bureau of the Public Debt would 
not be liable in disputes arising out of debit entries, unless the 
Bureau of the Public Debt names itself as an originator. Disputes 
arising out of debit entries would be the responsibility of the 
originator. Also, unless the Bureau of the Public Debt designates 
itself or a fiscal or financial agent as the originator, the originator 
would serve as the agent of the purchaser in handling the remittance.
    In any case, the Bureau of the Public Debt's liability would be 
limited to the amount of the improper debit, less any losses caused due 
to the failure of a claimant to exercise due diligence. The Bureau of 
the Public Debt's responsibility would be to replace lost, stolen, 
destroyed, mutilated, and defaced bonds, as well as to issue or replace 
bonds not received, under the rules set out in subpart F of part 353 of 
this chapter, as proposed to be amended.
(11) Governing Law (Sec. 370.50)
    Subpart E would establish rules for the electronic submission of 
purchase applications and remittances for the purchase of savings bonds 
issued through the Bureau of the Public Debt. The subpart explicitly 
would enable the Bureau of the Public Debt's acceptance of electronic 
signatures, establish the rules of contract formation accomplished by 
electronic means, address the admissibility of digital signatures, and 
set out the exclusive liability of the Bureau of the Public Debt for 
these transactions.
    The first use of these provisions would be to facilitate the sale 
of savings bonds over the World Wide Web through remittances paid for 
by credit cards. On April 30, 1997, the Secretary of the Treasury 
announced his support of this goal, stating:


[[Page 23698]]


    I am pleased to announce a number of steps we are taking to make 
savings bonds more attractive investments for American savers. * * *
    [W]e are using technology in an effort to make information about 
the savings bond program more available to all Americans * * *. [W]e 
will take another step to make savings bonds more available by 
introducing credit card purchasing on-line.

    The bonds will be available at World Wide Web site of the Bureau of 
the Public Debt, at <http://www.savingsbonds.gov>. These sales will 
utilize the latest in technology (including the issuance of digital 
certificates to credit card holders and the use of the Secure 
Electronic Transactions protocol), which may hamper the initial 
availability of bonds sold in this fashion but which will help insure 
the security of these sales for the Government and purchasers.
    It is important to note the limited scope and extent of these 
proposed regulations. As would be stated in Sec. 351.1 of this chapter, 
these rules would apply only to savings bond transactions accomplished 
through the Bureau of the Public Debt. These regulations would not 
apply to savings bond sales accomplished through issuing agents such as 
banks and employers offering payroll savings plans. Furthermore, the 
regulations are relatively brief, at least in comparison to work done 
by the American Bar Association, the National Conference of 
Commissioners on Uniform State Laws, the American Law Institute, and 
the United Nations Commission on International Trade Law, among others. 
Also, many states have passed or are contemplating comprehensive 
legislation in this area.
    Given the rapidly changing nature of the technology, its narrow 
initial use by the Bureau of the Public Debt, and a desire to avoid 
even the appearance of encroaching upon the right of states to pursue 
their own legislative approaches, these electronic and digital 
signature regulations must be drawn in a limited fashion. The 
regulations would leave unchanged the right of states to determine 
their own rules for electronic and digital signatures and would not 
address any issues related to certification authorities. Some brief 
federal contract law provisions addressing electronic and digital 
signatures are necessary to facilitate the sale of savings bonds over 
the Internet by the Bureau of the Public Debt, and that is what these 
regulations seek to implement.
(12) Definitions (Sec. 370.51)
    The section would list five definitions. The most fundamental would 
be a definition of ``signature.'' A signature would be ``any symbol or 
method executed or adopted by a party with present intention to be 
bound,'' which is a traditional legal definition of a signature. The 
definition would encompass electronic signatures. Case law on 
