Substitute amendment to Title III of HR 1714.
Re: electronic records and signatures under federal securities law.
Date: July 21, 1999.
Source: House Commerce Committee. This document was created by Tech Law Journal by scanning a photocopy, and converting to HTML.

Editor's Note: This amendment, and HR 1714 as amended, were both adopted by a unanimous voice votes of the House Commerce Committee's Finance Subcommittee on July 21, 1999.

AMENDMENT TO H.R. 1714

OFFERED BY MR. OXLEY

Page 9, beginning on line 18, strike title III and insert the following:

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 FOR SECURITIES LAWS.---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, and is required by other Federal or State statute, regulation, or other rule of law to be in writing, or is required to [begin page 2] be authenticated by means of an instrument in writing, the legal effect, validity, or enforceability of such contract, agreement, or record shall not be denied on the ground that the instrument is not in writing if the instrument is an electronic record;

"(B) if a contract, agreement, or record is required by the securities laws, 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, [begin page 3] 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 [begin page 4] may require that records be filed in a specified 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.

"(3) DEFINITIONS.---As used in this subsection, the terms 'electronic record' and 'electronic signature' have the meanings provided in section 104 of the Electronic Signatures in Global and National Commerce Act.".