[13286]
March 19, 2001
TO: ELECTRONIC COMMERCE ADVISORY COMMITTEE No. 6-01
PENSION COMMITTEE No. 16-01
PENSION OPERATIONS ADVISORY COMMITTEE No. 23-01
SEC RULES COMMITTEE No. 28-01
TAX COMMITTEE No. 12-01
TECHNOLOGY ADVISORY COMMITTEE No. 3-01
RE: ICI COMMENT LETTER TO FTC CONCERNING ESIGN ISSUES
As we previously informed you, 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 (“ESIGN”).1 That provision states that if information is
required to be provided 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 has filed a comment letter in response to the notice. A copy of
the letter is attached and it is summarized below.
The 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 ESIGN, that
are designed to facilitate electronic commerce. After acknowledging that consumers and
businesses alike already are realizing some of the benefits of ESIGN, the letter indicates that
ESIGN also has raised several questions and issues. Some of these questions and issues relate to
ESIGN’s impact on existing regulatory guidance concerning electronic delivery of disclosure
documents. The letter asserts that this has resulted in uncertainty that could have the effect of
frustrating ESIGN’s goal of facilitating the use of electronic records.
Regarding 101(c)(1)(C)(ii) of ESIGN, the letter points out that there are some questions
concerning the circumstances in which it applies. In addition, the letter comments on the
burdens of the requirement that consumers consent or confirm their consent electronically, and
1 See Memorandum to Electronic Commerce Advisory Committee No. 1-01, SEC Rules Committee No. 16-01 and
Technology Advisory Committee No. 2-01, dated February 14, 2001; Memorandum to Tax Committee No. 8-01,
Pension Committee No. 14-01 and Pension Operations Subcommittee No. 19-01, dated February 23, 2001.
2contrasts that requirement to the more flexible approach taken by the Securities and Exchange
Commission in its guidance on the use of electronic media. The letter also discusses the
“reasonable demonstration” requirement, describing some of the compliance methodologies
Institute members are employing. The letter cautions against narrow interpretations of the
reasonable demonstration requirement that would make compliance highly impractical or
impossible. It also suggests that periodic reevaluation of the consent requirement will be
advisable to assure that it is serving its intended purpose without unduly constraining the use
of new technologies.
The letter touches briefly on other consent-related issues, including suggesting that a
reasonable interpretation of 101(c)(1)(D)(ii) of ESIGN 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 letter concludes by suggesting 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.
Frances M. Stadler
Deputy Senior Counsel
Attachment
Attachment (in .pdf format)