S 921 IS.
Electronic Securities Transactions Act.
Date introduced: April 29, 1999.
Sponsor: Sen. Spencer Abraham (R-MI).
Source: Library of Congress.

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

IN THE SENATE OF THE UNITED STATES

April 29, 1999

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

A BILL

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

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

SECTION 1. SHORT TITLE.

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

SEC. 2. FINDINGS.

Congress finds that--

(1) the growth of electronic commerce and electronic transactions represent a powerful force for economic growth, consumer choice and creation of wealth;

(2) inefficient transaction procedures impose unnecessary costs on investors and persons who facilitate transactions on their behalf;

(3) new techniques in electronic commerce create opportunities for more efficient and safe procedures for effecting securities transactions; and

(4) because the securities markets are an important national asset which must be preserved and strengthened, it is in the national interest to establish a framework to facilitate the economically efficient execution of securities transactions.

SEC. 3. PURPOSES.

The purposes of this Act are--

(1) to permit and encourage the continued expansion of electronic commerce in securities transactions; and

(2) to facilitate and promote electronic commerce in securities transactions by clarifying the legal status of electronic signatures for signed documents and records used in relation to securities transactions involving broker-dealers, transfer agents and investment advisers.

SEC. 4. DEFINITIONS.

For purposes of this subsection--

(1) `document' means any record, including without limitation any notification, consent, acknowledgment or written direction, intended, either by law or by custom, to be signed by a person;

(2) `electronic' means of or relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities;

(3) `electronic record' means a record created, stored, generated, received, or communicated by electronic means;

(4) `electronic signature' means an electronic identifying sound, symbol or process attached to or logically connected with an electronic record;

(5) `record' or `records' means the same information or documents defined or identified as `records' under the Securities Exchange Act of 1934 and the Investment Advisers Act of 1940, respectively;

(6) `transaction' means an action or set of actions relating to the conduct of business affairs that involve or concern activities conducted pursuant to or regulated under the Securities Exchange Act of 1934 or the Investment Advisers Act of 1940 and occurring between two or more persons; and

(7) `signature' means any symbol, sound, or process executed or adopted by a person or entity, with intent to authenticate or accept a record.

SEC. 5. SECURITIES MODERNIZATION PROVISIONS.

(a) Section 15 of the Securities Exchange Act of 1934 (15 U.S.C. 78o) is amended by adding the following new subsection thereto:

`(i) RELIANCE ON ELECTRONIC SIGNATURES-

`(1) A registered broker or registered dealer may accept and rely upon an electronic signature on any application to open an account or on any other document submitted to it by a customer or counterparty, and such electronic signature shall not be denied legal effect, validity or enforceability solely because it is an electronic signature , except as the Commission shall otherwise determine pursuant to section 23 of this Act (15 U.S.C. 78w) or section 36 of this Act (15 U.S.C. 78mm).

`(2) Where any provision of this Act or any regulation, rule, or interpretation promulgated by the Commission thereunder, including any rule of a self-regulatory organization approved by the Commission, requires a signature to be provided on any record such requirement shall be satisfied by an electronic record containing an electronic signature , except as the Commission shall otherwise determine pursuant to section 23 of this Act (15 U.S.C. 78w) or section 36 of this Act (15 U.S.C. 78mm).

`(3) A registered broker or registered dealer may use electronic signatures in the conduct of its business with any customer or counterparty, and such electronic signature shall not be denied legal effect, validity or enforceability solely because it is an electronic signature .

`(4) With regard to the use of or reliance on electronic signatures, no registered broker or registered dealer shall be regulated by, be required to register with, or be certified, licensed, or approved by, or be limited by or required to act or operate under standards, rules, or regulations promulgated by, a State government or agency or instrumentality thereof.'.

(b) Section 17A of the Securities Exchange Act of 1934 (15 U.S.C. 78q-1) is amended by adding the following new subsection thereto:

`(g) RELIANCE ON ELECTRONIC SIGNATURES-

`(1) A registered transfer agent may accept and rely upon an electronic signature on any application to open an account or on any other document submitted to it by a customer or counterparty, and such electronic signature shall not be denied legal effect, validity or enforceability solely because it is an electronic signature , except as the Commission shall otherwise determine pursuant to section 23 of this Act (15 U.S.C. 78w) or section 36 of this Act (15 U.S.C. 78mm).

`(2) Where any provision of this Act or any regulation or rule promulgated by the Commission thereunder, including any rule of a self-regulatory organization approved by the Commission, requires a signature to be provided on any record such requirement shall be satisfied by an electronic record containing an electronic signature , except as the Commission shall otherwise determine pursuant to section 23 of this Act (15 U.S.C. 78w) or section 36 of this Act (15 U.S.C. 78mm).

`(3) A registered transfer agent may use electronic signatures in the conduct of its business with any customer or counterparty, and such electronic signature shall not be denied legal effect, validity or enforceability solely because it is an electronic signature .

`(4) With regard to the use of or reliance on electronic signatures, no registered transfer agent shall be regulated by, be required to register with, or be certified, licensed, or approved by, or be limited by or required to act or operate under standards, rules, or regulations promulgated by, a State government or agency or instrumentality thereof.'.

(c) Section 215 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-15) is amended by adding the following new subsection thereto:

`(c) RELIANCE ON ELECTRONIC SIGNATURES-

`(1) A registered investment adviser may accept and rely upon an electronic signature on any investment advisory contract or on any other document submitted to it by a customer or counterparty, and such signature shall not be denied legal effect, validity or enforceability solely because it is an electronic signature , except as the Commission shall determine pursuant to section 206A of this Act (15 U.S.C. 80b-6a) or section 211 of this Act (15 U.S.C. 80b-11).

`(2) Where any provision of this Act or any regulation or rule promulgated by the Commission thereunder, including any rule of a self-regulatory organization approved by the Commission, requires a signature to be provided on any record such requirement shall be satisfied by an electronic record containing an electronic signature , except as the Commission shall otherwise determine pursuant to section 206A of this Act (15 U.S.C. 80b-6a) or section 211 of this Act (15 U.S.C. 80b-11).

`(3) A registered investment adviser may use electronic signatures in the conduct of its business with any customer or counterparty, and such electronic signature shall not be denied legal effect, validity or enforceability solely because it is an electronic signature .

`(4) With regard to the use of or reliance on electronic signatures no registered investment adviser shall be regulated by, be required to register with, or be certified, licensed, or approved by, or be limited by or required to act or operate under standards, rules, or regulations promulgated by, a State government or agency or instrumentality thereof.

SEC. 6. RULEMAKING AUTHORITY.

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