signatures indicates that almost anything can constitute a signature, 
from printed and typewritten names to account numbers, if executed with 
an intent to be bound. Electronic signatures are no different from 
other forms of signatures in this regard. To retain some control over a 
new and uncertain process, an electronic signature submitted to the 
Bureau of the Public Debt would have to be of a type approved by the 
Bureau of the Public Debt.
    In addition, the section would include a definition of ``digital 
signature,'' which is a special type of electronic signature. Treasury 
will use digital signatures in the sale of savings bonds over the 
Internet. A digital signature uses ``public-key encryption'' and a 
``message digest function'' in transforming an electronic ``record.'' 
The definitions of these terms largely are taken from model, proposed, 
or existing authorities.
    Public-key encryption is a process that relies upon an algorithm to 
produce two mathematically related but different keys. If public-key 
encryption is implemented securely, it is computationally infeasible to 
derive one key from the other. The keys can be used for several 
purposes, including the creation and verification of digital 
signatures. One key (the private key) is kept private and can be used 
to create a digital signature, while the other key (the public key) may 
be distributed to anyone and may be used by a relying party to verify a 
digital signature. The association of a public key (and by implication, 
its corresponding private key) to the identity of a particular person 
is accomplished through the use of digital certificates, issued by 
certification authorities.
    The use of a message digest function (also known as a hash 
function) is an essential element in the creation and verification of 
digital signatures. A message digest function is an algorithm that 
typically provides a shortened, mathematical version of a longer 
electronic record. Even a small change to an electronic record can 
result in a dramatic change to a message digest, aiding in the 
verification of a digital signature and any electronic record to which 
the signature is attached. The signer uses the signer's private key to 
encrypt the short message digest, rather than the entire electronic 
record. This digital signature (the message digest, encrypted by the 
signer's private key) is sent to the recipient, along with a copy of 
the electronic record.
    Upon receipt of the digital signature and electronic record, the 
recipient uses the signer's public key to decrypt the digital signature 
and recover the message digest. The recipient then runs the received 
copy of the electronic record through the same message digest function 
used to create the received message digest. If the two results are 
identical, the recipient knows that the electronic record was encrypted 
by the signer's private key and that the electronic record was not 
tampered with from the time the signer created the digital signature.
(13) Contract Formation (Sec. 370.52)
    The ``mailbox rule'' would be adopted for the acceptance of 
purchase applications submitted electronically to the Bureau of the 
Public Debt. An application for a purchase of a bond submitted by 
electronic means would be an offer to create a bond contract. 
Acceptance of the offer by the Bureau of the Public Debt would be 
effective and a contract formed upon the transmittal of the message of 
acceptance by the Bureau of the Public Debt, not upon receipt of that 
message by the purchaser.
(14) Point of Sale (Sec. 370.53)
    The point of sale for a bond issued as a result of a purchase 
application submitted electronically under this subpart would be 
Parkersburg, West Virginia.
(15) Effect of Electronic Signature (Sec. 370.54)
    This section would overcome challenges to the legal effect of an 
electronically signed record that are based upon the electronic form of 
the record or signature. Some provisions of law, such as the Statute of 
Frauds, require evidence of an agreement to be in writing. Other 
provisions of law can require that an original record be produced in 
court, rather than a copy, or may require that a record be signed. 
However, there seems little reason to use these doctrines to preclude 
the admissibility of electronically signed records. These records are 
equivalent to signed writings, each copy of which is identical to the 
original. Accordingly, this section would prevent such challenges from 
stopping the introduction of electronically signed records into 
evidence.

