The finance sector and financial advisers would greatly benefit if laws relating to electronic signatures were harmonised across the country.
One group of lawyers is calling for this to be one of the main agenda items at the next Council of Australian Governments (COAG) meeting, following a recent legal judgement in New South Wales.
In the case, Williams Group Australia Pty Ltd v Crocker [2016] NSWCA 265, the defence for Crocker argued his e-signature was used fraudulently after it was accessed through the use of his password.
The court accepted the e-signature was valid. But it agreed that it was used fraudulently, after someone with his password accessed it through his computer without his knowledge and applied it to a document.
It was argued Crocker had given ostensible authority to the person who used his signature by giving this person his computer password.
“The court held that was not the case. Just because his password had gone to someone else didn’t mean he had given authority to that person to use his signature,” Peter Townsend, principal, Townsends Business and Corporate Lawyers, explains.
This is a practice management issue for financial advice businesses. It’s a warning to ensure the company has appropriate protocols around password protection in place, especially if the firm holds clients’ digital signatures.
It’s essential to ensure staff understand their obligations around keeping client record safe. This case is a timely reminder to firms to ensure their IT security protocols are up to date to reduce the risk of sensitive client data being compromised.
Issues go beyond security
Security concerns are, however, just one part of the puzzle that needs to be solved around digital signatures. There also must be national agreement over how they can be used.
This could improve productivity and increase efficiencies for financial advice practices. For instance, digital signatures could greatly reduce the need to scan and store hard-copy documents with signatures.
At the moment, each state takes a different approach. For instance, in NSW, it’s not possible to execute a deed or witness a document with an e-signature.
That’s just one idiosyncrasy; complexities abound throughout each state’s laws related to digital signatures.
“Our state governments have let us down very badly in this area,” Townsend says. “This needs to be discussed at the next COAG meeting or meeting of attorneys-general to work out a national protocol for the use of e-signatures and the laws need to be amended accordingly. It’s crazy having different rules in different states.”
Nevertheless, he cautions against seeing e-signatures as a panacea for speeding up processes in the financial and legal systems.
“They may seem to be an easy way for documents or agreements to be signed and returned to another party,” Townsend says. “But it’s important to balance speed and convenience with proper protections for electronic signatures, because there’s a risk it’s easier for people to access e-signatures than real ones and use them unlawfully. Treat all signatures appropriately, real and electronic
