SEC Proposes Transfer Agent Rule Overhaul for Tokenized Securities

The U.S. Securities and Exchange Commission (SEC) has proposed a major overhaul of transfer agent rules, which have not been updated in over four decades. The proposal aims to address the increasing use of blockchain recordkeeping and tokenized securities in regulated markets.

The SEC's existing requirements for transfer agents date back to the late 1970s and early 1980s, when investors commonly held paper certificates and firms processed ownership changes manually. Under the proposed rule, transfer agents would be required to update their registration, recordkeeping, transfer processing, and asset-safeguarding practices to accommodate digital records and automated systems.

The proposal introduces new standards for onchain transfer agents, covering controls over digital records, cybersecurity risks, and business continuity. Registered transfer agents would need to install controls protecting the integrity, availability, reproducibility, redundancy, and continuity of their electronic records.