WG on Transferrability of Electronic Financial Assets

At the Working Group on Electronic Financial Assets' meeting co-chair Linda Rusch gave a presentation on current industry activity with respect to electronic bills of lading and warehouse receipts. Apparently, they are in use in fivc settings, often based on private agreements and special regulatory provisions, rather than relying on the provisions of the UETA and revised Article 7. These settings include the cotton warehousing industry (eCotten), the Bolero system, eCOPS (the New York Board of Trade, for warehousing of coffee and cocoa), transmission of information from shippers to carriers, and an XML program developed for petroleum products. Linda prepared a handout titled Examples of Electronic Document of Title Systems. You can view the document by visiting the LawHub page for the Subcommittee on Electronic Financial Services [Members Only]

However, the current (and long-standing) problem to be solved is how attorneys can reliably assess whether a computer system meets the "control" test in UCC Article 9, UETA, and E-Sign. Today's discussion focused on how attorneys need to interact with technologists to meet this need, whether to generate a legal opinion, or to perform due diligence, or to examine a witness in a bankruptcy case.

This question has a real world application to the question of how to rate securities backed by transferable records. Apparently, chattel paper issuers are starting to take advantage of Revised Article 9's rules on electronic chattel paper and securitizing the chattel paper. They need the resulting securities rated and but the question is how to do it. Worse, the law firms for the issuers are not at all sure how to give legal opinions on the systems.

It was the most entertaining meeting of the working group in years.