[[Page 23699]]

(16) Admissibility of Digital Signature (Sec. 370.55)
    This section would address the legal requirement that an item be 
authenticated before being introduced into evidence. ``Authentication'' 
is a term that has a technical meaning specifically linked to the 
security of electronic signatures, but also has a separate meaning in 
the law of evidence, at which this section is directed.
    Under Rule 901 of the Federal Rules of Evidence, ``The requirement 
of authentication * * * as a condition precedent to admissibility is 
satisfied by evidence sufficient to support a finding that the matter 
in question is what its proponent claims.'' For instance, under Rule 
901(b)(2), this evidentiary requirement may be met in regard to a 
handwritten record by nonexpert testimony as to the genuineness of 
handwriting. Although there have not as yet been any cases on the 
matter, the requirement of authentication for digital signatures likely 
can be met under Rule 901(b)(9), which allows for the sufficiency of 
``[e]vidence describing a process or system used to produce a result 
and showing that the process or system produces such a result.''
    However, in some situations authentication evidence is not required 
as a condition precedent to admissibility. As noted under Rule 902 of 
the Federal Rules of Evidence, extrinsic evidence of authenticity is 
not necessary for certified birth and death certificates, newspapers 
and periodicals, trade inscriptions, commercial paper, and notarized 
records, among other things. Because these items are likely to be 
authentic, a strict adherence to preliminary authentication procedures 
would unnecessarily expend a court's time and resources. Accordingly, 
the items are considered to be self-authenticating and--barring other 
objections to the evidence--may be admitted into evidence without 
additional preliminary review.
    The inclusion of a limited self-authentication provision for 
digital signatures in these proposed regulations is appropriate. Under 
this section, extrinsic evidence of authenticity would be unnecessary 
to establish the existence of a digital signature that corresponds to a 
public key pair, as well as that an electronic record to which a 
digital signature is affixed has not been altered from its original 
form. Importantly, the self-authentication provision would not tie a 
digital signature to a particular person. Extrinsic evidence tying the 
public key pair used in the creation of a digital signature to a 
particular person still would have to be provided before a digital 
signature and a record to which it has been affixed could be 
admissible.
    There are several reasons that support the insertion of a limited 
self-authentication clause into this proposed rule. If public-key 
encryption has been properly implemented, the risk of a successful 
forgery or alteration of a digital signature is extremely remote, and 
is significantly less than the risk of forgery or alteration for paper 
records. Furthermore, although a legal showing of authenticity in the 
absence of a self-authentication provision almost certainly could be 
accomplished, such a showing would require considerable time and 
resources. Among other things, it would entail extensive scientific 
testimony on encryption, leading to an expensive and unproductive 
``battle of the experts.'' Use of a self-authentication provision would 
avoid this wasteful problem.
    In almost all cases, the existence of a digital signature should be 
beyond reasonable dispute. The most likely challenges to a digital 
signature and an electronic record to which it is affixed will turn not 
on whether a digital signature exists, but on whether it should be 
attributed to a particular person. These challenges frequently will 
focus on the issuance, protection, or revocation of the digital 
certificates used to link a digital signature and accompanying record 
to a particular person. This section would do nothing to prevent such 
challenges. This section also would have no application in criminal 
cases. Furthermore, even to the extent that a self-authenticated 
digital signature and accompanying record could be introduced into 
evidence under this section, this section would in no way prevent a 
party against whom a digital signature is asserted from contesting the 
existence or authenticity of the signature. However, any arguments 
would go to the weight of the evidence, not to its admissibility.
(17) Negligence Contributing to Unauthorized Signature (Sec. 370.56)
    This section would hold a person responsible for an unauthorized 
signature if the person's failure to use ordinary care substantially 
contributed to the creation or submission of the unauthorized 
signature. Furthermore, the burdens will be on the person challenging a 
signature to produce evidence that ordinary care was exercised and to 
persuade a trier of fact that it is more likely than not that the 
person exercised ordinary care.
    This section is drawn from section 3-406 of the Uniform Commercial 
Code (UCC). The responsibilities imposed upon persons in regard to the 
technology used to create and submit electronic signatures are similar 
to those imposed under the UCC in regard to rubber signature stamps 
used to sign checks. Official Comment 3 to UCC section 3-406 is 
enlightening in this regard. If a person's rubber signature stamp and 
checks, kept in a unlocked drawer, are stolen and used by an 
unauthorized party to forge a check, a bank may be able to successfully 
argue that the person is precluded from disavowing the forged signature 
because the person's lack of ordinary care substantially contributed to 
the forgery.
    Similarly, under the proposed rule if a person fails to take 
adequate security precautions to protect access to electronic signature 
technology (such as by not safekeeping a computer password, for 
instance) and this failure substantially contributes to the creation or 
submission of an unauthorized signature, the person would be precluded 
from disavowing the signature.
(18) Liability (Sec. 370.57)
    This section would limit the Bureau of the Public Debt's liability 
for claims involving this subpart to the amount of the transaction, 
less any losses caused by the failure of a claimant to exercise due 
diligence. For instance, this section would have application to claims 
involving errors in the handling of otherwise properly authorized 
transactions.

III. Procedural Requirements

    This proposed rule does not meet the criteria for a ``significant 
regulatory action,'' as defined in Executive Order 12866. Therefore, 
the regulatory review procedures contained therein do not apply.
    This proposed rule relates to matters of public contract and 
procedures for United States securities. Accordingly, although this 
proposed rule is being issued to secure the benefit of public comment, 
the notice and public comment provisions of the Administrative 
Procedure Act do not apply, pursuant to 5 U.S.C. 553(a)(2).
    As no notice of proposed rulemaking is required, the Regulatory 
Flexibility Act (5 U.S.C. 601, et seq.) does not apply.
    There are no new collections of information contained in this 
proposed rule. Therefore, the Paperwork Reduction Act (44 U.S.C. 3507) 
does not apply.

[[Page 23700]]

List of Subjects in 31 CFR Parts 317, 351, 353, and 370

    Bonds, Electronic Funds Transfers, Government Securities.
    For the reasons set forth in the preamble, 31 CFR parts 317, 351, 
353, and 370 are proposed to be amended as follows:

PART 317--REGULATIONS GOVERNING AGENCIES FOR ISSUE OF UNITED STATES 
SAVINGS BONDS

    1. The authority citation for part 317 is revised to read as 
follows:

    Authority: 2 U.S.C. 901; 5 U.S.C. 301; 12 U.S.C. 391; 31 U.S.C. 
3105.

    2. Revise Sec. 317.1 to read as follows:


Sec. 317.1  Definitions.

