Skip to main content
Menu Icon
Close

InfoBytes Blog

Financial Services Law Insights and Observations

Filter

Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.

  • IRS Ready to Accept Electronic Signatures on the 4506-T

    Fintech

    Recently, the Internal Revenue Service issued Electronic Signature Requirements that will allow applicants to electronically sign and submit IRS Forms 4506-T and 4506T-EZ (4506-T) beginning January 7, 2013. IRS regulations permit taxpayers to order a tax transcript using a form 4506-T through the IRS Income Verification Express Services (IVES). Under the Requirements, IVES participants may accept and submit an electronically signed 4506-T if the electronic signature process includes: (i) a structure that places creation of the signature under the signer’s sole control; (ii) a signature technology that permits the signature to be verified, either through the use of software algorithms or forensic analysis;  (iii) the ability to establish that the signature was created by a specific individual; (iv) a signature block on the document with a symbol, logically associated with the 4506-T, that allows validation of the signer’s name against the name listed on the 4506-T; (v) a process flow or communication with the signer establishing the intent to sign and the purpose of the signature; and (vi) application of the signature in a tamper-evident manner. In addition, the process used to present and sign the 4506-T must include each of the following: (i) authentication, (ii) consent, (iii) tamper-proofing, and (iv) an audit log. Each IVES participant accepting electronically signed 4506-Ts must determine that the electronic signature process adheres to the Requirements, and must also retain a copy of each signed 4506-T and accompanying audit log for at least two years. Such participants also must implement a third-party audit program and comply with specific monthly and annual third-party audit and reporting requirements. BuckleySandler’s Electronic Signatures and Records Team has substantial experience assisting entities seeking to comply with electronic signature requirements.

    IRS Electronic Signatures

  • UN Commission Publishes Report of Working Group on Electronic Commerce

    Federal Issues

    Recently, the United Nations Commission on International Trade Law (UNCITRAL) published the Report of Working Group IV (Electronic Commerce), reflecting the group’s work during its forty-sixth session, held in late October and early November. The report describes the Working Group’s continued efforts to explore issues related to electronic transferable records and to address the need for an international regime to facilitate the cross-border use of such records. During this most recent session, the Working Group considered in detail the legal issues relating to the use of electronic transferrable records, and developed parameters for a set of rules to address those issues. Working Group members expressed broad support for a draft model law that would incorporate the parameters identified, while allowing for flexibility when addressing differences in national substantive laws. Some members also expressed support for the preparation of guidance texts, such as a legislative guide, and Working Group members discussed the possible consideration of a binding instrument, such as a treaty, to establish a legal framework for the cross-border transfer of electronic records. The Working Group will follow up on these issues during its forty-seventh session to be held in New York from May 13-17, 2013.

    Electronic Signatures Electronic Records

  • Federal District Court Finds Valid Agreement under ESIGN Based on Upload of Images in Accordance with Website Terms of Use

    Fintech

    On November 13, the United States District Court for the District of Maryland held that uploaded pictures to a website disclosing in its Terms of Use (TOU) that uploading images creates valid assignments of the rights to use those images were electronic signatures creating valid assignments. Metro. Reg’l Info. Sys., Inc. v. Am. Home Realty Network, Inc., No. 12-cv-00954 (D. Md. Nov. 13, 2012). The plaintiff had obtained a preliminary injunction against the defendant’s use of images that appeared on the plaintiff’s website, and the defendant appealed the injunction, arguing, inter alia, that no valid assignment of the images had occurred under Section 204(a) of the Copyright Act, which requires assignments to be in writing and signed by the assignor. Citing Section 101(a) of the Electronic Signature in Global and National Commerce Act (ESIGN Act), the court found that users’ acts of uploading images constituted electronic signatures sufficient to satisfy the requirements of the Copyright Act. The court thus denied the defendant’s motion to suspend the preliminary injunction.

