The most basic function of your transfer agent team is to maintain your shareholder database. This is a more complex task than many appreciate. Those who elect to act as their own transfer agent discover this complexity before long. The complexity comes not simply from the volume and variety of the investor and transaction data you will need to collect and manage but the transfer agent functions you will have to perform using that data and the tracking and logging of those functions that you will need to do. Here are ten transfer agent functions that demonstrate the importance of precision shareholder database management:
10 Essential Functions Requiring Precision Database Management
- New Investments – Incoming investments may come in to the transfer agent team through paper subscription documents, straight-through processing channels, website forms, the AIP platform or other technologies. The database of record has to be capable of storing profile, investment, allocation, transaction and historical data related to the investment so that accurate commissions and distributions can be paid, statements can be produced and tax documents can be prepared. The system of record must be configured and the transfer agent team must be trained to ensure the strict accuracy of this data for processes to operate effectively.
- Changes – Any large group of individuals experience a brisk pace of change in the circumstances of life as time goes by. Investors marry, divorce, move, pass away and change service preferences. Your shareholder database must keep up with these changes – however the information comes in to the transfer agent team. Investors may call, send an email, enter changes on the investor web portal – or the need for changes may become apparent because of returned mail or other failed communication. A clear authenticated process for making changes to investor accounts, from whatever source, must be built into the shareholder database and be part of the training of the transfer agent team.
- Capital Calls – Clear records of allocations and committed capital are required for capital calls along with the ability of the transfer agent system to track and record outreach and response. Inadequate database management will hinder the process of calling capital.
- Distributions – Payments, ongoing adjustments to balances and contributions via DRIP require a precision of automated calculation that must be built into a transfer agent system to be reliable, trackable and reportable.
- Investor communications – Statements, tax documents, updates, notifications and marketing going out to investors via web portal, mail, email and phone all need to be managed and tracked by the transfer agent database and team so that investors are served according to the commitments of the fund formation document.
- Proxies – Tracking of voting rights, time-tables, response processing and tabulation of results for the election of officers is an essential transfer agent function only possible with precise database management in place.
- Transfers – The very core function of a transfer agent, the processing of transfers must occur strictly according to regulation with tracking of every step in the process.
- Redemptions – The repurchase of investor shares by the management company involves a level of compliance requiring very thorough maintenance of shareholder data by the transfer agent database.
- Final Payout – Only with precision tracking of allocations and distribution history over the entire life of the fund can accurate final payout distributions be made. The day-to-day quality of the database management of the transfer agent team could not be more important.
- Reporting – Through the life of the fund, the ability of the shareholder database to report in detail on sales, distributions, DRIPs and every transfer agent function is an important element of database management. The vast amount of aggregated data, if effectively harnessed, can improve sales, facilitate audits and support high-touch investor relations.
Your shareholder database is at the center of a complex series of transfer agent functions.
Consistent data integrity is key to your operational success
With specialized transfer agent technology and an experienced transfer agent staff, fund management can operate without operational distraction and derive real benefit from back-office processes. Three qualifications to keep in mind are that a service provider should be a SEC-registered transfer agent, employ SOC 1, Type II Audited transfer agent processes and adhere to Securities Transfer Association (STA) guidelines, best practices for transfer agent service providers. With this kind of operational infrastructure in place, fund sponsors save on operational costs and prime themselves for scalable success in investment management.