Proposed Rule2026-18190
Transfer Agent Rules
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
September 4, 2026
Effective
September 4, 2026
Issuing agencies
Securities and Exchange Commission
Abstract
The U.S. Securities and Exchange Commission ("SEC" or "Commission") is proposing to adopt new rules, amend existing rules, amend the existing form for registration with the Commission as a transfer agent (Form TA-1) and the existing form for reporting activities of transfer agents (Form TA-2), and rescind an existing rule governing registered transfer agents. The proposals are designed to modernize the rules governing registered transfer agents.
Full Text
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<title>Federal Register, Volume 91 Issue 171 (Friday, September 4, 2026)</title>
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[Federal Register Volume 91, Number 171 (Friday, September 4, 2026)]
[Proposed Rules]
[Pages 56946-57061]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-18190]
[[Page 56945]]
Vol. 91
Friday,
No. 171
September 4, 2026
Part II
Securities and Exchange Commission
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17 CFR Parts 240 and 249b
Transfer Agent Rules; Proposed Rule
Federal Register / Vol. 91 , No. 171 / Friday, September 4, 2026 /
Proposed Rules
[[Page 56946]]
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SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 240 and 249b
[Release No. 34-106246; File No. S7-2026-30]
RIN 3235-AL55
Transfer Agent Rules
AGENCY: Securities and Exchange Commission.
ACTION: Proposed rule.
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SUMMARY: The U.S. Securities and Exchange Commission (``SEC'' or
``Commission'') is proposing to adopt new rules, amend existing rules,
amend the existing form for registration with the Commission as a
transfer agent (Form TA-1) and the existing form for reporting
activities of transfer agents (Form TA-2), and rescind an existing rule
governing registered transfer agents. The proposals are designed to
modernize the rules governing registered transfer agents.
DATES: This release was published in the Federal Register on September
4, 2026. Comments should be received on or before November 3, 2026.
ADDRESSES: Comments may be submitted by any of the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/comments/s7-2026-30/transfer-agent-rules">https://www.sec.gov/comments/s7-2026-30/transfer-agent-rules</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#453730292068262a2828202b3136053620266b222a33"><span class="__cf_email__" data-cfemail="a0d2d5ccc58dc3cfcdcdc5ced4d3e0d3c5c38ec7cfd6">[email protected]</span></a>. Please include
File Number S7-2026-30 on the subject line.
Paper Comments
<bullet> Send paper comments to Vanessa A. Countryman, Secretary,
Securities and Exchange Commission, 100 F Street NE, Washington, DC
20549-1090.
All submissions should refer to File Number S7-2026-30. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method of submission. The Commission will post all
comments on the Commission's website (<a href="https://www.sec.gov/rules-regulations/public-comments/s7-2026-30">https://www.sec.gov/rules-regulations/public-comments/s7-2026-30</a>). Do not include personally
identifiable information in submissions; you should submit only
information that you wish to make available publicly. The Commission
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection.
Studies, memoranda, or other substantive items may be added by the
Commission or staff to the comment file during this rulemaking. A
notification of the inclusion in the comment file of any such materials
will be made available on the Commission's website. To ensure direct
electronic receipt of such notifications, sign up through the ``Stay
Connected'' option at <a href="http://www.sec.gov">www.sec.gov</a> to receive notifications by email.
A summary of the proposal of not more than 100 words is posted on
the Commission's website (<a href="https://www.sec.gov/rules-regulations/2026/09/s7-2026-30">https://www.sec.gov/rules-regulations/2026/09/s7-2026-30</a>).
FOR FURTHER INFORMATION CONTACT: Elizabeth Fitzgerald, Assistant
Director, Tina Barry and Kevin Schopp, Senior Special Counsels, Bryant
Eng, Ron Carny, or Scott Farnin, Special Counsels, Office of Clearance
and Settlement at (202) 551-6706, Division of Trading and Markets, U.S.
Securities and Exchange Commission, 100 F Street NE, Washington, DC
20549-7010.
SUPPLEMENTARY INFORMATION: The Commission is proposing to amend,
rescind, or add the following rules and forms.\1\
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\1\ We are also proposing to modify the CFR designations for
each of the rules in this release (other than the CFR designation
for Rule 17ad-7 which has already been amended) to ensure the
regulatory text conforms with section 2.13 of the Document Drafting
Handbook. See 1 CFR 21.11; Office of the Federal Register, Document
Drafting Handbook (Aug. 2018 Edition, Revision 2.1, dated Oct.
2023), <a href="https://www.archives.gov/files/federal-register/write/handbook/ddh.pdf">https://www.archives.gov/files/federal-register/write/handbook/ddh.pdf</a>. Because each of these rules contain an uppercase
letter in their CFR citations, if adopted, the proposed rules would
modify the CFR section designations at adoption to replace each such
uppercase letter with the corresponding lowercase letter. The new
rules being proposed in this release are being proposed with the
appropriate lowercase letter, for example, Rule 17ad-30 is being
proposed as 17 CFR 240.17ad-30 rather than 17 CFR 240.17Ad-30.
\2\ 15 U.S.C. 78a et seq.
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CFR citation (17
Commission reference CFR) Proposal
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Securities Exchange Act of 1934
(``Exchange Act'' or ``Act'')
\2\:
Form TA-1.................. Referenced in 17 Amend.
CFR 249b.100.
Form TA-2.................. Referenced in 17 Amend.
CFR 249b.102.
Rule 17ac2-1............... 17 CFR 240.17Ac2-1 Amend.
Rule 17ac2-2............... 17 CFR 240.17Ac2-2 Amend.
Rule 17ad-1................ 17 CFR 240.17Ad-1. Amend.
Rule 17ad-2................ 17 CFR 240.17Ad-2. Amend.
Rule 17ad-3................ 17 CFR 240.17Ad-3. Amend.
Rule 17ad-4................ 17 CFR 240.17Ad-4. Rescind.
Rule 17ad-6................ 17 CFR 240.17Ad-6. Amend.
Rule 17ad-7................ 17 CFR 240.17ad-7. Amend.
Rule 17ad-9................ 17 CFR 240.17Ad-9. Amend.
Rule 17ad-10............... 17 CFR 240.17Ad-10 Amend.
Rule 17ad-11............... 17 CFR 240.17Ad-11 Amend.
Rule 17ad-12............... 17 CFR 240.17Ad-12 Amend.
Rule 17ad-13............... 17 CFR 240.17Ad-13 Amend.
Rule 17ad-17............... 17 CFR 240.17Ad-17 Amend.
Rule 17ad-30............... 17 CFR 240.17ad-30 Add.
Rule 17ad-31............... 17 CFR 240.17ad-31 Add.
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Table of Contents
I. Introduction
A. Background Regarding Securities Ownership
B. Transfer Agent Regulation
C. Evolution of Transfer Agent Activities
D. Overview of the Proposal
II. Proposed Amendments to Registration and Annual Reporting
Requirements
A. Proposed Amendments to Rule 17ac2-1
B. Proposed Amendments to Rule 17ac2-2
C. Proposed Amendments to Form TA-1
D. Proposed Amendments to Form TA-2
[[Page 56947]]
III. Proposed Amendments to Definitions, Processing, Recordkeeping,
and Safeguarding Rules
A. Amendments to Rule 17ad-1
B. Amendments to Rule 17ad-9
C. New Definitions To Be Added to Rule 17ad-9
D. Amendments to Rule 17ad-2
E. Amendments to Rule 17ad-3
F. Rescission of Rule 17ad-4
G. Amendments to Rule 17ad-6
H. Amendments to Rule 17ad-7
I. Amendments to Rule 17ad-10
J. Amendments to Rule 17ad-12
K. Amendments to Rule 17ad-17
IV. Proposed New Rules
A. Proposed Rule 17ad-30: Compliance
B. Proposed Rule 17ad-31: Restrictive Legends
V. Economic Analysis
A. Introduction
B. Economic Baseline
C. Benefits and Costs
D. Efficiency, Competition, and Capital Formation
E. Reasonable Alternatives
F. Request for Comment
VI. Paperwork Reduction Act
A. Summary of the Collection of Information
B. Amendments to Forms TA-1, TA-2 and Rules 17ac2-1, 17ac2-2,
17ad-2, 17ad-3, 17ad-6, 17ad-7, 17ad-12, 17ad-17, 17ad-30, and 17ad-
31.
C. Summary of the Estimated Burden of the Proposed Amendments on
the Collections of Information
D. Initial and Ongoing Burden Estimates
E. Incremental and Aggregate Burden and Cost Estimate
F. Request for Comment
VII. Initial Regulatory Flexibility Act Analysis
VIII. Congressional Review Act
IX. Other Matters
Statutory Authority
I. Introduction
Transfer agents are a key component of the national clearance and
settlement system, performing critical functions related to the
securities lifecycle that help protect investors and support the prompt
and accurate processing of securities transactions. Their statutory
functions as defined under Section 3(a)(25) of the Securities Exchange
Act of 1934 (``Exchange Act'' or ``Act'') include countersigning
securities upon issuance, monitoring for overissuance, registering the
transfer of securities, exchanging or converting securities, and
transferring record ownership of securities by bookkeeping entry.\3\
Collectively, these functions help ensure that securities ownership
records remain accurate and that investors and other securities markets
participants can rely on the accuracy, integrity, and safety of the
clearance and settlement process throughout the securities lifecycle.
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\3\ Exchange Act Section 3(a)(25)(A)-(E), 15 U.S.C.
78c(a)(25)(A) through (E).
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The Commission first adopted the majority of the federal transfer
agent rules in the late 1970s and early 1980s.\4\ At that time, the
majority of investors held their securities in certificated (i.e.,
paper) form. The transfer agent industry was characterized by a mix of
small firms and public company issuers acting as their own transfer
agent, and transfer agents primarily provided manual processing of
certificates and related recordkeeping functions that some industry
observers viewed as purely ministerial.
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\4\ The Commission provided a detailed history of those rules,
and the market developments that led to those rules, in a 2015
concept release. See Transfer Agent Regulations, Exchange Act
Release No. 76743 (Dec. 22, 2015), 80 FR 81948 (Dec. 31, 2015)
(``2015 Concept Release'') for an overview of the history of the
Commission's transfer agent rules.
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Transfer agents have adapted to the complex, interconnected
electronic securities markets of today in numerous ways, including by
providing a broad suite of services.\5\ For example, in addition to
facilitating the issuance, cancellation, and transfer of both paper and
electronic securities and maintaining the official record of ownership
of an issuer's securities, most transfer agents also place, track, and
remove restrictive legends \6\ and at least one-third of them are
engaged by issuers to provide administrative, recordkeeping, and
processing services related to the distribution of cash and stock
dividends, bond principal and interest, mutual fund redemptions, and
corporate action and other payments to securityholders, what is
commonly referred to as paying agent activity. Transfer agents' paying
agent activity in particular has grown significantly in the last few
decades and continues to grow.\7\
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\5\ See Exchange Act Section 17A(a)(1)(A), 15 U.S.C. 78q-
1(a)(1)(A).
\6\ For additional discussion of transfer agents' role with
respect to restrictive legends, see 2015 Concept Release, supra note
4, Section VI.D.
\7\ See infra Section III.J.
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Many transfer agents function as administrators and third-party
information or technology service providers for mutual funds or direct
purchase, dividend reinvestment, employee stock purchase, retirement,
and other issuer-sponsored investment plans.\8\ In these roles,
transfer agents fulfill such tasks as calculating purchase or sale
prices for investors in mutual funds, aggregating and providing order
routing services to handle all aspects of enrollment and ongoing
account servicing, enhancing securityholder communications, and
performing paying agent services specific to funds and plans.
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\8\ See, e.g., 2015 Concept Release, supra note 4, Section
VII.E.1, discussing the practice of voluntary registration as
transfer agents by certain third-party administrators (``TPA'').
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Modern transfer agents may offer other ancillary services as well,
including annual meeting and proxy services such as electronic proxy
delivery, notice and access consulting, internet and phone voting, and
proxy tabulation; strategic shareholder consulting services to
corporations and shareholder groups working to influence corporate
strategy; communication services such as promotion campaigns, loyalty
programs, and communication services with brokers and fund managers;
global capital markets services such as access to international markets
and cross border transactions; corporate trust services; corporate
restructuring and class action administration services; and corporate
action consulting. A transfer agent's failure to perform its statutory
functions and related services promptly, accurately, and safely can
compromise the accuracy of an issuer's securityholder records, disrupt
the channels of communication between issuers and securityholders,
disenfranchise investors, and expose issuers, investors, securities
intermediaries, and the securities markets as a whole to significant
financial loss.\9\
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\9\ See Maintenance of Accurate Securityholder Files and
Safeguarding of Funds and Securities by Registered Transfer Agents,
Exchange Act Release No. 19142 (Oct. 15, 1982), 47 FR 47269 (Oct.
25, 1982) (``17ad-9 through 13 Proposing Release'') (noting examples
of substandard transfer agent performance presenting significant
potential adverse consequences); see also Processing Requirements
for Cancelled Security Certificates, Exchange Act Release No. 48931
(Dec. 16, 2003), 68 FR 74390, 74391 (Dec. 23, 2003) (noting examples
of substandard transfer agent performance and significant adverse
consequences).
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As technology and the securities markets continue to evolve,
transfer agents are increasingly operating at the frontier of rapidly
developing technologies, including tokenized securities, artificial
intelligence (``AI''), and other forms of digital infrastructure. For
example, market participants are actively seeking to bring blockchain-
native, or ``onchain'' transfer agents into the U.S. market, with some
firms developing models for blockchain-based recordkeeping, tokenized
fund administration, and cross-chain interoperability that would
require transfer agents to maintain issuer and securityholder records
on distributed ledgers and deploy and administer smart-contract-driven
processes. At the same time, rapid technological change--ranging from
tokenization initiatives, to
[[Page 56948]]
cloud-based systems, to AI-enabled operational tools--has the potential
to reshape core clearance, settlement, and transfer functions across
the market ecosystem. Transfer agents interacting with tokenized
securities, distributed ledger technologies, and smart contracts must
increasingly manage risks relating to blockchain data integrity,
security of tokenized securities, and distributed ledger operational
models, while those adopting AI or automated technologies must ensure
proper controls, accurate representations of system capabilities, and
effective oversight of automated processes. These developments place
transfer agents in an increasingly central role in safeguarding
investor records, issuing and supporting tokenized securities, and
ensuring resiliency against operational and cybersecurity risks within
the rapidly evolving technological landscape comprising the U.S.
securities markets.
Despite these developments, the Commission's transfer agent rules
have not been substantively updated since the first rules were adopted
in the late 1970s and early 1980s. As a result, these rules do not
sufficiently address the risks presented by the wide range of
processing, recordkeeping, safeguarding, paying agent, and other
services that characterize modern transfer agents' businesses, much
less the risks posed by transfer agents' central role in the evolving
blockchain-based, AI-driven landscape. For example, despite the highly
sophisticated electronic and automated systems utilized by modern
transfer agents, including transfer agents that are essentially
enterprise software providers, the current transfer agent rules are
silent with respect to information security, cybersecurity, disaster
recovery, operational risk, or other requirements related to their use
of connected and automated electronic systems. And although transfer
agents play a critical role in placing, tracking, and removing
restrictive legends to facilitate distributions, there are no
Commission rules specifying transfer agents' obligations in connection
with removing restrictive legends on securities.
Collectively, based on these changes the Commission concludes that
there is a disconnect between the transfer agent rules that have been
in place for decades and both the manner in which transfer agents
perform their critical functions and the technology they use to do so.
At the same time, transfer agents now perform a more diverse array of
functions and services, many of which may not be adequately addressed
by the transfer agent rules. As the pace of technological innovation
and advancement within the securities markets continues to accelerate,
the gap between the Commission's transfer agent rules and the risks
posed by transfer agents' activities and role within the national
clearance and settlement system continues to widen.
In this release, the Commission is proposing a targeted set of
amended and new rules to ensure that the Commission's transfer agent
rules continue to protect investors, support the public interest, and
facilitate the safe and efficient functioning of the national clearance
and settlement system. The Commission is soliciting public comment on
each of the proposals in this release. Public feedback and data would
help the Commission ensure that any regulatory action will be in the
public interest and will help protect investors, the markets, and the
national clearance and settlement system.
A. Background Regarding Securities Ownership
Investment securities confer certain intangible rights and benefits
upon the holder.\10\ In the past, the most common way to transfer
investment securities, such as shares of stock, was to transfer a paper
certificate that represents the benefits of ownership (``certificated
security'').\11\ Certificated securities are evidence that the owner is
registered on the books of the issuer (or its transfer agent) as a
securityholder.\12\ Although the shares themselves represent an
intangible right,\13\ the certificate is a negotiable instrument under
state law, which allows the registered owner of the certificated
security to transfer the bundle of intangible rights to a third
party.\14\
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\10\ Egon Guttman, Modern Securities Transfers Sec. 1:5 (4th
ed. 2010).
\11\ The Uniform Commercial Code (``UCC'') defines a
``certificated security'' as ``a security that is represented by a
certificate.'' U.C.C. 8-102(a)(4). The UCC, which was first
published in 1952, is a uniform act designed to standardize the law
of sales and other commercial transactions in all 50 states. The UCC
has the effect of law only when adopted by a state, and while it has
been adopted by all 50 states, there are numerous state-by-state
variations in the adopted texts.
\12\ Guttman Sec. 1:5.
\13\ Id.
\14\ Guttman Sec. 1:12.
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The transfer of certificated securities held by registered owners
was a time-consuming manual process for transfer agents. In 1977 the
concept of the ``uncertificated security'' was introduced in Article 8
of the Uniform Commercial Code (``UCC'').\15\ This innovation allowed
issuers to issue uncertificated (i.e., certificateless) book-entry
securities, the transfer of which is greatly simplified compared to the
transfer of certificated securities because transfer can be effected by
simply registering the transferee's name on the books of the
issuer.\16\
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\15\ See U.C.C. 8-102(a)(18) (defining new term uncertificated
security as ``a security that is not represented by a
certificate''); see also Egon Guttman, Toward the Uncertificated
Security: A Congressional Leap for States to Follow, 37 Wash. & Lee
L. Rev. 717, 729-32 (1980).
\16\ Guttman Sec. 6:4.
