Union Calendar No. 222

106TH CONGRESS

1ST SESSION H. R. 1714

[Report No. 106–341, Parts I and II]

A BILL

To facilitate the use of electronic records and

signatures in interstate or foreign commerce.

OCTOBER 15, 1999

Reported with an amendment, committed to the Committee of the Whole House on the State of the Union,

and ordered to be printed
IB

Union Calendar No. 222

106TH CONGRESS

1ST SESSION H. R. 1714

[Report No. 106–341, Parts I and II]

To facilitate the use of electronic records and signatures in interstate or

foreign commerce.

IN THE HOUSE OF REPRESENTATIVES

MAY 6, 1999

Mr. BLILEY (for himself, Mr. DAVIS of Virginia, Mr. TAUZIN, Mr. OXLEY, Mr.

TOWNS, and Mr. FOSSELLA) introduced the following bill; which was referred to the Committee on Commerce

SEPTEMBER 27, 1999

Reported with an amendment and referred to the Committee on the Judiciary

for a period ending not later than October 15, 1999, for consideration

of such provisions of the bill and amendment as fall within the jurisdiction of that committee pursuant to clause 1(k), rule X

[Strike out all after the enacting clause and insert the part printed in italic]

OCTOBER 15, 1999

Additional sponsors: Mr. DREIER, Mr. BURR of North Carolina, Mr.

PICKERING, Mr. SHADEGG, and Mr. CANNON

OCTOBER 15, 1999

Reported from the Committee on the Judiciary with an amendment, committed to the Committee of the Whole House on the State of the Union

and ordered to be printed
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[Strike out all after the enacting clause and insert the part printed in boldface roman]

[For text introduced bill, see copy of bill as introduced on May 6, 1999]

A BILL

To facilitate the use of electronic records and signatures

in interstate or foreign commerce.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Electronic Signatures

5 in Global and National Commerce Act’’.

6 TITLE I—VALIDITY OF ELEC7 TRONIC RECORDS AND SIG8 NATURES FOR COMMERCE

9 SEC. 101. GENERAL RULE OF VALIDITY.

10 (a) GENERAL RULE.—With respect to any contract or

11 agreement entered into in or affecting interstate or foreign

12 commerce, notwithstanding any statute, regulation, or other

13 rule of law, the legal effect, validity, or enforceability of

14 such contract or agreement shall not be denied—

15 (1) on the ground that the contract or agreement

16 is not in writing if the contract or agreement is an

17 electronic record; or

18 (2) on the ground that the contract or agreement

19 is not signed or is not affirmed by a signature if the
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1 contract or agreement is signed or affirmed by an

2 electronic signature.

3 (b) AUTONOMY OF PARTIES IN COMMERCE.—With re4 spect to any contract or agreement entered into in or affect5 ing interstate or foreign commerce—

6 (1) the parties to such contract or agreement

7 may establish procedures or requirements regarding

8 the use and acceptance of electronic records and elec9 tronic signatures acceptable to such parties; and

10 (2) the legal effect, validity, or enforceability of

11 such contract or agreement shall not be denied because

12 of the type or method of electronic record or electronic

13 signature selected by the parties in establishing such

14 procedures or requirements.

15 SEC. 102. AUTHORITY TO ALTER OR SUPERSEDE GENERAL

16 RULE.

17 (a) PROCEDURE TO ALTER OR SUPERSEDE.—Except

18 as provided in subsection (b), a State statute, regulation,

19 or other rule of law enacted or adopted after the date of

20 enactment of this Act may modify, limit, or supersede the

21 provisions of section 101 if such statute, regulation, or rule

22 of law—

23 (1)(A) constitutes an enactment or adoption of

24 the Uniform Electronic Transactions Act as reported
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1 to the State legislatures by the National Conference of

2 Commissioners on Uniform State Laws; or

3 (B) specifies the alternative procedures or re4 quirements for the use or acceptance of electronic

5 records or electronic signatures to establish the legal

6 effect, validity, or enforceability of contracts or agree7 ments;

8 (2) is enacted or adopted within 4 years after the

9 date of enactment of this Act; and

10 (3) makes specific reference to the provisions of

11 section 101.

12 (b) LIMITATIONS ON ALTERATION OR SUPERSES13 SION.—A State statute, regulation, or other rule of law (in14 cluding an insurance statute, regulation, or other rule of

15 law), regardless of its date of enactment or adoption, that

16 modifies, limits, or supersedes section 101 shall not be effec17 tive to the extent that such statute, regulation, or rule—

18 (1) discriminates in favor of or against a spe19 cific technology, method, or technique of creating,

20 storing, generating, receiving, communicating, or au21 thenticating electronic records or electronic signa22 tures;

23 (2) discriminates in favor of or against a spe24 cific type or size of entity engaged in the business of
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1 facilitating the use of electronic records or electronic

2 signatures;

3 (3) is based on procedures or requirements that

4 are not specific or that are not publicly available; or

5 (4) is otherwise inconsistent with the provisions

6 of section 101.

