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SEC proposal updates 1970s-era transfer agent rules
The SEC said most of its transfer-agent requirements date from the late 1970s and early 1980s, when investors commonly held paper certificates and firms processed ownership changes manually. Transfer agents maintain an issuer's official ownership records, register securities transfers and monitor whether a company issues more securities than authorized. Many also process dividends, interest payments, fund redemptions, and other corporate actions.
Under the proposal, the commission would update rules covering transfer-agent registration, reporting, recordkeeping, processing times, and the protection of securities and client funds. The package also introduces requirements for restrictive legends, paying-agent activity, and the oversight of third-party service providers. Market participants are actively seeking to bring blockchain-native, or onchain, transfer agents into the U.S. market, the SEC said, with firms developing systems for blockchain-based ownership records, tokenized fund administration and cross-chain interoperability.
Such models may require transfer agents to store shareholder information on distributed ledgers and manage processes run through smart contracts. Recent registrations show the growing interest in onchain transfer agents. In August, Injective Institutional Services secured transfer-agent registration, allowing the company to perform regulated functions connected to maintaining and changing securities ownership records. Superstate registered its blockchain-based transfer agent in March 2025 to support tokenized funds, including its Short Duration U.S. Government Securities Fund and Crypto Carry Fund. Such registrations do not exempt the firms or their products from federal securities laws.
Digital recordkeeping standards would cover blockchain systems
Proposed amendments to Rule 17ad-7 would require transfer agents using electronic recordkeeping systems to install controls protecting the integrity, availability, reproducibility, redundancy, and continuity of their records. Firms could continue using current technology if their systems meet the proposed standards. Records would need protection against unauthorized alteration, deletion, or destruction. Transfer agents would also have to maintain an audit trail identifying who accessed, changed, or deleted a record, along with the date and time of each action or attempted action.
For regulatory examinations, firms would need systems capable of immediately producing records in both human-readable and reasonably usable electronic formats. Recovery controls would also be required for information that becomes damaged, altered, or lost. Although the proposal would apply to blockchain systems, the SEC described its approach as technology-neutral. The rules would not prescribe one type of database or require transfer agents to adopt distributed ledgers.
Safeguarding standards would include cyber risks
Proposed changes to Rule 17ad-12 would replace requirements centered on physical certificates with a risk-management framework covering paper and uncertificated securities. Registered transfer agents would have to adopt written policies designed to protect securities and funds from theft, loss, misuse, damage, destruction, and unauthorized access. The framework would also require firms to identify, monitor, and reduce material custody, operational, and cybersecurity risks tied to their services.
Client and issuer funds held by a transfer agent would need to remain in a separate bank account designated as a for the benefit of account. Separating such funds from the transfer agent's operating money would reduce commingling and help keep customer assets outside the firm's general estate during insolvency. Business continuity plans form another part of the proposal. Each transfer agent would need written procedures for events that could disrupt operations, including steps for restoring records and resuming responsibilities. Firms would have to test, review, and update their plans periodically.
Data included in the proposal show the scale of the regulated activity. Of 253 transfer agents that submitted Form TA-2 for the 2025 reporting year, 152 acted as recordkeeping transfer agents, and 126 provided paying-agent services. Together, transfer agents distributed about $5 trillion in dividends and interest payments during the year. Reliance on outside companies has also become common, with 44% of transfer agents either using a service company for at least part of their work or providing services to another transfer agent in 2025.
Tokenized securities put ownership records in focus
For U.S. investors, a token's presence on a blockchain does not by itself determine who legally owns the underlying security. Transfer agents remain responsible for the official shareholder register, including changes arising from purchases, sales and corporate actions. Ownership records can affect voting rights, dividend payments, stock splits, tender offers, and claims during insolvency. Two transfer-agent groups warned the SEC in July that tokens created without an issuer's approval may not provide the same ownership rights as issuer-backed shares.
Continental Stock Transfer and Trust Company and the Securities Transfer Association asked the regulator to distinguish securities tokenized by an issuer from products created by unrelated platforms. According to the groups, an unaffiliated token may track a stock price or provide an indirect interest in shares without making its buyer a registered shareholder. The SEC's proposed overhaul also addresses restrictive legends, which identify limitations on whether a security can be sold. Public comments will remain open for 60 days after Federal Register publication, giving market participants time to weigh in on the most significant transfer-agent rule changes in over 40 years.