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Under the current centralized depository model in the United
States, there are two types of securities owners: (a) registered
securityholders and (b) beneficial owners. Registered securityholders
(who may also be referred to as ``holders of record'') \17\ own and
hold securities in ``registered form.'' \18\ The UCC provides that an
``issuer . . . may treat the registered owner as the person exclusively
entitled to vote, receive notifications, and otherwise exercise all the
rights and powers of an owner.'' \19\ Registered securityholders are
listed directly on the records of the issuer or the issuer's transfer
agent under their own names, and can hold their securities either in
certificated form or in uncertificated (i.e., book-entry) form.\20\
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\17\ See Exchange Act Rule 17ad-9(a)(3), 17 CFR 240.17Ad-9(a)(3)
(referring to ``securityholder's registration''); Exchange Act
Rule17ad-9(a)(4), 17 CFR 240.17Ad-9(a)(4) (referring to ``registered
securityholder''); Exchange Act Rule 12g5-1, 17 CFR 240.12g5-1
(``securities shall be deemed to be `held of record' by each person
who is identified as the owner of such securities on records of
security holders maintained by or on behalf of the issuer'').
\18\ See U.C.C. 8-102(a)(13). (`` `Registered form,' as applied
to a certificated security, means a form in which: (i) the security
certificate specifies a person entitled to the security; and (ii) a
transfer of the security may be registered upon books maintained for
that purpose by or on behalf of the issuer, or the security
certificate so states.'').
\19\ U.C.C. 8-207.
\20\ Historically, the Direct Registration System (``DRS'')
operated by the Depository Trust Company (``DTC'') has been the
predominant form of holding uncertificated securities in registered
form, however, in recent years, other forms of registered ownership
such as tokenization have become available. Regardless of the
specific format that a registered securityholder's securities take,
a registered securityholder's options for holding uncertificated
securities, through DRS, tokenization, or otherwise, will be subject
to the issuer's governing documents and the law of its jurisdiction
of organization, as well as to other legal requirements that may
apply to the issuer, such as rules of self-regulatory organizations
(``SROs'') such as DTC and national securities exchanges.
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The vast majority of securityholders in the U.S. are beneficial
owners rather than registered owners.\21\ Beneficial owners do not own
the securities
[[Page 56949]]
directly but generally have purchased them through an intermediary,
such as a broker or a bank, and determined to hold them in street name
through a book-entry account with that intermediary. Securities held in
street name are legally owned by and registered in the name of the
depository's nominee (most often DTC's nominee, Cede & Co.). The
individual investor's broker (or other intermediary) who is a member or
participant of the depository will be identified on the books of the
depository as having a ``security entitlement'' \22\ to, or an interest
in, a pro rata share of the fungible bulk of that security held by the
depository.\23\ Correspondingly, the individual investor will be
identified on the books of the depository participant (i.e., the
investor's broker or other intermediary) as having a security
entitlement to a pro rata share of the securities in which the
participant has an interest. At each level, the intermediary will be
obligated to provide the entitlement holder with payments and
distributions with respect to the financial asset and to exercise
rights as directed by the entitlement holder.\24\ A securities
intermediary satisfies such duties where the intermediary acts as
required by any agreement between the intermediary and entitlement
holder.\25\ The entitlement holder will be permitted to look only to
the intermediary for performance of the obligations.\26\
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\21\ For more information regarding beneficial ownership, see,
e.g., Concept Release On The U.S. Proxy System, Exchange Act Release
No. 62495 (July 14, 2010), 75 FR 42982 (July 22, 2010) (``Proxy
Concept Release''); Investor Bulletin: Holding Your Securities, SEC,
available at <a href="http://www.sec.gov/investor/pubs/holdsec.htm">http://www.sec.gov/investor/pubs/holdsec.htm</a> (last
visited May 22, 2026).
\22\ See U.C.C. 8-102(a)(7) (defining ``entitlement holder'' as
a person identified in the records of a securities intermediary as
the person having a security entitlement against the securities
intermediary); U.C.C 8-102(a)(17) (defining ``security
entitlement''); U.C.C. 8-102(a)(14) (defining ``securities
intermediary'' as (i) a clearing corporation or (ii) a person,
including a bank or broker, that in the ordinary course of its
business maintains securities accounts for others and is acting in
that capacity); U.C.C. 8-503(b) (providing that an entitlement
holder's property interest with respect to a particular financial
asset under [U.C.C. 8-503(a)] is a pro rata property interest in all
interests in that financial asset held by the securities
intermediary).
\23\ For securities held in ``fungible bulk,'' there are no
specifically identifiable shares directly owned by DTC participants.
Rather, each participant owns a pro rata interest in the aggregate
number of shares of a particular issuer held at DTC. In turn, each
customer, such as an individual investor of a DTC participant, owns
a pro rata interest in the shares in which the DTC participant has
an interest. See Processing of Tender Offers Within the National
Clearance and Settlement System, Exchange Act Release No. 19678, n.5
(Apr. 15, 1983), 48 FR 17603, 17605, n.5 (Apr. 25, 1983) (describing
fungible bulk); Office of Investor Education and Advocacy, Investor
Bulletin: DTC Chills and Freezes, SEC (May 2012), available at
<a href="https://www.sec.gov/investor/alerts/dtcfreezes.pdf">https://www.sec.gov/investor/alerts/dtcfreezes.pdf</a> (discussing
fungible bulk).
\24\ U.C.C. 8-505, 506.
\25\ U.C.C. 8-505(a)(1), 506(1). In the absence of an agreement
covering payments and distributions, the securities intermediary
must exercise due care in accordance with reasonable commercial
standards. In the absence of an agreement with respect to the
exercise of rights as directed by the entitlement holder, the
securities intermediary either must place the entitlement holder in
a position to exercise the rights directly or exercise due care in
accordance with reasonable commercial standards to follow the
direction of the entitlement holder. U.C.C. 8-505(a)(2), 506(2).
\26\ U.C.C. 8-503(c) (referring only to ``securities
intermediar[ies]'' with respect to enforcement rights that may be
exercised by an entitlement holder).
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B. Transfer Agent Regulation
Prior to 1975, most transfer agents were banks or trusts.\27\ There
was no federal regulation of transfer agents and transfer agents were
subject to state law, generally pursuant to UCC provisions. Transfer
agents were also subject to stock exchange requirements regarding
securities processing.
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\27\ SEC, Study of Unsafe and Unsound Practices of Brokers and
Dealers, H.R. Doc. No. 92-231, at 38. Transfer agents that are not
banks may be referred to as non-bank transfer agents.
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Following the Paperwork Crisis, as discussed in more detail in the
2015 Concept Release, in 1975, Congress enacted the Securities Acts
Amendments (the ``1975 Amendments''),\28\ which made sweeping changes
to the federal securities laws, implemented many of the principal
recommendations from the Securities Industry Study,\29\ and established
both the national market system \30\ and the national clearance and
settlement system as they exist today.\31\ Specifically, Congress
directed the Commission to, among other things: (i) ``facilitate the
establishment of a national system for the prompt and accurate
clearance and settlement of transactions in securities;'' \32\ (ii)
``end the physical movement of securities certificates in connection
with the settlement among brokers and dealers of transactions in
securities;'' \33\ and (iii) establish a system for reporting missing,
lost, counterfeit, and stolen securities.\34\
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\28\ Securities Acts Amendments of 1975, Public Law 94-29, 89
Stat. 97 (1975); see also S. Rep. No. 75, at 7 (1975).
\29\ Securities Industry Study, H.R. Rep. No. 92-1519, 64
(1972). The Senate Subcommittee on Securities conducted the
Securities Industry Study to determine the causes of the Paperwork
Crisis and recommend solutions. The Securities Industry Study
ultimately led to Congress enacting the 1975 Amendments. See 2015
Concept Release, supra note 4, at 81954.
\30\ Section 11A of the Exchange Act directed the Commission to
facilitate the establishment of a national market system to link
together the multiple individual markets that trade securities and
achieve the objectives of efficient, competitive, fair, and orderly
markets, that are in the public interest and protect investors. See
Exchange Act Section 11A(a)(2), 15 U.S.C. 78k-1(a)(2).
\31\ See Exchange Act Section 17A(a)(2), 15 U.S.C. 78q-1(a)(2).
\32\ Exchange Act Section 17A(a)(2)(A)(i), 15 U.S.C. 78q-
1(a)(2)(A)(i).
\33\ Exchange Act Section 17A(e), 15 U.S.C. 78q-1(e).
\34\ Exchange Act Section 17(f)(1), 15 U.S.C. 78q(f)(1).
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The 1975 Amendments gave the Commission regulatory authority for
the first time over transfer agents. Section 3(a)(25) of the Exchange
Act defines a ``transfer agent'' as any person who engages on behalf of
an issuer of securities or on behalf of itself as an issuer of
securities in:
(A) countersigning such securities upon issuance;
(B) monitoring the issuance of such securities with a view to
preventing unauthorized issuance (i.e., a registrar);
(C) registering the transfer of such securities;
(D) exchanging or converting such securities; or
(E) transferring record ownership of securities by bookkeeping
entry without the physical issuance of securities certificates.\35\
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\35\ Exchange Act Section 3(a)(25), 15 U.S.C. 78c(a)(25). Note
that any insurance company or separate account which performs such
functions solely with respect to variable annuity contracts or
variable life policies which it issues or any registered clearing
agency which performs such functions solely with respect to options
contracts which it issues is excluded from the definition of
``transfer agent'' under the Exchange Act. Id.
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Section 17A(c)(1) of the Exchange Act requires any person
performing any of these functions with respect to any security
registered pursuant to Section 12 of the Exchange Act or with respect
to any security which would be required to be registered except for the
exemption contained in subsection (g)(2)(B) or (g)(2)(G) of Section 12
(``Qualifying Security'') to register with the Commission or other
Appropriate Regulatory Agency (``ARA'').\36\ With respect to any
transfer agent so registered, Section 17A(d)(1) of the Exchange Act
authorizes the Commission to prescribe such rules and regulations as
may be necessary or appropriate in the public interest, for the
protection of investors, or otherwise in furtherance of the purposes of
the Exchange Act.\37\
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\36\ Exchange Act Section 17A(c)(1), 15 U.S.C. 78q-1(c)(1).
\37\ Exchange Act Section 17A(d)(1), 15 U.S.C. 78q-1(d)(1).
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Beginning in the late 1970s and early 1980s, the Commission adopted
a series of transfer agent rules designed to regulate the basic
recordkeeping and processing functions performed by transfer agents.
The rules primarily related to routine transfers of certificated equity
and debt securities and generally covered three areas: (i) registration
and annual reporting requirements; (ii) timing and certain
[[Page 56950]]
notice and reporting requirements related to securities transaction
processing (referred to as ``turnaround rules''); and (iii)
recordkeeping and record retention rules and safeguarding requirements
for securities and funds.
Although the Commission has made modest revisions to the initial
transfer agent rules and has added several new rules since the adoption
of those earlier rules, the core registration, processing,
recordkeeping, and safeguarding rules remain substantially unchanged,
and the exemptions for mutual funds, dividend reinvestment plans
(``DRIPs''), and limited partnerships have not been revisited.
1. Registration and Annual Reporting Requirements (Rules 17ac2-1 and
Form TA-1, Rule 17ac2-2 and Form TA-2)
Before a transfer agent may perform any of the statutory transfer
agent functions defined in Section 3(a)(25) of the Exchange Act for a
Qualifying Security, it must apply for registration by submitting Form
TA-1 (Uniform Form for Registration as a Transfer Agent and for
Amendment to Registration) to its ARA, and its registration as a
transfer agent with its ARA must have become effective.\38\ Form TA-1
requires a transfer agent seeking to register to disclose certain
information, including the following: basic information about the
registrant, transfer agent service company arrangements, control
persons and owners, and any investment-related criminal prosecutions,
regulatory actions, or civil actions to which its control persons or
affiliates have been subject.\39\ The registration automatically
becomes effective 30 days after the Form TA-1 is filed, unless the ARA
takes affirmative action to accelerate, deny, or postpone registration
in accordance with the provisions of Section 17A(c) of the Exchange
Act.\40\ A registrant must amend its Form TA-1 within 60 days following
the date on which information reported therein becomes inaccurate,
incomplete, or misleading.\41\
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\38\ Exchange Act Section 17A(c)(1), 15 U.S.C. 78q-1(c)(1);
Exchange Act Rule 17ac2-1, 17 CFR 240.17Ac2-1; SEC Form TA-1, 17 CFR
249b.100. Once registration has become effective, a transfer agent
may be subject to censure, suspension, limitation, or revocation of
its registration if the transfer agent or any person associated with
the transfer agent fails to obey Commission rules or violates
certain of the securities laws. Exchange Act Section 17A(c)(3), 15
U.S.C. 78q-1(c)(3); Exchange Act Section 17A(c)(4)(C), 15 U.S.C.
78q-1(c)(4)(C).
\39\ Basic identification information about the registrant
includes information such as name, contact person, phone number,
address, email address, identification numbers including the
transfer agent's file number and Financial Industry Number Standard
(``FINS'') number, and whether the transfer agent solely provides
services to its own securities or those of an affiliate. See Form
TA-1, 17 CFR 249b.100.
\40\ Exchange Act Rule 17ac2-1(a), 17 CFR 240.17Ac2-1(a); SEC
Form TA-1, General Instruction G, 17 CFR 249b.100. Note that the 30-
day time period in Exchange Act Rule 17ac2-1(a), 17 CFR 240.17Ac2-
1(a), is shorter than the Exchange Act's 45-day time period for
applications to be effective. Exchange Act Section 17A(c)(2), 15
U.S.C. 78q-1(c)(2).
\41\ Exchange Act Rule 17ac2-1(c), 17 CFR 240.17Ac2-1(c); SEC
Form TA-1, General Instruction H, 17 CFR 249b.100. For transfer
agents for whom the Commission is their ARA, they must file Form TA-
1 and amendments thereto electronically on the Commission's EDGAR
system and each answer provided by the transfer agent is required to
be formatted in an eXtensible Markup Language (``XML'') data
language. Exchange Act Rule 17ac2-1(d), 17 CFR 240.17Ac2-1(d);
Electronic Filing of Transfer Agent Forms, Exchange Act Release No.
54864, 5 (Dec. 4, 2006), 71 FR 74698 (Dec. 12, 2006) (``Electronic
Filing of Transfer Agent Forms Release'').
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All registered transfer agents, regardless of their ARA, must file
an annual report with the Commission using Form TA-2 (Form for
Reporting Activities of Transfer Agents Registered Pursuant to Section
17A of the Securities Exchange Act of 1934).\42\ Form TA-2 covers a
calendar year reporting period that ends on December 31 \43\ and must
be filed by March 31 of the year following the end of the reporting
period.\44\
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\42\ Exchange Act Rule 17ac2-2(a), 17 CFR 240.17Ac2-2(a); SEC
Form TA-2, 17 CFR 249b.102 (Form for Reporting Activities of
Transfer Agents Registered Pursuant to Section 17A of the Securities
Exchange Act of 1934).
\43\ Exchange Act Rule 17ac-2-2(b), 17 CFR 240.17Ac2-2(b).
\44\ Form TA-2 must be filed electronically on the Commission's
EDGAR system, and each answer provided by the transfer agent is
required to be formatted in an XML data language. Exchange Act Rule
17ac2-2(c), 17 CFR 240.17Ac2-2(c); Electronic Filing of Transfer
Agent Forms Release, supra note 41, at 5.
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Form TA-2 requires transfer agents to identify and report on the
use of service companies, or other transfer agents, in connection with
their transfer agent activities. It also requires transfer agents to
provide annual data regarding the transfer agent's compliance with the
turnaround rules. Additionally, the form requires transfer agents to
provide the Commission with updated information about their business
activities, including accounts administered, items received,\45\
turnaround performance, total amounts of funds distributed, and lost
securityholder accounts.\46\ Rule 17ac2-2 provides exemptions from
completing certain sections of Form TA-2 for small transfer agents and
for transfer agents that outsource their work completely to service
companies.\47\
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\45\ See generally, Section III.A.1 for discussion of ``item.''
\46\ See generally, SEC Form TA-2, 17 CFR 249b.102.
\47\ Specifically, if a registered transfer agent received fewer
than 1,000 items for transfer in the reporting period and did not
maintain master securityholder files for more than 1,000 individual
securityholder accounts as of December 31 of the reporting period,
it is only required to complete Questions 1 through 5, 11, and the
signature section of Form TA-2. Exchange Act Rule 17ac2-2(a)(1), 17
CFR 240.17Ac2-2(a)(1). A named transfer agent that engaged a service
company to perform all of its transfer agent functions during the
reporting period is only required to complete Questions 1 through 3
and the signature section of Form TA-2. Exchange Act Rule 17ac2-
2(a)(2), 17 CFR 240.17Ac2-2(a)(2).
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The Commission, other ARAs, their respective staff, and members of
the public (including issuers and investors) use information on Forms
TA-1 and TA-2. The Commission's Electronic Data Gathering, Analysis,
and Retrieval (``EDGAR'') database provides a means through which
information on these forms can be searched and retrieved. The
Commission uses the information on Form TA-1 to review an entity's
application for registration as a transfer agent and to maintain
current information about transfer agents. The Commission uses
information on Form TA-2, as well as information on Form TA-1 and
amendments thereto, for several purposes, including: (i) to determine
the nature of the business conducted by a transfer agent, (ii) to
review transfer agent activities and to evaluate compliance with
Commission rules, and (iii) to inform Commission transfer agent
policymaking.\48\ The Commission's Division of Examinations may use the
information on Forms TA-1 and TA-2 to help identify risks and better
understand a transfer agent's business during an examination.
Commission staff may also use the information on Forms TA-1 and TA-2 to
analyze industry trends and to provide basic census information
concerning registered transfer agents. In addition, Form TA-1 and TA-2
data provide the Commission with information about securities
processing issues that may need to be addressed by Commission
rulemaking. Form TA-1 and TA-2 data is also used by the Commission to
assist it in evaluating the costs and benefits of potential rulemaking.
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\48\ See Adoption of Revised Transfer Agent Forms and Related
Rules, Exchange Act Release No. 23084 (Mar. 27, 1986), 51 FR 12124
(Apr. 9, 1986) (``Revised Transfer Agent Forms and Related Rules'');
Electronic Filing of Transfer Agent Forms Release, supra note 41, at
5.