7 (c) ACTIONS TO ENJOIN.—Whenever it shall appear

8 to the Secretary of Commerce that a State has enacted or

9 adopted a statute, regulation, or other rule of law that is

10 prohibited by subsection (b), the Secretary may bring an

11 action to enjoin the enforcement of such statute, regulation,

12 or rule, and upon a proper showing a permanent or tem13 porary injunction or restraining order shall be granted

14 without bond.

15 SEC. 103. SPECIFIC EXCLUSIONS.

16 The provisions of section 101 shall not apply to—

17 (1) a statute, regulation, or other rule of law

18 governing the creation and execution of wills, codicils,

19 or testamentary trusts; or

20 (2) a statute, regulation, or other rule of law

21 governing adoption, divorce, or other matters of fam22 ily law.

23 SEC. 104. DEFINITIONS.

24 For purposes of this title:
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1 (1) ELECTRONIC RECORD.—The term ‘‘electronic

2 record’’ means a writing, document, or other record

3 created, stored, generated, received, or communicated

4 by electronic means.

5 (2) ELECTRONIC SIGNATURE.—The term ‘‘elec6 tronic signature’’ means information or data in elec7 tronic form, attached to or logically associated with

8 an electronic record by a person or an electronic

9 agent, that is intended by a party to signify agree10 ment to a contract or agreement.

11 (3) ELECTRONIC.—The term ‘‘electronic’’ means

12 of or relating to technology having electrical, digital,

13 magnetic, optical, electromagnetic, or similar capa14 bilities regardless of medium.

15 (4) ELECTRONIC AGENT.—The term ‘‘electronic

16 agent’’ means a computer program or an electronic or

17 other automated means used independently to initiate

18 an action or respond to electronic records in whole or

19 in part without review by an individual at the time

20 of the action or response.
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1 TITLE II—DEVELOPMENT AND

2 ADOPTION OF ELECTRONIC

3 SIGNATURE PRODUCTS AND

4 SERVICES

5 SEC. 201. TREATMENT OF ELECTRONIC SIGNATURES IN

6 INTERSTATE AND FOREIGN COMMERCE.

7 (a) INQUIRY REGARDING IMPEDIMENTS TO COM8 MERCE.—

9 (1) INQUIRIES REQUIRED.—Within 90 days after

10 the date of the enactment of this Act, and annually

11 thereafter, the Secretary of Commerce, acting through

12 the Assistant Secretary for Communications and In13 formation, shall complete an inquiry to—

14 (A) identify any domestic and foreign im15 pediments to commerce in electronic signature

16 products and services and the manners in which

17 and extent to which such impediments inhibit

18 the development of interstate and foreign com19 merce;

20 (B) identify constraints imposed by foreign

21 nations or international organizations that con22 stitute barriers to providers of electronic signa23 ture products or services; and
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1 (C) identify the degree to which other na2 tions and international organizations are com3 plying with the principles in subsection (b)(2).

4 (2) SUBMISSION.—The Secretary shall submit a

5 report to the Congress regarding the results of each

6 such inquiry within 90 days after the conclusion of

7 such inquiry.

8 (b) PROMOTION OF ELECTRONIC SIGNATURES.—

9 (1) REQUIRED ACTIONS.—The Secretary of Com10 merce, acting through the Assistant Secretary for

11 Communications and Information, shall promote the

12 acceptance and use, on an international basis, of elec13 tronic signatures in accordance with the principles

14 specified in paragraph (2) and in a manner con15 sistent with section 101 of this Act. The Secretary of

16 Commerce shall take all actions necessary in a man17 ner consistent with such principles to eliminate or re18 duce, to the maximum extent possible, the impedi19 ments to commerce in electronic signatures, including

20 those identified in the inquiries under subsection (a)

21 for the purpose of facilitating the development of

22 interstate and foreign commerce.

23 (2) PRINCIPLES.—The principles specified in

24 this paragraph are the following:
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1 (A) Free markets and self-regulation, rather

2 than government standard-setting or rules,

3 should govern the development and use of elec4 tronic records and electronic signatures.

5 (B) Neutrality and nondiscrimination

6 should be observed among providers of and tech7 nologies for electronic records and electronic sig8 natures.

9 (C) Parties to a transaction should be per10 mitted to establish requirements regarding the

11 use of electronic records and electronic signatures

12 acceptable to such parties.

