Tuesday, January 5, 2016

Transfer Agent Regulation Poised to Step Into the 21st Century

Author: David Schwartz J.D. CPA

On December 22, 2015, the Securities and Exchange Commission left a present in all our stockings with its publication of a 208-page advanced notice of proposed rule making and concept release on the regulation of transfer agents. Modernizing the aging rules for transfer agents has been rumored for awhile, but no doubt fell behind other priorities related to the financial crisis and Dodd-Frank mandates.  Commissioner Luis Aguilar and now former Commissioner Daniel Gallagher have both been fairly vocal about the need for new transfer agency rules.  Both would have preferred an actual rule proposal, but apparently will have to settle for an advanced notice/concept release at this stage.  


The current regime governing transfer agents adopted in 1977, and last updated in the early 1980s, has fallen far behind the times.  Business processes, technologies, and whole market structures have changed dramatically since then leaving some glaring differences between the rules written for a by-gone era and the actual practices and activities of transfer agents in 2016.  With this concept release and advanced notice of proposed rulemaking, the SEC hopes to lay the groundwork for modernized regulation by focusing attention on transfer agent registration and annual reporting requirements, safeguarding of funds and securities, antifraud requirements in connection with the issuance and transfer of restricted securities, and cybersecurity and information technology. The release also seeks input from the industry on other areas that may need improvement that should be brought to regulators’ attention.   


Comments on the release are due in early March, 60 days following publication in the Federal Register.