SEC Amends Rules Providing for Flexibility in the Use of Electronic Signatures
The Situation: On November 17, 2020, the U.S. Securities and Exchange Commission ("SEC" or "Commission") adopted amendments to Regulation S-T (General Rules and Regulations for Electronic Filings) to allow the use of electronic signatures when a filer is executing an authentication document in connection with a filing made through the Electronic Data Gathering, Analysis, and Retrieval system ("EDGAR"). In addition, the SEC adopted related amendments to the EDGAR Filer Manual ("EDGAR Filer Manual"), as well as to certain rules and forms under the Securities Act of 1933 ("Securities Act"), the Securities Exchange Act of 1934 ("Exchange Act"), and the Investment Company Act of 1940, as amended ("Investment Company Act") to allow for the use of electronic signatures when authenticating documents with respect to certain filings made pursuant to these acts. The rule amendments become effective upon publication in the Federal Register.
The Result: The modernization of Regulation S-T and corresponding rules will allow electronic filers to obtain authentication signatures in a more timely manner when making certain electronic filings through EDGAR or pursuant to certain Commission rules affected by the amendments.
Looking Ahead: Firms that routinely make electronic filings with the Commission will want to ensure they have a process in place to meet the requirements for obtaining electronic authentication signatures as set forth in the amended EDGAR Filer Manual.
Currently, under Regulation S-T, Rule 302(b), all signatories to electronic filings are required to "manually sign a signature page or other document authenticating, acknowledging or otherwise adopting his or her signature that appears in typed form within the electronic filing." The authentication document must be executed at or before the time of the electronic filing and must be retained by the filer for five years and made available to the Commission or staff upon request. The purpose of this wet, manual signature requirement, according to the SEC, was "to provide a satisfactory means by which signatories could authenticate and adopt their typed signatures appearing on filed documents for evidentiary purposes."
In April 2020, the COVID-19 pandemic made it increasingly difficult for electronic filers to provide manual authentication signatures in accordance with the rule. Subsequently, several law firms submitted a rulemaking petition to the SEC seeking authority to use electronic signatures when executing authentication documents pursuant to Rule 302(b).
Shortly thereafter, a number of public companies submitted a joint letter supporting the requested petition for rulemaking, and in June 2020, the SEC staff issued a statement recognizing that some persons and entities subject to Regulation S-T may experience difficulties satisfying the signature requirements due to circumstances arising from COVID-19. Staff recommended that the SEC not take enforcement action with respect to the requirements of Rule 302(b) if: (i) a signatory retains a manually signed signature page or other document authenticating, acknowledging or otherwise adopting his or her signature that appears in typed form within the electronic filing and provides such document, as promptly as reasonably practicable, to the filer for retention in the ordinary course pursuant to Rule 302(b); (ii) such document indicates the date and time when the signature was executed; and (iii) the filer establishes and maintains policies and procedures governing this process. The statement further indicated that the signatory may also provide to the filer an electronic record (such as a photograph or pdf) of such document when it is signed.
Amending Rule 302(b) and corresponding sections of the EDGAR Filer Manual to allow a signatory to an electronic filing to use an electronic signature is the next step by the SEC in recognizing the beneficial use of technology to create more efficiencies and lessen administrative burdens on issuers. The other requirements of Rule 302(b) remain unchanged. That is, electronic signature must occur before or at the time of the electronic filing and must be retained for a period of five years and be provided to the Commission or staff upon request.
Pursuant to the amended EDGAR Filer Manual, the process by which a signatory signs an authentication document using an electronic signature must meet, at a minimum, the following:
- Require the signatory to present a physical, logical, or digital credential authenticating their individual identity;
- Reasonably provide a method for the non-repudiation of the signature;
- Require that the signature be attached, affixed, or otherwise logically associated with the signature page or document being signed; and
- Provide a time stamp of the date and time of the signature to ensure it occurred before or at the time of the electronic filing.
The amendments also include a new Rule 302(b)(2) that requires a signatory—before using an electronic signature on an authentication document—to manually sign an attestation indicating his or her agreement that the use of an electronic signature on an authentication document is legally equal to a manual signature. This manually signed attestation must be maintained by the filer for the period of time that the signatory uses an electronic signature to sign an authentication document and for seven years after the most recently dated electronically signed authentication document.
As noted above, the SEC also approved corresponding amendments to certain forms and rules under the Securities Act, the Exchange Act, and the Investment Company Act to permit the use of electronic signatures on authentication documents where the filing made has a typed, rather than a manual, signature.
Three Key Takeaways
- These rule amendments are another step by the SEC toward modernizing its rules in recognition of technological developments beyond temporary accommodations due to difficulties posed by obtaining manual "wet" signatures during the COVID-19 pandemic.
- These rule amendments will make it much easier for issuers to obtain signatures from their directors and officers on a timely basis in connection with SEC filings subject to compliance with the attestation and authentication requirements.
- Filers should ensure they have a process in place to obtain the authentication signatures pursuant to the amended requirements, including the obligation to maintain a manually signed attestation that the electronic signature on the authentication is legally equal to a manual signature.