    ESIGN Electronic Signatures

  • FTC Loses Motion in Unfair Billing Case Against Online Payday Loan Referral Service

    Fintech

    On November 7, the U.S. District Court for the Middle District of Florida held that numerous factual issues prevented the court from granting summary judgment on the FTC’s claims that an online payday loan referral business engaged in unfair and deceptive billing practices and failed to provide adequate disclosures. FTC v. Direct Benefits Group, LLC, No 11-1186, 2012 WL 5430989 (M.D. Fla. Nov. 7, 2012). The FTC alleges that the defendants violated the FTC Act by obtaining consumers’ bank account information through payday loan referral websites and debiting their accounts without their consent. The FTC also alleges that the defendants failed to adequately disclose that, in addition to using consumers’ financial information for a payday loan application, they would use it to charge them for enrollments in unrelated programs and services. Although it acknowledged that the FTC had presented substantial evidence regarding consumer complaints about the defendants’ activities, the court held that because the defendants maintain that no consumer could be enrolled in the programs without at least clicking an “okay” button on the defendants’ websites, the FTC was not entitled to summary judgment. A bench trial is scheduled for November 27, 2012, during which the parties will present additional evidence and arguments regarding the content and operation of the websites and whether consumers could enroll in the referral programs without taking affirmative steps to do so.

    FTC Payday Lending Electronic Signatures Lead Generation Consumer Complaints

  • Arizona Appellate Court Requires Further Proceedings on Whether Certain Emails Constitute Electronic Signatures Under State Law

    Fintech

    Recently, the Arizona Court of Appeals ruled that a state trial court erred in dismissing a claim that an emailed thank-you note acknowledging the receipt of a signed agreement constituted an electronic signature. Young v. Rose, 286 P.3d 518 (Az. Ct. App. 2012). In this case, a real estate agent sued two former clients for breaching an exclusive representation contract. The clients had manually signed the contract and returned it as a PDF copy. The agent never manually signed the agreement, but claimed that her electronic business card attached to an email thanking her clients for the PDF copy constituted an electronic signature under the Arizona Electronic Transactions Act, which includes a broad definition of electronic signature. The trial court disagreed and dismissed the case, noting that the agent’s business card was included on all of her outgoing emails and therefore could not constitute an electronic signature in some cases but not others. The Arizona Court of Appeals vacated the trial court order on procedural grounds and held that further proceedings are necessary to determine whether the email at issue qualifies as an electronic signature. The court explained that in addition to proving the existence of an electronic signature, the agent must also establish that the parties intended to conduct the transaction by electronic means.

    Electronic Signatures

  • UK Court Holds Contract May Be Formed Through Series of Emails

    Federal Issues

    On September 3, an appeals court in the United Kingdom held that a contract of guarantee executed in a series of emails duly authenticated by the electronic signature of the guarantor is enforceable. Golden Ocean Group Ltd. v. Salgaocar Mining Indus. PVT Ltd., No A3/2001/0440, 0438. In this case, a ship owner sought to enter into a long-term charter of the ship with a mining conglomerate. The shipping brokers negotiating the contract on behalf of the parties did so through a series of emails. An early email contained the provision of guarantee, but the guarantee was not explicitly restated in the final email that culminated the agreement. The court held that under English law the emails at issue here properly formed a contract, including the guarantee. The court added that the electronic signature of the guarantor’s agent on the culminating email is proper authentication of the contract of guarantee contained in the earlier email, and that generally, “an electronic signature is sufficient and that a first name, initials, or perhaps a nickname will suffice.” The court upheld the lower court’s decision and dismissed the appeal.

    Electronic Signatures

  • Michigan Appellate Court Affirms Validity of Electronic Signature Under UETA

    Fintech

    Recently, the Michigan Court of Appeals affirmed summary judgment in favor of a defendant insurance company seeking to dispose of a challenge to an electronic signature executed by a policyholder. Zulkiewski v. Am. Gen. Life Ins. Co., No. 299025, 2012 WL 2126068 (Mich. Ct. App. Jun. 12, 2012). In this case, shortly before a life insurance policy holder died, the beneficiary information on his policy was changed through the insurance company’s online account management service. The former beneficiaries challenged the new beneficiary designation, arguing that although the Uniform Electronic Transactions Act (UETA) permits an electronic signature, to validate the authenticity of such a signature the insurance company must prove the efficacy of its security procedures. On appeal, the court held that the trial court did not err when it relied on evidence provided by the insurance company showing the extent of the personal information required to change the beneficiary, combined with an affidavit that the new beneficiary did not change the beneficiary designation. The court further explained that the appellants misread the relevant portions of the UETA when they argued that the lower court improperly accepted the insurance company’s assertions that its security procedures were “adequate to prevent deception by an imposter.”  The court explained that the insurance company need not prove the efficacy of its online security procedures to authenticate a customer’s signature since under the UETA doing so is merely one method by which to show attribution.