13 (D) Parties to a transaction—

14 (i) should be permitted to determine

15 the appropriate authentication technologies

16 and implementation models for their trans17 actions, with assurance that those tech18 nologies and implementation models will be

19 recognized and enforced; and

20 (ii) should have the opportunity to

21 prove in court or other proceedings that

22 their authentication approaches and their

23 transactions are valid.

24 (E) Electronic records and electronic signa25 tures in a form acceptable to the parties should
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1 not be denied legal effect, validity, or enforce2 ability on the ground that they are not in writ3 ing.

4 (F) De jure or de facto imposition of stand5 ards on private industry through foreign adop6 tion of regulations or policies with respect to

7 electronic records and electronic signatures

8 should be avoided.

9 (G) Paper-based obstacles to electronic

10 transactions should be removed.

11 (c) FOLLOWUP STUDY.—Within 5 years after the date

12 of enactment of this Act, the Secretary of Commerce, acting

13 through the Assistant Secretary for Communications and

14 Information, shall conduct an inquiry regarding any State

15 statutes, regulations, or other rules of law enacted or adopt16 ed after such date of enactment pursuant to section 102(a),

17 and the extent to which such statutes, regulations, and rules

18 comply with section 102(b). The Secretary shall submit a

19 report to the Congress regarding the results of such inquiry

20 by the conclusion of such 5-year period and such report

21 shall identify any actions taken by the Secretary pursuant

22 to section 102(c) and subsection (b) of this section.

23 (d) CONSULTATION.—In conducting the activities re24 quired by this section, the Secretary shall consult with users
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1 and providers of electronic signature products and services

2 and other interested persons.

3 (e) PRIVACY.—Nothing in this section shall be con4 strued to require the Secretary or the Assistant Secretary

5 to take any action that would adversely affect the privacy

6 of consumers.

7 (f) DEFINITIONS.—As used in this section, the terms

8 ‘‘electronic record’’ and ‘‘electronic signature’’ have the

9 meanings provided in section 104 of the Electronic Signa10 tures in Global and National Commerce Act.

11 TITLE III—USE OF ELECTRONIC

12 RECORDS AND SIGNATURES

13 UNDER FEDERAL SECURITIES

14 LAW

15 SEC. 301. GENERAL VALIDITY OF ELECTRONIC RECORDS

16 AND SIGNATURES.

17 Section 3 of the Securities Exchange Act of 1934 (15

18 U.S.C. 78c) is amended by adding at the end the following

19 new subsection:

20 ‘‘(h) REFERENCES TO WRITTEN RECORDS AND SIGNA21 TURES.—

22 ‘‘(1) GENERAL VALIDITY OF ELECTRONIC

23 RECORDS AND SIGNATURES.—Except as otherwise

24 provided in this subsection—
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1 ‘‘(A) if a contract, agreement, or record (as

2 defined in subsection (a)(37)) is required by the

3 securities laws or any rule or regulation there4 under (including a rule or regulation of a self5 regulatory organization), and is required by

6 other Federal or State statute, regulation, or

7 other rule of law to be in writing, the legal effect,

8 validity, or enforceability of such contract, agree9 ment, or record shall not be denied on the ground

10 that the contract, agreement, or record is not in

11 writing if the contract, agreement, or record is

12 an electronic record;

13 ‘‘(B) if a contract, agreement, or record is

14 required by the securities laws or any rule or

15 regulation thereunder (including a rule or regu16 lation of a self-regulatory organization), and is

17 required by other Federal or State statute, regu18 lation, or other rule of law to be signed, the legal

19 effect, validity, or enforceability of such contract,

20 agreement, or record shall not be denied on the

21 ground that such contract, agreement, or record

22 is not signed or is not affirmed by a signature

23 if the contract, agreement, or record is signed or

24 affirmed by an electronic signature; and
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1 ‘‘(C) if a broker, dealer, transfer agent, in2 vestment adviser, or investment company enters

3 into a contract or agreement with, or accepts a

4 record from, a customer or other counterparty,

5 such broker, dealer, transfer agent, investment

6 adviser, or investment company may accept and

7 rely upon an electronic signature on such con8 tract, agreement, or record, and such electronic

9 signature shall not be denied legal effect, valid10 ity, or enforceability because it is an electronic

11 signature.

12 ‘‘(2) IMPLEMENTATION.—

13 ‘‘(A) REGULATIONS.—The Commission may

14 prescribe such regulations as may be necessary to

15 carry out this subsection consistent with the pub16 lic interest and the protection of investors.

17 ‘‘(B) NONDISCRIMINATION.—The regulations

18 prescribed by the Commission under subpara19 graph (A) shall not—

20 ‘‘(i) discriminate in favor of or against

21 a specific technology, method, or technique

22 of creating, storing, generating, receiving,

23 communicating, or authenticating electronic

24 records or electronic signatures; or
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1 ‘‘(ii) discriminate in favor of or

2 against a specific type or size of entity en3 gaged in the business of facilitating the use

4 of electronic records or electronic signatures.