    (a) Bond(s) means those series of United States Savings Bonds 
currently being offered for sale by the Secretary of the Treasury.
    (b) Federal Reserve Bank refers to the Federal Reserve Bank or 
Branch providing savings bond services to the district in which the 
issuing agent or the applicant organization is located. See 
Sec. 317.9(a).
    (c) Issuing agent refers to an organization that has been qualified 
by a designated Federal Reserve Bank, the Commissioner of the Bureau of 
the Public Debt, or the Commissioner's designee to sell savings bonds. 
The definition encompasses:
    (1) Each organization that accepts and processes purchase orders 
for bonds sold over-the-counter, but does not inscribe bonds, and
    (2) Each organization that is authorized to inscribe bonds sold 
over-the-counter or through payroll savings plans. An issuing agent 
acts as an agent of the purchaser in handling the remittance.
    (d) Offering circular refers to Department of the Treasury 
Circular, Public Debt Series No. 1-80, current revision.
    (e) Organization means an entity, as described in Sec. 317.2, that 
may qualify as an issuing agent of bonds.
    3. Revise Sec. 317.2 to read as follows:


Sec. 317.2  Organizations authorized to act.

    Organizations eligible to apply for qualification and serve as 
issuing agents are the following:
    (a) Banks, Federal credit unions in good standing, trust companies, 
and savings institutions chartered by or incorporated under the laws of 
the United States, or those of any State or Territory of the United 
States, the District of Columbia, or the Commonwealth of Puerto Rico.
    (b) Agencies of the United States and State and local governments.
    (c) Employers operating payroll savings plans for the purchase of 
United States Savings Bonds, as well as organizations operating payroll 
savings plans on behalf of employers.
    (d) Other organizations to be specifically and individually 
qualified by the Commissioner of the Bureau of the Public Debt or the 
Commissioner's designee, whenever the Commissioner or the 
Commissioner's designee deems such a qualification to be in the public 
interest. In selecting an issuing agent, the Commissioner or the 
Commissioner's designee may use such process that the Commissioner or 
the Commissioner's designee deems to be appropriate. The selected 
issuing agent will be subject to such conditions that the Commissioner 
or the Commissioner's designee deems to be appropriate.
    4. Amend Sec. 317.3 as follows:
    A. Revise paragraph (a) introductory text to read as follows:


Sec. 317.3  Procedure for qualifying and serving as issuing agent.

    (a) Execution of application agreement. An organization seeking 
issuing agent qualification shall obtain from and file with a 
designated Federal Reserve Bank an application-agreement form. If an 
organization seeks qualification under Sec. 317.2(d) or because of its 
status as an organization operating a payroll savings plan on behalf of 
an employer under Sec. 317.2(c), the completed application-agreement 
form shall be forwarded by the designated Federal Reserve Bank to the 
Bureau of the Public Debt for approval by the Commissioner of the 
Bureau of the Public Debt or the Commissioner's designee.
* * * * *
    B. Add the words ``or the Bureau of the Public Debt'' after the 
words ``Federal Reserve Bank'' in paragraphs (b) and (c).
    5. Revise Sec. 317.6(b) to read as follows:


Sec. 317.6  Issuance of bonds.

* * * * *
    (b) Fees. Each issuing agent, other than a Federal agency, will be 
paid fees. Only issuing agents are eligible to collect fees. With prior 
approval, agents that are authorized to inscribe bonds and receive fee 
payments will also be paid a bonus for presorting savings bond 
mailings. Schedules reflecting the amount of the fees and presort 
bonuses, and the basis on which they are computed and paid, will be 
published separately in the Federal Register.
* * * * *
    6. Amend the appendix to Sec. 317.8 as follows:
    A. Revise the section heading to the appendix to read as set out 
below;
    B. Remove paragraph 3 of subpart B;
    C. Revise paragraphs 2(c) and 2(e) of subpart A, all of subpart C, 
and paragraphs 2(a)(i) and 2(b) of subpart D to read as follows:


Sec. 317.8  Remittance of sales proceeds and registration records.

* * * * *

Appendix to Sec. 317.8--Remittance of Sales Proceeds and 
Registration Records, Department of the Treasury Circular, Public 
Debt Series No. 4-67, Third Revision (31 CFR Part 317), Fiscal 
Service, Bureau of the Public Debt

Subpart A--General Information

* * * * *
    2. Definition of terms. As used in this appendix:
* * * * *
    (c) Over-the-counter sale means any sale of savings bonds other 
than payroll sales.
* * * * *
    (e) Issuing agent, as provided in Sec. 317.1(c) of the Circular, 
refers to an organization that has been qualified by a designated 
Federal Reserve Bank, the Commissioner of the Bureau of the Public 
Debt, or the Commissioner's designee to sell savings bonds.
* * * * *

Subpart C--Remittance of Payroll Sales Proceeds

    1. Application of requirements. The remittance requirements for 
payroll sales apply only to issuing agents. An employer that 
maintains a payroll savings plan but does not issue bonds shall be 
notified by the servicing issuing agent that it must remit sales 
proceeds to the issuing agent in sufficient time to permit 
compliance with the requirements.
    2. Remittance of payroll sales deductions. Issuing agents shall 
remit sales proceeds throughout the month shown in the issue date as 
soon as the full amount of the purchase price of the bonds has been 
received or accumulated. In no case should such proceeds be remitted 
later than the second business day of the month following the month 
shown in the issue date. The issuing agent shall ensure that its 
system properly accounts for and recognizes when the full purchase 
price has been received, or has been accumulated, so that timely 
remittance can be made. The issuing agent shall transmit 
registration records in an electronically processible format within 
thirty (30) days following the month shown on the issue date.