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2. Processing, Reporting, Recordkeeping, and Exemptions: Rules 17ad-1
Through 17ad-7
On June 16, 1977, the Commission adopted Rules 17ad-1 through 17ad-
7 as a set of performance standards for transfer agents.\49\ These
turnaround and processing rules were ``designed to
[[Page 56951]]
protect investors . . . and to contribute to the establishment of the
national system for the prompt and accurate clearance and settlement of
transactions in securities by,'' among other things, ``assuring that
the transfer agent community performs its functions in a prompt,
accurate and more predictable manner.'' The rules primarily focused on
establishing minimum performance and recordkeeping standards for
routine transfers of certificated equity and debt securities and the
prompt and accurate cancellation and issuance of certificated
securities.\50\ The rules were also designed to provide an early
warning system to alert issuers and regulatory agencies when the
performance standards are not being met, prohibit under-performing
transfer agents from expanding their operations, require transfer
agents to respond promptly to certain written inquiries regarding items
presented for transfer, and require the maintenance and preservation of
certain records necessary for regulatory authorities to examine and
enforce transfer agent compliance with the turnaround rules.\51\ The
specific processing, reporting, and retention requirements were
metrics-based and, at the time, considered to be those necessary to
ensure that transfer agents adequately performed their functions and
that the Commission and other ARAs would be able to examine transfer
agents' compliance with the turnaround rules.\52\ Further, the new
transfer agent rules established by the Commission were designed not
only to ensure that transfer agents meet prescribed performance
standards for their core recordkeeping and transfer activities, but to
ensure they would be regulated appropriately in the context of the
national clearance and settlement system and that any problems meeting
these performance standards would not negatively impact individual
investors or the clearance and settlement system as a whole.\53\
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\49\ Exchange Act Rules 17ad-1 through 17ad-7, 17 CFR 240.17Ad-1
through 17 CFR 240.17Ad-7.
\50\ See Regulation of Transfer Agents, Exchange Act Release No.
13636 (June 16, 1977), 42 FR 32404, 32404 (June 24, 1977) (``Rule
17ad-1 through 17ad-7 Adopting Release'').
\51\ Id. See also Exchange Act Rules 17ad-1 through 17ad-7, 17
CFR 240.17Ad-1 through 17 CFR 240.17Ad-7.
\52\ Rule 17ad-1 through 17ad-7 Adopting Release, supra note 50,
at 32410.
\53\ Rule 17ad-1 through 17ad-7 Adopting Release, supra note 50,
at 32407 (noting the importance of avoiding impediments to ``the
Commission's efforts to provide necessary or appropriate regulations
for transfer agents in the broader context of the establishment of a
national system for the prompt and accurate clearance and settlement
of securities transactions.'').
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3. Recordkeeping and Safeguarding Rules: Rules 17Ad-8 Through 17ad-13
and 17ad-17
On June 10, 1983, the Commission adopted Rules 17ad-9 through 17ad-
13 to supplement the turnaround rules, based on its experience.\54\
These new rules established various requirements and exemptions
designed to ensure that transfer agents maintain appropriate internal
controls, meet adequate levels of service and performance, and avoid
adverse operational and financial problems that could harm investors,
issuers, or other securities industry participants. Most notably, the
new rules established additional minimum standards for recordkeeping
and codified minimum requirements for the safeguarding of funds and
securities.\55\ The Commission believed that these additional minimum
standards were critical to addressing seriously deficient transfer
agent performance.\56\
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\54\ Exchange Act Rules 17ad-9 through 17ad-13, 17 CFR 240.17Ad-
9 through 17 CFR 240.17Ad-13.
\55\ See 17ad-9 through 13 Proposing Release, supra note 9.
\56\ Id. The Commission was particularly concerned with reducing
the potential for transfer agent failure, which inevitably imposes
substantial potential liabilities and costs on issuers, securities
firms, and securityholders, as well as improving generally transfer
agent performance, thereby reducing the broker-dealers' costs
associated with fails to settle and extended transfer delays.
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Rule 17ad-17 was first adopted in 1997 \57\ and later amended at
the beginning of 2013 \58\ and was designed to ensure that the transfer
agents, brokers, dealers, and other financial intermediaries make
adequate efforts to find lost securityholders.\59\ The rule defines
``lost securityholder'' as a securityholder for whom an item of
correspondence sent to his or her last known address was ``returned as
undeliverable'' and requires transfer agents, brokers, and dealers to
conduct two database searches in their efforts to locate a lost
securityholder.
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\57\ Lost Securityholders, Exchange Act Release No. 39176 (Oct.
1, 1997), 62 FR 52229 (Oct. 7, 1997) (``Rule 17ad-17 Adopting
Release'').
\58\ Lost Securityholders and Unresponsive Payees, Exchange Act
Release No. 68668 (Jan. 16, 2013), 78 FR 4768 (Jan. 23, 2013).
\59\ Exchange Act Rule 17ad-17, 17 CFR 204.17Ad-17.
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C. Evolution of Transfer Agent Activities
This section discusses some of the core recordkeeping, transfer,
and other activities that transfer agents engage in, the manner in
which the existing transfer agent rules apply to those activities, and
how those activities have evolved since the first transfer agent rules
were adopted. Since then, the increased use and decreased cost of
technology, the expansion of corporate actions to bring securities into
the public market, the continued dematerialization of securities, and
other changes have resulted in significant evolution and changes to the
types of services transfer agents provide and the manner in which they
provide them.
1. Recordkeeping
Transfer agents have direct responsibility for maintaining on
behalf of the issuer the currency and integrity of the official list of
the registered owners of an issuer's stocks and bonds, how those stocks
and bonds are held, and how many shares or bonds each investor owns.
This list is defined by Rule 17ad-9(b) as the master securityholder
file.\60\ Without the master securityholder file, registered owners of
an issuer's securities cannot be assured that they are recognized as
such by the issuer and that they will receive corporate distributions,
communications, and the other rights of security ownership to which
they are entitled.\61\
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\60\ See Exchange Act Rule 17ad-9(b), 17 CFR 240.17Ad-9(b).
\61\ See generally, e.g., Del. Code Ann. tit. 8 Sec. Sec. 170,
173 (authorizing a corporation to pay cash and stock dividends under
certain circumstances); Exchange Act Rule 14c-3, 17 CFR 240.14c-3
(requirement to furnish an annual report to securityholders); Del.
Code Ann. tit. 8 Sec. 212 (providing for voting rights of
stockholders and permitting them to vote by proxy); Del. Code Ann.
tit. 8 Sec. 222 (requirement to send stockholder notice in advance
of stockholder meeting).
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Transfer agents also maintain and keep current the control book
which is defined by Rule 17ad-9(d) as the record of the total number of
shares of equity securities or the principal dollar amount of debt
securities authorized and issued by the issuer for each issue the
transfer agent services.\62\ One of the main purposes of the control
book is to allow the transfer agent to monitor the number of securities
outstanding to prevent overissuance because the total number of shares
reflected in the aggregate on the master securityholder file should
match the number of shares authorized in the control book.\63\
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\62\ Exchange Act Rule 17ad-9(d), 17 CFR 240.17Ad-9(d).
\63\ When monitoring for overissuance, a transfer agent may be
referred to as a ``registrar.'' See Exchange Act Section 3(a)(25),
15 U.S.C. 78c(a)(25).
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Finally, pursuant to Rule 17ad-6, transfer agents maintain the
transfer journal.\64\ The transfer journal can be a useful tool for
transfer agents and issuers. For example, when reviewed in conjunction
with the master securityholder file, the transfer journal may provide
historical information
[[Page 56952]]
regarding the issuance and transfer of a specific security or the
holdings of a specific securityholder. The transfer agent rules do not
define transfer journal nor codify requirements with respect to the
transfer journal.
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\64\ Exchange Act Rule 17ad-6, 17 CFR 240.17Ad-6.
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2. Securities Transfers, Exchanges, and Conversions
Transfer agents are integrally involved in effecting transfers of
ownership of securities, as well as exchanging and converting
securities.\65\ For uncertificated securities, transfer agents effect
book-entry transfers by registering the change in ownership on the
master securityholder file, which does not involve the physical
issuance and cancelling of securities certificates. The term
``registering'' means an official form of recording by a person charged
with that function, which is accomplished under Exchange Act Rules
17ad-9(h) and 17ad-10(a) by updating the master securityholder file, as
discussed above.\66\ For the transfer of certificated securities,
several rules apply, including Rule 17ad-19 regarding certificate
cancellation and Rule 17ad-12 regarding the safeguarding of cancelled
certificates.\67\
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\65\ The terms ``exchange'' and ``conversion'' are used in
Exchange Act Section 3(a)(25) and in the Commission's transfer agent
rules but are not defined in the Commission's transfer agent rules.
The term ``exchange'' is commonly used to refer to the trading of
specific securities for another asset, usually without an
accompanying change in ownership. The term ``conversion'' is
commonly used to refer to the changing into or substitution of one
security for another security or asset under specific conditions,
also without an accompanying change in ownership.
\66\ Book-entry transfer may be accomplished through DTC's DRS
using DTC's Profile Modification System. Once the transfer has been
effected, the investor receives from the transfer agent a statement
of ownership that acknowledges his or her new DRS position. See
supra note 20.
\67\ See 2015 Concept Release, supra note 4, at 81972-73 for a
more fulsome description of the transfers of certificated
securities.
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3. Securities Issuance
Transfer agents are also involved in the issuance of securities,
which may be one of the final stages before completing a certificate
transfer or could involve a primary offering of securities such as an
initial public offering. Upon issuing a new security to a transferee,
the transfer agent must credit the securities account of the transferee
receiving the new security. Under Rule 17ad-1(d), posting the new
ownership information to the master securityholder file changes the
ownership information of the securities account and ``completes
registration of change in ownership of all or a portion of those
securities.''
4. Corporate Actions and Related Services
A corporate action is an event in the life of a security, typically
instigated by the issuer, which affects a position in that
security.\68\ Examples of common corporate actions include changes that
affect capital structure, such as a merger or acquisition, and
distributions to securityholders, such as a dividend distribution or
principal or interest payment on a debt security. Corporate actions may
also include bankruptcy or liquidation proceedings, conversions,
warrants, exchange offers, subscription rights, tender offers, and
other events.\69\ Generally, corporate actions can be divided into two
broad categories: mandatory and voluntary (sometimes referred to as
``elective''). Mandatory corporate actions usually affect all
securityholders equally and the securityholder does not have different
options from which to choose; voluntary corporate actions usually allow
securityholders to choose among one or more different elections they
can make.
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\68\ Simmons and Dalgleish, Corporate Actions: A Guide to
Securities Event Management 3-5 (2006).
\69\ See id. (categorizing major types of corporate actions).
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Transfer agents may perform a variety of roles and provide a
variety of services, depending on the type and nature of the corporate
action. For example, a transfer agent may take on the role of exchange
agent in a mandatory corporate action, such as a stock-for-stock merger
or a cash-for-stock merger. In such circumstances, under Rule 17ad-10,
the transfer agent performing exchange agent services generally must
update the master securityholder file with certificate details within
five business days. But because the transfer associated with some of
the most common corporate actions qualify as non-routine items under
Rule 17ad-1, including transfers ``in connection with a reorganization,
tender offer, exchange, redemption, or liquidation,'' \70\ the general
three business day deadline for turnaround of routine items under Rule
17ad-2 may not apply. However, if a transfer agent makes a
determination that a transfer does fall within Rule 17ad-1(i)(5) and
therefore is non-routine, Rule 17ad-6(a)(11) requires the transfer
agent to maintain records documenting the basis for this
determination.\71\ Other aspects of the processing of the corporate
action may cause the corporate action to be classified as non-routine
as well.\72\
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\70\ Exchange Act Rule 17ad-1(i)(5), 17 CFR 240.17Ad-1(i)(5).
\71\ A large portion of specific records that transfer agents
are required to maintain under Rule 17ad-6 and to retain for
different periods of time under Rule 17ad-7 relate to: (i) the
classification of an item as routine or non-routine; (ii) tracking
the compliance of the transfer agent with the performance standards
for turnaround of routine items under Rule 17ad-2(a); and (iii) the
performance standards for processing of all items pursuant to Rule
17ad-2(b).
\72\ Exchange Act Rule 17ad-1(i), 17 CFR 240.17Ad-1(i).
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Voluntary corporate actions, which permit securityholders to choose
among different options, may result in the need for additional tasks
and systems for transfer agents to process them. For example, in
addition to the ordinary recordkeeping tasks, the transfer agent may be
responsible for monitoring whether elections have been made by
deadlines and for tracking such elections.
In addition to the examples discussed above, transfer agent roles
in connection with corporate actions may also include serving as: (i)
tender agent, when the transfer agent collects shares surrendered from
securityholders and makes payments for the shares at a predetermined
price; (ii) exchange agent, when the transfer agent collects shares
surrendered from securityholders and issues, registers, and/or
distributes shares of the bidding company's securities as compensation
for tendered securities of the subject company; (iii) subscription
agent, when the transfer agent invites existing equity securityholders
of an issuer to subscribe to a new issuance of additional debt or
equity of the issuer; (iv) conversion agent, for example when the
transfer agent converts debt securities into equity securities; and (v)
escrow agent, when the transfer agent holds an asset on behalf of one
party for delivery to another party upon specified conditions or
events. Finally, transfer agents providing corporate action services
may be subject to Rules 17ad-12 and 17ad-13, regarding safeguarding
requirements for funds and securities and an annual audit of internal
control of safeguarding procedures.
5. Annual Meeting, Proxy-Related Services, and Securityholder Services
and Communications
One of the key rights of securityholders is the right to vote their
shares on important matters that affect the companies they own.
Pursuant to state corporate law, registered securityholders may either
attend a meeting to vote shares in person or authorize an agent to act
as their ``proxy'' at the meeting to vote their shares pursuant to
their voting instructions.\73\ Because most
[[Page 56953]]
securityholders do not physically attend public company securityholder
meetings, the corporate proxy is the principal means by which they
exercise their voting rights.
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\73\ See Del. Code Ann. tit. 8, Sec. 212 (b), (c). A full
discussion of the proxy system is beyond the scope of this release.
For more information on the proxy system, see Proxy Concept Release,
supra note 21.
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The process in the United States for distributing proxy materials
and soliciting, tabulating, and verifying votes by securityholders is
complex, especially with respect to beneficial securityholders.\74\
Most corporate issuers and securities intermediaries such as banks and
brokers rely on a proxy service firm to perform these functions, which
may include distributing and forwarding the proxy materials and
collecting and tabulating voting instructions. Alternatively, some
issuers choose to engage their transfer agents for certain parts of the
proxy distribution process, such as printing and distributing proxy
materials either directly to registered securityholders or to
intermediaries, which will then distribute them to beneficial owners
either through the mail or electronically. Providing these services may
be a natural extension of a transfer agent's core functions because
most transfer agents will already possess and maintain the master
securityholder file listing the issuer's registered securityholders,
will have the infrastructure in place to communicate with registered
securityholders, and will be in a position to reconcile the identity of
registered voters and the number of votes against the official records
of the issuer.\75\ Typical transfer agent proxy services might include
mailing or electronically transmitting notices of meetings,\76\ proxy
statements, and proxy cards \77\ to securityholders.
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\74\ Beneficial owners holding securities in street name are not
technically entitled to vote shares or grant proxy authority.
Rather, the voting rights reside with Cede & Co. as the record owner
of all street name shares. However, because Cede & Co.'s role is
only that of nominee for DTC as custodian and it has no beneficial
interest in the shares, mechanisms have been developed in order to
pass the legal rights it holds as the record owner to the beneficial
owners, enabling them to vote. For a more comprehensive discussion
of these and other issues relating to the U.S. proxy and indirect
holding systems, see Proxy Concept Release, supra note 21.
\75\ See Proxy Concept Release, supra note 21.
\76\ See, e.g., Del. Code Ann. tit. 8, Sec. 222 (2001). See
also Del. Code Ann. tit. 8, Sec. 232 (2001).
\77\ In cases where the issuer is relying upon the notice and
access model of proxy statement distribution, the proxy card must be
mailed even if the proxy statement is not mailed by the issuer. See
Final Rule: internet Availability of Proxy Materials, Exchange Act
Release No. 55146, 10 (Jan. 22, 2007), 72 FR 4148 (Jan. 29, 2007).
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All transfer agents also provide some level of securityholder
communications services. The level of services may depend on the type
or size of the issuer, but at a minimum, most transfer agents
facilitate the mailing of quarterly and annual statements with details
of holdings, transaction confirmations, and letters or communications
confirming other transactions, such as address-change confirmations.
Many transfer agents also provide tax reporting services, including
sending tax forms such as W-9, W-8BEN, 1099-DIV, and 1099-B.
Most transfer agents also receive and respond to inquiries and
requests by securityholders and non-securityholders.\78\ Requests may
involve a transfer (for example, a gift of fund shares from one family
member to another) or a change in the securityholder's account, such as
an address change or different election regarding dividend
reinvestment. For transfer agents to open-end mutual funds, transfers
may involve a purchase (i.e., a ``subscription'') or sale (i.e., a
``redemption'') of the fund's shares. Transfer agents may receive
inquiries as well, which may not require processing a transaction or
account change, but may involve merely answering questions about the
securityholder's account or regarding the issuer generally.\79\
Requests and inquiries are transmitted to transfer agents through
various methods, including by telephone, mail, facsimile, email,
internet, mobile communication device, and in-person. The predominance
of telephone and other forms of electronic communication as favored
methods for securityholders to communicate with issuers and their
transfer agents, including the use of standardized protocols over the
internet, means that managing sizable call centers and other customer
service departments, with many representatives fielding calls and other
message-traffic, has become a critical aspect of the transfer agent-
issuer relationship.
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\78\ Several Commission rules address securityholder inquiries.
See Exchange Act Rule 17ad-5, 17 CFR 240.17Ad-5 (written inquiries
and requests); Exchange Act Rules 17ad-6, 7, 17 CFR 240.17Ad-6, 7
(recordkeeping and retention requirements regarding inquiries and
requests).
\79\ Inquiries about the securityholder's account may relate,
for example, to matters such as dividend reinvestment or other
account options.
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One aspect of these securityholder services is lost certificate
replacement. If a securityholder loses a certificate, the old
certificate must be cancelled and new shares issued, either in
certificated or book-entry form. Transfer agents facilitate this
process by processing the request and replacing the lost or missing
certificate. Generally, the securityholder will be required to fill out
a declaration, affidavit, or other form with identifying information
and a description of the circumstances giving rise to the loss and pay
a fee to the transfer agent for processing the request. Most transfer
agents will also require a surety bond to indemnify the issuer and
transfer agent against any potential losses in connection with the
missing or replacement certificate in the event it is later presented
for transfer or conversion. The transfer agent will then report the
lost or missing certificate to the Lost and Stolen Securities Program
operator pursuant to Rule 17f-1.
