October 26, 1999
James A. Ricketts
P.O. Box 2209
Omaha, NE 68103-2209
Re: Electronic Signature System
Dear Mr. Ricketts:
You have requested interpretive guidance regarding whether a service you propose to establish, an electronic workflow process utilizing optical disk technology, is consistent with National Association of Securities Dealers, Inc. (NASD) rules. In particular, you have asked whether the use of electronic entries by a licensed principal to indicate the review and approval of new customer accounts is in accord with the provisions of NASD Rule 3110(c)(1)(C). You also have asked whether your proposed use of optical disk technology for record retention is consistent with NASD and Securities and Exchange Commission (SEC) record retention requirements and rules.
You and I discussed this interpretive request by telephone on October 1, 1999. I told you that SEC Rule 17a-4 specifically contemplates the use of optical disk technology for record retention. I suggested that you seek guidance directly from the SEC as to whether your proposed records management system is consistent with SEC rules.
With respect to electronic approvals, as you know, a NASD Regulation, Inc. interpretive letter issued to American Express Financial Corporation (AEFC) on November 26, 1997 addressed this issue. The AEFC letter stated that electronic signatures may be used in place of manual signatures to acknowledge the review and approval by a qualified Series 24 principal of new customer accounts if certain safeguards enumerated in the letter are met. The safeguards you propose to apply to your service appear to meet the safeguards detailed in the AEFC letter. Based on the representations in your letter and compliance with the safeguards enumerated therein, the staff is of the opinion that you may utilize electronic signatures in place of manual signatures for principal approval of new customer accounts under Rule 3110(c)(1)(C).
I hope this letter is responsive to your inquiry. Please note that the opinions expressed in this letter are staff opinions only and have not been reviewed or endorsed by the Board of Directors of NASD Regulation. This letter responds only to the issues you have raised based on the facts as you have described them in your letter, and does not necessarily address any other rule or interpretation of the NASD or all the possible regulatory and legal issues involved.
Please do not hesitate to contact me should you have any further questions about this issue.
Mary N. Revell
Associate General Counsel
cc: Jack Rosenfield, Vice President and Director, District 4