President Signs E-SIGN Legislation

Washington, DC, July 8, 2000 - President Clinton signed on June 30 the Electronic Signatures in Global and National Commerce Act (E-SIGN). E-SIGN gives legal recognition and effect to electronic signatures, contracts, and records, and empowers the use of online contracts and provision of notices. E-SIGN contains extensive consumer consent provisions, special records retention requirements, and certain preemption provisions that limit states' ability to supersede the enacted legislation. The law becomes effective October 1, 2000, except for certain provisions affecting the use of electronic records to satisfy records retention requirements, which will not become effective until March 1, 2001.

Federal agencies are given exemptive authority allowing them to unconditionally exempt specified categories or types of records from the consumer consent provisions. Most notably, the legislation directs the Securities and Exchange Commission to use this authority to issue a regulation or order that effectively allows mutual funds to provide prospective investors with an electronic fund prospectus at or before the time they access electronic sales literature without first obtaining investor consent to the electronic format of the prospectus. This would enable funds to continue the practice, permitted under SEC's interpretive releases, of using hyperlinks on their websites to give prospective investors simultaneous access to both sales literature and the fund's prospectus.