What is the function of a transfer agent?

Transfer agents, according to the Securities and Exchange Commission, serve three basic purposes:

• Issue and revoke certificates to reflect ownership changes. The transfer agent, for example, issues new shares when a firm declares a stock dividend or split. Transfer agents keep track of who owns a company’s stocks and bonds as well as how they’re held—by the owner in certificate form, the company in book-entry form or the investor’s brokerage firm in street name. The number of shares or bonds that each investor possesses is also kept on file by transfer agents.
• Act as a go-between for the company. A transfer agent may also act as a payment agent for the corporation, distributing interest, cash and stock dividends and other distributions to shareholders. Transfer agents also serve as a proxy agent (distributing proxy materials), an exchange agent (exchanging a company’s stock or bonds in a merger), a tender agent (tendering shares in a tender offer) and a mailing agency (distributing the company’s quarterly, annual and other reports).
• Deal with certificates that have been misplaced, destroyed or stolen. When a stock or bond certificate is lost, damaged or stolen, transfer agents assist shareholders and bondholders.

In many circumstances, you can learn about a company’s transfer agent by visiting the investor relations section of its website. You can also go to the Securities Transfer Association (STA) website. The STA is a private trade association for transfer agents.

A bank, a trust firm, a stand-alone transfer agent provider or a team within a corporation or investment fund operating as the company’s own transfer agent are all examples of transfer agents. Without the licensor being the ‘transfer agent of record,’ an in-house team can license a transfer agent system to improve their own efficiency. Even if it is not required, many investment funds use a third-party transfer agent. The due diligence requirements of sophisticated and institutional investors are satisfied by having a third-party ‘transfer agent of record.’

In the past, transfer agents generally played a minor role in the private investment fund industry. An SEC-registered transfer agent was necessary for funds that were publicly registered with the SEC. These were usually big funds with tens of thousands of unaffiliated investors. Private funds (private equity, venture capital and private real estate funds), on the other hand, often had fewer investors and were not subject to as much regulation, hence they did not require a transfer agent. However, private equity fund investor numbers have risen in recent years, investor-related regulatory requirements have been implemented and fee compression and cost pressures have forced more private equity firms to engage transfer agents. As a standard of operational professionalism, sophisticated investors and organizations such as pension funds now demand an investment fund under consideration engage a transfer agent.

A Service Organization Control (SOC) audit reviews transfer agent processes to ensure that the systems and procedures in place are accurate and dependable. To meet their due diligence requirements, many fund companies will request an annual SOC audit of their transfer agent.

Because a transfer agent is responsible for housing and maintaining a company’s most critical information, the investor database, it’s not uncommon for a transfer agent to offer additional services related to the investor experience. Fund accounting and reporting for the fund’s assets may also be offered, extending the transfer agent’s offering all the way to the fund’s entire back office. A fund administrator is a transfer agent that provides significant additional back-office services that effect investors, assets and even sales teams.

Phoenix American’s transfer agent services are part of a comprehensive set of back-office services for alternative investment funds. We serve fund sponsors in the alternative investment industry with full-service fund administration, fund accounting, transfer agent and investor services as well as sales, marketing and financial reporting. Phoenix American has provided industry-leading transfer agent services and pioneered the development of the transfer agent position into full-service fund administration and back-office outsourcing since its inception in 1972 as a sponsor of equipment leasing funds.

Because a transfer agent is in charge of storing and maintaining a company’s most important data, the investor database, it’s not uncommon for them to provide extra services relevant to the investor experience. Fund accounting and reporting for the fund’s assets may also be provided, extending the transfer agent’s services to the complete back office of the fund. A fund administrator is a transfer agent who offers a variety of back-office services related to investors, assets and even sales teams.

The transfer agent services provided by Phoenix American are part of a complete range of back-office services for alternative investment funds. We provide full-service fund administration, fund accounting, transfer agent and investor services, as well as sales, marketing, and financial reporting to fund sponsors in the alternative investment industry. Since its beginning in 1972, as a sponsor of equipment leasing funds, Phoenix American has offered industry-leading transfer agent services and pioneered the evolution of the transfer agent role into full-service fund administration and back-office outsourcing.