Subpart D--Interest on Late Remittances

* * * * *
    2. * * *
    (a) Bonds inscribed by issuing agent--(i) Payroll sales. If, 
during any three (3) month

[[Page 23701]]

period, the interest assessed on an issuing agent's late remittance 
of proceeds from payroll savings plan sales or thrift, savings, 
vacation, or similar plan sales accumulates to less than $50 for 
each type of sales, the interest assessed for the first month will 
be waived. The interest assessed for each type of sales for the 
remaining two (2) months will then be carried forward to the next 
period of three (3) consecutive months.
* * * * *
    (b) Bonds inscribed by the designated Federal Reserve Bank. The 
interest assessed on late remittance of all sales proceeds 
transmitted during a given month will be waived if it is less than 
$25.
* * * * *

PART 351--OFFERING OF UNITED STATES SAVINGS BONDS, SERIES EE

    1. The authority citation for part 351 continues to read as 
follows:

    Authority: 5 U.S.C. 301; 12 U.S.C. 391; 31 U.S.C. 3105.

    2. Revise Sec. 351.1 to read as follows:


Sec. 351.1  Governing regulations.

    Series EE bonds are subject to the regulations of the Department of 
the Treasury, now or hereafter prescribed, governing United States 
Savings Bonds of Series EE and HH, contained in Department of the 
Treasury Circular, Public Debt Series No. 3-80 (part 353 of this 
chapter). The regulations in part 370 of this chapter apply to 
transactions for the purchase of United States Savings Bonds issued 
through the Bureau of the Public Debt. The regulations in part 370 do 
not apply to transactions for the purchase of bonds accomplished 
through issuing agents generally, unless and to the extent otherwise 
directed by the Commissioner of the Bureau of the Public Debt or the 
Commissioner's designee.
    3. Revise Sec. 351.5 to read as follows:


Sec. 351.5  Purchase of bonds.

    (a) Payroll sales--(1) Payroll savings plans. Bonds in $100 and 
higher denominations may be purchased through deductions from the pay 
of employees of organizations that maintain payroll savings plans. The 
bonds must be issued by an authorized issuing agent.
    (2) Employee thrift, savings, vacation, and similar plans. Bonds 
registered in the names of trustees of employee plans may be purchased 
in book-entry form in $100 multiples through a designated Federal 
Reserve Bank after Bureau of the Public Debt approval of the plan as 
eligible for the special limitation under Sec. 353.13 of this chapter, 
also published as Sec. 353.13 of Department of the Treasury Circular, 
Public Debt Series No. 3-80.
    (b) Over-the-counter sales--(1) Eligible issuing agents. Bonds may 
be purchased through any issuing agent, except that an organization 
serving as an issuing agent because of its status as an employer or an 
organization operating an employer's payroll savings plan under 
Sec. 317.2(c) of this chapter may sell bonds only through payroll 
savings plans.
    (2) Manner of sale. An application for the purchase of a bond must 
be accompanied by a remittance to cover the issue price. The purchase 
application and remittance may be submitted to an issuing agent by any 
means acceptable to the issuing agent. An application may authorize 
purchases on a recurring basis. The issuing agent bears the burden of 
collection and the risk of loss for non-collection or return of the 
remittance.

PART 353--REGULATIONS GOVERNING UNITED STATES SAVINGS BONDS, SERIES 
EE AND HH

    1. The authority citation for part 353 is revised to read as 
follows:

    Authority: 5 U.S.C. 301; 12 U.S.C. 391; 31 U.S.C. 3105, 3125.


Sec. 353.6  [Amended]

    2. Remove the word ``deduction'' in Sec. 353.6(b)(4), and add, in 
its place, the word ``savings.''


Sec. 353.13  [Amended]

    3. Add the phrase ``, as amended'' after the word ``1954'' in 
Sec. 353.13(c)(3).
    4. Revise Sec. 353.27 to read as follows:


Sec. 353.27  Application for relief--Non-receipt of bond.

    If a bond issued on any transaction is not received, the issuing 
agent must be notified as promptly as possible and given all 
information about the non-receipt. An appropriate form and instructions 
will be provided. If the application is approved, relief will be 
granted by the issuance of a bond bearing the same issue date as the 
bond that was not received. Also, relief is authorized for the issuance 
of bonds for which the Secretary has not received payment, in order to 
preserve public confidence in dealing with issuing agents.

