Wednesday, May 04, 2016

NASAA proposes policy on electronic offering documents

By John M. Jascob, J.D., LL.M.

NASAA's Corporation Finance Section has released for public comment a proposed policy statement on the use of electronic offering documents and signatures. The proposal seeks to establish uniform state guidelines for issuers wishing to provide investors with electronic subscription agreements and other documents that may be executed electronically.

Uniform guidelines. NASAA’s proposal reflects the ongoing efforts of state regulators to address appropriately the increasing use of technology in the securities industry. NASAA’s proposing release notes that several issuers have requested no-action letters or other relief on a case-by-case basis in order to gain state approval of the electronic distribution and execution of offering documents. The proposed statement of policy is intended to provide a tool for NASAA jurisdictions to establish uniform standards for these initiatives and to streamline the process for industry participants.

Format, delivery, and custody. The proposal would permit an issuer to deliver offering documents, including subscription agreements, over the Internet or by other electronic means, provided that they are prepared and delivered in a manner consistent with state and federal securities laws. The offering documents must be delivered as a single, integrated document or file that permits storage and printing by the recipient and which does not contain any links to or from external documents or content.

The issuer must obtain informed consent from the prospective investor to receive the documents electronically and must maintain evidence of delivery, among other requirements. An investor may revoke his or her consent at any time. Investors who decline to receive documents electronically must not be subjected to higher costs, other than the direct cost of printing, mailing, and processing the documents in paper form.

Entities participating in an electronic documents initiative—including placement agents, broker-dealers, and other selling agents—must maintain written policies and procedures governing their use. Entities and agents which have custody of these documents must store them in a non-rewriteable and non-erasable format and maintain secure offsite backups.

Request for comments. Comments on the proposal are due by June 1, 2016. After the comment period has closed, NASAA will post the comments it receives to its website.