D. Overview of the Proposal
Based on the Commission's experience regulating and supervising
registered transfer agents, the Commission is proposing to update the
transfer agent rules to address the way in which modern transfer agents
carry out their transfer agent activities and the risks posed by those
activities to investors, the national clearance and settlement system,
and the U.S. securities markets as a whole. Accordingly, as summarized
below in Table 1, the Commission is proposing to update Forms TA-1 and
TA-2, amend several existing rules, rescind one rule, and add two new
rules.
Table 1--Overview of Proposed Changes
------------------------------------------------------------------------
------------------------------------------------------------------------
Overview of Proposed Changes
------------------------------------------------------------------------
Amendments to Forms.................... Form TA-1.
Form TA-2.
Amendments to Existing Rules........... 17ac2-1--Registration.
17ac2-2--Annual Reporting.
17ad-1 and 17ad-9--Definitions.
17ad-2--Turnaround.
17ad-3--Limitations on
Expansion.
[[Page 56954]]
17ad-6--Recordkeeping
17ad-7--Record Retention.
17ad-10--Prompt Posting.
17ad-11--Reports (title only).
17ad-12--Safeguarding.
17ad-17--Lost Securityholders.
Rescission of Existing Rule............ 17ad-4--Applicability of Rules
17ad-2, 17ad-3, and 17ad-
6(a)(1) through (7) and (11).
New Rules.............................. Rule 17ad-30--Compliance
Program.
Rule 17ad-31--Restrictive
Legends.
------------------------------------------------------------------------
II. Proposed Amendments to Registration and Annual Reporting
Requirements
Exchange Act Section 17A(c)(2) provides that a transfer agent may
be registered by filing an application in such form and containing such
information and documents concerning the transfer agent and any persons
associated with the transfer agent as the ARA may prescribe as
necessary or appropriate in furtherance of the purposes of the Exchange
Act.\80\ As explained above, those purposes include, among other
things, protecting investors, facilitating the prompt and accurate
clearance and settlement of securities transactions, and the
safeguarding of funds and securities.\81\ Exchange Act Section
17A(d)(1) empowers the Commission with authority to prescribe for
registered transfer agents engaging in any activity as transfer agents
such rules and regulations as necessary or appropriate in the public
interest, for the protection of investors, or otherwise in furtherance
of the purposes of the Exchange Act.\82\ As discussed above, pursuant
to that authority, transfer agents are required to file a Form TA-1 to
register as a transfer agent, a Form TA-2 each year to provide annual
disclosures, and a Form TA-W when they withdraw from registration.\83\
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\80\ Exchange Act Section 17A(c)(2), 15 U.S.C. 78q-1(c)(2).
\81\ See Exchange Act Section 17A(a)(1)(A), 15 U.S.C. 78q-
1(a)(1)(A).
\82\ Exchange Act Section 17A(d)(1), 15 U.S.C. 78q-1(d)(1).
\83\ For a detailed and comprehensive overview of the existing
registration, reporting, and disclosure requirements applicable to
registered transfer agents, see 2015 Concept Release, supra note 4.
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The Commission uses the information on Forms TA-1 and TA-2 to
fulfill its statutory duties, including its duty to protect investors,
facilitate the establishment of the national market system and the
national clearance and settlement system, and advance the public
interest. For example, Form TA-1 and Form TA-2 are necessary for the
Commission to gather sufficient information to understand the nature
and scope of the business conducted by the transfer agent, the specific
activities engaged in by the transfer agent, and identify and collect
the disciplinary history of the persons who may exercise direct or
indirect control over the transfer agent. This information is necessary
for the Commission to identify transfer agents, review and assess an
entity's registration application, determine whether there are
statutory grounds to deny, suspend, or revoke the entity's
registration, and identify and assess the risks the transfer agent and
its activities may pose to the securities markets, the national
clearance and settlement system, investors, and the public interest.
Once a transfer agent is registered, Commission staff use the
information on Form TA-2 to maintain current information about
individual registered transfer agents, review and identify trends in
transfer agent activities both with respect to individual transfer
agents and across the industry as a whole, evaluate individual transfer
agents' compliance with Commission rules, identify compliance issues
and trends that may require policy interventions, compliance
examinations, or enforcement actions, and develop and evaluate
appropriate regulatory standards for transfer agents, including
evaluating the costs and benefits of potential rulemaking. As noted
above, the Commission's Division of Examinations may use the
information on Forms TA-1 and TA-2 to help identify risks and better
understand a transfer agent's business during an examination.
Similarly, the Commission's Division of Economic and Risk Analysis
(``DERA'') uses the information on Forms TA-1 and TA-2 to analyze the
potential economic effects of Commission rulemaking and other
Commission actions, and to develop reports, analytics, and other
information to support the Commission's policy initiatives, examination
function, and enforcement actions.\84\
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\84\ See Transfer Agent Data Sets, <a href="https://www.sec.gov/data-research/sec-markets-data/transfer-agent-data-sets">https://www.sec.gov/data-research/sec-markets-data/transfer-agent-data-sets</a>.
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The Commission has observed over time that, as the nature and scope
of transfer agents' activities within the securities markets and the
national clearance and settlement system have changed and expanded, the
limited information disclosed on Forms TA-1 and TA-2 is no longer
sufficient in supporting the Commission to meet its statutory duties
under the Exchange Act. For example, the risk profile of a transfer
agent that is part of a multi-national conglomerate and provides dozens
of loosely-related services across multiple markets all under a single
registered transfer agent will differ from a small corporation or
limited liability company that primarily provides transfer and
recordkeeping services for small- and mid-cap equity issuers. Yet
because Forms TA-1 and TA-2 were created at a time when nearly all non-
bank transfer agents had a straightforward corporate organization and
primarily engaged in traditional transfer and related activities, the
limited information on the forms does not permit the Commission to
distinguish between them without issuing a regulatory document request,
conducting a formal examination, or otherwise seeking additional
information not already disclosed on the forms. Similarly, the risks to
investors, the markets, and the national clearance and settlement
system posed by the specific activities engaged in by a person or
entity that registers as a transfer agent because, for example, it
engages in wallet whitelisting (i.e., determining whether a wallet
address meets the credentialing requirements required for certain
activities, such as holding tokenized securities or other crypto
assets) and incorporates distributed ledger technology as a component
of its master securityholder file will differ from the risks posed by
the activities engaged in by a mutual fund transfer agent that
processes purchases and redemptions, calculates net asset value, and
whose transaction processing in general may be more complex or involve
additional responsibilities as compared to a
[[Page 56955]]
transfer agent for an operating company.\85\ Yet, again, the
information on the forms does not permit the Commission to identify and
understand the full scope of those activities, much less the risks they
pose because the forms were developed and adopted at a time when
certain technologies did not exist and transfer agent activities were
carried out in a significantly more limited way than they are today.
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\85\ See 2015 Concept Release, supra note 4, at Section VII.C.2.
For a detailed discussion of transfer agents to mutual funds, see
2015 Concept Release, supra note 4, at Section VII.C.
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To ensure that Forms TA-1 and TA-2 continue to support the
Commission's ability to fulfill its statutory duties, especially in
consideration of the expanded scope of transfer agents' activities as
discussed throughout this release, the Commission is proposing
amendments to Forms TA-1 and TA-2. We discuss the specific proposed
amendments to each form and related Commission rule in turn below.
A. Proposed Amendments to Rule 17ac2-1
As noted above, under existing Rule 17ac2-1, a transfer agent's
registration automatically becomes effective 30 days after the Form TA-
1 is filed, unless the ARA takes affirmative action to accelerate,
deny, or postpone registration in accordance with the provisions of
Section 17A(c) of the Exchange Act.\86\ However, Section 17A(c)(2) of
the Exchange Act specifies that a transfer agent's registration shall
become effective 45 days after receipt of the Form TA-1 application, or
within such shorter period of time as the ARA may determine.\87\
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\86\ Exchange Act Rule 17ac2-1(a), 17 CFR 240.17Ac2-1(a); SEC
Form TA-1, General Instruction G, 17 CFR 249b.100.
\87\ Exchange Act Section 17A(c)(2), 15 U.S.C. 78q-1(c)(2).
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The Commission has observed over time that 30 days is often
insufficient to determine whether to accelerate, deny, or postpone a
registration application, which often requires additional research into
the entity and its control persons, outreach to the applicant for
additional information or clarification of the application, and
consultation and coordination among Commission staff in multiple
divisions and offices related to legal, regulatory, and other issues.
Accordingly, the Commission is proposing to amend paragraphs (a) and
(b) of Rule 17ac2-1 to specify that an application for registration
would become effective 45 days after filing of the application for
registration, or any amendment to a pending application for
registration, rather than 30 days which the existing rule specifies.
This would provide the Commission with additional time to determine
whether to act on a registration application, as required by the
Exchange Act, and would enhance consistency between the rule and
statutory provision.\88\
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\88\ Exchange Act Section 17A(c)(3), 15 U.S.C. 78q-1(c)(3).
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B. Proposed Amendments to Rule 17ac2-2
The Commission is proposing to amend Rule 17ac2-2 to require that,
if a transfer agent discovers that any of the information reported on
Form TA-2 was materially inaccurate, misleading, or incomplete at the
time of filing, the transfer agent shall correct the information by
filing an amendment to Form TA-2 pursuant to the instructions on the
form to correct such information within 60 days following the date on
which the transfer agent discovered that such information was
materially inaccurate, misleading, or incomplete. The existing rule
provides that a transfer agent may file an amendment to Form TA-2 to
correct information that has become inaccurate, incomplete or
misleading; it does not require filing of the amendment, nor does it
specify a time period in which such corrections should be made.\89\ The
proposed amendment differs from the existing requirement to amend Form
TA-1 if information becomes materially inaccurate, misleading, or
incomplete. Unlike Form TA-1, Form TA-2 is used to report transfer
agent activities from the prior year reporting period and is required
to be filed annually and therefore the information disclosed on Form
TA-2 would not become inaccurate, incomplete, or misleading before the
next year's Form TA-2 is required to be filed. Instead, a transfer
agent may discover that the information on its Form TA-2 was
inaccurate, incomplete, or misleading at the time of filing and
therefore the transfer agent may need or want to amend its filing with
corrected information. Commission staff have received questions from
transfer agents regarding whether they should file a Form TA-2
amendment after discovering that certain information on their form was
inaccurate at the time of filing. This proposed amendment would address
these issues by specifying that, if the information on its Form TA-2
was materially inaccurate, incomplete, or misleading at the time of
filing, under the proposed rule, the transfer agent would be required
to amend its Form TA-2 to correct such information, within 60 days of
discovering such deficiency. The amendment would align the time frame
of 60 days for filing required amendments in Rule 17ac2-2 with Rule
17ac2-1, which requires transfer agents to file required amendments to
Form TA-1 within 60 days.\90\
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\89\ See Exchange Act Rule 17ac2-2(a), 17 CFR 240.17Ac2-2(a).
\90\ Exchange Act Rule 17ac2-1(c), 17 CFR 240.17Ac2-1(c).
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C. Proposed Amendments to Form TA-1
The Commission is proposing to amend the instructions for Form TA-1
to improve the quality of information provided in connection with
several existing questions, add new questions that would provide
additional information that ensures the form continues to support its
intended purpose, and remove two questions that are duplicative of
information required to be reported and updated annually on Form TA-2.
Table 2 below provides an overview of the proposed amendments to Form
TA-1.
Table 2--Comparison of Existing Form TA-1 Requirements With the Proposed
Amendments
------------------------------------------------------------------------
Existing Form TA-1 requirement Proposed TA-1 requirement
------------------------------------------------------------------------
1(a). Filer CIK................... Form Instructions would be updated
1(b). CCC......................... to provide full terms for
abbreviations CIK and CCC.
1(f)(i-iii). Contact Name, Phone Form and Form Instructions would be
Number, Email Address. updated to require that the
individual listed as the contact be
authorized to receive all
compliance communications for the
registrant and have responsibility
for disseminating them as
appropriate within the registrant's
organization.
3(a). Full Name of Registrant..... Form Instructions would be updated
to state that complete and accurate
legal name is required.
6. Service companies (transfer Existing Question 6 would be
agents) engaged by Registrant. removed; similar information
disclosed on Form TA-2.
[[Page 56956]]
7. Registrant engagements to act Existing Question 7 would be
as a service company. removed; similar information
disclosed on Form TA-2.
8. Form of business organization.. Checkboxes would be added for
``Limited Liability Company'' and
``Trust.''
8(a). Section for Reporting Form and Form Instructions would be
Additional Persons (Disclosure of updated to specify the individuals
owners, control persons). that must be disclosed in response
to Question 8.
11(a-d). Signature Block.......... Form would be updated to include
language regarding the Commission's
authority to examine all records of
registered transfer agents.
12. Attachments................... Attachment would be required of
organizational diagram depicting
relationship between the transfer
agent and its control affiliates.
None.............................. New Question 3(f) would require
disclosure of registrant's website
address.
None.............................. New Question 6(a) would require
disclosure of registrant's other
SEC registrations, if any.
New Question 6(b) would require
disclosure of registrant's other
federal, state, or foreign
registrations, if any.
None.............................. New Question 7 would require
disclosure of any control affiliate
of the registrant, and any federal,
state or foreign registration of
such affiliate and the registration
number.
Technical Amendments:
In Question 2, the checkbox for
Office of Thrift Supervision would
be removed.
In Question 10, references to 8(b)
and 8(c) in definition of control
affiliate would be removed.
In Signature Block, references to
SEC supplement and Schedules B-D
would be removed.
In Instructions ``Who Must File,''
threshold for Section 12(g)(1)
would be removed.
------------------------------------------------------------------------
The proposed changes to Form TA-1 are discussed more fully below.
1. Proposed Changes to Form TA-1 Instructions
The Commission is proposing to amend the instructions for use of
Form TA-1 for the questions discussed below to promote clarity
regarding the required information and to improve the quality,
consistency, and comparability of the information provided in response.
Form TA-1 Questions 1(a) and 1(b) (filer CIK and CCC, respectively)
would not change, but the form instructions would be updated to state
that ``CIK'' is an abbreviation for ``Central Index Key,'' which is the
unique number the Commission assigns to each filer to distinguish it
from other filers, including those with similar names. Similarly, the
form instructions would be updated to note that ``CCC'' is an
abbreviation for ``CIK Confirmation Code,'' which is a unique code that
each filer needs to make filings, and to retrieve and edit the filer's
data on EDGAR. Commission staff routinely receive questions from
prospective registrants regarding the meaning and importance of these
terms. Providing these clarifications would provide that information
uniformly to all potential registrants and help improve the clarity and
transparency of the form.
Form TA-1 Question 1(f) (contact name, phone number, and email
address) would not change, but the form instructions would be updated
to require that the contact listed in response to Question 1(f) must be
an individual authorized to receive all compliance communications for
the registrant with responsibility to disseminate them as appropriate
within the registrant's organization. In Commission staff's experience,
the contact information provided in response to Question 1(f) is not
always an individual with knowledge of the registration application or
the authority to speak to Commission staff regarding the application.
This can hinder the Commission staff reviewing the application from
conveying important information to the potential registrant and
obtaining information or responses necessary to continue processing the
application, and otherwise frustrate, delay, or prevent the application
review process. This proposed change is in the public interest and
would help ensure that transfer agents complete the form consistently
and accurately, and that Commission staff are able to follow up
effectively with the registrant regarding any questions on the content
of the filing or other supervisory matters, both while the registration
application is pending and on a going forward basis for as long as the
transfer agent remains registered. However, because this information
contains personally identifiable information, it is not made publicly
available on EDGAR and is only available to the Commission and its
staff.
Form TA-1 Question 3 (full name of registrant) would not change,
but the form instructions would be updated to specify that registrants
must provide the complete and accurate legal name of the entity that is
registering as a transfer agent. Because the field for Question 3 is
auto-populated based on the applicant's Form ID, applicants should
ensure that they use the complete and accurate legal name of the entity
that is registering when completing the Form ID.\91\ This information
is necessary for the Commission's review of the application to ensure
that, if the application is approved, the correct legal entity is
registered, and to ensure that investors and other members of the
public are able to identify the correct legal entity acting as a
transfer agent. In Commission staff's experience, however, prospective
registrants do not always provide this information consistently or
completely, so updating the instructions would help remind filers of
this responsibility.
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\91\ For more information on Form ID, see Rule 10 of Regulation
S-T, 17 CFR 232.10; Edgar Filer Manual Vol. I Section 3.
---------------------------------------------------------------------------
Form TA-1 Questions 8-10 require disclosure of background
information for the owners and other control persons of independent,
non-issuer transfer agents, ``with a particular emphasis on whether
offenses have been committed by these persons, and therefore, whether
the transfer agent's association with a particular individual would
have an impact on the transfer agent's ability to perform its functions
properly.'' \92\ When the proposed changes were adopted in 1986, the
final amended Form TA-1 included a ``Supplement to Form TA-1'' that
required disclosure of
[[Page 56957]]
owner and control person information for different entity types on
difference schedules (i.e., corporations, partnerships, etc.), and the
form instructions provided a definition of ``control'' (e.g., C-suite
executives, general partners, etc.) for each entity type and specified
that a 25 percent or higher ownership stake qualified as control.\93\
When electronic filing was mandated in 2006, the schedules were
replaced by drop down menu items and the detailed instructions defining
control persons and level of ownership were truncated and moved to the
EDGAR Filer Manual.\94\
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\92\ Revised Transfer Agent Forms and Related Rules, Exchange
Act Release No. 21950 (Apr. 17, 1985), 50 FR 15912 (Apr. 23, 1985),
15913. When this information was first proposed to be added to Form
TA-1 in 1985, it paralleled similar questions then being added to a
revised version of Form BD and the Uniform Application for Broker-
Dealer Registration and related Form U-4 utilized by what was then
known as the National Association of Securities Dealers (now FINRA).
Id.
\93\ See Revised Transfer Agent Forms and Related Rules, supra
note 48.
\94\ See Electronic Filing of Transfer Agent Forms Release,
supra note 41, at 5; EDGAR Filer Manual, Volume II (June 2025) at 8-
185.
