[Federal Register Volume 66, Number 120 (Thursday, June 21, 2001)]
[Rules and Regulations]
[Pages 33175-33177]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-15455]
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SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 231, 241, 251 and 271
[Release Nos. 33-7985, 34-44424; 35-27419; IC-25003]
RIN 3235-AI14
Application of the Electronic Signatures in Global and National
Commerce Act To Record Retention Requirements Pertaining to Issuers
Under the Securities Act of 1933, Securities Exchange Act of 1934 and
Regulation S-T
AGENCY: Securities and Exchange Commission.
ACTION: Interpretation.
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SUMMARY: We are publishing guidance on the obligations of issuers to
maintain certain records under the Securities Act of 1933 (``Securities
Act''), Securities Exchange Act of 1934 (``Exchange Act'') and
Regulation S-T in light of the Electronic Signatures in Global and
National Commerce Act (``E-SIGN'').
EFFECTIVE DATE: June 21, 2001.
FOR FURTHER INFORMATION CONTACT: Mark A. Borges, Division of
Corporation Finance, at (202) 942-2910.
SUPPLEMENTARY INFORMATION: We are publishing guidance \1\ on the impact
of E-SIGN \2\ on our rules promulgated under the Securities Act,\3\
Exchange Act \4\ and Regulation S-T \5\ that require issuers to retain
signature authentication documents and certain other records for
specified time periods.
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\1\ Except for the discussion in this release about
authentication documents, our views expressed today do not address
record retention requirements for investment companies and public
utility holding companies. Our views also do not address record
retention requirements for investment advisers, transfer agents or
broker-dealers. These matters are addressed in separate releases.
See Investment Company Act Release No. 24991 (May 24, 2001) [66 FR
29224 (May 30, 2001)] (investment companies and investment
advisers); Public Utility Holding Company Act Release No. 27404 (May
24, 2001) [66 FR 29471 (May 31, 2001)] (public utility holding
companies); Exchange Act Release No. 44238 (May 1, 2001) [66 FR
22916 (May 7, 2001)] (broker-dealers); and Exchange Act Release No.
44227 (Apr. 27, 2001) [66 FR 21648 (May 1, 2001)] (transfer agents).
This release does not in any way affect the record retention
requirements discussed in those releases.
As we have previously noted (see Securities Act Release No. 7912
(Oct. 27, 2000) [65 FR 65736 (Nov. 2, 2000)]; Securities Act Release
No. 7877 (July 27, 2000) [65 FR 47281 (Aug. 2, 2000)]), we are
considering the broader implications of the Electronic Signatures in
Global and National Commerce Act on securities transactions.
\2\ Pub. L. No. 106-229, 114 Stat. 464 (2000) (codified at 15
U.S.C. 7001-7006, 7021, 7031).
\3\ 15 U.S.C. 77a, et seq.
\4\ 15 U.S.C. 78a, et seq.
\5\ 17 CFR 232.10--232.601.
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Discussion
I. Background
E-SIGN seeks to promote electronic commerce by permitting and
encouraging the use of electronic records and signatures in
transactions in interstate or foreign commerce.\6\ Generally, E-SIGN
provides that, with respect to any transaction \7\ within its scope, a
signature, contract or other record relating to the transaction may not
be denied legal effect, validity or enforceability solely because it is
in electronic form.\8\ Similarly, E-SIGN provides that a contract
relating to such transaction may not be denied legal effect, validity
or enforceability solely because an electronic signature or electronic
record was used in its formation.\9\
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\6\ E-SIGN preamble.
\7\ E-SIGN section 106(13) [15 U.S.C. 7106(13)] defines the term
``transaction'' generally to mean ``an action or set of actions
relating to the conduct of business, consumer or commercial affairs
between two or more persons.''
\8\ E-SIGN section 101(a)(1) [15 U.S.C. 7001(a)(1)]. Note,
however, that section 101(e) of E-SIGN [15 U.S.C. 7001(e)] provides
that legal effect, validity or enforceability may be denied to a
contract or other record required to be in writing that is kept in
electronic form if the electronic record is not in a form that is
capable of being retained and accurately reproduced for later
reference by all involved parties.
\9\ E-SIGN section 101(a)(2) [15 U.S.C. 7001(a)(2)].
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E-SIGN also encourages the electronic storage of records relating
to business, consumer and commercial transactions.\10\ Further, E-SIGN
authorizes federal and state regulatory agencies to set standards and
formats for the retention of these electronic records.\11\
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\10\ E-SIGN section 101(d)(1) [15 U.S.C. 7001(d)(1)]. With
respect to record retention requirements imposed by a federal
statute or agency rule, E-SIGN became effective on March 1, 2001
unless a federal regulatory agency had announced, proposed or
initiated rulemaking to establish performance standards to assure
accuracy, record integrity and accessibility of electronic records
on or before that date. Where a federal regulatory agency announced,
proposed or initiated a rulemaking project on or before March 1,
2001, the effective date of E-SIGN was postponed until June 1, 2001
with respect to those record retention requirements. See E-SIGN
section 107(b)(1) [15 U.S.C. 7007(b)(1)]. On February 28, 2001, we
published notice of our intention to engage in rulemaking in order
to provide interpretive guidance and, where appropriate, propose or
adopt electronic performance standards consistent with E-SIGN. See
Securities Act Release No. 7955 (Feb. 28, 2001) [66 FR 13273 (Mar.
