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Top 5 Things You Need to Know to Keep Your
Electronic Documents Legal and Secure July 16, 2013
Presenters
DOCUSIGN CONFIDENTIAL 2
Miles Kelly Sr. Director, Industry
Marketing DocuSign
Steve Bisbee CEO
eOriginal
Margo Tank Partner
BuckleySandler LLP
Top 5 Things You Need to Know
1. Know the law
2. Require the highest level of security in your document ecosystem
3. Understand electronic chattel paper
4. Understand eTransaction management
5. Implementation best practices
DOCUSIGN CONFIDENTIAL 3
1960s Mainframe Computing
1970s Mini
Computing
1980s Client / Server
Computing
1990s Cloud
Computing
2000s Social
Networking
2010s Mobile
Computing
Next Step
Fully Digital Financial Services
About DocuSign Vision
Empower organizations to “keep business digital.”
with DocuSign eSignature Transaction Management Solutions
Everyone’s Mobile
Transactions Growing
Consumers Digital
Digitally anytime, any place, any device.
Leveraging Key Trends
2009 2010 2011 2012 2013
Exponential Growth
Next Major Step in Productivity
DOCUSIGN CONFIDENTIAL 4
More than 37M users growing to 60M
More than 63,000 users a day
Up to 5M pages a day
More than 65,000 customers
189 countries
DocuSign Network Taking Off
1. Know the Law: UETA and ESIGN Overview
DOCUSIGN CONFIDENTIAL 6
2. Require a Broad Set of Security Certifications
DOCUSIGN CONFIDENTIAL
Data Privacy
Collection of Data
Use of Data
Data Requirements Protection of Data
General Computing Controls Focus
Comprehensive Scope
Security Framework
Testing of Controls
Measures Effectiveness
Reliability of Service
Global Security Gold Standard: ISO 27001
Defines An (ISMS) Information Security Management System
Requires Business Continuity
Streamlined process for EU privacy law compliance
DocuSign Security
Customer Benefits
Confidentiality
Integrity
Availability
Authenticity
Non-Repudiation
DOCUSIGN CONFIDENTIAL
DocuSign Security Assurance Program
Security Assurance Program Benefits
DOCUSIGN CONFIDENTIAL 9
Confidentiality Customer documents and data are private, and access is workflow controlled
Integrity Documents, both in progress and completed, are tamper-proof
Availability Critical service is accessible to customers 365x24x7
Authenticity Third parties (such as courts) can rely on validity of signers as well as documents
Non-Repudiation Documents are technically, legally, and procedurally irrefutable
Stephen F. Bisbee President and CEO of eOriginal
Margo Tank Partner, BuckleySandler LLP
eOriginal
Certified Print®
TOLEC
Transfer Ownership
Destruction
Over 23 million financial transactions managed within the eOriginal eVaults.
Over $1T of transferable assets under management within eOriginal eVaults.
Our Vision Enabling the post-execution management of secure, legally compliant and enforceable electronic eSignatures and transactions consisting of high value assets or source records throughout their lifecycle.
3. Understanding Electronic Chattel Paper: Brief History
In 2000, Congress enacted the Electronic Signatures in Global and National Commerce Act (E-Sign Act).
Its purpose was to facilitate the use of electronic records and signatures and ensure the validity of electronic contracting.
In addition to the federal E-Sign Act, all but 3 states have enacted the Uniform Electronic Transactions Act (UETA) -- and the other 3 states have enacted similar laws over which the eSign Act is potentially preemptive.
The E-Sign Act did not do anything to change the basic rules of contract law, preserves underlying consumer protection laws and the consumer's right to receive certain information in writing.
Its purpose, as set forth in Section 101(a) of the E-Sign Act, was to make it clear that a signature, contract, or other record could not be considered invalid or unenforceable just because it was done in an electronic format.
Under Section 101(d) and (e), however, an electronic contract could be invalid or unenforceable if the electronic record was not capable of being retained and accurately reproduced for later reference.
Contracts, Leases or other financial assets are often securitized or pledged as collateral to lenders that provide financing to different industries.
If the contract is "chattel paper," then the lender may perfect by either filing or by taking possession of the contract (with possession taking priority).
If the contract is created in an electronic format, then it may be "electronic" chattel paper.
If the contract is electronic chattel paper, then the lender may perfect by taking "control" of the contract.
Key to remember -- “control" is to electronic chattel paper what "possession" is to chattel paper (in terms of priority).
3. Understanding Electronic Chattel Paper:
So what does it mean to take "control" of electronic chattel paper?