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In the Commission's experience since 2006, however, without
detailed instructions specifying who must be disclosed in response to
Question 8, filers do not apply a consistent definition or approach to
responding to the question, which hinders the Commission in obtaining
and evaluating this important information. Accordingly, while Form TA-1
Question 8(a) (section for reporting additional persons) would not
change, the form instructions would be updated to reintroduce the
instructions from prior iterations of the form that define control
persons for corporations and partnerships and add comparable
instructions for trusts and limited liability companies to account for
other common types of business entities that modern transfer agents
choose to take. Specifically, the instructions would specify that
registrants must provide the full names of the following owners,
executive officers, or other control persons in response to Question
8(a):
<bullet> Each Chief Executive Officer, Chief Financial Officer,
Chief Operations Officer, Chief Legal Officer, Chief Compliance
Officer, director, and any other persons with similar status or
functions.
<bullet> If the registrant is organized as a corporation, each
person that is a direct or indirect beneficial owner of 5% or more of
any class of the registrant's equity securities.
<bullet> If the registrant is organized as a partnership, all
general partners and each limited and special partner that have
contributed 5% or more of the registrant's capital.
<bullet> In the case of a trust, (i) a person that directly owns 5%
or more of a class of the registrant's voting securities, or that has
the right to receive upon dissolution, or has contributed, 5% or more
of the registrant's capital, (ii) the trust, and (iii) each trustee.
<bullet> If the transfer agent is organized as a limited liability
company (``LLC''), (i) each member that has the right to receive upon
dissolution, or has contributed, 5% or more of the registrant's
capital, and (ii) if managed by elected managers, all elected managers.
In addition, the form instructions would be updated to provide
definitions for ``person'' and ``control'' to assist registrants in
responding to Question 8(a). For purposes of Form TA-1, the term
``person'' would be defined as an individual, partnership, corporation,
trust, or other organization, consistent with the definition of person
used in other Commission registration forms.\95\ The term ``control''
would be defined as the power to direct, or cause the direction of, the
management or policies of a person, whether through ownership, by
contract, or otherwise, consistent with the definition of control in
the prior iteration of Form TA-1.\96\ In addition, any person that is a
director, partner, or officer exercising executive responsibility (or
having similar status or functions) or that directly or indirectly has
the right to vote 25% or more of the voting securities or is entitled
to 25% or more of the profits would be presumed to be a control person,
as indicated in the prior iteration of Form TA-1.\97\ This information
would help to inform the Commission's understanding of the ownership
structure of the transfer agent and in identifying who ultimately
controls the transfer agent and its policies and procedures. The
information requested would also inform the Commission about any future
changes in control of the transfer agent, given the requirement to
amend Form TA-1 whenever any reported information becomes inaccurate,
misleading, or incomplete. This information is critical, both to the
Commission's assessment of the registration application, and to its
ongoing supervision of the registered transfer agent for the duration
of the transfer agent's registration, because it will allow the
Commission to better understand, for example, potential conflicts,
concentration in the industry, and the potential disciplinary history
of control persons.
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\95\ The proposed definition of ``person'' is consistent with
the definition of ``person'' used for broker-dealers required to
register on Form BD, investment advisers required to register on
Form ADV, municipal advisors required to register on Form MA, and
funding portals required to register on Form Funding Portal. See 17
CFR 249.501, 17 CFR 279.1, 17 CFR 249.1300, and 17 CFR 249.2000.
\96\ See Revised Transfer Agent Forms and Related Rules, supra
note 48.
\97\ See id.
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Form TA-1 Question 11 (signature block) would not change, but the
form would be updated with a statement regarding the Commission's
authority to examine all records of registered transfer agents pursuant
to Section 17(b) of the Exchange Act.\98\ In the Commission's
experience, certain transfer agents are unaware of their obligation to
permit examination of the transfer agent's records pursuant to Section
17(b) of the Exchange Act, and therefore refuse to produce records
requested in connection with an examination or attempt to limit the
records they produce in response to records requests from Commission
staff. A transfer agent's refusal to permit examination of records
clearly within the scope of Section 17(b) of the Exchange Act
frustrates and delays examinations and hinders the Commission's ability
to carry out its regulatory and oversight responsibilities. Including
language on the Form TA-1 reminding transfer agents of their statutory
obligation to permit examination of their records should help ensure
that transfer agents are aware of their statutory obligations and could
help reduce instances of non-compliance. Accordingly, the proposed
statement preceding a registrant's signature would be as follows:
``Pursuant to Section 17(b) of the Securities Exchange Act of 1934, all
records of registered transfer agents are subject to examination by SEC
staff. If a registered transfer agent does not comply with Section
17(b), the Commission may seek all available relief against that
transfer agent in district court and/or an administrative proceeding.
Such relief includes, but is not limited to, an injunction, denial,
suspension, and/or revocation of registration, and civil penalties. The
registrant submitting this Form, and the person signing the Form,
acknowledge that they understand and will comply with the requirement
to make records available for examination. If, at any point, the firm
believes it is unable to comply with its obligations to provide its
records to SEC staff for examination, the firm should consider whether
it needs to withdraw from registration.''
[[Page 56958]]
With this language on the form, each time an officer of the transfer
agent signs Form TA-1 (either the initial filing or an amendment), they
would be acknowledging that they understand, and will comply with, the
obligation of the registered transfer agent to provide records to the
Commission upon request.
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\98\ Section 17(b) of the Exchange Act provides that ``All
records of persons described in subsection (a) of this section
[i.e., transfer agents] are subject at any time, or from time to
time, to such reasonable, periodic, special, or other examinations
by representatives of the Commission and the [appropriate ARA] as
the Commission [or the appropriate ARA] deems necessary or
appropriate in the public interest, for the protection of investors,
or otherwise in furtherance of the purposes of this chapter.''
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2. Proposed Changes to Form TA-1 Reporting Requirements
The Commission is proposing to amend Form TA-1 to remove two
existing questions regarding service company arrangements and to add
questions requiring registrants to report additional information, as
described more fully below.
Form TA-1 would be amended to remove existing Questions 6 and 7
regarding registrant service company arrangements as this information
is duplicative of information that is required to be disclosed and
updated annually in response to Question 2 on Form TA-2. The
corresponding instructions related to existing Questions 6 and 7 would
also be removed. As a result, a transfer agent's service company
arrangements would not be disclosed on Form TA-1 (but would be
disclosed and updated annually on Form TA-2). Given the requirement in
Rule 17ac2-1(c) for transfer agents to file an amendment within 60 days
if any information on Form TA-1 becomes inaccurate, misleading, or
incomplete,\99\ the Commission also would no longer be informed within
60 days of each change in a transfer agent's service company
arrangements. However, because Form TA-2 requires registered transfer
agents to report all service company arrangements from each prior
calendar year reporting period,\100\ the Commission will receive an
annual summary of these arrangements on Form TA-2 by the filing
deadline each year. Therefore, this proposed change would not
materially impact the Commission's oversight of transfer agent
operations with respect to service company arrangements.
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\99\ Exchange Act Rule 17ac2-1(c), 17 CFR 240.17Ac2-1(c).
\100\ See Question 2 on Form TA-2 (Form for Reporting Activities
of Transfer Agents Registered Pursuant to Section 17A of the
Securities Exchange Act of 1934), 17 CFR 249b.102.
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Form TA-1 would be amended to add new Question 3(f), which would
require disclosure of the registrant's website address. A website
address would assist the Commission in evaluating applications for
registration and in overseeing registered transfer agents.
Form TA-1 would also be amended to add new Question 6(a) regarding
the applicant's other registrations with the Commission, new Question
6(b) regarding the applicant's other federal, state, or foreign
registrations, and new Question 7 regarding the applicant's control
affiliates. Existing Questions 8 and 9 require disclosure of the
applicant's control persons, and Question 10 requires the applicant to
disclose whether it or any of its control persons or control affiliates
has been subject to investment-related criminal prosecutions,
regulatory actions, or civil actions. The definition of control
affiliate is broad and includes, among other things, an individual or
firm that is under common control with the applicant.\101\ As a result,
the disciplinary history for transfer agents that are part of a larger
corporate family of registered entities can include information related
to multiple entities that are registered with the Commission or other
regulators in different capacities. For example, if a transfer agent's
parent company also controls a bank, a broker-dealer, and an investment
adviser, the transfer agent's Form TA-1 needs to include the
disciplinary history for the affiliated bank, broker-dealer, and
investment adviser in response to Question 10. However, in the
Commission's experience, transfer agent applicants do not always
provide full and complete information regarding control person and
control affiliate disciplinary history when completing the Form TA-1.
This then requires the Commission staff reviewing the application to
either manually search for other registrations--a laborious undertaking
\102\--or risk processing the application with incomplete or inaccurate
information. This could be addressed by including information on the
Form TA-1 regarding the registrant's additional registrations and
registration numbers, which would allow the Commission staff reviewing
an application to cross-reference the applicant's other registrations
without either relying on the registrant to accurately and timely
update or complete its other registrations, or conduct a laborious and
time-consuming manual search. This in turn would facilitate the
Commission's ability to evaluate and act on transfer agent registration
applications within the limited time permitted under the Exchange
Act.\103\
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\101\ SEC Form TA-1, Question 10, 17 CFR 249b.100.
\102\ For example, there could be a slight variation in the
entity's or an individual's name across different registration
applications that could hinder a manual search or call the results
into question.
\103\ A Form TA-1 registration automatically becomes effective
30 days after filing unless the Commission takes affirmative action
to accelerate, deny, or postpone the registration in accordance with
the provisions of Section 17A(c) of the Act. Exchange Act Rule
17Ac2-1(a), 17 CFR 240.17Ac2-1(a). As noted, we are proposing to
amend Rule 17Ac2-1(a) to specify that registration would become
effective 45 days after filing. See supra Section II.A.
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Accordingly, the Commission is proposing to amend Form TA-1 to add
new Question 6(a), which would require applicants to disclose any other
SEC registrations they hold, along with the corresponding SEC
registration number. Similarly, new Question 6(b) would require
registrants to disclose any other federal, state, or foreign
registrations of the registrant, along with the associated registration
number, if any. This information is similar to registration information
requested of other Commission registrants,\104\ should be readily
available to the registrant and easily listed on the Form TA-1 and
would allow the Commission to cross-reference those entities applying
for registration as transfer agents with those that are already
registered in another capacity with the Commission or another regulator
without conducting a laborious and potentially inaccurate manual search
for such registrations. This, in turn, would help ensure that the
Commission has accurate and complete information to develop a
comprehensive assessment of the applicant's control person and control
affiliate disciplinary history across the full range of its regulated
activities, which is necessary for the Commission to understand and
assess the risks to investors, the securities markets, and the national
clearance and settlement system posed by those persons, affiliates, and
activities, which is consistent with promoting investor protection. It
also would facilitate more efficient and effective examinations of
transfer agents that are also registered in other capacities and
develop a more comprehensive understanding of both individual transfer
agents and the transfer agent industry as a whole.
---------------------------------------------------------------------------
\104\ See, e.g., Form MA and Form Funding Portal, 17 CFR
249.1300 and 17 CFR 249.2000.
---------------------------------------------------------------------------
Likewise, requiring the applicant to affirmatively identify its
control affiliates in new Question 7 (as opposed to simply asking for
the disciplinary history of its control affiliates) would allow the
Commission to cross-check and validate applicant's disciplinary
disclosures provided in response to Question 10 without relying
exclusively on the applicant to provide a complete and accurate list of
its control affiliates'
[[Page 56959]]
disciplinary history, which would have the same benefits as new
Questions 6(a) and 6(b) discussed above, including facilitating the
Commission's ability to evaluate and act on transfer agent registration
applications within the limited time permitted under the Exchange Act.
Accordingly, the Commission is proposing to add new Question 7 to Form
TA-1, which would supplement the existing requirement to disclose the
disciplinary history for the applicant's control affiliates by
requiring applicants to disclose in new Schedule A the name of any
control affiliate, and any federal, state, or foreign registration of
such control affiliate and the associated registration number.
In addition, Form TA-1 Question 12 would be amended to require a
registrant to file an attachment to Form TA-1 containing a diagram
depicting the relationship between the transfer agent and the control
affiliates in its organizational structure. Transfer agents should be
able to prepare an organizational chart suited to their operational
structure, and limiting the chart to control affiliates would ensure
the chart includes only the most relevant individuals or firms that
would aid the Commission in understanding the nature of a transfer
agent's regulated business operations and overall organizational
control structure. This would enhance the Commission's ability to
evaluate applications for registration as transfer agents, facilitate
more efficient and effective examinations of transfer agents, and
develop a more comprehensive understanding of both individual transfer
agents and the transfer agent industry as a whole. In the Commission's
experience, an accurate organization chart is often necessary to
understand the structure of an organization and its affiliates,
especially large organizations with many affiliates. This information
will help to ensure that the Commission has accurate and complete
information regarding a transfer agent's control structure, which would
help the Commission understand and assess the risks to investors, the
securities markets, and the national clearance and settlement system
posed by the transfer agent and its control persons and affiliates,
consistent with investor protection.
Form TA-1 Question 8 (form of organization) would be amended to
provide checkboxes for two additional organization types: trusts and
limited liability companies. Currently Question 8 provides the
following checkboxes: Corporation, Partnership, Sole Proprietorship,
Other, and Not Applicable. The Commission has observed that many
transfer agents are organized as trusts or limited liability companies
and adding these additional checkboxes to Form TA-1 would aid
registrants in responding to Question 8.
3. Technical Amendments to Form TA-1
The Commission is also proposing to make several technical
amendments to Form TA-1 to remove information that is no longer
necessary or accurate. Specifically, the option to select the Office of
Thrift Supervision in Question 2 as an appropriate regulatory agency
would be removed, as this agency has been abolished.\105\ The
definition of control affiliate in Question 10 would be amended to
remove references to Questions 8(b) and 8(c), as those questions do not
exist on Form TA-1. Similarly, the reference to the SEC supplement and
Schedules B-D preceding the Form TA-1's signature block would be
removed, as those items are no longer part of Form TA-1. Finally, the
Form TA-1 instructions would be amended to remove outdated asset and
holder thresholds under Section 12(g)(1) of the Exchange Act for exempt
equity securities.
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\105\ Dodd-Frank Wall Street Reform and Consumer Protection
Act., Public Law 111-203, 313, 124 Stat. 1376, 1523 (2010).
---------------------------------------------------------------------------
4. Request for Comment
The Commission requests comments on all aspects of the proposed
amendments to Form TA-1. In particular, the Commission requests
comments on the following:
1. Should the proposed 45 day effectiveness period apply uniformly
to all transfer agent applications for registration regardless of size,
complexity, or type of activities engaged in?
2. Should the Commission require less information to be disclosed
on Form TA-1? Are there any specific questions or categories of
information on the existing form that registrants believe are no longer
necessary or useful to the Commission?
3. Should the Commission require transfer agents to designate more
than one contact person on Form TA-1 to ensure continuity of compliance
communications in the event the primary contact is unavailable?
4. Should the Commission require transfer agents to update their
contact information more frequently than currently required, given the
importance of maintaining current and accurate contact information for
compliance communications? If so, what update frequency should be
appropriate?
5. Does the service company information required to be disclosed on
Form TA-2 provide the Commission with sufficient information regarding
service company arrangements? Is there any additional information the
Commission should require transfer agents to disclose on Form TA-1 or
Form TA-2 regarding service company arrangements?
6. While registrants must disclose on Form TA-1 whether they or any
of their control affiliates have been subject to criminal prosecution
for investment related crimes, should this requirement be expanded to
cover other types of criminal activity, such as theft or fraud outside
of an investment context?
7. Should the Commission require all registrants to provide an
attachment to their Form TA-1 with a diagram depicting the control
affiliates in their organizational structure, or should the Commission
provide an exemption from this requirement for small or less
organizationally complex transfer agents? If so, what types of transfer
agents should be exempt from the requirement to provide an
organizational diagram?
8. More generally, does the proposed requirement to provide an
attachment to the Form TA-1 with a diagram depicting their
organizational structure impose a burden on any particular types of
transfer agents?
9. Are the proposed checkboxes for ``Limited Liability Company''
and ``Trust'' as additional organization types in Question 8 sufficient
to capture the full range of organizational structures used by transfer
agents? Are there other organizational structures that should be added
to the list of checkboxes?
10. Do the proposed definitions for ``control'' and ``person''
adequately cover the appropriate individuals and entities that should
be disclosed on Form TA-1, or are the proposed definitions either too
expansive or, conversely, too limited? Should the Commission consider
alternative definitions or thresholds for determining who qualifies as
a control person for purposes of Form TA-1?
11. Is any information that would be required by the proposed
changes to Form TA-1 difficult for a transfer agent to provide? If so,
why? Are there alternative approaches to collecting the same
information that would be less burdensome for transfer agents, such as
providing this information upon request, while still providing the
Commission with the information it needs?
12. Should any information that would be required by the proposed
changes to Form TA-1 (other than the
[[Page 56960]]
personal name and contact information in Question 1(f)) not be publicly
disclosed?
D. Proposed Amendments to Form TA-2
The Commission is proposing to update the form instructions for
several questions on Form TA-2 to further explain the required
information. Additionally, the Commission is proposing to introduce new
requirements to provide additional information that the Commission
considers important for determining the nature of the business
conducted by transfer agents, monitoring their activities, evaluating
compliance with Commission rules, informing Commission transfer agent
policymaking, and supporting the Commission's statutory duty to
facilitate the establishment of a national clearance and settlement
system for the prompt and accurate clearance and settlement of
transactions in securities.\106\ The Commission is also proposing to
eliminate questions that would no longer be necessary if the proposed
changes to Form TA-2 are adopted. Table 3 provides an overview of the
proposed amendments to Form TA-2.
---------------------------------------------------------------------------
\106\ See 15 U.S.C. 78q-1(a)(2).
Table 3--Comparison of Existing Form TA-2 Requirements With the Proposed
Amendments
------------------------------------------------------------------------
Existing Form TA-2 requirements Proposed Form TA-2 requirements
------------------------------------------------------------------------
1(a). Filer CIK...................... Form Instructions would be
1(b). Filer CCC...................... updated to provide full terms
for abbreviations CIK and CCC.
1(f)(i-iii). Contact Name, Contact Form and Form Instructions would
Phone Number, Contact Email Address. be updated to require that the
individual listed as the contact
employee be authorized to
receive all compliance
communications for the
registrant and have
responsibility for disseminating
them as appropriate within the
registrant's organization.
