SEC Proposes New Rule to Modernize Transfer Agent Regulations

The US Securities and Exchange Commission (SEC) has proposed a new rule to modernize transfer agent regulations, which have remained largely unchanged since the late 1970s and early 1980s. The current requirements were designed for an era when investors relied on paper certificates and firms processed ownership changes manually.

The proposed rule would cover recordkeeping, cybersecurity, and asset protection, and would require transfer agents to implement electronic record keeping systems that meet specific controls related to the integrity, availability, reproduction, redundancy, and continuity of digital records. The rule also includes standards for restrictive legends, paying-agent services, and third-party providers.

The proposed rule is designed to be technology neutral, allowing regulated entities to use systems that satisfy the control procedures, including blockchain systems. This would enable transfer agents to leverage emerging technologies without having to abandon their existing infrastructure.