Are E-Signatures Legal for Financial Advisors?

Are E-Signatures Legal for Financial Advisors?

Online and electronic signatures are legal in the United States of America since 2000, but financial advisors have to keep in mind various issues regarding compliance. Brokers and dealers who want to use online signatures should ensure that any technology they use must be FINRA/SEC-compliant.

Most financial advisors are choosing e-signatures for an easy and quick way to get documents signed by the required people. Any technology used should be legal because there are strict laws in the USA governing electronic signatures. There are specific guidelines for E-signature vendors, and not all vendors comply with these guidelines.

E-Signatures are used by various vendors, dealers, financial institutions, etc. In the USA, Form W-9 is used by a business or a party to request information from a taxpayer. Recently, E-Signatures are being used widely to fill out a blank W9 form. An electronic signature should be compliant with both SEC and FINRA guidelines.

The American Bar Association spent almost four years and, with the help of around 70 lawyers, came up with the Digital Signature Guidelines. This will help you to quickly check if your e-signature vendor meets all legal requirements and is legitimate. E-signature vendors need to keep various things in for them to be considered legal.

The Identity of the Signer Must be Authentic

It is vital to know with whom you are doing business online. No one will do business with someone who he does not know. This also goes for E-signatures, and if a particular document is challenged in a court, you will need to prove the identity of the signer. Here are some common ways to prove identity:

  • By using E-mail authentication, the identity of the signer can be checked. A link is sent to the signer’s e-mail, and he will need to open this link by logging into the e-mail.
  • While sending a document, the signer has to answer a security question that can be used later in case of identity verification. Some common questions are the signer’s mother’s name or the last 4-5 digits of his account number.
  • The E-signature company can send an SMS to the signer’s mobile phone with a random code. The signer needs to enter the same code when asked to. This is an easy and fast method to prove the identity of a digital signer.
  • Knowledge-based authentication is also used where the signer can be asked his social security number or date of birth. If he answers correctly, then he will need to answer four more questions based on data found in public records. Information is gathered from the town hall, public health, and credit reports.

The Signer Must Reach Disclosure and Consent with E-Signature Vendor

It is vital for an E-signature vendor to come up with a consent and disclosure page for the clients before they sign. The ESIGN Act has made this compulsory to protect both the vendor and its clients. This makes sure that the client knows he will be legally bound after the signature is done and cannot change his choice.

For people who have never used online signatures before, this is a great thing because it tells them all the consequences beforehand. The consent page makes sure that no one signs a document accidentally while reading it and saves both the client and the vendor from unnecessary issues.

The E-signature vendor should document all actions

The best E-signature service providers use an audit log to document all the steps involved in the e-signature. It can be beneficial in proving the identity of the signer and the date of signing of the documents.

Generally, companies log the start of the transaction, notifications, and e-mails sent to the signer, consent of the signer for e-signature, documents seen by the signer, acknowledgment of the documents, completion of the transaction, downloaded documents, and any cancellation. If there are any disputes in the future, this information will help solve it.

All Documents Should be Accessible by the Signer

Anyone who does an e-signature should have access to the documents after he signs them. The vendor should give a final copy of the signed documents to the signer. The process should be completely secure, and no one should tamper with the documents.

Good e-signature vendors offer tamper evidence that captures proof anytime someone tries to tamper with or change any terms in a signed document. Even if someone capitalizes a word or deletes a space, the vendor will catch it. This feature is highly beneficial in cases of tampering. If a person claims that the documents have tampered, this feature provides all necessary evidence to check any alterations or changes.

The Best E-Signature Service Providers

PandaDoc, sign now, eSign Genie, SignEasy, etc. are some of the top e-signature service providers for all businesses. With eSign Genie, you can add and edit documents, send it to the concerned people for e-signatures, and archive signed final documents. Their team members worldwide work on single contract documents. Users can upload their own documents or can even make the documents with the software.

The software keeps track of the changes made to a document, and all versions of the document are managed by it. It also offers template creation, notifications through phone and e-mail, and editing rights to third-party companies in some cases. 256-bit encryption is used to keep contracts and other documents safe from cyberattacks and data breaches. All services provided by eSign Genie are FINRA, HIPAA, and SEC-compliant, and it is safe to use.


Electronic signatures have the same legal status as signatures made on paper according to law. It increases the efficiency and speeds up transactions using paperless and convenient online signatures. The reliance on paper signatures is reducing, and more and more businesses are opting for e-signatures.

One thing you need to ensure is that the e-signature vendor you choose should be compliant to the guidelines issued by SEC and FINRA. eSign Genie is a great e-signature service provider that has some of the best features and is totally safe and legal. Now, you can easily make digital signatures with legal assurance and not worry about lengthy paper transactions.

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