Institute Comments on SEC's E-SIGN Interim Final Rule

Washington, DC, September 1, 2000 - The Institute has filed a comment letter with the SEC on interim final rule 160 under the Securities Act of 1933, which exempts mutual fund prospectuses from the consumer consent provisions of the Electronic Signatures in Global and National Commerce Act (E-SIGN) so long as they are used for the sole purpose of permitting supplemental sales literature to be provided to prospective investors.

The Institute's comment letter supports Rule 160, but expresses concern that the rule is unnecessarily restrictive. The letter notes that the rule would exempt a mutual fund prospectus from the consumer consent requirements of E-SIGN if it is sent or given "for the sole purpose" of permitting a communication not to be deemed a prospectus under Section 2(a)(10)(a) of the Securities Act. The letter recommends against limiting the exemption in this manner because:

1. the Commission is not required by E-SIGN to impose a "sole purpose" limitation or adopt an exemption that limits the purposes for which such disclosure records may be used;

2. the "sole purpose" limitation is inconsistent with the securities laws and the Commission's interpretive positions regarding electronic delivery of disclosure documents; and

3. the limitation does not appear to serve an important policy objective or identify any investor protection concerns that the condition is intended to address.

The letter explains that eliminating the "sole purpose" requirement (by deleting the term "sole" from the text of the rule) would not thwart any Commission policy objective because an investor who has already received a prospectus should not have to receive another one (and consent to receiving it electronically, if applicable) if he or she subsequently purchases fund shares.