5 ‘‘(3) EXCEPTIONS.—Notwithstanding any other

6 provision of this subsection—

7 ‘‘(A) the Commission, an appropriate regu8 latory agency, or a self-regulatory organization

9 may require that records be filed in a specified

10 electronic format or formats if the records are re11 quired to be submitted to the Commission, an

12 appropriate regulatory agency, or a self-regu13 latory organization, respectively; and

14 ‘‘(B) the Commission may require that con15 tracts, agreements, or records relating to pur16 chases and sales, or establishing accounts for

17 conducting purchases and sales, of penny stocks

18 be manually signed, and may require such man19 ual signatures with respect to transactions in

20 similar securities if the Commission determines

21 that such securities are susceptible to fraud and

22 that such fraud would be deterred or prevented

23 by requiring manual signatures.

24 ‘‘(4) RELATION TO OTHER LAW.—The provisions

25 of this subsection apply in lieu of the provisions of
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1 title I of the Electronic Signatures in Global and Na2 tional Commerce Act to a contract, agreement, or

3 record (as defined in subsection (a)(37)) that is re4 quired by the securities laws.

5 ‘‘(5) DEFINITIONS.—As used in this subsection:

6 ‘‘(A) ELECTRONIC RECORD.—The term ‘elec7 tronic record’ means a writing, document, or

8 other record created, stored, generated, received,

9 or communicated by electronic means.

10 ‘‘(B) ELECTRONIC SIGNATURE.—The term

11 ‘electronic signature’ means information or data

12 in electronic form, attached to or logically associ13 ated with an electronic record, that is intended

14 by a party to signify agreement to a contract or

15 agreement.

16 ‘‘(C) ELECTRONIC.—The term ‘electronic’

17 means of or relating to technology having elec18 trical, digital, magnetic, optical, electromagnetic,

19 or similar capabilities regardless of medium.’’.

20 SECTION 1. SHORT TITLE.

21 This Act may be cited as the ‘‘Electronic

22 Signatures in Global and National Commerce

23 Act’’.
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1 TITLE I—VALIDITY OF ELEC2 TRONIC RECORDS AND SIG3 NATURES FOR COMMERCE

4 SEC. 101. FINDINGS.

5 The Congress makes the following find6 ings:

7 (1) The growth of electronic com8 merce and electronic government trans9 actions represents a powerful force for

10 economic growth, consumer choice, im11 proved civic participation, and wealth

12 creation.

13 (2) The promotion of growth in pri14 vate sector electronic commerce through

15 Federal legislation is in the national in16 terest because that market is globally im17 portant to the United States.

18 (3) A consistent legal foundation,

19 across multiple jurisdictions, for elec20 tronic commerce will promote the growth

21 of such transactions, and that such a

22 foundation should be based upon a sim23 ple, technology neutral, nonregulatory,

24 and market-based approach.
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1 (4) The Nation and the world stand at

2 the beginning of a large-scale transition

3 to an information society which will re4 quire innovative legal and policy ap5 proaches, and therefore, States can serve

6 the national interest by continuing their

7 proven role as laboratories of innovation

8 for quickly evolving areas of public pol9 icy, provided that States also adopt a

10 consistent, reasonable national baseline

11 to eliminate obsolete barriers to elec12 tronic commerce such as undue paper

13 and pen requirements, and further, that

14 any such innovation should not unduly

15 burden interjurisdictional commerce.

16 (5) To the extent State laws or regula17 tions do not provide a consistent, reason18 able national baseline or in fact create an

19 undue burden to interstate commerce in

20 the important burgeoning area of elec21 tronic commerce, the national interest is

22 best served by Federal preemption to the

23 extent necessary to provide such con24 sistent, reasonable national baseline and

25 eliminate said burden, but that absent
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1 such lack of consistent, reasonable na2 tional baseline or such undue burdens,

3 the best legal system for electronic com4 merce will result from continuing experi5 mentation by individual jurisdictions.

6 (6) With due regard to the funda7 mental need for a consistent national

8 baseline, each jurisdiction that enacts

9 such laws should have the right to deter10 mine the need for any exceptions to pro11 tect consumers and maintain consistency

12 with existing related bodies of law within

13 a particular jurisdiction.

14 (7) Industry has developed several

15 electronic signature technologies for use

16 in electronic transactions, and the public

17 policies of the United States should serve

18 to promote a dynamic marketplace with19 in which these technologies can compete.

20 Consistent with this Act, States should

21 permit the use and development of any

22 authentication technologies that are ap23 propriate as practicable as between pri24 vate parties and in use with State agen25 cies.
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1 SEC. 102. PURPOSES.

