The law does not spell out how this should be done, but companies must employ a variety of safeguards, such as requesting social security numbers and other personal information and refusing to transfer money to any place other than where it originated. A handful of small and midsize fund companies, including the Invesco unit of Amvescap PLC, Wasatch Funds, Marsico Capital Management and Quant Funds, already offer online account registration. And `whatifi.com,' a site launched in July, requires customers to open accounts electronically to invest in its five fund offerings managed by Barclays PLC. For fidelity, electronic signatures are not a big stretch. It already lets investors fill out an online application that generates an account number, and they can purchase a fund the same day, provided their bank wires the money.

The largest US fund company is ready to let clients set up a wire transfer directly on its web site now that electronic signatures have the green light. Initially, however, the process will be available only to customers opening a new brokerage account that the firm is promoting.

Vanguard, the No 2 fund company, also will restrict online account registration to brokerage accounts at the beginning, and only for existing customers. But it plans to roll out the process for all types of accounts next year. Vanguard spokeswoman Katherine Hynes said the company is attracted by the potential to save time and money. "e-signatures will be cost- and time-effective by cutting back on the amount of new account documents and the time lag of mail and receipt," she said. Janus, a unit of Stilwell Financial, the fifth-largest fund company, sees electronic signatures as a convenience for investors. However, Janus is taking the precaution of limiting the size of initial online transactions to $25,000. American Century was a pioneer in online financial services, offering transactions over the Internet in 1996, but customers have not been able to open an account online. "This is the one element that's missing from a total electronic relationship with the customer," said American Century spokesperson BethRandolph.

At Schwab, half of the mutual fund exchanges and redemptions handled by its fund supermarket take place over the Internet, up from 16% a few years ago. But Schwab will initially allow only existing customers to use electronic signatures for things like opening additional accounts or setting up automatic bill payments. "The most important thing is assuring that those transactions have the utmost security," said Schwab spokesman Greg Gable. Another fund giant, T Rowe Price & Associates, does not see much demand for opening new accounts online. Only about 20% of the firm's retail clients have signed up for online access to their accounts, and most of them only use the company's web site to check their balances.

The firm may start to offer online account registration sometime in the first half of 2001, but spokesman Steve Norwitz said, "There are still a lot of wrinkles to be ironed out, and it's not a big priority." Digital signatures are not likely to do away with paper account forms and prospectuses entirely. And the cost of offering both kinds of transactions could put smaller firms at a disadvantage. MetaMarkets.com, for example, decided the expense of selling its $6 million OpenFund online wasn't worthwhile, given the fund's diminutive assets. "We practically encourage people to [buy] through a brokerage," said MetaMarkets.com spokesman Duff Fergusen. "They'll have a much better experience."

(The Wall Street Journal)