4(b). Number of individual Form Instructions would be
securityholder accounts for which updated with information
the TA maintained master regarding how to count the
securityholder files. number of individual
securityholder accounts.
5(a). Total number of individual Existing Question 5 would be
securityholder accounts, including removed.
accounts in the DRS, dividend New Question 4(c) would require
reinvestment plans, and/or direct registrant to provide the total
purchase plans as of December 31. number of individual
securityholder accounts by
security type in a new table.
5(b). Number of individual
securityholder dividend reinvestment
plan, and/or direct purchase plan
accounts as of December 31.
5(c). Number of individual .................................
securityholder DRS accounts as of
December 31.
5(d). Approximate percentage of .................................
individual securityholder accounts
from subsection (a) in the following
categories as of December 31: 5(d)(i-
vi).
6. Number of securities issues for Existing Question 6 would be
which Registrant acted in the removed.
following capacities, as of December New Question 6(a) would require
31:. registrant to provide similar
data in a new table.
6(a). Receives items for transfer and
maintains master securityholder
files.
6(b). Receives items for transfer but .................................
does not maintain the master
securityholder files.
6(c). Does not receive items for .................................
transfer but maintains master
securityholder files.
7(a). Number of issues for which Existing Question 7(a) and 7(b)
dividend reinvestment plan, and/or would be incorporated into new
direct purchase plan services were Question 6(a).
provided, as of December 31.
7(b). Number of issues for which DRS .................................
services were provided, as of
December 31.
7(c). Dividend disbursement and Registrant would be required to
interest paying agent activities report the number of issues for
conducted during the reporting which paying agent services were
period:. provided as of December 31 in
<bullet> Number of issues (Question new Question 6(a).
7(c)(i)).. New Question 7 would require
<bullet> Amount (in dollars) registrant to report all fund
(Question 7(c)(ii)).. movements to/from
securityholders as well as in-
kind distributions to
securityholders (not just
dividend and interest
disbursements).
9(a)(i-ii). Turnaround Compliance.... Question 9 would be revised to
<bullet> Number of months during the conform to Proposed Rule 17ad-2.
reporting period Registrant was not Registrant would be required to
in compliance with the turnaround report the total number of
time for routine items (Question routine items it received during
9(a)(i)). the reporting period and the
<bullet> Number of written notices number of routine items it
Registrant filed during the failed to turn around or process
reporting period to report its within the shorter of one
noncompliance with the turnaround business day or the time period
time for routine items (Question specified by Rule 15c6-1(a) of
9(a)(ii)). the Exchange Act for each month
of the reporting period.
13(a-e). Related Documents/ Attachment would be required for
Attachments. a list of all issues serviced by
registrant.
None................................. New Questions 4(d) and (e) would
require registrant to report on
usage of physical certificates
and distributed ledger
technology during the reporting
period.
None................................. New Question 5(a) would require
registrant to report the number
of employees engaged in transfer
agent functions or activities
incidental thereto during the
reporting period.
None................................. New Question 5(b) would require
registrant to report certain
service providers used during
the reporting period.
None................................. New Question 6(b) would require
registrant to report the number
of issues, by tokenization
model, serviced by the
registrant as of December 31.
------------------------------------------------------------------------
The proposed changes to Form TA-2 are discussed more fully below.
1. Proposed Changes to Form TA-2 Instructions
The Commission is proposing to amend the instructions for use of
Form TA-2 for the questions discussed below to provide specificity
regarding the required information and to improve the quality,
consistency, and comparability of the information provided in response.
Form TA-2 Questions 1(a) and 1(b) (filer CIK and CCC, respectively)
would not change, but the form instructions would be updated to state
that ``CIK'' is an abbreviation for ``Central Index Key.'' Similarly,
the form instructions would be updated to note that ``CCC'' is an
abbreviation for ``CIK Confirmation Code.'' As with Form TA-1 described
above, Commission staff routinely receive questions from registrants
regarding the meaning and importance
[[Page 56961]]
of these terms. Providing these clarifications would provide that
information uniformly to all registrants. It would also help improve
the clarity and transparency of the form, thereby decreasing the amount
of time it takes for registrants to complete the form.
Form TA-2 Question 1(f) (contact name, phone number, and email
address) would not change, but the form instructions would be updated
to require that the contact listed in response to Question 1(f) must be
an individual authorized to receive all compliance communications for
the registrant with responsibility to disseminate them as appropriate
within the registrant's organization. As with Form TA-1, in Commission
staff's experience, the contact information provided in response to
Question 1(f) is not always an individual with knowledge of the annual
report or the authority to speak to Commission staff regarding the
annual report. This can hinder the Commission staff reviewing the
annual report from conveying important information to the registrant or
obtaining information in response to questions regarding the annual
report. This proposed change would help ensure that transfer agents
complete the form consistently and accurately, and that Commission
staff are able to follow up effectively with the registrant regarding
any questions on the content of the annual report or other supervisory
matters that arise while the transfer agent remains registered.
Moreover, not having up-to-date contact information for an
appropriately authorized individual could impede the Commission in
carrying out its regulatory and oversight responsibilities with respect
to transfer agents. However, because this information contains
personally identifiable information, it is not made publicly available
on EDGAR and is only available to the Commission and its staff.
Form TA-2 Question 4(b) (number of individual securityholder
accounts for which the transfer agent maintained master securityholder
files) would not change, but the form instructions would be updated to
provide instructions regarding how to calculate the number of
individual securityholder accounts. Based on the Commission's
supervisory experience, the Commission understands that there is
variability in the way registered transfer agents calculate the number
of individual securityholder accounts reported in response to Question
4(b), which hinders the Commission's ability to gather and analyze
accurate and comparable information. This proposed change to the form
instructions would help ensure consistently accurate reporting of the
number of individual securityholder accounts, based upon the same
calculation methodology, which should, in turn, support investor
protection and market integrity by ensuring that the Commission has an
accurate understanding of the market. Therefore, the Commission
proposes to provide instructions for transfer agents regarding the
calculation methodology that considers both the number of securities
issues as well as the number of securityholders for the issue. For
purposes of Question 4(b), the number of individual securityholder
accounts for each securities issue should be determined separately and
then added together to arrive at the number reported in response to
Question 4(b). For example, if the transfer agent maintains the master
securityholder file for two securities, one with five individual
securityholders and the other with the same five securityholders, the
transfer agent should report 10 in response to Question 4(b). Any
identical securityholders for the two securities should be counted
separately for each issue for purposes of responding to Question 4(b).
2. Proposed Changes to Form TA-2 Reporting Requirements
The Commission is proposing to amend Form TA-2 in several ways that
would provide the Commission with information regarding a transfer
agent's staffing, securityholders, service providers, recordkeeping,
and handling of funds. These proposed changes, as described below,
would further support the Commission's statutory mandate to protect
investors, promote the prompt and accurate clearance and settlement of
securities transactions, and promote the safeguarding of funds and
securities by enhancing oversight of a transfer agent's operational
capacity, operational risks, recordkeeping practices, and outsourcing
risks.\107\
---------------------------------------------------------------------------
\107\ Exchange Act Section 17A(a)(2)(A), 15 U.S.C. 78q-
1(a)(2)(A).
---------------------------------------------------------------------------
a. Number of Individual Securityholder Accounts
Accurate and relevant data regarding the specific types and volume
of securities accounts serviced by a transfer agent is critical to the
Commission's assessment and oversight of a transfer agent's operational
capacity, recordkeeping practices, operational risks, and safeguarding
practices. Existing Form TA-2 Questions 5(a)--(d) require disclosure of
the total number of individual securityholder accounts, individual
securityholder DRS accounts, individual securityholder dividend
reinvestment plan and/or direct purchase plan accounts, and approximate
percentages of individual securityholder accounts in various security
type categories, as of December 31. To ensure that the data provided on
Form TA-2 is relevant to the types and volume of securities accounts
serviced by modern transfer agents and therefore continues to support
the Commission's statutory duties related to the oversight of
registered transfer agents, Questions 5(a)-(d) would be removed along
with the corresponding form instructions and replaced with proposed new
Question 4(c). As depicted in Figure 1 below, proposed new Question
4(c) would require registrants to report the total number of individual
securityholder accounts, by security type, as of December 31. Proposed
Question 4(c) is similar to existing Question 5(d), but proposed
Question 4(c) would require the total number of individual
securityholder accounts by security type, as opposed to the approximate
percentage of individual securityholder accounts by security type,
which should be more readily available and would avoid the need for
registrants to perform a percentage calculation. In addition, proposed
Question 4(c) would provide more granular security types than existing
Question 5(d) by including categories for corporate equity securities
at two different market capitalization levels, exchange traded funds,
and closed end investment company securities, as transfer agent
activities, operational risks, recordkeeping practices, and
safeguarding activities may vary depending on the type of security
being serviced.
The security types provided in the table would include corporate
equity securities with market capitalization less than or equal to $300
million, corporate equity securities with market capitalization greater
than $300 million, corporate debt securities, non-exchange traded open-
end investment company securities, exchange-traded funds, closed end
investment company securities, limited partnership securities,
municipal debt securities, and other securities. The number of
individual securityholder accounts in DRS, dividend reinvestment plans,
or direct purchase plans required by Questions 5(b) and (c) are
proposed to be deleted and would no longer be required. As subsets of
the total number of individual securityholder accounts, those
subcategories are not necessary given the requirement in Form TA-2 to
[[Page 56962]]
report the number of issues for which DRS, dividend reinvestment plan,
or direct purchase plan services were provided in existing Question 7.
Figure 1: Proposed Question 4(c) Regarding Individual Securityholder
Accounts
4(c). Provide the total number of individual securityholder
accounts, by security type, as of December 31:
------------------------------------------------------------------------
Total number of individual
Security type securityholder accounts (as
of December 31)
------------------------------------------------------------------------
Corporate Equity Securities (market cap
<=$300 million)..........................
Corporate Equity Securities (market cap
>$300 million)...........................
Corporate Debt Securities.................
Non-Exchange Traded Open End Investment
Company Securities.......................
Exchange-Traded Funds.....................
Closed End Investment Company Securities..
Limited Partnership Securities............
Municipal Debt Securities.................
Other Securities..........................
-----------------------------
Total.................................
------------------------------------------------------------------------
b. Number of Issues by Activity Type
Existing Form TA-2 Question 6 (number of securities issues for
which Registrant received items and/or maintained the master
securityholder files, broken down by various security types) would be
removed and replaced with proposed new Question 6(a) which would
request similar information but would also incorporate the transfer
agent activity types from Question 7 and include more granular security
types than existing Question 6. Proposed Question 6(a) would add
security type categories for corporate equity securities at two
different market capitalization levels, exchange-traded funds, and
closed end investment company securities, as transfer agent activities,
operational risks, recordkeeping practices, and safeguarding activities
may vary depending on the type of security being serviced.
Specifically, as depicted in Figure 2 below, registrants would be
required to report the following data as of December 31 in a new table
categorized by security type: the number of securities issues for which
the transfer agent (i) received items for transfer, (ii) maintained the
master securityholder file(s), (iii) provided DRS services, (iv)
provided direct purchase plan services, (v) provided dividend
reinvestment plan services, and (vi) provided paying agent services.
The security types provided in the table include corporate equity
securities with market capitalization less than or equal to $300
million, corporate equity securities with market capitalization greater
than $300 million, corporate debt securities, non-exchange traded open-
end investment company securities, exchange-traded funds, closed end
investment company securities, limited partnership securities,
municipal debt securities, and other securities. These proposed
revisions to Question 6 would incorporate the content of Question 7(a)
regarding the number of issues for which dividend reinvestment plan
and/or direct purchase plan services were provided as of December 31,
Question 7(b) regarding the number of issues for which DRS services
were provided as of December 31, and Question 7(c)(i) regarding the
number of issues for which dividend disbursement and interest paying
agent activities were conducted during the reporting period and thus,
those questions would be removed. Dividend disbursement and interest
paying agent activities would be included with other paying agent
services in a single column in proposed Question 6(a).
Figure 2: Table for Proposed Question 6(a)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Number of issues for which registrant provided the following services (as of December
31)
----------------------------------------------------------------------------------------
Provided Provided
Security type Received Maintained Direct Direct Provided Provided
items for master Registration Purchase dividend paying agent
transfer securityholder System (DRS) Plan (DPP) reinvestment services
file(s) services services services
--------------------------------------------------------------------------------------------------------------------------------------------------------
Corporate Equity Securities (market cap <=$300 million)........
Corporate Equity Securities (market cap >$300 million).........
Corporate Debt Securities......................................
Non-Exchange Traded Open End Investment Company Securities.....
Exchange-Traded Funds..........................................
Closed End Investment Company Securities.......................
Limited Partnership Securities.................................
Municipal Debt Securities......................................
Other Securities...............................................
----------------------------------------------------------------------------------------
Total......................................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 56963]]
c. Handling of Securityholder Funds and Securities
Form TA-2 Question 7(c)(ii) (amount in dollars of dividend
disbursement and interest paying agent activities conducted during the
reporting period) would be replaced by proposed new Question 7 which is
designed to capture all money movement through a transfer agent to or
from securityholders, not just dividend disbursements and interest
payments as required by existing Question 7(c)(ii), as well as any in-
kind distribution activity. Specifically, registrants would be required
to report the amount (in dollars) of dividend disbursements, interest
or coupon payments, principal payments, disbursements in connection
with corporate actions, open-end investment company purchases and
redemptions, stock purchases, and any other monetary inflows or
disbursements, as well as the amount (in units) of any in-kind
distributions to securityholders during the reporting period. These
proposed changes would contradict the form's existing instructions for
answering Question 7(c),\108\ so those instructions would be removed.
Requiring transfer agents to report more detailed information regarding
the nature and extent of their handling of securityholder funds would
provide the Commission with data relevant to assess safeguarding risks
across the transfer agent population as a whole and at individual
transfer agents. This information would further support the
Commission's statutory mandate to protect investors, promote the prompt
and accurate clearance and settlement of securities transactions, and
promote the safeguarding of funds and securities.
---------------------------------------------------------------------------
\108\ The existing instructions for Form TA-2 Question 7.c.
direct registrants to exclude coupon payments and transfers of
record ownership as a result of corporate actions.
---------------------------------------------------------------------------
d. Turnaround Performance
Form TA-2 Question 9 (turnaround compliance) would be removed in
its entirety due to the proposed changes to Rule 17ad-2 discussed in
Section III.D. Existing Form TA-2 Question 9(a)(i) requires a
registrant to report the number of months during the reporting period
it was not in compliance with the turnaround time for routine items
according to Rule 17ad-2, while existing Question 9(a)(ii) requires a
registrant to report the number of written notices filed during the
reporting period with the SEC and with its ARA regarding noncompliance
with the turnaround time for routine items according to Rule 17ad-
2.\109\ Instead, proposed new Question 9(a) would require registrants
to report the total number of routine items received during the
reporting period, and proposed new Question 9(b) would require
registrants to report the number of routine items that were not turned
around or processed within the shorter of one business day or the time
period specified by Rule 15c6-1(a) of the Exchange Act for each month
of the reporting period. These proposed new questions would align the
reporting requirements on Form TA-2 with the proposed changes to Rule
17ad-2 regarding turnaround and processing performance.
---------------------------------------------------------------------------
\109\ 17 CFR 249b.102.
---------------------------------------------------------------------------
3. Proposed Additions to Form TA-2 Reporting Requirements
New Questions would be added to Form TA-2 to require registrants to
report the following information, as accurate data in these areas is
important for the Commission's assessment and oversight of a transfer
agent's operational capacity, recordkeeping practices, operational
risks, and safeguarding practices:
<bullet> The number of issues serviced by the registrant for which
physical certificates were in use during the reporting period in new
Question 4(d);
<bullet> The number of issues for which the registrant maintained
the master securityholder file using distributed ledger technology
during the reporting period in new Question 4(e);
<bullet> The number of employees engaged in transfer agent
functions or activities incidental thereto during the reporting period
in new Question 5(a);
<bullet> The types of service providers used by the registrant
during the reporting period using a check-the-box format along with the
name of the service provider(s) that directly supports the performance
of transfer agent functions using a fill-in-the-blank format in new
Question 5(b);
<bullet> The number of issues, by tokenization model, serviced by
the registrant as of December 31 in new Question 6(b); and
<bullet> A list of issues serviced by the registrant as of December
31 of the reporting period.
a. Certificates and Distributed Ledger Technology
The Commission is proposing to add new Question 4(d) to the Form
TA-2 to require registered transfer agents to report the number of
issues for which physical certificates were in use during the reporting
period and new Question 4(e) to require registered transfer agents to
report the number of issues for which distributed ledger technology was
used to maintain the master securityholder file during the reporting
period. The risks associated with safeguarding physical securities
certificates are vastly different than the risks associated with
safeguarding book-entry securities or tokenized securities, and
accurate data in this area is important for the Commission's assessment
and oversight of a transfer agent's recordkeeping practices,
operational risks, and safeguarding practices.
b. Staffing Information
The Commission is proposing to add a new question to the Form TA-2
to require registered transfer agents to report the number of employees
engaged in transfer agent functions (as defined in section 3(a)(25) of
the Exchange Act) or activities incidental thereto during the reporting
period. The individuals engaging in transfer agent functions or
activities incidental thereto are subject to Exchange Act Rule 17f-2
regarding fingerprinting of securities industry personnel, cannot claim
the exemption to the fingerprinting requirement in Rule 17f-
2(a)(1)(ii), and are often responsible for interfacing with
securityholders, handling sensitive securityholder information,
completing transfers of securities, and processing various types of
payments from issuers to securityholders. Accurate transfer agent
staffing data will help to ensure that the information provided on Form
TA-2 is relevant to the operational capacity and operational risks of
modern transfer agents, would be comparable across the transfer agent
population and therefore would continue to support the Commission's
statutory duties related to the oversight of transfer agents. This
information would further support the Commission's statutory mandate to
protect investors, promote the prompt and accurate clearance and
settlement of securities transactions, and promote the safeguarding of
funds and securities.
c. Service Providers
Based upon its supervisory experience, the Commission has observed
that transfer agents have used service providers to help ensure the
prompt and accurate clearance and settlement of securities
transactions. The range of corporate structures and functions performed
by a registered transfer agent means that service providers can perform
a wide variety of functions. Requiring a transfer agent to provide
information about certain service providers on Form TA-2, as described
further below, would allow the Commission to better understand the
potential operational risks faced by
[[Page 56964]]
transfer agents in performing their transfer agent functions. For
example, based upon its supervisory experience, the Commission
understands that transfer agents may use third parties to provide
recordkeeping functions. In such cases, failure of the service provider
to perform its obligations due to, for example, an outage or a systems
error, would pose significant operational risks and have critical
effects on the transfer agent's ability to perform its transfer agent
functions and as such could hinder the prompt and accurate clearance
and settlement of securities transactions which the Commission is
authorized to facilitate.
