An SEC Registered Transfer Agent
Outsourcing transfer agent services to a vendor that can handle a fund’s expanding transfer agent and portfolio accounting needs while also managing document management, data security and compliance is a sound business decision.
A transfer agent is an agnostic third party employed by the issuer of an investment product. The transfer agent processes new investments, keeps track of the ownership of shares, executes transfers in ownership, keeps track of the issuer’s shareholder database, cancels and issues certificates and distributes dividends and other payments to investors. Because the transfer agent acts as a conduit between issuers and security holders, the efficient operation of the transfer agent is essential for new investments, transfers and secondary market trades to be completed successfully. Securities and Exchange Commission (SEC) rules and regulations govern transfer agent operations and are designed to facilitate the timely and accurate clearance and settlement of securities transactions, as well as to ensure the security of shares and invested funds. Registration, inspections and rules governing transfer agents are intended to protect investors from errors and omissions in transfer agent processes.
Most transfer agents must be registered with the SEC. A transfer agent is, in some cases, a bank. A transfer agent bank must register as a transfer agent with a bank regulatory body according to Section 17A(c) of the 1934 Act. Transfer agents are not governed by a self-regulatory organization. As a result, the SEC has issued rules and regulations for all registered transfer agents, with the goal of facilitating the timely and correct clearance and settlement of securities transactions while also ensuring the security and safety of investment shares and funds. Minimum transfer agent performance standards exist. A transfer agent must meet these standards in the issuing of new shareholder certificates as well as related recordkeeping and reporting. A transfer agent must perform fast and correct production of shareholder records and the preservation of securities and funds. The SEC also inspects transfer agents.
Before registering as a transfer agent, an organization must meet all the applicable provisions of the Securities Exchange Act of 1934, the Securities Act of 1933, and the Investment Company Act of 1940, as well as the applicable rules made by the SEC under those acts.
There is a transfer agent registration process as well as the annual reporting requirements for registered transfer agents.
Registration as a Transfer Agent
It is illegal for a transfer agent to execute any transfer agent duty with respect to any qualifying security unless such transfer agency is registered with its proper regulatory authority. Any security registered under Section 12 of the Securities Exchange Act of 1934 is a “qualifying security.” Before performing any transfer agent function for a qualified security, a transfer agent must apply for registration on Form TA-1 with its Appropriate Regulatory Authority (ARA), and that registration must have become effective.
What to File and Where to File. Each registrant must submit Form TA-1 along with their ARA. A registrant’s ARA can be determined by the following:
- A national bank, a bank operating under the District of Columbia’s Code of Law, or a subsidiary of any of these banks must register with the Comptroller of the Currency. The Board of Governors of the Federal Reserve System registers state member banks, subsidiaries, and bank holding companies.
- A bank or a subsidiary of a bank insured by the Federal Deposit Insurance Corporation (FDIC) (other than a member of the Federal Reserve System) must register with the Federal Deposit Insurance Corporation.
- All other transfer agents must register with the Securities and Exchange Commission in the United States.
- Unless the filing does not comply with applicable requirements or the ARA takes affirmative action to accelerate, deny, or postpone registration in accordance with Section 17A(c) of the Act, a transfer agent’s registration becomes effective thirty days after the ARA receives the application for registration.
Any transfer agent who wants to cancel their registration as a transfer agent must notify their ARA in writing. If the SEC is the ARA, the transfer agent must file a notification of withdrawal from registration on Form TA-W, following the requirements on the form.
Annual Reporting Requirements for Transfer Agents
Every transfer agent who is registered on December 31 of a given year must complete an annual report on Form TA-2 by March 31 of the following year. The SEC has the authority to reject a transfer agent filing if it does not meet the applicable standards.
Any transfer agent who wants to cancel their registration as a transfer agent must notify their ARA in writing. If the SEC is the ARA, the transfer agent must file a notification of withdrawal from registration on Form TA-W, following the requirements on the form. A transfer agent’s notice to withdraw from registration becomes effective 60 days after it is filed with the SEC or within such a shorter period as the SEC may specify.
Before a transfer agent can execute any transfer agent function for a qualified security, a registration application must be submitted to and approved by the appropriate regulatory agency.
A registered transfer agent’s partners, directors, executives, and employees must be fingerprinted and submit their fingerprint cards to the Attorney General of the United States for identification and necessary processing, albeit there are some exceptions.
If a transfer agent or any person associated with the transfer agent has committed certain prohibited acts listed in Section 15(b)(4) of the Exchange Act or is otherwise barred from associating with a registered transfer agent, the appropriate regulatory agency may deny, suspend, or limit the transfer agent’s registration.
Every registered transfer agent, including those whose appropriate regulatory agency is not the SEC, is required to file an annual report on Form TA-2 with the SEC detailing their previous year’s actions.
Continuing Registration Requirements for Transfer Agents
Section 17A of the Act, as well as the other reporting, recordkeeping, and other obligations set forth in the rules published under Section 17A, must be followed by a registered transfer agent. A transfer agent may cancel its registration by completing a Form TA-W with the SEC. Transfer agent responsibilities after ceasing to execute transfer agent functions are detailed in Rule 17Ad-16.
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