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Transfer Agent 101

What they do, why you need them, and which type is best for your company

May 4, 2023

When it comes to securities transactions, accuracy and efficiency are key. That's where transfer agents come in, providing essential services to ensure that transactions are processed correctly and that the rights of investors are protected. However, understanding the work of a transfer agent can be complex, especially when it comes to the future of your business and its shareholders.

In this article, we'll dive into the crucial role of transfer agents and provide guidance on choosing between traditional and digital providers based on your business needs.

What is a Transfer Agent?

A transfer agent is an entity that tracks and maintains the records of an organization's shareholders.

Here are a few reasons a company may need transfer agent services:

  • Maintaining accurate records: A transfer agent helps a company maintain accurate records of its securities holders. This includes recording the names and addresses of the registered owners of the securities, and updating the records when ownership changes.
  • Facilitating the transfer of securities: When securities are bought or sold, the transfer agent helps to facilitate the transfer of ownership. They are responsible for verifying the identities of the buyer and seller (KYC/KYB), confirming the necessary paperwork is completed, and updating the records of ownership.
  • Issuing new securities: In the case of a company issuing new securities such as stock or bonds, the transfer agent is responsible for distribution- and that they are issued in compliance with applicable laws and regulations.
  • Providing information to investors: Dividend payments and voting rights about securities are some examples of information transfer agents provide to investors.
  • Maintaining compliance with regulations: Transfer agents must comply with various regulations and laws related to the transfer of securities, such as the Securities Exchange Act of 1934 and the Securities Act of 1933. By working with a transfer agent, a company can ensure that it is complying with these regulations and avoiding potential legal and regulatory issues.

The Different Types of Transfer Agents

  • Traditional transfer agents are typically a physical office that handles the transfer of securities from one party to another, responsible for maintaining the shareholder register and keeping track of all securities issued by the company. They also distribute dividends, process stock splits, and handle shareholder inquiries.

Traditional transfer agents have the advantage of experience and expertise, as they may have been in the business for a long time and established relationships with other companies in the industry. They can, however, be limited by their physical location, and their services are often slow and expensive. The process of transferring securities can take several weeks with high fees and manual paperwork associated with the service.

  • Digital transfer agents, on the other hand, are web-based platforms that allow companies to manage their securities online. They are designed to be more efficient and cost-effective than traditional transfer agents, as transactions can be completed in a matter of days rather than weeks.

Digital transfer agents offer more transparency and real-time reporting, allowing companies to monitor their securities in real-time. Since they are digital, they can be accessed from anywhere in the world, making it easier for companies to manage their securities even if they are located in different countries. Digital transfer agents offer a more efficient and cost-effective alternative to the transfer process, making them an increasingly popular choice for companies looking to streamline their securities management.

Digital transfer agents are designed to be more efficient and cost-effective than traditional transfer agents, as transactions can be completed in a matter of days rather than weeks.

Securitize Transfer Agent Services: Digital and Flexible

Successfully managing the lifecycle of your security involves a lot of moving parts. And with the multitude of advancements in technology, both companies and their shareholders expect timeliness, agility and security. 

Securitize’s range of transfer agent services equip businesses with 100% digital solutions at various price points depending on what they need at the time, while also being able to account for growth and scalability in the future.  

You can learn more about Securitize Transfer's features and services here.

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