Calif. adopts digital-signature law

By Kathleen Ohlson, Computer World |  Government

California brokerage firms may enter into contracts with their customers through digital signatures, rather than filling out a pile of paperwork.

Gov. Gray Davis yesterday signed into California law a bill that allows contracts with electronic signatures to count as legal documents, according to a statement from ETrade Group Inc., one of the sponsors of the bill. The new law applies to firms that conduct business in California and their customers in all 50 states, ETrade said.

The Menlo Park, Calif.-based brokerage plans to use digital signatures to open and transfer customer account information, as well as add new privileges, such as margin agreements, ETrade said. The company doesn't know which digital signature technology it will use, but expects to use digital signatures "sometime in 1999," said Tim Alban, a spokesman for ETrade.

Gomez Advisors' John Robb said while brokerages may sign up customers faster, they will have to overcome a few obstacles. There isn't any good digital signature technology available now for such applications, and digital signatures are currently not widely adopted, Robb said. Adopting digital signatures is a "state-by-state battle," since brokerages need to register in each state individually. However, this law is a "good first step," he added.

Online brokerages will benefit if they can automate more account processing and keep costs down, Robb said.

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