PART 370--REGULATIONS GOVERNING THE TRANSFER OF FUNDS BY ELECTRONIC 
MEANS ON ACCOUNT OF UNITED STATES SECURITIES

    1. The authority citation for part 370 is revised to read as 
follows:

    Authority: 12 U.S.C. 391; 31 U.S.C. chapter 31.

    2. Revise Sec. 370.0 to read as follows:


Sec. 370.0  Scope.

    The regulations in this part apply to the transfer of funds by 
electronic means as employed by the Bureau of the Public Debt in 
connection with United States securities, except as otherwise provided. 
To the extent that the rules in part 210 of this title apply to the 
purchase or payment of interest and principal on United States 
securities, the rules in this part 370 apply in the event of any 
inconsistencies. Among other things, the written authorization of the 
Financial Management Service is not necessary for the issuance of 
routing numbers by a Federal Reserve Bank or for the receipt, 
origination, or reversal of any credit or debit entries accomplished 
pursuant to this part.
    3. Revise Sec. 370.1 to read as follows:


Sec. 370.1  Definitions.

    In this part, unless the context indicates otherwise:
    Automated Clearing House (ACH) entry means a transaction in 
accordance with applicable Operating Rules and Operating Guidelines of 
the National Automated Clearing House Association, as modified by these 
and other regulations and law. The rules in this part control in the 
event of any inconsistencies with the applicable Operating Rules and 
Operating Guidelines.
    Credit entry means an ACH entry for the deposit of money to a 
deposit account.
    Debit entry means an ACH entry for the payment of money from a 
deposit account.
    Deposit account means a demand deposit (checking), savings, or 
asset account (other than an occasional or incidental credit balance in 
a credit plan) held directly or indirectly by a financial institution.
    Financial institution means:
    (1) An entity described in section 19(b)(1)(A), excluding 
subparagraphs (v) and (vii), of the Federal Reserve Act (12 U.S.C. 
Sec. 461(b)(1)(A)). Under section 19(b)(1)(A) of the Federal Reserve 
Act and for purposes of this part only, the term ``depository 
institution'' means:
    (i) Any insured bank as defined in section 3 of the Federal Deposit 
Insurance Act (12 U.S.C. Sec. 1813) or any bank that is eligible to 
make application to become an insured bank under section 5 of such Act 
(12 U.S.C. Sec. 1815);
    (ii) Any mutual savings bank as defined in section 3 of the Federal 
Deposit Insurance Act (12 U.S.C. Sec. 1813) or any bank that is 
eligible to make application to become an insured bank under section 5 
of such Act (12 U.S.C. Sec. 1815);

[[Page 23702]]

    (iii) Any savings bank as defined in section 3 of the Federal 
Deposit Insurance Act (12 U.S.C. Sec. 1813) or any bank that is 
eligible to make application to become an insured bank under section 5 
of such Act (12 U.S.C. Sec. 1815);
    (iv) Any insured credit union as defined in section 101 of the 
Federal Credit Union Act (12 U.S.C. Sec. 1752) or any credit union that 
is eligible to make application to become an insured credit union 
pursuant to section 201 of such Act (12 U.S.C. Sec. 1781);
    (v) Any savings association (as defined in section 3 of the Federal 
Deposit Insurance Act) (12 U.S.C. Sec. 1813) that is an insured 
depository institution (as defined in such Act) (12 U.S.C. Sec. 1811 et 
seq.) or is eligible to apply to become an insured depository 
institution under the Federal Deposit Insurance Act (12 U.S.C. 
Sec. 1811 et seq.); and
    (2) Any agency or branch of a foreign bank as defined in section 
1(b) of the International Banking Act, as amended (12 U.S.C. 
Sec. 3101).
    Originator means an entity authorized by a person to initiate debit 
or credit entries to the person's deposit account and that also has an 
agreement with a financial institution to transmit the debit or credit 
entries to the person's deposit account.
    Owner means the person(s) in whose name(s) a security is 
registered.
    Security means any obligation issued by the United States that, by 
the terms of the applicable offering circular, is made subject to this 
part.
    Settlement date means the date an exchange of funds with respect to 
an entry is reflected on the books of the Federal Reserve Bank(s). For 
a security held in the TREASURY DIRECT system, the issue date will in 
most cases be the same as the settlement date. For United States 
Savings Bonds, the issue date will in most cases be the first day of 
the month in which settlement takes place.
    4. Add Sec. 370.4 to subpart B to read as follows:


Sec. 370.4  Definition.

