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US Mutual Fund Industry Welcomes New Electronic Signature Law

Mike Godfrey, Tax-news.com, New York

13 September 2000


Leading US companies in the mutual fund industry are taking advantage of new legislation passed recently by Congress by preparing to offer investors the facility to purchase funds with an electronic signature. According to Shelley Grice, spokesperson for Janus Capital Corporation, the new electronic signature service will add 'instant gratification, a lot of folks are looking for that.'

More leading investment companies such as Fidelity Investments, the Vanguard Group and American Century Investments will also allow investors to open accounts online, rather than filling out applications, signing them and posting them by snail mail.

American Century, which has offered transactions over the Internet since 1996, says it is now able to offer a more complete electronic service. 'This is the one element that's missing from a total electronic relationship with the customer,' says Beth Randolph, a spokesperson for American Century.

However, not all companies will be making electronic signatures effective immediately. T. Rowe Price insists that as only about 20 percent of the retail clients have registered for online access to their accounts, and most of them use the company's Web site only to check their balances, the company will not prioritise the offer until sometime in the first half of 2001. Spokesman for T. Rowe Price, Steve Norwitz, confirmed there are 'still a lot of wrinkles to be ironed out, and it's not a big priority.'

A Department of Commerce report, commissioned before the act was passed, presented the overwhelming need for electronic signatures. The report concluded that information technology industries are responsible for about 30 percent of U.S economic growth since 1995. Information technology has consistently accounted for at least 50 per cent of the recent increase in US. productivity growth: from 1.4 per cent per year, during 1973-1995, to 2.8 per cent per year since 1995. IT also accounts for two-thirds of the growth in overall US business investment in recent years.

The new law, entitled "Electronic Signatures in Global and National Commerce Act" will take effect on October 1. It will require customers to register their identities online through social security numbers and other personal details, and these identities will act as their electronic signatures. It will ensure the legal validity of electronic contracts, signatures, notices, and other records and documents and will facilitate contracting parties to choose the technology for authenticating their transactions without government intervention. Furthermore, the new legislation will provide the legal certainty necessary for entrepreneurs to invest in electronic commerce. Overall, the landmark legislation is intended to remove all legal impediments to electronic commerce.

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