The Electronic Signatures in Global and National Commerce Act, set to go into effect last night, is the first step in the federal government's attempt to impose some kind of rational system on the world of digital signatures. But what's the big deal?

The federal law is supposed to give the same weight to online signatures as is usual for signatures in the nonvirtual world. In addition, the act determines certain legal authorities over contracts executed online, similar to what exists in the physical world.

But the Securities and Exchange Commission (SEC) -- the brokerage and financial services watchdog agency -- already has regulations governing the electronic transmission of documents in the financial world.

They have been around for years, as Wall Street has been shunting billions of dollars around LANs, WANs and other bits of wire (with varying degrees of success) for almost 40 years. In 1967, the outgoing president of the New York Stock Exchange, Keith Funston, ordered the trading floor closed at 2:00 p.m. for nine days in August, in order to keep volume down and allow the brokerage firms to deal with the mountain of paperwork. They couldn't process the orders fast enough.

Over the years, a compendium of SEC regulations has grown to accommodate new systems and technology. Clearly, the industry has also embraced e-commerce with a reluctant bear hug.

So, does it matter which set of regulations companies follow when they feel the new federal bill conflicts with or confuses their understanding of SEC regulations that are already on the books?

Chances are, these issue will arise, but the new federal rules have served to turn the attention of companies and politicians to the subject of online security.

"From a legal perspective, these new regulations were not really needed," said Paul Gaines, vice president for electronic security at the Federal Reserve Bank of New York.

"In the Uniform Commercial Code, Article 4, there is already guidance for how to approve contracts without using handwritten signatures. It is the common way, but it is not the exclusive way," said Gaines, who has been at the bank for four years.

No, the true beauty of the new authority and rules going into effect, Gaines said, is that they "highlighted the issue of electronic security. Imagine if the president were able to now sign an act online using a digital signature. The path of the industry has always been to become more efficient, and anything that helps that is worthwhile."

At the very least, the act will compel firms to recognize that electronic transfers and business are going to gather force, whether they like the rules or not.

» posted by ITworld staff

Computer World

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