5, 2001)]. Accordingly, to the extent that E-SIGN affects any record
retention requirements under the federal securities laws, E-SIGN
took effect on June 1, 2001, instead of March 1, 2001.
\11\ E-SIGN section 104(b)(3) [15 U.S.C. 7004(b)(3)].
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II. E-SIGN's Record Retention Provision
Under E-SIGN, if a statute, regulation or other rule of law
requires that a contract or other record relating to a transaction be
retained, that requirement is met by retaining an electronic record of
the information in the contract or other record if the electronic
record
Accurately reflects the information set forth in the
contract or other record; and
Remains accessible to all persons who are entitled to
access by statute, regulation or rule of law, for the period required
by such statute, regulation or rule of law, in a form that is capable
of being accurately reproduced for later reference.\12\
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\12\ E-SIGN section 101(d)(1) [15 U.S.C. 7001(d)(1)]. E-SIGN
preserves our authority to interpret this provision. E-SIGN section
104(b)(1) [15 U.S.C. 7004(b)(1)].
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E-SIGN generally supersedes pre-existing regulatory agency
requirements that a record be kept on paper if that record is generated
in a business, consumer or commercial transaction.\13\ If, however, the
record is generated
[[Page 33176]]
principally for governmental purposes, it is not subject to E-SIGN.\14\
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\13\ See Office of Management and Budget, Memorandum for the
Heads of Departments and Agencies from Jacob J. Lew, No. M-00-15,
OMB Guidance on Implementing the Electronic Signatures in Global and
National Commerce Act (Sept. 25, 2000), Part III, B.1 (``OMB
Guidance'').
\14\ Id. at Part I, B and Part III, B.1. The OMB Guidance
provides two examples that illustrate this point. In the first
example, E-SIGN applies to a governmental agency's requirement that
a seller retain a copy of the contract of sale for a regulated
substance for future audit or law enforcement purposes because the
contract is generated as part of a commercial transaction. In the
second example, E-SIGN does not apply to a governmental agency's
requirement that a seller retain a copy of an audit of its
consumption of the regulated substance because retention is not
``related to'' a commercial transaction, but occurs to comply with a
governmental requirement. See also 146 Cong. Rec. H4357 (daily ed.
Jun. 14, 2000) (statement of Rep. Dingell).
Records generated to comply with governmental requirements are
subject to the Government Paperwork Elimination Act [Pub. L. No.
105-277, Title XVII, Secs. 1701--1710 (1998) (codified at 44 U.S.C.
3504)], which is effective October 21, 2003.
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III. Record Retention Requirements Imposed on Issuers Under the
Securities Act, Exchange Act and Regulation S-T
Several of our disclosure rules require issuers to retain records
related to the documents filed with us or distributed to investors. Of
principal concern to us is the provision in Regulation S-T that
requires issuers to retain manually-signed signature pages or other
documents that signatories must execute (``authentication documents'')
to authenticate, acknowledge or otherwise adopt their signatures that
appear in typed form within electronically filed documents.\15\ These
authentication documents must be executed before or at the time an
issuer makes an electronic filing. The filer must retain each
authentication document for a period of five years and furnish it to us
upon request. Comparable requirements exist under the Securities Act
and the Exchange Act where typed, duplicated or facsimile signatures
appear on a document that we permit issuers to file with us in paper
form.\16\
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\15\ See Item 302(b) of Regulation S-T [17 CFR 232.302(b)].
Since 1993, we have required most documents filed or otherwise
submitted to us to be transmitted electronically to our Electronic
Data Gathering, Analysis and Retrieval, or EDGAR, system. Regulation
S-T, in conjunction with the EDGAR Filer Manual and the electronic
filing provisions of applicable rules, regulations and forms,
governs the electronic submission of documents filed or otherwise
submitted to us via EDGAR. See Item 10(a) of Regulation S-T [17 CFR
232.10(a)].
\16\ See Securities Act Rule 402(e) [17 CFR 230.402(e)];
Securities Act Rule 471(b) [17 CFR 230.471(b)]; Exchange Act Rule
12b-11(d) [17 CFR 240.12b-11(d)]; and Exchange Act Rule 14d-1(h) [17
CFR 240.14d-1(h)]. A similar requirement is applicable to beneficial
owners of more than ten percent of any class of equity securities
registered under Section 12 of the Exchange Act [15 U.S.C. 78l], and
the officers and directors of the issuer of such security who are
subject to Section 16(a) of the Exchange Act [15 U.S.C. 78p(a)]. See
Exchange Act Rule 16a-3(i) [17 CFR 240.16a-3(i)] (retention of
manually-signed signature page for any Section 16(a) statement filed
with a typed, duplicated or facsimile signature).
