Amendment offered by Rep. Coble on October 13, 1999, to HR 1714  as adopted by the House Courts and Intellectual Property Subcommittee on October 7, 1999 (E-SIGN Act).
Re: providing for the acceptance of electronic signatures.
Date: October 13, 1999.

Editor's Notes:
• The House Judiciary Committee provided Tech Law Journal with a paper copy of this amendment.
• Tech Law Journal then scanned and converted into HTML. Some features were lost in the conversion, including double spacing, and line numbering.
• This amendment was amended significantly by amendment offered by Rep. Berman. It was then approved by unanimous voice vote. Then, the bill as amended was reported by the Judiciary Committee by a unanimous voice vote.
• Copyright Tech Law Journal. All rights reserved.

AMENDMENT TO H.R. 1714
OFFERED BY MR. COBLE

(Page & line nos. refer to Amendment in the Nature of a Substitute as Reported by the Subcommittee on Courts and Intellectual Property)

Page 2, line 22, insert after "commerce" the following: ", including the business and regulation of insurance,

Page 3, line 8, strike "and as" and all that follows through "issue".

Page 4, line 10, insert after "transaction" the following: ", including an insurance transaction,".

Page 7, lines 7 through 8, strike "preempt" and all that follows through "Uniform" and insert "preempt the Uniform".

Page 7, lines 12 through is, strike "provisions" and all that follows through "section." and insert "form provided by the National Conference of Commissioners on Uniform State Laws."

Page 8, line 16 through page 10, line 13, amend section 104 to read as follows:

[begin page 2]

SEC. 104.  STUDY BY ATTORNEY GENERAL.

The Attorney General shall, within 18 months after the date of enactment of this Act, report to the Congress concerning the effect of this Act on the authenticity of records, their storage and retention, and their usability for law enforcement purposes, along with any legislative recommendations.

Page 10, line 14, through page 12, line 15, strike Title II and insert the following new titles:

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 [begin page 3] 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 103 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 [begin page 4] 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

[begin page 5]

(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. The Secretary shall submit a report to the Congress regarding the results of such inquiry by the conclusion of such 5-year [begin page 6] period and such report shall identify any actions taken by the Secretary pursuant to 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 101 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.

[begin page 7]

"(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 [begin page 8] 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 [begin page 9] 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 [begin page 10] 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.".