Yesterday, in recognition of the widespread use of electronic signatures, the SEC adopted rules and amendments to permit the use of electronic signatures in signature "authentication documents" required under Reg S-T in connection with electronic SEC filings. In addition, the SEC adopted corresponding revisions to allow the use of electronic signatures for certain other filings. (Separately, the SEC also amended the Rules of Practice to require electronic filing and service of documents in the SEC's administrative proceedings, not covered in this post.) The new rules were adopted following submission of an incredibly persuasive rulemaking petition from three Silicon Valley law firms—Cooley being one—which was supported in correspondence from almost 100 public companies. The changes will become effective upon publication in the Federal Register.

Currently, Rule 302(b) of Reg S-T requires each signatory to an electronic filing to manually sign a signature page or other document (which the SEC refers to as an "authentication document") before or at the time of the electronic filing to authenticate or otherwise adopt the signature that appears in typed form in the electronic filing. The electronic filer is required to retain the authentication document for each signatory for five years and furnish a copy to the SEC upon request. In March, in connection with the COVID-19 pandemic, the SEC provided some relief with respect to this rule to address the difficulties associated with providing manual signatures in the context of COVID-19.  (See this PubCo post.)  Then in April, the thoroughly convincing rulemaking petition was submitted to the SEC, asking the SEC to amend the rules to allow the use of electronic signatures in SEC filings. (See this PubCo post.)

After considering the petition and the issues involved, the SEC has adopted rules and amendments to permit the use of electronic signatures on authentication documents in connection with electronic filings provided that the signatures satisfy requirements specified in the EDGAR Filer Manual and the signatory follows certain procedures. Rule 302(b) will still require the electronic filer to retain the authentication document for a period of five years and furnish a copy of it upon request to the SEC.

More specifically, the EDGAR Filer Manual will specify that, to use an electronic signature for an authentication document, the signing process must, at a minimum:

  • "Require the signatory to present a physical, logical, or digital credential that authenticates the signatory's individual identity;
  • Reasonably provide for non-repudiation of the signature;
  • Provide that the signature be attached, affixed, or otherwise logically associated with the signature page or document being signed; and
  • Include a timestamp to record the date and time of the signature."

The SEC indicates that the requirements are "intended to be technologically neutral and allow for different types and forms of electronic signatures, provided that the signing process satisfies a number of conditions that relate to the validity and enforceability of an electronic signature." For example, the requirement that the signature be "logically associated with the signature page" is intended to provide the signatory with "notice of the nature and substance of the document and an opportunity to review it before signing." Similarly, the requirement that the electronic signature be linked to the signature page will allow later confirmation that the signatory signed the signature page.

Certain terms used in these requirements will be defined in the EDGAR Filer Manual. "Electronic signature" is defined, consistent with the widely used definition of the term in the E-SIGN Act, as "an electronic sound, symbol, or process, attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record." "Credential" is defined as "an object or data structure exclusively possessed and controlled by an individual to assert identity and provide for authentication." "Non-repudiation" is defined as "assurance that an individual cannot falsely deny having performed a particular action."

In addition, new Rule 302(b)(2) will require that, prior to initial use of an electronic signature, the signatory manually sign a document "attesting that the signatory agrees that the use of an electronic signature in any authentication document constitutes the legal equivalent of such individual's manual signature for purposes of authenticating the signature." The filer is required to retain this manually signed document for the duration of time that the signatory may use an electronic signature, and at least for a minimum of seven years after the date of the most recent electronically signed authentication document. The filer must also provide a copy to the SEC upon request. Under Rule 302(b)(3), the manually signed document  may be stored electronically.

Finally, the SEC also amended certain rules and forms under the Securities Act, Exchange Act and Investment Company Act to allow the use of electronic signatures, under generally the same conditions applicable to electronic filers under Rule 302(b), in authentication documents in connection with certain other filings when these filings contain typed, rather than manual, signatures.  

Interestingly, the adopting release includes a discussion of why this rulemaking did not follow the typical Administrative Procedure Act requirement for notice and comment.  The SEC observes that this requirement is not applicable "to rules of agency organization, procedure, or practice, or if the agency 'for good cause finds ... that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest.'" Here, the SEC found that the amendments are related to SEC procedures "and do not substantially alter the rights and obligations of non-agency parties. We also find that notice and comment are unnecessary because the amendments merely provide an optional alternative method for signatories to sign authentication documents pursuant to Rule 302(b) and corresponding provisions in our rules and forms." The SEC also found good cause to make the amendments effective upon publication in the Federal Register to provide companies and signatories with the option of using electronic signatures as soon as practicable.

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