Home | About NCTR | Resources | Meetings | News Room | Member Directory

President Clinton signed E-Sign into law on June 30, 2000 (Public Law 106-229).  Its purpose is to eliminate barriers to the use of electronic signatures (e-signs[1]) and electronic records (e-records) in commercial transactions.  E-Sign prohibits any statute, regulation, or other rule of law from denying the legal effect, validity, or enforceability of a signature, contract or other record relating to a transaction because it is in electronic form (Section 101(a)(1)).  By the same token, a contract relating to such transaction may not be denied legal effect, validity, or enforceability solely because an electronic signature (e-sign) or electronic record (e-record) was used in its formation (Section 101(a)(2)).  The transaction must arise in interstate and foreign commerce (Section 101) and must relate to the conduct of business, consumer, or commercial affairs between two or more persons involving personal property, service, or real property (Section 106(13)). 

E-Sign generally overrides state laws that are inconsistent with its provisions.  The following exceptions exist: 

Ø      States that have adopted the Uniform Electronic Transactions Act (UETA) as approved and recommended by the National Conference of Commissioners on Uniform State Laws without changes should not have that law pre-empted (Section 102(4)).  (If the state adopts only a portion of UETA, certain exceptions apply.)

Ø      E-Sign does not apply to a contract or other record to the extent it is governed by a statute, regulation, or other rule of law relating to wills, family law, or certain articles of the Uniform Commercial Code (Section 103(a)). 

Ø      Also excepted are court orders and the like and certain notices regarding cancellation of utility service, foreclosure, and other enumerated situations (Section 103(b)). 

E-Sign does not limit or supersede any requirement by a state regulatory agency that records be filed with such agency or organization in accordance with specified standards or formats (Section 104(a)).  It also allows the preservation of existing state rulemaking authority under certain circumstances (Section 104(b)).

            E-Sign is generally effective on October 1, 2000, except for certain record retention activities, which are effective of as March 1, 2001 or June 1, 2001, depending on the situation.

If a state wishes to enter into a contract with a private sector vendor, it retains the same right as any other party to determine whether or not to use e-signs or e-records.  This provision likely applies to retirement systems contracting with private entities for services such as information systems and investment management or for purchase or sale of investment assets.  Because E-Sign appears to be confined to these types of transactions, it does not appear to otherwise affect the operations of state and local government retirement systems.  Several NCTR members interested in this issue reviewed this memo and agree with its conclusion.

A more technical explanation is contained in a memo by the National Governors Association, which can be located at http://www.nga.org/Pubs/IssueBriefs/2000/Sum000922ESIGN.asp.  

The enacted version of E-Sign is available at http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=106_cong_bills&docid=f:s761enr.txt.pdf.