Historically, investing in securities has been a largely manual process with documents being mailed or faxed back and forth to be signed. “Wet signatures,” ink on paper, were once the required method of signing to complete transactions. But, since the passage of the Electronic Signatures in Global and National Commerce Act (“ESIGN”) in 2000, the use of electronic signatures has increased.
The definition of an electronic signature is: “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.” Such a signature “is attributable to the person if it was the act of the person.” A person’s act “may be shown in any manner.” However, the best practice is for a party to demonstrate the e-signature trail as is often provided by third-party e-signature vendors.
Electronic signatures, like written signatures, only are valid when each party agrees to the transaction. For electronic signatures, an additional “consent” is necessary: consent to perform the transaction electronically. “Whether the parties agree to conduct a transaction by electronic means is determined from the context and surrounding circumstances, including the parties' conduct.” The party’s consent does not have to be a separate form, but can be shown in a manner that reasonably demonstrates that the consumer can access information in the electronic form and he/she affirmatively consents by going forward with the contract. In practice, if a person uses technology to effectuate the agreement, they are presumed to consent to do business electronically.
The purpose of ESIGN is to facilitate electronic commerce by giving more legal certainty to transactions affected by electronic means. ESIGN provides that an electronic signature is valid and enforceable. ESIGN is a federal law that applies to contracts in interstate commerce. However, ESIGN does not preempt state versions of the Uniform Electronic Transactions Act or similar legislation. For example, Virginia’s e-signature laws are an adoption of the Uniform Electronic Transactions Act, and thus apply (instead of ESIGN) to contracts executed under Virginia law. However, ESIGN and Virginia law operate in almost exactly the same way.
E-signatures and Securities Regulators
The SEC has allowed for the electronic retention of records, including signatures meeting the ESIGN requirements. The SEC is on board with use of these electronic signatures, provided that:
- All parties consented to engage in the transaction electronically;
- all parties intended to sign the record;
- all signatures are logically associated with the signatory parties;
- the electronic record being retained is accurate, accessible, and able to be reproduced.
FINRA’s approach has been similar, but in 2011, in a response to a proposed rule, FINRA explicitly considered a valid electronic signature to be “any electronic mark that clearly identifies the signatory and is otherwise in compliance with ESIGN, the guidance issued by the SEC relating to ESIGN, and the guidance provided by FINRA through its interpretive letters.” One FINRA interpretative letter went into detail about requirements and safeguards that a technology service needed to legally use electronic signatures. Then again in 2015, in a Regulatory Notice, FINRA repeated, verbatim, its position from 2011 on electronic signatures. 
Advances in technology are rendering the “wet signatures” of the 20th century as burdensome compared to the alternatives available today. Members of the securities industry, specifically broker-dealers and other financial intermediaries, should embrace the transition to an e-signature process. As long as the parties follow basic requirements as provided in laws and regulations, e-signatures are valid and enforceable. Electronic signatures have already facilitated efficiency gains in the previously paper laden private securities investment process. Done correctly, an e-signature execution process in the securities context is enforceable, more investor friendly, and potentially more secure for all parties.
 Va. Code Ann. §59.1-480(8). Virginia law is used here as an example, all states using the Uniform Electronic Transaction Act and ESIGN have fundamentally the same requirements.
 Va. Code Ann. §59.1-487(a).
 Id. See A.C. Furniture, Inc. v. Arby's Rest. Grp., Inc., 2014 WL 4961055, at *3 (W.D. Va. Oct. 3, 2014) (finding an “email signature with  name and title” sufficient under Va. Code Ann. § 59.1-485 where the e-mail was written and sent from “an address associated with only one person”).
 Va. Code Ann. §59.1-483.
 15 U.S.C. § 7001(a)
 15 U.S.C.A. § 7002.
 Va. Code Ann. §§ 59.1-480, 59.1-483, 59.1-485; see Unif. Elec. Transaction Act §§ 1-21 (1999).
 See supra at note 1.
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