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What is the role of transfer agent?


Transfer agent, usually trust company, bank or another financial institutions assigned by a corporation has several duties including maintaining issuer's security holder record, canceling/issuing certificates and distributing dividends among others. Because transfer agent stands between company that issues securities and security holders, transfer agent is crucial for successful completion of secondary sales. Pursuant to 1934 Act, transfer agent must be registered with the SEC or bank regulatory agency if transfer agent is a bank. The SEC also conducts inspections of transfer agent. Companies themselves can act as their own transfer agent.

 Transfer agent keeps record of who owns company's  stocks and bonds and how many each shareholder or bondholder owns. Also transfer agent issues and cancels certificates to reflect changes in ownership. In case of stock split or stock dividend transfer agent will issue new shares to shareholders. Just like stock transfer agent makes sure that stockholder receive dividend payment in timely manner, bond transfer agent will make sure that bondholder receive their due interest payments as well as face value of the bond once it reaches its maturity.  Form in which stocks or bonds are held is also recorded: by owner in certificate form, by company in book-entry form or by investor's brokerage firm in street name. Stock transfer agents never issue physical certificate, but mutual fund transfer agent must do so upon shareholder request. To prevent unauthorized issuance transfer agent monitors issuance of securities.

 Transfer agent also facilitates communication between issuer and security holders and act as intermediary for the issuer. He or she can be acting as company's paying agent, distributing interest, cash or stock dividends. Voting can be facilitated through transfer agent who sends proxy materials to shareholders. Others possible duties include acting as an exchange agent (exchanging stocks and bonds in case of a merger), tender agent (tendering shares in a tender offer) and mailing agent (furnishing shareholders with company's quarterly, annual and other reports).Transfer agents can process investors mails and handle investor's problems.

 In case of loss, destruction or stealing of certificate transfer agent will help security holder to resolve the problem. If you hold securities in a physical form of certificate and want to transfer you securities you will need to sign it and get a guarantee from financial institution in a form special stamp and signature combination known as - medallion signature guarantee. transfer agent will not accept the transaction. It protects shareholders by preventing unauthorized transfers and potential loss but also limits the liability of transfer agent. Banks, broker dealers and other financial institutions that are members of medallion program can provide you with one and they acts as guarantors of you signature and accept liability in case of forgery. That is why verify owners through the use of signature guarantees. In case that your securities are held in "street name" , in brokerage firm on your behalf you might not need signature guarantee.
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