Therefore, the Commission is proposing to require registered
transfer agents to identify, by name and type, on Form TA-2 certain
service providers that directly support the performance of transfer
agent functions, however this information would not be made publicly
available on EDGAR. Identification by name would allow the Commission
to assess potential operational risk across the national system of
clearance and settlement; for example, if a particular recordkeeping
service provider suffers an outage or is otherwise unable to provide
services, knowing how many transfer agents rely on that provider would
help the Commission assess the impact on the national system for the
settlement of securities transactions, and the market generally.
Identification by type would provide the Commission with better
comparability across the transfer agents that help make up the national
system of clearance and settlement, which should help inform its
oversight and responsibility for the prompt and accurate clearance and
settlement of securities transactions.
As depicted in Figure 3 below, proposed Question 5(b) would include
checkboxes for the following types of service providers that directly
support the registrant in carrying out transfer agent activities: (1)
banks, (2) escrow agents, (3) recordkeeping system providers, (4) lost
securityholder search providers, (5) printing and mailing services, (6)
call center providers, (7) tokenization agents, and (8) distributed
ledger technology platforms. Following each entry is a space for
registrants to fill-in-the-blank with the name of the service
provider(s).
Figure 3: Proposed Question 5(b) Regarding Service Providers
------------------------------------------------------------------------
-------------------------------------------------------------------------
Registrant used the following Service Providers during the Reporting
Period.
Check all that apply and provide name of service provider(s) that
directly supports the performance of transfer agent functions:
[ballot] Bank(s): ____________________________________
[ballot] Escrow Agent(s): ________________________________
[ballot] Recordkeeping System Provider(s):
_________________________________________
[ballot] Lost Securityholder Search Provider(s):
________________________________________
[ballot] Printing and Mailing Service Provider(s):
______________________________________
[ballot] Call Center Provider(s):
________________________________________
[ballot] Tokenization Agent(s):
_____________________________________________
[ballot] Distributed Ledger Technology Platform(s):
__________________________________________
------------------------------------------------------------------------
d. Tokenized Securities
As discussed above, some transfer agents play a role in developing,
issuing, and administering tokenized securities, which may present
different operational requirements and risks, recordkeeping systems,
and safeguarding controls than traditional certificated and
uncertificated securities. To ensure that the data provided on Form TA-
2 is relevant to the types and volume of securities serviced by modern
transfer agents, and therefore continues to support the Commission's
statutory duties related to oversight of transfer agents to protect
investors, promote the prompt and accurate clearance and settlement of
securities transactions, and promote the safeguarding of funds and
securities, as depicted in Figure 4 below, proposed new question 6(b)
would require registrants to report the number of issues, by
tokenization model and security type, serviced by the registrant as of
December 31. The tokenization models provided in the table would
include issuer-sponsored and third-party sponsored, as the risks to
investors differ depending on the tokenization model.\110\ The security
types provided in the table would include corporate equity securities
with market capitalization less than or equal to $300 million,
corporate equity securities with market capitalization greater than
$300 million, corporate debt securities, non-exchange traded open-end
investment company securities, exchange-traded funds, closed end
investment company securities, limited partnership securities,
municipal debt securities, and other securities.
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\110\ See Statement on Tokenized Securities, Division of
Corporation Finance, Division of Investment Management, Division of
Trading and Markets (Jan. 28, 2026), available at <a href="https://www.sec.gov/newsroom/speeches-statements/corp-fin-statement-tokenized-securities-012826-statement-tokenized-securities">https://www.sec.gov/newsroom/speeches-statements/corp-fin-statement-tokenized-securities-012826-statement-tokenized-securities</a> (stating
that, with respect to third-party sponsored tokenized securities,
the models that third parties are using to tokenize securities vary,
and the rights, obligations, and benefits associated with the crypto
asset may or may not be materially different from those of the
underlying security, the crypto asset may or may not represent an
ownership interest in or contractual obligation of the issuer of the
underlying security, and holders of the crypto asset may be exposed
to risks with respect to the third party, such as bankruptcy, to
which a holder of the underlying security would not necessarily be
exposed). That statement and any other staff statement referenced in
this release is not a rule, regulation, guidance, or statement of
the Commission, and the Commission has neither approved nor
disapproved its content. Staff statements have no legal force or
effect: they do not alter or amend applicable law, and they create
no new or additional obligations for any person.
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Figure 4: Proposed Question 6(b) Regarding Tokenized Securities
----------------------------------------------------------------------------------------------------------------
Number of issues serviced by the registrant by
tokenized security model (as of December 31)
Security type -----------------------------------------------------
Issuer-sponsored Third-party-sponsored
tokenized securities tokenized securities
----------------------------------------------------------------------------------------------------------------
Corporate Equity Securities (market cap <=$300 million)...
[[Page 56965]]
Corporate Equity Securities (market cap >$300 million)....
Corporate Debt Securities.................................
Non-Exchange Traded Open End Investment Company Securities
Exchange-Traded Funds.....................................
Closed End Investment Company Securities..................
Limited Partnership Securities............................
Municipal Debt Securities.................................
Other Securities..........................................
-----------------------------------------------------
Total.................................................
----------------------------------------------------------------------------------------------------------------
e. List of Issues Serviced
To ensure that the data provided on Form TA-2 is relevant to the
types and volume of securities serviced by modern transfer agents, and
therefore continues to support the Commission's statutory duties
related to the oversight of transfer agents, Form TA-2 Question 13
(related documents/attachments) would be amended to require registrants
to provide an attachment to their Form TA-2 with a list of issues
serviced as of December 31 of the reporting period. The list should
include, for each issue serviced, both the name of the issue and its
identification number from the master securityholder file. Under the
existing rules, the Commission does not know which transfer agent
services a particular security. Having this information on the Form TA-
2 would address this gap and enable the Commission to more efficiently
address investor questions or concerns related to their interactions
with transfer agents to further support the Commission's statutory
mandate to protect investors, promote the prompt and accurate clearance
and settlement of securities transactions, and promote the safeguarding
of funds and securities.
4. Request for Comment
The Commission requests comments on all aspects of the proposed
amendments to Form TA-2. In particular, the Commission requests
comments on the following:
13. Should the Commission amend Rule 17ac2-2 to require registered
transfer agents to file an amendment to Form TA-2 if they discover that
any of the information reported on Form TA-2 was materially inaccurate,
misleading, or incomplete at the time of filing? Should the Commission
provide a definition or examples of what would be ``materially
inaccurate, misleading, or incomplete'' in this context? How soon after
a transfer agent discovers that information reported on Form TA-2 was
materially inaccurate, misleading, or incomplete at the time of filing
should a transfer agent be required to file an amendment? Is within 60
days a sufficient amount of time, or should the Commission consider a
shorter or longer period of time?
14. Should the Commission require registered transfer agents to
report all fund movements to or from securityholders on Form TA-2 in
proposed new Question 7, rather than just dividend disbursements and
interest payments as required by the existing form? Would this broader
reporting requirement provide more useful information to the Commission
in understanding a transfer agent's operational risks related to the
safeguarding of securityholder funds?
15. Should the Commission require registered transfer agents to
report staffing information on Form TA-2, including the number of
employees engaged in transfer agent functions or activities incidental
thereto during the reporting period in new Question 5(a)? Would this
requirement fit the purpose of the Form? Or, would other data be more
appropriate to require on the Form such as volume of transactions
processed and error rates during the reporting period?
16. What additional information should the Commission require to be
reported on Form TA-2 regarding a transfer agent's recordkeeping
practices?
17. Are the specific security types and categories in proposed
Questions 4(c), 6(a), and 6(b) appropriate and sufficient to capture
the full range of securities for which transfer agents maintain
securityholder accounts? Should any security types or categories be
added, removed, or modified?
18. Is the proposed methodology for calculating the number of
individual securityholder accounts in response to Question 4(b) clear
and operationally feasible for transfer agents? Are there alternative
methodologies that would be more accurate or easier for transfer agents
to implement?
19. Are there additional types of service providers routinely used
by transfer agents that should be included in the list of service
providers in Question 5(b)? Alternatively, should any service providers
included in the proposed list in Question 5(b) not be included? To what
extent is the information that would be reported in response to
Question 5(b) duplicative of information that would be provided in
response to other questions, such as Question 4(e)?
20. Should the Commission require transfer agents to provide more
detailed information about their service provider arrangements, such as
the specific services provided or the oversight and monitoring
procedures used to manage associated risks? Alternatively, should the
Commission require disclosure of service provider arrangement
information at all, or less detailed information about their service
provider arrangements?
21. Should the Commission require transfer agents to report on the
number of issues, by tokenization model and security type, serviced by
the registrant as of December 31 in new Question 6(b)? Are the specific
tokenization models proposed appropriate, clear, operationally
feasible, and sufficient to capture the full range of tokenization
models used in connection with transfer agent activities? Should any
tokenization models be added, removed, or modified? Should the Form TA-
2 instead seek identification only of tokenized securities more
generally, as opposed to breaking the information out by tokenization
model? Would tokenized equity-linked notes be difficult for transfer
agents to categorize as issuer-sponsored or third-party sponsored in
the proposed table? If so, should the requirements of Question 6(b) be
modified or clarified? Should the Commission provide a sunset date for
[[Page 56966]]
proposed Question 6(b) and if so, what should be the trigger for such
sunset date?
22. Is any information that would be required by the proposed
changes to Form TA-2 difficult for a transfer agent to provide? If so,
why? Are there alternative approaches to collecting the same
information, such as providing this information upon request, that
would be less burdensome for transfer agents while still providing the
Commission with the information it needs to fulfill its regulatory and
oversight responsibilities?
23. Should any information not be publicly disclosed that would be
required by the proposed changes to Form TA-2?
24. Is there any additional information that the Commission should
require to be disclosed on Form TA-2, or conversely, should the
Commission require less information to be disclosed?
III. Proposed Amendments to Definitions, Processing, Recordkeeping, and
Safeguarding Rules
The Commission is proposing amendments to the definitions in Rules
17Ad-1 and 17Ad-9 to modernize the foundational terminology that
governs the processing, turnaround, recordkeeping, safeguarding, and
compliance obligations of registered transfer agents.
When the Commission originally adopted these definitions, the
securities markets operated chiefly through the transfer of securities
represented by physical certificates, and the transfer of certificated
securities was a complicated, time-intensive, manual process completed
over the course of multiple days and involving numerous in-person
deliveries to and from multiple parties. Definitions such as item,
receipt, certificate detail, deposit shipment control list, and control
book were grounded in this physical environment and designed to reflect
and address the technological and operational needs and limitations of
manual processing, paper certificates, in-person deliveries, and mail-
based communication.\111\ Today, however, the technological and
operational environment in which transfer agents operate has changed.
The Commission understands that nearly all transactions are electronic;
most securities are held in immobilized or uncertificated form; and
transfer agents receive, validate, and process instructions through
automated systems, electronic platforms, and digital communication
channels. In addition, new and rapidly developing technologies, such as
tokenized securities and distributed ledger technology, continue to
modify the environment in which transfer agents operate, even as they
present both new benefits and challenges.
---------------------------------------------------------------------------
\111\ See, e.g., Depository Shipment Control List Transfer
Instructions; Definition of Item, Exchange Act Release No. 23677
(Oct. 2, 1986), 51 FR 36547 (Oct. 14, 1986); see also Maintenance of
Accurate Securityholder Files and Safeguarding of Funds and
Securities by Registered Transfer Agents, Exchange Act Release No.
19860 (June 10, 1983), 48 FR 28231 (June 21, 1983) (``17ad-9 through
13 Adopting Release''); Prompt Transfer of Securities; Transfer
Agent Turnaround Performance Time Frame, Exchange Act Release No.
21375 (Oct. 5 1984), 49 FR 40573 (Oct. 17, 1984).
---------------------------------------------------------------------------
The prompt and accurate clearance and settlement of securities
transactions is a matter of public interest, and clearly defined terms
that accurately reflect the current operational and technological
environment in which registered transfer agents operate are necessary
to give practical effect to the Commission's oversight of registered
transfer agents and the national clearance and settlement system.\112\
As the securities markets and transfer agent operations continue to
evolve, definitions that are both grounded in statutory authority and
responsive to technological and operational change would help the
Commission to carry out its statutory responsibilities under Section
17A of the Act, including its responsibility to protect investors, to
safeguard securities and funds, and to facilitate the prompt and
accurate clearance and settlement of securities transactions in a
manner that keeps pace with the markets the Commission is charged with
overseeing.\113\ As discussed below, each of the proposed changes
discussed in this section seeks to ensure that the defined terms used
in the Commission's transfer agent rules accurately reflect the current
operational and technical environment in which transfer agents operate,
including the transition from a manual, paper-based environment to an
automated, electronic environment and beyond.
---------------------------------------------------------------------------
\112\ See Exchange Act Section 3(a)(25), 15 U.S.C. 78(c)(a)(25).
\113\ See Section 17A(a)(2)(A) of the Exchange Act, 15 U.S.C.
78q-1(a)(2)(A).
---------------------------------------------------------------------------
A. Amendments to Rule 17ad-1
Rule 17ad-1 defines relevant terms used throughout the rules. A
fundamental term used in the rules is ``item,'' which is the basic unit
for which the turnaround and other processing requirements apply.\114\
Other key definitions in Rule 17ad-1 are ``transfer'' and
``turnaround.'' \115\ The Commission is proposing amendments to the
definitions of the terms ``item,'' ``receipt,'' and ``routine.''
---------------------------------------------------------------------------
\114\ See Rule 17Ad-1 through 17Ad-7 Adopting Release, supra
note 50.
\115\ ``Transfer'' of a certificated security (where an outside
registrar is not involved) is the completion of all acts necessary
to cancel the certificate, issue a new one, and make it available to
the presentor, and ``turnaround'' for an item (where an outside
registrar is not involved) is completed when transfer is
accomplished. Exchange Act Rule 17ad-1(d), (e), 17 CFR 240.17Ad-
1(d), (e). The term ``outside registrar'' with respect to a transfer
item means a transfer agent which performs only the registrar
function for the certificate or certificates presented for transfer
and includes the persons performing similar functions with respect
to debt issues. Exchange Act Rule 17ad-1(b), 17 CFR 240.17Ad-1(b).
---------------------------------------------------------------------------
1. Item
Existing Rule 17ad-1(a)(1) defines the term item as: (i) A
certificate or certificates of the same issue of securities covered by
one ticket (or, if there is no ticket, presented by one presentor)
presented for transfer, or an instruction to a transfer agent which
holds securities registered in the name of the presentor to transfer or
to make available all or a portion of those securities; (ii) Each line
on a ``deposit shipment control list'' or a ``withdrawal shipment
control list'' submitted by a registered clearing agency; or (iii) In
the case of an outside registrar, each certificate to be
countersigned.\116\ The Commission proposes to amend the definition of
``item'' to include two additional subsections within the definition:
``(iv) A transfer instruction submitted to the transfer agent through a
deposit or withdrawal at custodian or functionally similar service
operated by a central securities depository; and (v) Any other transfer
instruction submitted to the transfer agent, or to an electronic system
controlled, operated, or enabled by the transfer agent, to be
accomplished without the physical issuance of certificates.'' \117\
---------------------------------------------------------------------------
\116\ Exchange Act Rule 17ad-1(a)(1), 17 CFR 240.17Ad-1(a)(1).
\117\ See proposed Rule 17ad-1(a)(1).
---------------------------------------------------------------------------
As noted, item is the basic unit for which the turnaround and other
processing requirements apply,\118\ and is an essential term used
throughout the transfer agent rules, including in other definitions
discussed in this release. The Commission is proposing to amend the
definition of item to clearly and unambiguously include instructions
relating to uncertificated securities and capture new technologies and
means of transmitting information to ensure that the technology,
platforms, and communication channels utilized by modern transfer
agents are both contemplated and permitted under the rules.
---------------------------------------------------------------------------
\118\ See Rule 17ad-1 through 17ad-7 Adopting Release, supra
note 50.
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[[Page 56967]]
These amendments would include transfer instructions submitted
through DTC's Deposit/Withdrawal at Custodian (``DWAC'') service and
other electronic systems, which the Commission understands are now the
predominant means by which securities are transferred. The proposed
amendments are also designed to capture new and novel methods by which
transfer agents may receive instructions from presentors pursuant to
the UCC.\119\ Finally, the phrase ``an electronic system controlled,
operated, or enabled by the transfer agent'' will ensure that
instructions transmitted by or through both existing technologies, such
as blockchains and other distributed ledger-based platforms and new, as
yet unforeseen technologies, are captured by the definition as proposed
to be amended. These amendments would help ensure that Rule 17ad-2's
turnaround and processing requirements apply uniformly to certificated
and uncertificated securities, regardless of the specific technology
used to issue, transfer, or custody the securities, and that new and
potential future communication channels through which transfer
instructions are or could be initiated, are contemplated under the
rule.
---------------------------------------------------------------------------
\119\ See UCC Sec. Sec. 8-107 and 8-401.
---------------------------------------------------------------------------
2. Receipt
Existing Rule 17ad-1(g) provides that ``[t]he receipt of an item or
a written inquiry or request occurs when the item or written inquiry or
request arrives at the premises at which the transfer agent performs
transfer agent functions, as defined in Section 3(a)(25) of the Act.''
