February 24, 2021

Electronic Signatures: Can You Authenticate Through Affirmative Reply Emails?

This Bryan Cave blog provides some helpful input about the SEC’s recently adopted electronic signature process – a topic that we’ve received a lot of questions about in our Q&A Forum. Here’s an excerpt addressing a common area of uncertainty: will the authentication requirements be met if a company emails a document for signature and asks that the recipient reply by email affirmatively indicating approval of the filing?

Many take the more conservative view that affirmative reply emails, without added features, are not sufficiently secure to authenticate the signer’s identity. For example, someone other than the signer may have access to his or her email account and the ability to send affirmative reply emails on his or her behalf. Similarly, someone could theoretically walk by an unoccupied computer and send a reply email.

Another view is that an affirmative reply email in and of itself should be a sufficient “logical or digital” authentication as long as the attestation form confirms the signatory’s email address to be used for that purpose.

We recommend that unless and until the SEC provides guidance, companies proceed with caution in using “affirmative reply” emails to authenticate signatures, and that, to the extent practicable, they consider adding features such as those discussed in Item 3 below.

As the blog’s response suggests, the details surrounding the authentication requirement are somewhat murky, and this is an area where experienced practitioners disagree on the right approach.  Some guidance from the Staff on this and other electronic signature-related topics would be helpful. Sure, this is pretty mundane stuff – but worrying about the mundane stuff probably accounts for the vast majority of sleepless nights among securities lawyers.

Activism: The Pandemic as a Catalyst

Last year’s proxy season saw a decrease in the number of activist campaigns, as pandemic-related disruptions during the early spring early raised investor concerns about the potential for opportunistic behavior among activist hedge funds.  This recent Deloitte report suggests that this year may be a different story – and that some of the changes brought about by the pandemic may serve as a catalyst for activism. Here’s an excerpt:

In another intriguing example of how dramatically things have changed in the past year, labor productivity in the United States jumped even as companies scrambled to adjust to the economic upheaval. Worker productivity growth in the United States had been essentially flat in the decade since the Great Recession, but through the first three quarters of 2020, it jumped.

This may be a macroeconomic clue that points to unexpected value in our new ways of doing business—increased digital interaction with their customers, or workforce changes such as work-from-home. Activists are likely to see in this and other “disconnects” new opportunities for boosting margins that can be added to their playbooks. As a result, we may see activists pushing companies to pursue digital transformation or change product mix based on the lessons of the crisis.

The report suggests that the typical advice to boards – “think like an activist” – is even more important this year. The focus on margin improvement is a case in point. Activists will typically look for opportunities to improve a company’s performance in three main areas: revenue growth, margin enhancement, or portfolio changes. Boosting margins is often a more attractive option than revenue growth, because smaller gains can have a bigger impact on the bottom line.

Transcript: “Shareholder Proponents Speak – 14a-8 Fallout & Other Initiatives”

We have posted the transcript for the recent webcast – “Shareholder Proponents Speak: 14a-8 Fallout & Other Initiatives.”

John Jenkins