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We believe that these requirements to retain authentication
documents are not subject to E-SIGN because authentication documents
are records generated principally for governmental purposes rather than
in connection with a business, consumer or commercial transaction.\17\
Moreover, these authentication documents arise in the context of a
governmental filing. Governmental filings are expressly excluded from
E-SIGN.\18\ Accordingly, issuers subject to these retention
requirements should continue to retain the paper original of all
authentication documents.\19\
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\17\ As explained in the adopting release for Regulation S-T,
generally the authentication document retention requirement was
established to provide a satisfactory means by which signatories
could authenticate and adopt their typed signatures appearing on
filed documents for evidentiary purposes. See Securities Act Release
No. 6977, Section III.F.2 (Feb. 23, 1993) [58 FR 14628 (Mar. 18,
1993)]. Subsequently, comparable changes were made to the signature
requirements for paper filings under the Securities Act and Exchange
Act. See Securities Act Release No. 7300, Section IV (May 31, 1996)
[61 FR 30397 (June 14, 1996)].
\18\ E-SIGN section 104(a) [15 U.S.C. 7004(a)].
\19\ Similarly, officers, directors and greater than ten percent
beneficial owners who are subject to Section 16(a) of the Exchange
Act should continue to retain the paper original of their
authentication documents. See Exchange Act Rule 16a-3(i) [17 CFR
240.16a-3(i)].
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Other rules under the Securities Act, Exchange Act and Regulation
S-T that require issuers to retain records \20\ do not expressly
require that the records be retained in paper form.\21\ Accordingly,
issuers may elect to keep these records in electronic form as long as
the storage method selected offers the same assurances of accuracy and
accessibility as are provided by paper retention.
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\20\ See, for example, Securities Act Rule 428(a)(2) [17 CFR
230.428(a)(2)] (issuers filing registration statements on Form S-8
[17 CFR 239.16b] required to retain documents comprising the Form S-
8 prospectus for a period of five years after last use) and Item
405(b)(2)(ii) of Regulation S-K [17 CFR 229.405(b)(2)(ii)] (issuers
that maintain for a period of two years the written representation
of any reporting person under Section 16(a) of the Exchange Act [15
U.S.C. 78p(a)] that they were not required to file an annual
statement of beneficial ownership of securities on Form 5 [17 CFR
249.105] for the issuer's most recently completed fiscal year not
required to identify reporting person as having failed to file a
Form 5 for that year).
\21\ We note, however, that Item 304(c) of Regulation S-T [17
CFR 232.304(c)] requires electronic filers to retain for a period of
five years a copy of each publicly distributed document, in the
format used, that contains graphic, image, audio or video material
where such material is not included in the filed version of the
document. Therefore, if graphic or image material is distributed to
investors in paper, an issuer would have to retain the information
in paper under the rule. We will not object, however, if issuers
elect to keep graphic or image information in electronic form, so
long as it is a form that replicates the appearance of the
distributed document.
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At this time, we do not believe that the specification of any
additional standards \22\ for the electronic retention of issuer
records subject to E-SIGN is needed to protect investors. If questions
arise about the accuracy, integrity or accessibility of electronic
records in the future, we may exercise our authority to impose
appropriate standards for electronic retention.
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\22\ E-SIGN permits us to establish performance standards to
assure the accuracy, record integrity and accessibility of records
that are required to be retained. See E-SIGN section 104(b)(3)(A)
[15 U.S.C. 7004(b)(3)(A)].
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List of Subjects
17 CFR Parts 231 and 241
Securities.
17 CFR Part 251
Holding companies; Securities.
17 CFR Part 271
Investment companies; Securities.
Amendments to the Code of Federal Regulations
For the reasons set forth in the preamble, Title 17, Chapter II of
the Code of Federal Regulations is amended as set forth below:
PART 231--INTERPRETATIVE RELEASES RELATING TO THE SECURITIES ACT OF
1933 AND GENERAL RULES AND REGULATIONS THEREUNDER
1. Part 231 is amended by adding Release No. 33-7985 and the
release date of June 14, 2001, to the list of interpretive releases.
PART 241--INTERPRETATIVE RELEASES RELATING TO THE SECURITIES
EXCHANGE ACT OF 1934 AND GENERAL RULES AND REGULATIONS THEREUNDER
2. Part 241 is amended by adding Release No. 34-44424 and the
release date of June 14, 2001, to the list of interpretive releases.
PART 251--INTERPRETATIVE RELEASES RELATING TO THE PUBLIC UTILITY
HOLDING COMPANY ACT OF 1935 AND GENERAL RULES AND REGULATIONS
THEREUNDER
3. Part 251 is amended by adding Release No. 35-27419 and the
release date of June 14, 2001, to the list of interpretive releases.
[[Page 33177]]
PART 271--INTERPRETATIVE RELEASES RELATING TO THE INVESTMENT
COMPANY ACT OF 1940 AND GENERAL RULES AND REGULATIONS THEREUNDER
4. Part 271 is amended by adding Release No. IC-25003 and the
release date of June 14, 2001, to the list of interpretive releases.
Dated: June 14, 2001.
By the Commission.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-15455 Filed 6-20-01; 8:45 am]
BILLING CODE 8010-01-P