SEC Proposes Transfer Agent Rule Overhaul to Address Blockchain and Tokenization

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

The SEC notes that many of its current transfer agent requirements date back to the late 1970s and early 1980s, when investors commonly held paper certificates and firms processed ownership changes manually. The proposed rules would update registration, recordkeeping, transfer processing, and asset-safeguarding requirements for transfer agents.

The proposal also introduces new standards for restrictive legends, paying-agent services, and the oversight of third-party service providers. Transfer agents using electronic recordkeeping systems would be required to install controls protecting the integrity, availability, reproducibility, redundancy, and continuity of their records.