    Payment means, for the purpose of this subpart, the deposit of 
money from the Department to the deposit account of the owner.
    5. Revise the heading of subpart C to read as follows:

Subpart C--Debit ACH Entries for the Sale of Securities in TREASURY 
DIRECT

    6. Redesignate subpart D as subpart F and Secs. 370.30 and 370.31 
as Secs. 370.60 and 370.61.
    7. Add subparts D and E to read as follows:

Subpart D--Debit ACH Entries for the Sale of United States Savings 
Bonds Issued Through the Bureau of the Public Debt

Sec.
370.30  Governing law.
370.31  Authorization by purchaser.
370.32  Termination or suspension by the Bureau of the Public Debt.
370.33  Termination or suspension by purchaser.
370.34  Changes and error resolution.
370.35  Prenotification.
370.36  Liability.


Sec. 370.30  Governing law.

    This subpart provides rules for Automated Clearing House debit 
entries used for the sale of United States Savings Bonds issued through 
the Bureau of the Public Debt. This subpart also establishes the 
exclusive liability of the Bureau of the Public Debt for such entries. 
This subpart does not apply to transactions for the purchase of bonds 
accomplished through issuing agents generally, unless and to the extent 
the Commissioner of the Public Debt or the Commissioner's designee 
requires otherwise.


Sec. 370.31  Authorization by purchaser.

    (a) General. The purchaser of a bond shall authorize an originator 
to initiate Automated Clearing House debit entries and a financial 
institution and deposit account to receive such entries. An 
authorization shall be accomplished only through a form approved by the 
Bureau of the Public Debt. The purchaser's signature is necessary for 
the authorization to be effective. Except to the extent required by the 
Bureau of the Public Debt, the originator will not be required to take 
additional steps to verify the identity of the purchaser or the 
authenticity of the signature.
    (b) Recurring debit entries. A single authorization may allow debit 
entries to be made to a deposit account on a recurring basis.
    (c) Successor originator. The Bureau of the Public Debt reserves 
the right to name a successor to the originator named on the debit 
authorization form. The designation of a successor shall be effective 
without additional notice to the purchaser.
    (d) Subsequent authorizations. A purchaser's subsequent 
authorization cancels a previous authorization only if so noted by the 
purchaser on the subsequent authorization form.


Sec. 370.32  Termination or suspension by the Bureau of the Public 
Debt.

    The Bureau of the Public Debt may terminate or suspend the 
availability of debit entries as a means of purchase for bonds at any 
time. A decision to terminate or suspend the availability of debit 
entries as a means of purchase is in the sole discretion of the Bureau 
of the Public Debt and shall be final.


Sec. 370.33  Termination or suspension by purchaser.

    The purchaser may terminate all future debits or suspend one or 
more future debits by providing written notice to the originator. A 
written notice is also necessary to lift a suspension of indefinite 
length. All notices must be received by the originator at least three 
business days before the debit is to be initiated.


Sec. 370.34  Changes and error resolution.

    In response to an oral notice from a person relating to the 
propriety of bond issuance information or a debit entry involving the 
person's deposit account, the originator may request the person to 
submit the notice in writing. If so asked, the person shall respond in 
writing within thirty calendar days. The originator may ignore the oral 
notice if written notice is not received within thirty days. The 
originator may suspend debit entries while reaching a resolution in 
response to any notice, written or oral.


Sec. 370.35  Prenotification.

    The requirement of a prenotification prior to the initiation of any 
debit entry, as well as the length of the period during which the 
originator must wait after initiating a prenotification before 
initiating a subsequent debit entry, is left to the discretion of the 
Bureau of the Public Debt.


Sec. 370.36  Liability.

    (a) Scope of liability. Unless the Bureau of the Public Debt has 
designated itself or a fiscal or financial agent as an originator, the 
Bureau of the Public Debt shall not be liable for any unauthorized, 
erroneous, duplicative, or otherwise improper debit entries, and shall 
not be liable for a failure to debit a deposit account. Unless the 
Bureau of the Public Debt has designated itself or a fiscal or 
financial agent as the originator, the originator serves as the agent 
of the purchaser in handling the remittance. Any claims must be pursued 
against the originator. The Bureau of the Public Debt shall not be 
liable for its choice of an originator. The Bureau of the Public Debt 
shall not be liable to any Automated Clearing House association.
    (b) Extent of liability. For any claim that may proceed against the 
Bureau of the Public Debt, the Bureau of the Public Debt's liability is 
limited to the amount of the improper debit and does not extend to 
other damages or costs, including consequential damages,

[[Page 23703]]

punitive damages, the costs of litigation, or payment of attorney fees. 
The liability of the Bureau of the Public Debt also shall be reduced by 
the amount of the loss resulting from a failure of the claimant to 
exercise due diligence, including a failure to follow standard 
commercial practices.

