ICI Comments to Regulators Concerning E-SIGN Issues

Washington, DC, March 19, 2001 - The Federal Trade Commission and the Department of Commerce recently issued a notice seeking public comment on the benefits and burdens of the consumer consent requirement set forth in §101(c)(1)(C)(ii) of the Electronic Signatures in Global and National Commerce Act (E-SIGN). The Institute filed a comment letter in response to the notice.

The above E-SIGN provision states that if information must be sent or made available to a consumer in writing, the information may be provided electronically only if the consumer "consents electronically, or confirms his or her consent electronically, in a manner that reasonably demonstrates that the consumer can access information in the electronic form that will be used to provide the information that is the subject of the consent."

The Institute comment letter states that mutual funds are leaders in using electronic means to increase efficiency and enhance the types and quality of services they provide to investors. It notes that the Institute has actively supported legislative and regulatory initiatives, such as E-SIGN, that are designed to facilitate electronic commerce.

The Institute indicates that E-SIGN also has raised several questions and issues, some of which relate to E-SIGN's impact on existing regulatory guidance concerning electronic delivery of disclosure documents. The Institute asserts that this has resulted in uncertainty that could have the effect of frustrating E-SIGN's goal of facilitating the use of electronic records.

Regarding §101(c)(1)(C)(ii) of E-SIGN, the Institute points out that there are some questions concerning the circumstances under which it applies. In addition, the it mentions the burdens of the requirement that consumers consent or confirm their consent electronically, and contrasts that requirement to the more flexible approach taken by the Securities and Exchange Commission in its guidance on the use of electronic media.

The Institute discusses briefly other consent-related issues, including a suggestion that a reasonable interpretation of §101(c)(1)(D)(ii) of E-SIGN would permit a mutual fund investor to consent at the outset to electronic delivery of all information relating to his or her investment in the fund.

The Institute also suggests that federal agencies such as the SEC and the IRS should issue guidance that accommodates reasonable and workable approaches to conducting business with mutual fund investors electronically. It notes that review of these issues by regulators will also help identify areas where legislative changes might be warranted.