<u>Part 357, on regulations governing book-entry Treasury bills, notes, and bonds, covers dual</u> book-entry systems, the authority and obligations of the Treasury and Federal Reserve banks, and rules for direct deposits, reinvestment, and handling of transaction requests. Section357.20 sets out rules for securities accounts in the _TreasuryDirect_ system, requirements for opening such accounts, and reporting requirements for tax purposes. Section <u>357.24</u> addresses rules related to the availability and disclosure of _TreasuryDirect_ records. Consistent with the U.S. Privacy Act of 1974 (section 552a, on records maintained on individuals; see <u>http://www.usdoj.gov/04foia/privstat.htm), these records are</u> confidential and can be released only to designated entities under certain circumstances. These entities include the owners of securities or, in special cases, administrators, legal representatives, and survivors for the purposes of investigation, certain other federal and state government agencies, trustees in bankruptcy, and receivers of insolvent individuals’ estates.

Part 370 sets out regulations governing electronic transactions and funds transfers related to government securities. Of particular importance for TreasuryDirect, the rule provides for the use of ACH debit entries for the sale of marketable securities and savings bonds. The provisions in Part 370 are the most important for investors. The provisions govern each step of the business process, laying out the terms and conditions that investors agree to when they purchase electronically issued securities. A few areas of Part 370 are worth noting: Section 370.1 defines important terms. In particular, it distinguishes between an electronic signature and a digital signature. This distinction is important because the type of e-signature used affects issues of liability and burdens of proof.

Section 370.15 is an example of risk shifting. It provides that the Treasury does not have to verify the identification or authorization of a signature. So, if it receives an electronic entry, it may act on that entry without incurring any liability. But section 370.35 states that the Bureau of the Public Debt will not accept an e-signature unless it is generated using a method approved by the Treasury.

Section 370.36 establishes that a transaction request becomes effective when an electronic message is received in Parkersburg, West Virginia. The law usually states that a transaction is effective when it is sent or received. But this section states that no matter where an electronic message is initiated or where it travels, it becomes effective only when it is received in Parkersburg. Thus investors have no control over the effectiveness of transactions, because once a message is sent they must rely on the telecommunications system to transmit it.

Sections 370.7 and 370.8 are examples of presumptions built into the law. In 370.7, if a financial institution initiates a change order, the Treasury does not have to verify it and the initiating institution indemnifies both the Treasury and the investor for any resulting loss. Section 370.8 states that if a financial institution fails to respond within a set timeframe to a pre-notification entry, the institution warrants that the information in the entry is correct.

The terms and conditions in Part 370 show how the law is changing to accommodate technology rather than using technology to affirm established law. It also shows how risk and liability are being shifted to investors. The proposition is that if investors want to transact business 11