2 The purposes of this Act are—

3 (1) to permit and encourage the con4 tinued expansion of electronic commerce

5 through the operation of free market

6 forces rather than proscriptive govern7 mental mandates and regulations;

8 (2) to promote public confidence in

9 the validity, integrity, and reliability of

10 electronic commerce and online govern11 ment under Federal law;

12 (3) to facilitate and promote elec13 tronic commerce by clarifying the legal

14 status of electronic records and elec15 tronic signatures in the context of writ16 ing and signing requirements imposed by

17 law;

18 (4) to facilitate the ability of private

19 parties engaged in interstate transactions

20 to agree among themselves on the terms

21 and conditions on which they use and ac22 cept electronic signatures and electronic

23 records; and

24 (5) to promote the development of a

25 consistent national legal infrastructure

26 necessary to support electronic com-
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1 merce at the Federal and State levels

2 within existing areas of jurisdiction.

3 SEC. 103. DEFINITIONS.

4 In this Act:

5 (1) ELECTRONIC.—The term ‘‘elec6 tronic’’ means relating to technology hav7 ing electrical, digital, magnetic, wireless,

8 optical, electromagnetic, or similar capa9 bilities.

10 (2) ELECTRONIC AGENT.—The term

11 ‘‘electronic agent’’ means a computer pro12 gram or an electronic or other automated

13 means used to initiate an action or re14 spond to electronic records or perform15 ances in whole or in part without review

16 by an individual at the time of the action

17 or response.

18 (3) ELECTRONIC RECORD.—The term

19 ‘‘electronic record’’ means a record cre20 ated, generated, sent, communicated, re21 ceived, or stored by electronic means.

22 (4) ELECTRONIC SIGNATURE.—The term

23 ‘‘electronic signature’’ means an elec24 tronic sound, symbol, or process attached

25 to or logically associated with an elec-
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1 tronic record and executed or adopted by

2 a person with the intent to sign the elec3 tronic record.

4 (5) RECORD.—The term ‘‘record’’

5 means information that is inscribed on a

6 tangible medium or that is stored in an

7 electronic or other medium and is re8 trievable in perceivable form.

9 (6) TRANSACTION.—The term ‘‘trans10 action’’ means an action or set of actions

11 relating to the conduct of commerce be12 tween 2 or more persons, neither of

13 which is the United States Government, a

14 State, or an agency, department, board,

15 commission, authority, institution, or in16 strumentality of the United States Gov17 ernment or of a State.

18 (7) UNIFORM ELECTRONIC TRANSACTIONS

19 ACT.—The term ‘‘Uniform Electronic

20 Transactions Act’’ means the Uniform

21 Electronic Transactions Act as enacted

22 by a State based on the form provided by

23 the National Conference of Commis24 sioners on Uniform State Law in the form
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1 or any substantially similar variation

2 thereof.

3 SEC. 104. PRINCIPLES GOVERNING THE USE OF ELEC4 TRONIC SIGNATURES IN INTERNATIONAL

5 TRANSACTIONS.

6 To the extent practicable, the Federal

7 Government shall observe the following prin8 ciples in an international context to enable

9 commercial electronic transaction:

10 (1) Remove paper-based obstacles to

11 electronic transactions by adopting rel12 evant principles from the Model Law on

13 Electronic Commerce adopted in 1996 by

14 the United Nations Commission on Inter15 national Trade Law (UNCITRAL).

16 (2) Permit parties to a transaction to

17 determine the appropriate authentication

18 technologies and implementation models

19 for their transactions, with assurance

20 that those technologies and implementa21 tion models will be recognized and en22 forced.

23 (3) Permit parties to a transaction to

24 have the opportunity to prove in court or

25 other proceedings that their authentica-
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1 tion approaches and their transactions

2 are valid.

3 (4) Take a nondiscriminatory ap4 proach to electronic signatures and au5 thentication methods from other jurisdic6 tions.

7 SEC. 105. INTERSTATE CONTRACT CERTAINTY.

8 (a) IN GENERAL.—In any commercial trans9 action affecting interstate commerce, a con10 tract may not be denied legal effect or en11 forceability solely because an electronic sig12 nature or electronic record was used in its

13 formation.

14 (b) METHODS.—In commercial transactions

15 affecting interstate commerce, the parties to

16 a contract may agree on the terms and condi17 tions on which they will use and accept elec18 tronic signatures and electronic records, ex19 cept to the extent a law or regulation gov20 erning the record provides otherwise.

21 (c) RECORD RETENTION.—When a law re22 quires that a contract be in writing, that re23 quirement is satisfied by an electronic record

24 of the information in the record provided to

25 the parties which—
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1 (1) accurately reflects the information

2 set forth in the record after it was first

3 generated in its final form as an elec4 tronic record or otherwise; and

5 (2) remains capable of retention in a

6 form that can be accessed for later ref7 erence and used to prove the terms of the

8 agreement.

