Transfer agents play an important role in our capital markets.They act as registrars and keep track of changes in the record ownership of a company’s securities. They ensure that companies’ interest, dividends, and other distributions get paid to the right holders of stocks and bonds. Transfer agents also monitor the restrictive legends and “stop transfer” orders that distinguish restricted securities from freely-tradable securities. This responsibility puts transfer agents in a unique position to identify and potentially prevent unregistered securities from being unlawfully distributed.
These safeguards could include transfer agent due diligence obligations prior to the removal of restrictions (or legends) on stock certificates that otherwise would restrict their transfer. As noted, transfer agents function as gatekeepers, and persuading them to remove the restrictions on unregistered stock certificates is an essential step in perpetrating a fraudulent offering of unregistered securities.Regulation SCI will ensure that our securities markets are more reliable and resilient, and less vulnerable to natural disasters and cyber-attacks.When Regulation SCI was adopted, Chair White stated that she had “directed the staff to prepare recommendations for the Commission’s consideration as to whether an SCI-like framework should be developed for other key market participants, such as broker-dealers and transfer agents.” 9) It is easier to become a transfer agent than to become a lawyer, a broker, or an accountant.The Commission issues concept releases to identify and prioritize those areas where the Commission should proceed to take action. However, unlike a specific proposal, concept releases, by definition, do not usually recommend any specific action.Concept releases may be appropriate in situations where the Commission has a lack of information and is unsure how best to proceed, or whether to proceed at all.Some omit what seems to be crucial information about prior regulatory violations or other office locations.
Some do not update them when control people pass away.
As my prior answers make clear, transfer agents play a critical role in the proper functioning of the securities markets.
It is, therefore, critical that the persons who assume the role of transfer agents have the integrity and competency to fulfill these responsibilities to the highest capability.
7) There are no net capital standards, no insurance requirements, or other capital requirements for transfer agents. Clearly, the changes over the years that I’ve mentioned suggest that the Commission should take a renewed look at transfer agents and their operations.
When the transfer agent rules were adopted, fewer people owned stock, and those who did typically held their physical stock certificates themselves. Clearly, more American families today are invested in the capital markets and, thus, more people than ever depend on transfer agents to discharge their responsibilities promptly, accurately, and efficiently.
It is past time that the Commission takes a close look at this gap and modernizes the rules regulating transfer agents. 3) The SEC has increasingly focused on the role that transfer agents could play, intentionally or not, in aiding and abetting microcap fraud by removing restrictive legends on stocks.