SEC Proposes Transfer Agent Rule Update Amid Blockchain, Tokenization Growth

The US Securities and Exchange Commission (SEC) has proposed an update to its transfer agent rules, which have not been significantly revised since the late 1970s and early 1980s. The current framework does not adequately address the increasing use of blockchain-based recordkeeping and tokenized securities in US markets.

The SEC is seeking to modernize the rules to cover registration, recordkeeping, safeguarding, and securities transfers, as well as introducing new compliance standards for transfer agents. These include expanded reporting requirements and rules governing restrictive legends on securities and the use of third-party service providers.

Market participants are looking to bring blockchain-native transfer agents into the US market, with models for blockchain-based recordkeeping and tokenized fund administration emerging. The SEC is concerned about risks related to cybersecurity, operational resilience, and safeguarding securities and investor records.

The agency is seeking public comment on the proposed changes, which will be published in the Federal Register soon. Comments are due 60 days after publication.