9 (d) FORMULATION OF CONTRACT.—A con10 tract relating to a commercial transaction af11 fecting interstate commerce may not be de12 nied legal effect solely because its formation

13 involved—

14 (1) the interaction of electronic

15 agents of the parties; or

16 (2) the interaction of an electronic

17 agent of a party and an individual who

18 acts on that individual’s own behalf or

19 for another person.

20 (e) APPLICATION IN UETA STATES.—This

21 section does not apply in any State in which

22 the Uniform Electronic Transactions Act is in

23 effect.
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1 SEC. 106. STUDY OF LEGAL AND REGULATORY BARRIERS

2 TO ELECTRONIC COMMERCE.

3 (a) BARRIERS.—Each Federal agency shall,

4 not later than 6 months after the date of en5 actment of this Act, provide a report to the Di6 rector of the Office of Management and Budg7 et and the Secretary of Commerce identifying

8 any provision of law administered by such

9 agency, or any regulations issued by such

10 agency and in effect on the date of enactment

11 of this Act, that may impose a barrier to elec12 tronic transactions, or otherwise to the con13 duct of commerce online or by electronic

14 means. Such barriers include, but are not lim15 ited to, barriers imposed by a law or regula16 tion directly or indirectly requiring that sig17 natures, or records of transactions, be accom18 plished or retained in other than electronic

19 form. In its report, each agency shall identify

20 the barriers among those identified whose re21 moval would require legislative action, and

22 shall indicate agency plans to undertake reg23 ulatory action to remove such barriers among

24 those identified as are caused by regulations

25 issued by the agency.
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1 (b) REPORT TO CONGRESS.—The Secretary

2 of Commerce, in consultation with the Direc3 tor of the Office of Management and Budget,

4 shall, within 18 months after the date of en5 actment of this Act, and after the consultation

6 required by subsection (c) of this section, re7 port to the Congress concerning—

8 (1) legislation needed to remove bar9 riers to electronic transactions or other10 wise to the conduct of commerce online

11 or by electronic means; and

12 (2) actions being taken by the execu13 tive branch and individual Federal agen14 cies to remove such barriers as are

15 caused by agency regulations or policies.

16 (c) CONSULTATION.—In preparing the re17 port required by this section, the Secretary of

18 Commerce shall consult with the General

19 Services Administration, the National Ar20 chives and Records Administration, and the

21 Attorney General concerning matters involv22 ing the authenticity of records, their storage

23 and retention, and their usability for law en24 forcement purposes.
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1 (d) INCLUDE FINDINGS IF NO RECOMMENDA2 TIONS.—If the report required by this section

3 omits recommendations for actions needed to

4 fully remove identified barriers to electronic

5 transactions or to online or electronic com6 merce, it shall include a finding or findings,

7 including substantial reasons therefor, that

8 such removal is impracticable or would be in9 consistent with the implementation or en10 forcement of applicable laws.

11 SEC. 107. STUDY OF EFFECTS OF ELECTRONIC COMMERCE.

12 (a) IN GENERAL.—The Federal Trade Com13 mission and the Secretary of Commerce shall

14 conduct a study of electronic commerce

15 issues.

16 (b) RESPONSIBILITY OF EACH AGENCY.—

17 (1) FTC.—The Federal Trade Commis18 sion, in consultation with the Secretary

19 of Commerce, shall conduct a portion of

20 the study to determine the effectiveness

21 of Federal and State consumer protection

22 laws with respect to electronic trans23 actions involving consumers.

24 (2) COMMERCE DEPARTMENT.—The Sec25 retary of Commerce, in consultation with
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1 the Federal Trade Commission, shall con2 duct a portion of the study to determine

3 the extent to which a uniform commer4 cial legal framework would facilitate and

5 enforce interstate electronic trans6 actions.

7 (c) REPORT.—Not later than 2 years after

8 the date of the enactment of this Act, the Fed9 eral Trade Commission and the Secretary of

10 Commerce shall transmit a report to Congress

11 containing —

12 (1) findings from the study required

13 under subsection (a); and

14 (2) such recommendations for legisla15 tion or administrative actions as the Fed16 eral Trade Commission and the Secretary

17 of Commerce, respectively, deem appro18 priate.