Subpart E--Electronic Submissions of Purchase Applications and 
Remittances for the Purchase of United States Savings Bonds Issued 
Through the Bureau of the Public Debt

Sec.
370.50  Governing law.
370.51  Definitions.
370.52  Contract formation.
370.53  Point of sale.
370.54  Effect of electronic signature.
370.55  Admissibility of digital signature.
370.56  Negligence contributing to unauthorized electronic 
signature.
370.57  Liability.


Sec. 370.50  Governing law.

    This subpart provides rules for the electronic submission of 
purchase applications and remittances for the sale of United States 
Savings Bonds issued through the Bureau of the Public Debt. This 
subpart also establishes the exclusive liability of the Bureau of the 
Public Debt for transactions submitted through electronic means. This 
subpart does not apply to transactions for the sale of bonds 
accomplished through issuing agents generally, unless and to the extent 
the Commissioner of the Bureau of the Public Debt or the Commissioner's 
designee requires otherwise.


Sec. 370.51  Definitions.

    (a) Digital signature is a type of electronic signature. A digital 
signature uses public-key encryption and a message digest function to 
transform an electronic record. A person who has the initial electronic 
record and the signer's public key can verify:
    (1) Whether the transformation was accomplished by the private key 
that corresponds to the signer's public key, and
    (2) Whether the initial record has been altered since the 
transformation was made.
    (b) Message digest function means an algorithm mapping or 
translating one sequence of bits into another, generally smaller, set 
such that:
    (1) An electronic record yields the same message digest result 
every time the algorithm is executed using the same electronic record 
as input,
    (2) It is computationally infeasible that an electronic record can 
be derived or reconstituted from the message digest result produced by 
the algorithm, and
    (3) It is computationally infeasible that two electronic records 
can be found that produce the same message digest using the algorithm.
    (c) Public-key encryption means a process which generates and 
employs a key pair consisting of a private key and its mathematically 
related public key, in which one use of the public key is to verify a 
digital signature created by the private key.
    (d) Record means information that is inscribed on a tangible medium 
or that is stored in an electronic or other medium and is retrievable 
in perceivable form.
    (e) Signature means any symbol or method executed or adopted by a 
party with present intention to be bound, and includes electronic 
methods (such as those accomplished by digital and biometric means) 
approved by the Bureau of the Public Debt.


Sec. 370.52  Contract formation.

    An application for a purchase of a bond submitted by electronic 
means is an offer to create a bond contract. An offer is accepted at 
the moment the message of acceptance is sent to the purchaser, not when 
the message is received by the purchaser, regardless of the method used 
to transmit the acceptance.


Sec. 370.53  Point of sale.

    For jurisdiction and venue purposes, the point of sale for a bond 
purchased pursuant to this subpart is Parkersburg, West Virginia, 
regardless of from where the application is transmitted or where the 
application is actually processed.


Sec. 370.54  Effect of electronic signature.

    In any dispute involving this subpart, an electronic signature and 
any electronic record to which it is affixed shall not be denied legal 
effect because the signature or record is in electronic form. To the 
extent that the law requires a signature, a writing, or an original, an 
electronic signature and any electronic record to which it is affixed 
shall satisfy that rule of law.


Sec. 370.55  Admissibility of digital signature.

    In any civil litigation or dispute involving this subpart, 
extrinsic evidence of authenticity as a condition precedent of 
admissibility shall not be necessary to establish:
    (1) The existence of a digital signature that corresponds to a 
specific public key pair and is affixed to an electronic record, and
    (2) The electronic record to which the digital signature is affixed 
has not been altered from its original form.


Sec. 370.56  Negligence contributing to unauthorized electronic 
signature.

    A person whose failure to exercise ordinary care substantially 
contributes to the creation or submission of an unauthorized electronic 
signature is precluded from disavowing the unauthorized signature and 
the validity of any electronic record to which the signature is 
affixed. In any dispute involving this subpart, the burden of 
production and the burden of persuasion is on the person against whom 
the signature is asserted to establish the exercise of ordinary care.


Sec. 370.57  Liability.

    For any claim arising out of an electronic transaction that may 
proceed against the Bureau of the Public Debt, the Bureau of the Public 
Debt's liability is limited to the amount of the transaction and does 
not extend to other damages or costs, including consequential damages, 
punitive damages, the costs of litigation, or payment of attorney fees. 
The liability of the Bureau of the Public Debt shall also be reduced by 
the amount of the loss resulting from a failure of the claimant to 
exercise due diligence, including a failure to follow standard 
commercial practices.

    Dated: April 6, 1998.
Donald V. Hammond,
Acting Fiscal Assistant Secretary.
[FR Doc. 98-11153 Filed 4-29-98; 8:45 am]
BILLING CODE 4810-39-P