Transfer Agent

Publication Date :

Blog Author :

Edited by :

Reviewed by :

Table Of Contents

arrow

Meaning of Transfer Agent

A transfer agent tracks and maintains the records of an organization's shareholders. Some examples of transfer agents are financial companies, trust companies, banks, or individuals. Listed firms often assign their shareholders' data management to a transfer agent. For instance, Amazon's transfer agent is Computershare. Amazon has provided its shareholders with the agent's contact details to help them update their names, addresses or report on lost share certificates.

Table of contents
  • A transfer agent manages the records of an organization’s shareholders by acting as an intermediary between the two. Examples include financial companies, trust companies, banks or individuals.
  • They are responsible for recording and updating shareholders' names, addresses, contact details, dividend information, issuing and canceling new share certificates, etc.
  • They maintain shareholders' records and cancel and issue new share certificates, whereas a registrar registers the details when shares are issued in an authorized register on behalf of the company.

Roles and Responsibilities of Transfer Agent

Transfer Agent

Like Amazon, many companies provide their agent's contact details on their website. In the case of banks, agents based in the United States need to register themselves with the United Securities and Exchange Commission and a bank regulatory agency.

There are many transfer agents in the market, with some of the top names being BNY Mellon, American Stock Transfer and Trust, and Continental Stock Transfer and Trust. BNY Mellon is reported to have almost 40.2% hold in the market.

The roles and responsibilities of transfer agents are described in detail below.

#1 - Maintaining Records

Most companies appoint these agents to issue new shares to the company's shareholders. They are responsible for recording and updating shareholders' names, addresses, contact details, dividend information, etc. They are responsible for recording and updating shareholders' names, addresses, contact details, dividend information, etc. They also maintain and update individual investors' transaction balances. Agents look into whether a person has lost the share certificate and issue new share certificates. 

They look at how many outstanding shares are present. Besides, they also look at how many shares are traded daily and their respective owners.

#2 - Payment of dividends and interests

One of transfer agents' most crucial responsibilities is timely dividend payment to the shareholders. They are also responsible for paying interest on the due date. The agents report the dividend and interest payments to the Internal Revenue Service for tax purposes.

#3 - Issue Certificates to Show Ownership Change

Whenever an individual or entity buys a stock or bond, a certificate is provisioned to bring the ownership change. It is maintained through electronically recorded ownership certificates. If an organization does a stock split or dividend, the agent is responsible for recording and issuing the new shares.

#4 - Support Services

The agents bridge the gap between the shareholders and the company by timely delivery of the dividends. They are responsible for mailing the annual reports and audited financial statements to the shareholders. Also, the agents help shareholders with materials guiding their voting rights, roles, and how to exercise them when the situation occurs.

Some legal entities or persons prefer to hold physical stock certificates rather than have a book-entry form. The physical stock might get stolen or destroyed, so in that case, the transfer agents help the investor to get it. Generally, the transfer agents provide a medallion signature guarantee or right for selling and transferring security.

Transfer agents are well-versed with the complexities of the SEC rules and state regulations concerning trading. They actively implement action on behalf of their clients. They plan accordingly for any new rules brought to the market. They also assist in mergers, stock splits and rebranding, etc.

#5 - Corporate Action

They also assist in corporate actions such as mergers, stock splits and rebranding, etc. For example, for corporate action like a merger, or acquisition, the agents will receive the acquired company's stock. They will also issue new shares certificates after the merger. Another example is when a company is switching from private to public, ensuring a hassle-free initial public offering (IPO).

Difference Between Registrars and Transfer Agents

A registrar and a transfer agent are authorized to assist the firms and investors in recording shares and shareholder-related data. Their roles overlap, and companies often appoint any one of the two to perform all the roles. The few differences between the two are listed below.

  • Transfer agents maintain shareholders' records and cancel and issue new share certificates. In contrast, a registrar registers the details when shares are issued in an authorized register on behalf of the company.
  • Registrars can be record keepers. But the transfer agents work as shareholders’ record-keepers and corporate services providers.
  • The work of the transfer agent is to see how many outstanding shares are present. In addition, they look at how many shares are being traded daily and their respective owners.  On the other hand, the registrar's work is to identify who has invested in the bond and who should receive the payments. At the time of maturity, the registrar's documents determine how small an amount is to be paid.

Mutual Fund Transfer Agent

They need to be a registered transfer agent. They perform the following roles.

  • They provide support service facilities to the organization and the shareholders.
  • Record and maintain the details of shareholders' accounts.
  • Compute calculations on the income from mutual funds and transfer the same to shareholders' accounts. 
  • Provide dividend related tax information to the tax department.
  • Provide annual and quarterly reports.