Representatives of several Silicon Valley-based law firms have petitioned the SEC to conduct a rulemaking under Regulation S-T to permit electronic signatures on forms submitted to the SEC. While the petition acknowledges the earlier relief issued by the SEC on electronic signatures under Regulation S-T due to the burdens posed by COVID-19 restrictions, its signatories feel that due to the changing nature of commerce, the Commission should formally amend the applicable rules under Regulation S-T.
Regulation S-T signatures and temporary relief. The SEC’s Regulation S-T provides general rules for electronic filings. Rule 302(b) requires that signatories to documents that are electronically filed “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” and that such documents must be executed before or at the same time the filing is made.
Recognizing that some persons and entities subject to Regulation S-T may be experiencing difficulties in satisfying the regulation’s signature requirements due to circumstances arising from COVID-19, the Commission issued on March 24, 2020, a statement that CorpFin will not recommend an enforcement action with respect to the electronic signature requirements under Rule 302(b) under the following circumstances:
- The 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;
- The document indicates the date and time when the signature was executed; and
- The filer establishes and maintains policies and procedures governing this process.
The petition outlines a number of ways electronic signatures are permitted, such as obtaining actions by written consent under Delaware law to execute billion-dollar merger agreements. Regarding registered offerings, the petition notes that registrants use electronic signatures for underwriting agreements, lock-up agreements, and legal opinions. Electronic signatures can also be used to enter commercial agreements, contracts, and equity compensation agreements, according to the petition.
The law firm representatives petitioning the SEC remarked that their clients have indicated that the COVID-19 crisis has accelerated the trend towards electronic signatures, especially considering the difficulties in obtaining traditional “wet” signatures. The petitioners believe that the transition to remote work environments during the COVID-19 pandemic will only increase trends that are already being witnessed as commerce is being conducted in virtual interactions, including executing transactions and agreements. The petition also cites numerous state and federal court cases in support of the effectiveness of validating electronic signatures.
The petition also touts technology improvements which make it possible to confirm who has signed a document and when it was signed, asserting that electronic signatures are more accurate regarding the timing of execution. These technological advancements also make recordkeeping and storage of electronic signatures “seamless and secure,” according to the petition.
The ability to obtain electronic signatures would benefit all registrants, including larger companies with operations in multiple locations and smaller companies that face challenges in filing manually signed documents, the petition states. In addition to signing the petition with electronic signatures by the law firm representatives, the petition includes the text of its proposed amendments to Regulation S-T that the petitioners recommend the SEC adopt.
Other SEC action on electronic signatures. Citing the logistical difficulties of submitting Forms 144 in paper in light of COVID-19 concerns, CorpFin said last week that it will not recommend enforcement action to the Commission if Forms 144 filed in paper under Rules 101(b)(4) or 101(c)(6) of Regulation S-T are submitted via email in lieu of mailing or delivering the paper form. The statement also outlines criteria for submitting the form with a typed signature in lieu of the manual signature.