Under Article 9-105 of the UCC, a secured party has “control” of electronic chattel paper if the record or records comprising the chattel paper are created, stored and assigned in such a manner that each of following six criteria are met:
1. A single authoritative copy of the record exists that is unique, identifiable, and, except as provided below (in 4, 5 and 6), has not been altered;
2. The authoritative copy identifies the secured party as the assignee of the record or records;
3. The authoritative copy is communicated to and maintained by the secured party or its custodian
3. Understanding Electronic Chattel Paper: Legal Requirements
3. Understanding Electronic Chattel Paper: Legal Requirements
4. Copies or revisions that add or change the identified assignee of the authoritative copy can only be made with the participation of the secured party;
5. Each copy of the authoritative copy (or any copy of a copy) is readily identifiable as a copy that is not the authoritative copy; and
6. Any revision of the authoritative copy is readily identifiable as an authorized or unauthorized revision.
Note: The 2010 amendments to Article 9 -105, effective July 1, 2013, add a general rule of control satisfied “if a system employed for evidencing the transfer of interests in the chattel paper reliably establishes the secured party as the person to which the chattel paper was assigned.”
The satisfaction of the six criteria above become a safe harbor for meeting this general rule.
That is what Article 9-105 tells us; what Article 9-105 does not tell us is how to go about complying with each of these criteria
No guidance that says “If you do A, B or C, then you satisfy a certain requirement”
Largely left to the marketplace to determine best practices
Little case law, even additional revisions to Article 9-105 offer little help
The "control" standard set forth in UCC 9-105 brings a level of order and certainty to the process
In the near-term, expect that funders will treat electronic leases/contracts as electronic chattel paper (regardless of whether they actually are) to ensure accepted compliance
3. Understanding Electronic Chattel Paper: Legal Requirements
An added incentive for complying with the requirements of Article 9-105 – because it wants to create an additional comfort level for any subsequent buyer of those electronic leases
Why? Because any buyer of contracts (whether paper or electronic) wants to make sure that they are getting possession/control of the contracts and are buying enforceable contracts
If a seller can adequately demonstrate that it has the necessary control procedures in place, it will give the prospective buyer a much greater comfort level in contracts being purchased
Acceptance of eContracts Customers Funding Sources Counsel/Underwriters Rating Agencies
3. Understanding Electronic Chattel Paper: Legal Requirements
What is the role of Standard and Poor’s, Fitch’s and Moody’s in the secondary market for eContracts? What types of electronic transactions have been rated?
What differences, if any, are involved in rating a paperless transaction vs. paper? UCC 9-105 Control Opinions and System Descriptions Electronic Collateral Control Agreements Communicating with transaction participants Counsel, underwriters, servicers, trustees, issuers, custodians
How counsel educates investors and underwriters about eContracting
Start with the right tools and mindset for paperless transactions
4. eTransaction Management
4. eTransaction Management
Facilitate Post Closing Environment Including:
Transaction Management Integrity checks Audited control of access (who, when?) Evidentiary package, Certified Print® Content media format, Paper Out® and Paper In®
Establish Control Transfer of Control (Ownership), securitization and
collateralization, release Restricting important actions- e.g., deleting or transferring
eContracts. Provide Insight/Transparency/Document Retention Policies Deliver Audit/Compliance
4. eTransaction Management: Pledging as Collateral
Customers Originators Funding Sources
Custodians
Orginator eOriginal
Vault
Collateral Control Agreement
eDeposit
4. eTransaction Management: Securitization
Customers Originators Funding Source
Selected pool
Funding Source eOriginal Vault
Or 3rd Party Custodian
Internal
OrginatoreOriginal
Vault
Selected pool
Warehouse SPV
Warehouse Bank Lender
Term securitization
SPV Trust Indentured
Trustee Or
3rd Party Custodian
Internal
eDeposit
5. Best Practices & Implementation Tips
Overcoming Tradition in an Industry Based on Tradition
Obtaining Internal Buy-in Obtaining External Buy-in from Vendors, End Users and
Syndication Sources
Focus on Business Efficiencies
Formulating the Appropriate Security Levels
Agreements to Contract Electronically
Important Role of Global Agreements
Acting Globally, but Thinking Locally
Getting the Various Business Units Up and Running
Special Concerns of Different Collateral Financiers
Summary
End to end digital transactions are becoming a standard for
modern financial service institutions
The world is evolving to electronic chattel paper
Utilize industry resources as you modernize!
DOCUSIGN CONFIDENTIAL 23
Q&A
Thank You Upcoming Webinars Forrester eSignature Technology Insights – What to Look for in a Provider Tuesday, August 6th, 2013 at 10:00 AM PT
Online Admissions Best Practices for Higher Education Wednesday, July 31st, 2013 at 10:00 AM PT
For more information: Call: +1-877-720-2040 or [email protected] Website: www.docusign.com Website: www.eoriginal.com
Thank you very much!
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