Managing Syndicated Loans: How to Get Comfortable with E-Signatures
To raise your comfort level around electronic signatures and take advantage of the benefits, you first need to identify all the applicable regulations.
2 November 2015
The Intralinks Debtspace™ Knowledge Series is a periodic post of topical articles authored by the Intralinks Debtspace team, created to help you accelerate and improve your loan syndication process throughout the primary, secondary, and agency phases. Installments will explore how to leverage Intralinks’ end-to-end offering to support your full loan lifecycle. In this installment, Serge Renaud, Intralinks' VP of Security and Quality Assurance, discusses how to raise your comfort level around electronic signatures and by identifying applicable regulations and outlining the benefits.
Signatures have been moving away from pen and paper (or wet signing) to electronic signatures (e-signatures) as more industries and their processes become paperless. This transition occurs at the process-level; it is not a sweeping top-down or industry-wide mandate. At Intralinks, we've noted that during the credit agreement amendment process a handful of lenders still prefer wet ink signatures as their means of consenting to an amendment of the formal documents.
I suspect that the wet signature preference is culturally ingrained and is well understood by all the parties — and, in truth, until recently there was no online equivalent to this manual paper-based amendment process.
Getting comfortable with e-signatures
To raise your comfort level around electronic signatures and take advantage of the benefits of going paperless, you first need to identify all the applicable regulations and understand which frameworks are in place to establish the functional equivalence of an electronic signature.
From my understanding (not legal advice), US federal laws do not require the use of any specific technology for a legally enforceable e-signature – the requirements are purposely technology-neutral. I've found that the GSA’s e-signature guidelines is one of the better reads available on this topic. Besides outlining the laws, it defines many useful terms and concepts, and provides the five requirements for a legally binding electronic signature. I found it interesting that the laws reject the notion that users of electronic signatures require more security than handwritten signatures. It all ties back to "functional equivalence."
What constitutes an acceptable electronic form of signature?
One of the five signing requirements has to do with the "form of signature." Many people think that an electronic signature is just a scan of their signature, copy & pasted into a document. It turns out that this just one example of the acceptable electronic forms of signature. The set includes (from GSA’s e-signature guidelines):
- A digitized image of a handwritten signature that is attached to an electronic record
- A typed name (e.g., typed at the end of an email message by the sender, or typed into a signature block on a website form by a party)
- Clicking on an "I Agree" button
- A shared secret (e.g., a secret code, password, or PIN39) used by a person to sign the electronic record
- A unique biometrics-based identifier, such as a fingerprint, voice print, or a retinal scan
- A digital signature
There are numerous risk considerations, such as the likelihood of a successful challenge or the monetary loss resulting from a challenge. These help to determine which form of signature is the best to use, but again functional equivalence comes into play.
Similarly in Europe, according to the EU E-Signature Directive, all of these electronic signature methods are recognized as valid and enforceable, in effect, making all electronic signatures — from simple to advanced — equal in status to wet signatures.
Requirements for legally binding electronic signatures
These are the five accepted GSA signing requirements:
- A person (i.e., the signer) must use an acceptable electronic form of signature (discussed above)
- The electronic form of signature must be executed or adopted by a person with the intent to sign the electronic record, (e.g., to indicate a person’s approval of the information contained in the electronic record)
- The electronic form of signature must be attached to or associated with the electronic record being signed
- There must be a means to identify and authenticate a particular person as the signer
- There must be a means to preserve the integrity of the signed record
Intralinks Debtspace™: Our approach
As Intralinks continues to evolve solutions for highly regulated industries such as life sciences and financial services, we advise you to consider the following when assessing systems or solutions that incorporate the use of electronic signatures:
- Is the signature required by a regulation? Or are you using the signature to emphasize the seriousness of the transaction or you need to bind a party to the transaction?
- Does the system ensure the identification and authentication of its users and signers? Does the signer have a unique identifier? Can the system show that it associates a single user with the signer?
- Does the system support the intent to sign and the reason for signing (a.k.a. the "signing ceremony")? Does it make it clear to the user that they are "signing" and why? Can you tailor the reason for signing (i.e., provide your own text)?
- Do the system's underlying electronic records contain the appropriate details? Do they identify the signer, date, and time of the signature, and the reason (such as agreement, review, approval, or author)?
- Does the system's displayed or printed electronic record show the appropriate details (a.k.a. the signature's "manifestation")? Does it show the signer, date, and time of the signature, and the reason?
At Intralinks we employ an electronic signature process in our Amendment Vote Management (AVM) tool to help reduce effort and resources, and to speed credit decisions for syndicated loan deals. As a leader in inter-enterprise content management, our approach to electronic signatures addresses all the requirements outlined above to ensure that AVM is not only efficient but is legally compliant.
Serge Renaud is VP of Security and Quality Assurance at Intralinks. He is part of the risk readiness team which focuses on improving security and addressing client audits. Serge is a Subject Matter Specialist in technology risk management across diverse industries, and acts as a process improvement guide and internal consultant. He has successfully guided more than 140 client audits through the Intralinks Platform.