Federal Register / Vol. 63, No. 83 /Thursday, April 30, 1998 / Proposed Rules 23695

‘‘Except as otherwise provided in

§ 4281.15 (regarding the valuation of

benefits payable as lump sums under

trusteed plans), and subject’’ and

adding, in their place, the word

‘‘Subject’’.

§ 4281.15 [Removed and Reserved]

17. Section 4281.15 is removed and

reserved.

Issued in Washington, D.C. this 24th day

of April, 1998.

David M. Strauss,

Executive Director, Pension Benefit Guaranty

Corporation.

[FR Doc. 98–11519 Filed 4–29–98; 8:45 am]

BILLING CODE 7708–01–P

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.

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:

<Savbonds@bpd.treas.gov>. 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 <wearnest@bpd.treas.gov>;

Troy D. Martin, Senior Program Analyst,

Division of Staff Services, at (304) 480–

6545 or by e-mail at

<tmartin@bpd.treas.gov>; Edward C.

Gronseth, Deputy Chief Counsel, at

(304) 480–5192 or by e-mail at

<egronset@bpd.treas.gov>; or Gregory J.

Till, Attorney-Adviser, Office of the

Chief Counsel, at (202) 219–3320 or by

e-mail at <gtill@bpd.treas.gov>.

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 §§ 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 § 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 (§ 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 § 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 (§ 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 § 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

§ 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 § 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.
23696 Federal Register / Vol. 63, No. 83 /Thursday, April 30, 1998 / Proposed Rules

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 (§ 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 § 317.2(d)

or because of its status as an

organization operating a payroll savings

plan on behalf of an employer under

§ 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 (§ 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 § 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 § 317.2. The

term ‘‘over-the-counter’’ would be

redefined to reflect the expanded

meaning given to that term in § 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 (§ 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 (§ 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 § 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 § 351.5 but rather

combines the four categories of sales

described in § 351.5 into two categories:

(1) ‘‘payroll sale’’; and (2) ‘‘over-thecounter sale.’’ The term ‘‘payroll sale’’ is

not used in § 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

§ 317.8 as compared to its use in § 351.5,

making the regulations more difficult to

understand.

The proposed rule would revise

§ 351.5 (as well as the appendix to

§ 317.8), using the two categories in the

appendix to § 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

§ 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 overthe-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 § 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 (§ 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 (§ 370.0)

This section would be amended to

clarify that to the extent that the rules
Federal Register / Vol. 63, No. 83 /Thursday, April 30, 1998 / Proposed Rules 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 (§ 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 (§ 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 (§ 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 § 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 (§ 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 § 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 (§ 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 (§ 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

(§ 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 (§ 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 (§ 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 (§ 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:
23698 Federal Register / Vol. 63, No. 83 /Thursday, April 30, 1998 / Proposed Rules

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

§ 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 (§ 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 (§ 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 (§ 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

(§ 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.
Federal Register / Vol. 63, No. 83 /Thursday, April 30, 1998 / Proposed Rules 23699

(16) Admissibility of Digital Signature

(§ 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 selfauthenticating and—barring other

objections to the evidence—may be

admitted into evidence without

additional preliminary review.

The inclusion of a limited selfauthentication 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 selfauthentication 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 selfauthentication 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 selfauthentication 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 (§ 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 (§ 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.
23700 Federal Register / Vol. 63, No. 83 /Thursday, April 30, 1998 / Proposed Rules

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 § 317.1 to read as follows:

§ 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

§ 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 overthe-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 § 317.2, that may qualify as

an issuing agent of bonds.

3. Revise § 317.2 to read as follows:

§ 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 § 317.3 as follows:

A. Revise paragraph (a) introductory

text to read as follows:

§ 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 § 317.2(d) or

because of its status as an organization

operating a payroll savings plan on

behalf of an employer under § 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 § 317.6(b) to read as follows:

§ 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 § 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:

§ 317.8 Remittance of sales proceeds and

registration records.

* * * * *

Appendix to § 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

§ 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
Federal Register / Vol. 63, No. 83 /Thursday, April 30, 1998 / Proposed Rules 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 § 351.1 to read as follows:

§ 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 § 351.5 to read as follows:

§ 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

§ 353.13 of this chapter, also published

as § 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 § 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.

§ 353.6 [Amended]

2. Remove the word ‘‘deduction’’ in

§ 353.6(b)(4), and add, in its place, the

word ‘‘savings.’’

§ 353.13 [Amended]

3. Add the phrase ‘‘, as amended’’

after the word ‘‘1954’’ in § 353.13(c)(3).

4. Revise § 353.27 to read as follows:

§ 353.27 Application for relief—Nonreceipt 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 nonreceipt. 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 § 370.0 to read as follows:

§ 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 § 370.1 to read as follows:

§ 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. § 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. § 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. § 1815);

(ii) Any mutual savings bank as

defined in section 3 of the Federal

Deposit Insurance Act (12 U.S.C. § 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.

§ 1815);
23702 Federal Register / Vol. 63, No. 83 /Thursday, April 30, 1998 / Proposed Rules

(iii) Any savings bank as defined in

section 3 of the Federal Deposit

Insurance Act (12 U.S.C. § 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. § 1815);

(iv) Any insured credit union as

defined in section 101 of the Federal

Credit Union Act (12 U.S.C. § 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. § 1781);

(v) Any savings association (as

defined in section 3 of the Federal

Deposit Insurance Act) (12 U.S.C.

§ 1813) that is an insured depository

institution (as defined in such Act) (12

U.S.C. § 1811 et seq.) or is eligible to

apply to become an insured depository

institution under the Federal Deposit

Insurance Act (12 U.S.C. § 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. § 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 § 370.4 to subpart B to read as

follows:

§ 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 §§ 370.30 and 370.31 as §§ 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.

§ 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.

§ 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.

§ 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.

§ 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.

§ 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.

§ 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.

§ 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,
Federal Register / Vol. 63, No. 83 /Thursday, April 30, 1998 / Proposed Rules 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.

§ 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.

§ 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.

§ 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.

§ 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.

§ 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.

§ 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.

§ 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.

§ 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

DEPARTMENT OF TRANSPORTATION

Coast Guard

33 CFR Part 165

[COTP Savannah 98–010]

RIN 2115–AA97

Safety Zones: Savannah River,

Savannah, GA

AGENCY: Coast Guard, DOT.

ACTION: Notice of proposed rulemaking.

SUMMARY: The Coast Guard proposes to

establish six (6) temporary safety zones

in the vicinity of the Savannah River

and approaches during the Americas’

Sail marine event to be held from July

2–6, 1998. These regulations are

necessary to protect life and property on

navigable waters because of the danger

associated with the large number of

expected participant and spectator craft

within the narrow confines of the

navigation channel.

DATES: Comments must be received on

or before June 1, 1998.