19 (d) BIENNIAL UPDATES.—The Federal Trade

20 Commission and the Secretary of Commerce

21 shall update the report every 2 years there22 after and transmit the updated report to the

23 Congress.
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1 TITLE II—DEVELOPMENT AND

2 ADOPTION OF ELECTRONIC

3 SIGNATURE PRODUCTS AND

4 SERVICES

5 SEC. 201. TREATMENT OF ELECTRONIC SIGNATURES IN

6 INTERSTATE AND FOREIGN COMMERCE.

7 (a) INQUIRY REGARDING IMPEDIMENTS TO

8 COMMERCE.—

9 (1) INQUIRIES REQUIRED.—Within 90

10 days after the date of the enactment of

11 this Act, and annually thereafter, the Sec12 retary of Commerce, acting through the

13 Assistant Secretary for Communications

14 and Information, shall complete an in15 quiry to—

16 (A) identify any domestic and for17 eign impediments to commerce in

18 electronic signature products and

19 services and the manners in which

20 and extent to which such impedi21 ments inhibit the development of

22 interstate and foreign commerce;

23 (B) identify constraints imposed

24 by foreign nations or international

25 organizations that constitute barriers
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1 to providers of electronic signature

2 products or services; and

3 (C) identify the degree to which

4 other nations and international orga5 nizations are complying with the

6 principles in subsection (b)(2).

7 (2) SUBMISSION.—The Secretary shall

8 submit a report to the Congress regard9 ing the results of each such inquiry with10 in 90 days after the conclusion of such in11 quiry.

12 (b) PROMOTION OF ELECTRONIC SIGNA13 TURES.—

14 (1) REQUIRED ACTIONS.—The Secretary

15 of Commerce, acting through the Assist16 ant Secretary for Communications and

17 Information, shall promote the accept18 ance and use, on an international basis,

19 of electronic signatures in accordance

20 with the principles specified in para21 graph (2) and in a manner consistent

22 with section 105 of this Act. The Sec23 retary of Commerce shall take all actions

24 necessary in a manner consistent with

25 such principles to eliminate or reduce, to
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1 the maximum extent possible, the impedi2 ments to commerce in electronic signa3 tures, including those identified in the in4 quiries under subsection (a) for the pur5 pose of facilitating the development of

6 interstate and foreign commerce.

7 (2) PRINCIPLES.—The principles speci8 fied in this paragraph are the following:

9 (A) Free markets and self-regula10 tion, rather than government stand11 ard-setting or rules, should govern

12 the development and use of electronic

13 records and electronic signatures.

14 (B) Neutrality and nondiscrimina15 tion should be observed among pro16 viders of and technologies for elec17 tronic records and electronic signa18 tures.

19 (C) Parties to a transaction

20 should be permitted to establish re21 quirements regarding the use of elec22 tronic records and electronic signa23 tures acceptable to such parties.

24 (D) Parties to a transaction—
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1 (i) should be permitted to de2 termine the appropriate authen3 tication technologies and imple4 mentation models for their trans5 actions, with assurance that those

6 technologies and implementation

7 models will be recognized and en8 forced; and

9 (ii) should have the oppor10 tunity to prove in court or other

11 proceedings that their authen12 tication approaches and their

13 transactions are valid.

14 (E) Electronic records and elec15 tronic signatures in a form accept16 able to the parties should not be de17 nied legal effect, validity, or enforce18 ability on the ground that they are

19 not in writing.

20 (F) De jure or de facto imposition

21 of standards on private industry

22 through foreign adoption of regula23 tions or policies with respect to elec24 tronic records and electronic signa25 tures should be avoided.
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1 (G) Paper-based obstacles to elec2 tronic transactions should be re3 moved.

4 (c) FOLLOWUP STUDY.—Within 5 years after

5 the date of enactment of this Act, the Sec6 retary of Commerce, acting through the As7 sistant Secretary for Communications and In8 formation, shall conduct an inquiry regarding

9 any State statutes, regulations, or other rules

10 of law enacted or adopted after such date of

11 enactment. The Secretary shall submit a re12 port to the Congress regarding the results of

13 such inquiry by the conclusion of such 5-year

14 period and such report shall identify any ac15 tions taken by the Secretary pursuant to sub16 section (b) of this section.

17 (d) CONSULTATION.—In conducting the ac18 tivities required by this section, the Secretary

19 shall consult with users and providers of elec20 tronic signature products and services and

21 other interested persons.

22 (e) PRIVACY.—Nothing in this section shall

23 be construed to require the Secretary or the

24 Assistant Secretary to take any action that
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1 would adversely affect the privacy of con2 sumers.

3 (f) DEFINITIONS.—As used in this section,

4 the terms ‘‘electronic record’’ and ‘‘electronic

5 signature’’ have the meanings provided in sec6 tion 103 of the Electronic Signatures in Global

7 and National Commerce Act.