\120\ While the term ``arrive'' applies to both physical and electronic
items, it reflects a focus on physical items received by transfer
agents--the transfer bundles from a bygone era discussed above--and is
out of step with the electronic instructions that constitute most items
received by modern transfer agents. Similarly, existing Rule 17ad-2(a)
specifies that ``items received at or before noon on a business day
shall be deemed to have been received at noon on that day, and items
received after noon on a business day or received on a day not a
business day shall be deemed to have been received at noon on the next
business day.'' \121\ Thus, for many years transfer agents have set up
their processing and recordkeeping systems to bifurcate each business
day for purposes of determining when items have been received and
starting the clock for turnaround. While this provision also applies
with equal force to physical and electronic items, it too reflects a
focus on physical items received by transfer agents--the transfer
bundles that, once received at a mailbox or window, needed to be picked
up, processed, and physically delivered to an appropriate workspace on
the transfer agent's premises where the various confirmations,
examinations, and checks could be conducted. Accordingly, this
provision is out of step with the electronic instructions that
constitute most items received by modern transfer agents, which are
transmitted at the speed of light and can be accessed from virtually
any computer or workstation authorized by the transfer agent.
---------------------------------------------------------------------------
\120\ 17 CFR 240.17ad-1(g).
\121\ Exchange Act Rule 17ad-2(a), 17 CFR 240.17ad-2(a). Rule
17ad-2(b) includes an identical provision for items received by
transfer agents acting as an outside registrar.
---------------------------------------------------------------------------
The Commission proposes to amend the definition of ``receipt'' to
provide that receipt occurs on the business day when the item or
written inquiry or request arrives at any premises at which the
transfer agent performs transfer agent functions or, in the case of an
item or written inquiry or request submitted in electronic form, the
business day when the item or written inquiry or request is received by
the transfer agent.\122\ The proposed amendment would also provide that
if an item or written inquiry or request arrives or is received on a
non-business day, receipt is deemed to occur on the next business
day.\123\ The existing definition does not explicitly address
electronic transmissions or electronic deliveries, which are now a
common means by which transfer agents receive items and other
communications. The proposed amendment would specify that receipt of
electronic transmissions occurs when the item or communication is
received by the transfer agent, as evidenced by, for example, a time
stamp or other electronic record. The proposed amendment would also
acknowledge that arrival or receipt can occur at any premises at which
the transfer agent performs transfer agent functions, not just the
principal location, thereby reflecting the reality that many modern
transfer agents operate from multiple locations. These changes would
help ensure that the definition of receipt is clear and applicable to
the full range of methods by which transfer agents receive items and
communications in today's electronic environment.
---------------------------------------------------------------------------
\122\ See proposed Rule 17ad-1(g).
\123\ Id.
---------------------------------------------------------------------------
3. Routine
Existing Rule 17ad-1(i) defines a ``routine'' item by listing eight
categories of items that are not routine, including paragraph 17ad-
1(i)(2), which specifies that ``a certificate as to which the transfer
agent has received notice of a stop order, adverse claim, or any other
restriction on transfer'' would be considered a non-routine item.\124\
The Commission is proposing to replace the reference to ``certificate''
in paragraph (i)(2) with ``security'' to ensure that the definition
applies equally to both certificated and uncertificated
securities.\125\
---------------------------------------------------------------------------
\124\ 17 CFR 240.17ad-1(i).
\125\ See proposed Rule 17ad-1(i).
---------------------------------------------------------------------------
B. Amendments to Rule 17ad-9
Rule 17ad-9 \126\ defines 12 principal terms with respect to
transfer agents as used especially in Rules 17ad-10 through 17ad-13:
``certificate detail,'' ``master securityholder file,'' ``subsidiary
file,'' ``control book,'' ``credit,'' ``debit,'' ``record difference,''
``record keeping transfer agent,'' ``co-transfer agent,'' ``named
transfer agent,'' ``service company,'' and ``file.'' \127\ The
Commission is proposing amendments to all of the definitions in Rule
17ad-9 other than ``subsidiary file,'' ``co-transfer agent,'' ``named
transfer agent,'' ``service company,'' and ``file.'' The Commission is
also proposing to add three new defined terms: ``authorized
securities,'' ``transfer journal,'' and ``presentor.''
---------------------------------------------------------------------------
\126\ 17 CFR 240.17Ad-9.
\127\ See 17ad-9 through 13 Proposing Release, supra note 9.
---------------------------------------------------------------------------
1. Certificate Detail
Existing Rule 17ad-10 requires recordkeeping transfer agents to
promptly and accurately post credits and debits containing minimum and
appropriate certificate detail to the master securityholder file
whenever a security is transferred, purchased, redeemed, or
issued.\128\ The certificate detail that must be posted to the master
securityholder file is defined in existing Rule 17ad-9(a) and consists
of eight specific ``items'' of information: (1) The certificate number;
(2) The number of shares for equity securities or the principal dollar
amount for debt securities; (3) The securityholder's registration; (4)
The address of the registered securityholder; (5) The issue date of the
security; (6) The cancellation date of the security; (7) In the case of
redeemable securities of investment companies, an appropriate
description of each debit and credit (i.e., designation indicating
purchase, redemption, or
[[Page 56968]]
transfer); and (8) Any other identifying information about securities
and securityholders the transfer agent reasonably deems essential to
its recordkeeping system for the efficient and effective research of
record differences.\129\ The Commission is proposing to replace the
term ``certificate detail'' with a neutral term that can apply to any
form of security, whether certificated or uncertificated, and to amend
items one, three, four, and eight, in the definition of certificate
detail, as described more fully below.
---------------------------------------------------------------------------
\128\ 17 CFR 240.17Ad-10(a)(1).
\129\ 17 CFR 240.17Ad-9(a).
---------------------------------------------------------------------------
The Commission proposes to amend the definition of ``certificate
detail'' to reflect the securities industry's transition from a manual,
paper-based environment to an automated, electronic environment and to
ensure that the Commission's transfer agent rules appropriately reflect
and facilitate transfer agents' use of new and emerging technologies in
their recordkeeping and operations. First, given that most securities
today are uncertificated, the Commission proposes to replace the term
``certificate detail,'' which signifies the use of a paper certificate,
with the term ``position detail,'' which is a neutral term that can
apply to any form of security, whether certificated or
uncertificated.\130\ To ensure consistency throughout the rules, the
Commission proposes to make conforming changes in other rules that use
the term certificate detail as well, specifically throughout Rule 17ad-
10,\131\ as discussed in more detail below, and by amending the title
of Rule 17ad-11.\132\
---------------------------------------------------------------------------
\130\ See proposed Rule 17ad-9(a).
\131\ See proposed Rule 17ad-10.
\132\ See proposed Rule 17ad-11 (amending the term ``certificate
detail'' in the title to instead refer to ``position detail'').
---------------------------------------------------------------------------
Second, the Commission is proposing to expand item one beyond
solely a certificate number for certificated securities. A certificate
number is a unique numerical identifier pre-printed on physical stock
or bond certificates used to identify the security and track ownership.
However, the Commission understands that both certificated and
uncertificated securities may also have unique alpha-numeric
identifiers, while only certificated securities specifically have
``certificate numbers.'' Under the existing definition of certificate
detail, transfer agents are not required to maintain in the master
securityholder file a unique identifier for securities. Given the
importance of being able to uniquely identify and track securities, it
is necessary and appropriate for the protection of investors to require
transfer agents to maintain a unique identifier for securities when
such a unique identifier is available. Accordingly, under the proposed
changes, item one would consist of the certificate number for
certificated securities, and for all securities, including certificated
securities, the applicable unique identifier for the security, which
could be a Committee on Uniform Securities Identification Procedures
number (CUSIP) or Financial Instrument Global Identifier number (FIGI).
With respect to the applicable unique identifier, the Commission
understands that both the CUSIP and the FIGI are standardized
identification numbers widely used for both certificated and
uncertificated securities across different asset classes, that CUSIP is
widely used with respect to U.S. exchange-traded securities, including
some tokenized securities, and FIGI can be and is used with respect to
both traditional and tokenized securities. However, the amended rule
would not mandate the use of these specific identifiers. The Commission
is aware that other unique identifiers are used, often in connection
with a specific jurisdiction or specific system,\133\ and others may be
developed in the future. The Commission is also aware that it is
possible that in some instances an uncertificated security may not have
a unique identifier. Accordingly, through this change, the position
detail maintained by transfer agents would include unique identifiers
for both certificated and, if applicable, uncertificated securities,
including tokenized securities.
---------------------------------------------------------------------------
\133\ For example, the Stock Exchange Daily Official List
(SEDOL) is used primarily in the United Kingdom and Ireland, while
the Reuters Instrument Code (RIC) is used specifically within London
Stock Exchange Group (LSEG) systems.
---------------------------------------------------------------------------
Third, the Commission is proposing to amend item three,
``registration.'' A securityholder's registration, historically
referred to the registered owner's name, as well as any relevant
formatting or titling information, such as whether the security is held
individually, jointly, in trust, by a corporate entity, etc.\134\ To
ensure that transfer agents understand the term and apply it
consistently, the Commission is proposing to replace the term
``registration'' with a description of the specific information that
constitutes ``registration,'' as noted above. Specifically, item three
would include the securityholder's full name and any other relevant
identifying, titling, or formatting information (e.g., a digital wallet
address in the case of any tokenized security; whether the security is
held individually, jointly, or in trust; whether it is held by a
natural person, a corporation, etc.) necessary to accurately identify
the specific securityholder to the exclusion of other securityholders.
Ensuring that transfer agents maintain accurate and up-to-date
registration information for registered securityholders is vital to
determine who is legally recognized as the securityholder, who is
entitled to receive distributions, proxies, issuer communications, and
corporate rights provided to the legal owner of the securities, who has
legal authority to authorize transfers, and how ownership is recorded
and validated. All recordkeeping transfer agents are also required to
comply with the lost securityholder notice and search requirements set
forth in Rule 17ad-17,\135\ which requires transfer agents to identify
and maintain certain contact information for individual
securityholders. Ensuring that transfer agents' position detail
information includes sufficient information to identify individual
securityholders to the exclusion of other securityholders would also
help recordkeeping transfer agents meet their lost securityholder
search obligations under Rule 17ad-17.
---------------------------------------------------------------------------
\134\ See 17ad-9 through 13 Proposing Release, supra note 9, at
47270.
\135\ See 17 CFR 240.17Ad-17.
---------------------------------------------------------------------------
For these same reasons, the Commission is proposing to expand item
four to include additional contact information beyond the
securityholder's physical mailing address. Specifically, under the
proposal, item four would include contact information for the
registered securityholder sufficient to enable the transfer agent to
effectively deliver securityholder communications, dividends and other
payments, legal notices, and other communications, including at a
minimum a physical mailing address. In addition to a mailing address,
such contact information could include, for example, a home phone
number, a mobile phone number, an email address, a blockchain wallet
address, or another form of communication, although the Commission
recognizes that the specific contact information for a given
securityholder could vary depending on the securityholder. For example,
a buy-and-hold investor who prefers written communications or phone
calls might only have a mailing address and home phone number, while an
investor that prefers online access and communication methods might
prefer to receive email communications or be contacted through such
investor's mobile phone number. Comprehensive and current
securityholder contact information is essential to ensure prompt and
accurate clearance and
[[Page 56969]]
settlement. Limiting the securityholder contact information maintained
by transfer agents to a physical mailing address is no longer adequate
to support the efficient functioning of a modern clearance and
settlement system that relies on electronic communications to process
securities transactions. The ability to rapidly and reliably
communicate with registered securityholders through multiple channels
enables transfer agents to fulfill their critical role within the
national clearance and settlement system, reduce settlement failures,
resolve processing discrepancies in real time, and comply with the full
range of applicable laws and regulations governing their participation
in that system, all of which directly serve protecting investors and
the broader public interest. At the same time, it is still important
for transfer agents to ensure that the contact information they
maintain for registered securityholders includes a physical mailing
address because physical mail may serve as the primary means of
communication for some securityholders and a secondary means of
communication for other securityholders, and ensuring that a physical
mailing address is part of the master securityholder file may help
recordkeeping transfer agents comply with Rule 17ad-17, which requires
recordkeeping transfer agents to exercise reasonable care to ascertain
the correct addresses for lost securityholders.\136\ Even in situations
where a transfer agent is sending correspondence to a securityholder
electronically, when that correspondence is returned as undeliverable,
having a physical mailing address may help the transfer agent to obtain
a correct electronic address for the securityholder.
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\136\ 17 CFR 240.17Ad-17(a)(1), Exchange Act Rule 17ad-17(a)(1).
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Finally, item eight would be expanded to include any other
identifying information about securities and securityholders the
transfer agent reasonably deems necessary to its recordkeeping,
operations, or for the efficient and effective research of record
differences.\137\ This would be an expansion of existing item eight,
which only requires identifying information the transfer agent
reasonably deems essential to its recordkeeping system for the
efficient and effective research of record differences. As with the
amendments to items three and four, these amendments would help ensure
that transfer agents have sufficient information to comply with their
obligations under the transfer agent rules, including the proposed
amendments to Rules 17ad-6 and 17ad-7 discussed herein, and the new
operational risk requirements that would be imposed in connection with
the proposed amendments to Rule 17ad-12 discussed below. Requiring that
transfer agents maintain this information also would help ensure that
the information is kept and retained in accordance with the
recordkeeping requirements that apply to transfer agents. Further, as
noted, modern transfer agents' activities go beyond the type of
ministerial recordkeeping and administrative tasks that characterized
their work when these definitions were first adopted. In addition to
identifying information about securities and securityholders the
transfer agent reasonably deems necessary to researching record
differences, modern transfer agents might maintain other information
the transfer agent reasonably deems necessary to its operations. For
example, a transfer agent may maintain information about registered
securityholders that enable the transfer agent to provide
securityholders access to an online portal that allows them to view
their holdings, initiate transactions, or download corporate
communications in lieu of receiving them in paper copy through the mail
and information needed to make payments to securityholders. Provision
of these services may involve collecting and storing specialized
information, such as passwords and other login information, necessary
to ensure the proper functioning of the transfer agent's website,
online portal, or other technology platforms. As another example, a
transfer agent providing paying agent services may need to maintain
information about registered securityholders that enable them to make
payments. It is vital that transfer agents that choose to provide
services in these ways maintain the identifying information necessary
to make them work effectively, accurately, and securely. The proposed
amendments to item eight would help ensure that a transfer agent's
position detail comprises information sufficient to meet the full scope
of its regulatory obligations under the transfer agent rules and
effectively support its provision of transfer agent services.
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\137\ See proposed Rule 17ad-9(a).
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2. Master Securityholder File
Existing Rule 17ad-9(b) defines ``master securityholder file'' as
``the official list of individual securityholder accounts.'' \138\ The
rule further provides that ``[w]ith respect to uncertificated
securities of companies registered under the Investment Company Act of
1940 (``1940 Act''), the master securityholder file may consist of
multiple, but linked, automated files.'' \139\
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\138\ 17 CFR 240.17Ad-9(b).
\139\ Id.
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The Commission proposes to amend the existing definition of
``master securityholder file'' to require that it be maintained in
electronic form and to remove reference to investment company
securities, such that any master securityholder file (not just those
related to uncertificated investment company securities) may consist of
multiple linked files or systems. The amended definition would further
specify that the specific technology, systems, or files that compose
the master securityholder file are within the transfer agent's
discretion, provided the transfer agent maintains at all times
exclusive control over the master securityholder file.\140\
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\140\ See proposed Rule 17ad-9(b).
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The master securityholder file is the authoritative record of who
owns an issuer's securities. It is the list of individual
securityholder accounts recognized by the issuer as the official list
of record owners of the issuer's securities and is intended to be
synonymous with the record referred to in state corporate law as the
``stockholder ledger'' or ``stockholder register.'' \141\ Ensuring that
it is consistently accurate and reliable is one of the core roles of a
transfer agent and fundamental to the prompt and accurate clearance and
settlement of securities transactions.
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\141\ See 17ad-9 through 13 Adopting Release, supra note 111, at
28234.
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In adopting the definition of master securityholder file in 1983,
the Commission found that open-end investment companies commonly
maintained master securityholder files as multiple, but linked,
automated files whereas most other transfer agents did not.\142\
Specifically, the Commission noted that common industry practice among
mutual fund transfer agents at the time was to maintain a group of
three or more computer files, commonly linked by the securityholder's
account number and that, taken together, these files contained the
required certificate detail as well as other useful account
information.\143\ At the same time, the Commission noted that this was
not the practice with respect to ``other securities issues;'' rather,
industry practice at that time was to post certificate detail to a
[[Page 56970]]
single master securityholder file.\144\ The Commission stated that
``maintaining a single record containing all critical certificate and
account detail simplifies performance of transfer agent functions,
contributes to efficient transfer agent operations, and promotes the
accuracy of securityholder records.'' \145\ This supported the
Commission's decision to adopt a carve-out for uncertificated
securities of investment companies registered under the 1940 Act, but
not for other securities issues.\146\
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\142\ See id.
\143\ Id.
\144\ Id.
\145\ Id.
\146\ Id.
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Contemporary securities industry standards and practices, chief
among them information technology standards and the efficiency,
reliability, and recoverability of electronic recordkeeping systems, no
longer warrant such a delineation. While maintaining the master
securityholder file as a single record may have promoted efficiency and
accuracy in 1983, when manual, paper-based processes were the standard,
that is not the case today.
Through its oversight of the transfer agent industry, the
Commission understands that most if not all transfer agents now
maintain their master securityholder files electronically and that
electronic recordkeeping is essential to the efficient operation of
both modern transfer agents and the national clearance and settlement
system. Compared to paper-based recordkeeping, electronic records
provide better accessibility because multiple people can access the
same record at the same time or from different locations; better
searchability using automated keyword searches and other methods not
possible with paper-based records; better security and control through
encryption, password protection, access restrictions, logical controls,
and automated audit trails that are not possible with paper-based
records; and more efficient workflows and enhanced reliability and
backup through automation, digital duplication and distribution, and
other digital tools not possible with paper-based records.\147\ To
ensure that transfer agent records can benefit from these aspects of
electronic recordkeeping compared to paper-based records given the
importance of the master securityholder file to protecting investors,
promoting the prompt and accurate clearance and settlement of
securities transactions, and promoting the safeguarding of funds and
securities, the proposed amended definition of master securityholder
file would explicitly specify that it be maintained in electronic form.
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\147\ See Recordkeeping Requirement for Transfer Agents,
Exchange Act Release No. 44227 (Apr. 27, 2001), 66 FR 21648, 21656-
57 (May 1, 2021) (discussing the benefits associated with transfer
agents adopting electronic recordkeeping).
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Further, because the existing definition only permits the master
securityholder file to consist of ``multiple, but linked, automated
files'' with respect to uncertificated securities of companies
registered u
[…truncated; see source link]Indexed from Federal Register on September 4, 2026.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.