    Electronic Signatures UETA

  • State Law Update: NAAG to Focus on Privacy; Vermont, Connecticut, Oklahoma Make E-Commerce Changes

    Fintech

    Incoming NAAG President to Focus on Privacy Issues. On June 22, after being elected president of the National Association of State Attorneys General (NAAG), Maryland Attorney General Doug Gansler announced a year-long Presidential Initiative titled “Privacy in the Digital Age.” The Initiative will explore the best ways to manage consumer privacy risks in light of “emerging technologies and business models” that are challenging consumers’ ability to control their personal information. Through the Initiative, state Attorneys General will attempt to ensure that “the Internet’s major players protect online privacy and provide meaningful options for privacy control” to consumers.

    Two States Expand Data Breach Notification Requirements. Recently, Connecticut and Vermont altered state requirements for firms experiencing a data breach to report the breach. Connecticut’s revision – in the state’s annual budget bill, House Bill 6001 – expanded existing breach notification provisions to include notification to the state attorney general and takes effect October 1, 2012. Vermont amended, in House Bill 254, its breach notice law to require consumer notice of a security breach within 45 days and notification to the attorney general within 14 days of discovery of the incident.  The Vermont requirement was effective as of May 8, 2012.

    Oklahoma High Court Approves Rules for Electronic Filing and Signatures. On June 21, the Supreme Court of Oklahoma issued new state court rules governing the electronic filing of court documents in that state. These rules apply to a new statewide electronic management system that will replace the mix of electronic and paper-based record systems previously used in Oklahoma. Among other things, the rules provide for the use of electronic signatures where any statute or court rule requires a person’s signature in an Oklahoma state court. Like the new electronic system, the new rules will be phased in gradually; they become effective in each district and appellate court at the time the Oklahoma Unified Case Management System is implemented in that court.

    State Attorney General Electronic Signatures Privacy/Cyber Risk & Data Security

  • New York Appellate Court Holds Electronically Signed Affirmations Admissible

    Fintech

    On June 21, a New York state appellate court held that an electronically signed affirmation is admissible under state court rules. Martin v. Portexit Corp., No. 303854/07, 2012 WL 2344889 (N.Y. App. Div. June 21, 2012). In this personal injury case, the defendants moved for summary judgment in the trial court and relied on two electronically signed expert affirmations. In opposing the motion, the plaintiff argued that the electronically signed affirmations were inadmissible because they did not comply with court rules. The trial court agreed. On appeal, the court determined that the term “subscribed” in state court rules does in fact include electronic signatures; as such, electronic signatures have the same legal effect as handwritten signatures. Further, the court held that under the federal E-SIGN Act and state law, a party to a suit need not prove who placed the electronic signature on an affirmation.

    ESIGN Electronic Signatures

  • European Commission Proposes Electronic Identification Regulation

    Federal Issues

    On June 4, the European Commission adopted a proposed regulation that would create a framework for secure cross-border electronic transactions in Europe. The regulation seeks to facilitate European electronic commerce by requiring mutual recognition of national electronic identification systems, which would allow individuals and businesses to use their national electronic identification schemes to access public services in other EU countries. For example, the regulation would remove technical and legal barriers in order to make it easier for a company in one country to bid on public sector contracts elsewhere within the EU. The regulation does not require action by member states to develop electronic identity cards and will not require an EU-wide electronic identification or database.  Under the European Union’s ordinary legislative procedure, the regulation now must be adopted by the European Parliament and Council.

    Electronic Signatures

Pages

Upcoming Events