Today the system verifies an investor’s identity only when an account is opened. But in the future, there are plans to introduce account verifications that will occur when a nonconforming event triggers the system. Once an account is opened, investors can buy securities, manage their accounts, and redeem their investments online. All securities are in electronic form and are transferred to the investor’s TreasuryDirect account within one business day of an order being approved. The purchase amount is automatically debited from the designated bank account. The system will eventually offer marketable Treasury securities as well, and replace the multiple systems now in place. The new Treasury Direct is designed to support 80 million accounts, and as of March 2004, had 168,000 accounts.

# **Legal framework for TreasuryDirect**

The legal framework underlying TreasuryDirect involves:

- Laws regulating the issuance and circulation of book-entry Treasury securities eligible to be

- sold through the system (including provisions allowing dematerialization).

- Laws governing electronic transactions for these securities, including payment systems.

- Laws related to confidentiality and information disclosure.

- Laws and regulations related to e-security. (For a more complete review of legal issues, see

- Glaessner, McNevin, and Kellermann 2002.)

From a legal perspective, the hierarchy of priorities for TreasuryDirect involve establishing the authority to issue and sell securities, determining the terms and conditions that must be fulfilled to consummate a sale, ensuring the ability to resolve issues of ownership, rights, and responsibilities among the various players with consistent results, and ensuring the ability to protect the process.

Title 31 of the Code of Federal Regulations, titled _Money and Finance_ , governs the lifecycle of Treasury securities and TreasuryDirect (see <u>http://www.access.gpo.gov/nara/cfr/ waisidx_00/31cfrv2_00.html). Parts 351</u> and 352 define the offering terms for and rules governing series EE savings bonds. Parts 359 and <u>360</u> define the offering terms for and rules governing series I savings bonds. Part <u>363</u> contains the regulations governing securities held in the new TreasuryDirect system. (For a complete list of department circulars under Title 31, see <u>http://www.publicdebt.treas.gov/sav/savdeptcircular.htm.)</u> <u>Part 356, on the sale and issue of marketable book-entry Treasury bills, notes, and bonds,</u> defines book-entry securities, establishes the Treasury’s authority to issue and sell such securities, and lays out the rules on denomination, taxation, tenders, offering announcements, and submission of competitive and noncompetitive bids. It defines book-entry securities as those represented by an accounting entry or electronic record, and not by a paper certificate. These are held in either TRADES—a commercial book-entry system—or the legacy _TreasuryDirect_ system. In October 2002 holdings in legacy _TreasuryDirect_ totaled about $66 billion or 2 percent of outstanding marketable debt. Part 356.3 sets out the terms and conditions under which the Treasury can sell and issue marketable book-entry bills, notes, and bonds to the public. For _TreasuryDirect_ , book-entry securities of account holders are identified and maintained directly in the records of the Bureau of Public Debt.

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