8 TITLE III—USE OF ELECTRONIC

9 RECORDS AND SIGNATURES

10 UNDER FEDERAL SECURITIES

11 LAW

12 SEC. 301. GENERAL VALIDITY OF ELECTRONIC RECORDS

13 AND SIGNATURES.

14 Section 3 of the Securities Exchange Act

15 of 1934 (15 U.S.C. 78c) is amended by adding

16 at the end the following new subsection:

17 ‘‘(h) REFERENCES TO WRITTEN RECORDS AND

18 SIGNATURES.—

19 ‘‘(1) GENERAL VALIDITY OF ELECTRONIC

20 RECORDS AND SIGNATURES.—Except as oth21 erwise provided in this subsection—

22 ‘‘(A) if a contract, agreement, or

23 record (as defined in subsection

24 (a)(37)) is required by the securities

25 laws or any rule or regulation there-
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1 under (including a rule or regulation

2 of a self-regulatory organization), and

3 is required by other Federal or State

4 statute, regulation, or other rule of

5 law to be in writing, the legal effect,

6 validity, or enforceability of such con7 tract, agreement, or record shall not

8 be denied on the ground that the con9 tract, agreement, or record is not in

10 writing if the contract, agreement, or

11 record is an electronic record;

12 ‘‘(B) if a contract, agreement, or

13 record is required by the securities

14 laws or any rule or regulation there15 under (including a rule or regulation

16 of a self-regulatory organization), and

17 is required by other Federal or State

18 statute, regulation, or other rule of

19 law to be signed, the legal effect, va20 lidity, or enforceability of such con21 tract, agreement, or record shall not

22 be denied on the ground that such

23 contract, agreement, or record is not

24 signed or is not affirmed by a signa25 ture if the contract, agreement, or
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1 record is signed or affirmed by an

2 electronic signature; and

3 ‘‘(C) if a broker, dealer, transfer

4 agent, investment adviser, or invest5 ment company enters into a contract

6 or agreement with, or accepts a

7 record from, a customer or other

8 counterparty, such broker, dealer,

9 transfer agent, investment adviser, or

10 investment company may accept and

11 rely upon an electronic signature on

12 such contract, agreement, or record,

13 and such electronic signature shall

14 not be denied legal effect, validity, or

15 enforceability because it is an elec16 tronic signature.

17 ‘‘(2) IMPLEMENTATION.—

18 ‘‘(A) REGULATIONS.—The Commis19 sion may prescribe such regulations

20 as may be necessary to carry out this

21 subsection consistent with the public

22 interest and the protection of inves23 tors.

24 ‘‘(B) NONDISCRIMINATION.—The

25 regulations prescribed by the Com-
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1 mission under subparagraph (A) shall

2 not—

3 ‘‘(i) discriminate in favor of or

4 against a specific technology,

5 method, or technique of creating,

6 storing, generating, receiving,

7 communicating, or authenticating

8 electronic records or electronic

9 signatures; or

10 ‘‘(ii) discriminate in favor of

11 or against a specific type or size

12 of entity engaged in the business

13 of facilitating the use of elec14 tronic records or electronic signa15 tures.

16 ‘‘(3) EXCEPTIONS.—Notwithstanding

17 any other provision of this subsection—

18 ‘‘(A) the Commission, an appro19 priate regulatory agency, or a self20 regulatory organization may require

21 that records be filed in a specified

22 electronic format or formats if the

23 records are required to be submitted

24 to the Commission, an appropriate
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1 regulatory agency, or a self-regu2 latory organization, respectively; and

3 ‘‘(B) the Commission may require

4 that contracts, agreements, or

5 records relating to purchases and

6 sales, or establishing accounts for

7 conducting purchases and sales, of

8 penny stocks be manually signed, and

9 may require such manual signatures

10 with respect to transactions in simi11 lar securities if the Commission de12 termines that such securities are sus13 ceptible to fraud and that such fraud

14 would be deterred or prevented by

15 requiring manual signatures.

16 ‘‘(4) RELATION TO OTHER LAW.—The

17 provisions of this subsection apply in lieu

18 of the provisions of title I of the Elec19 tronic Signatures in Global and National

20 Commerce Act to a contract, agreement,

21 or record (as defined in subsection

22 (a)(37)) that is required by the securities

23 laws.

24 ‘‘(5) DEFINITIONS.—As used in this sub25 section:
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1 ‘‘(A) ELECTRONIC RECORD.—The

2 term ‘electronic record’ means a writ3 ing, document, or other record cre4 ated, stored, generated, received, or

5 communicated by electronic means.

6 ‘‘(B) ELECTRONIC SIGNATURE.—The

7 term ‘electronic signature’ means in8 formation or data in electronic form,

9 attached to or logically associated

10 with an electronic record, that is in11 tended by a party to signify agree12 ment to a contract or agreement.

13 ‘‘(C) ELECTRONIC.—The term ‘elec14 tronic’ means of or relating to tech15 nology having electrical, digital, mag16 netic, optical, electromagnetic, or

17 similar capabilities regardless of me18 dium.’’.