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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 the management of their shareholders’ data 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.

Key Takeaways

  • 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, issue and cancellation of new share certificates, etc.
  • They maintain shareholders’ records, 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

Just like Amazon, many companies provide their agent’s contact details on their website. The agents based in the United States need to get themselves registered with the United Securities and Exchange Commission and a bank regulatory agency in case of banks. 

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.

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 also maintain and update individual investors’ transaction balances. If a person has lost the share certificate, agents look into the matter and issue new share certificates

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

#2 – Payment of dividends and interests

One of the most crucial responsibilities of transfer agents includes the timely payment of the dividend 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 purpose.

#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. In case an organization does a stock split or dividend, the agent is responsible for recording and issuing the new shares. It is maintained through electronically recorded ownership certificates.

#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 on their voting rights, roles and how to exercise it when the situation occurs.

Some legal entities or persons prefer to hold physical stock certificates rather than having 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 of security.

#5 – Legal Compliance

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 both 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, 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. 
  • Registrar 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 much 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 facility 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.

Recommended Articles

This has been a guide to What is a Transfer Agent and its Definition. Here we discuss their roles and responsibilities towards individual investors along with examples. You may also have a look at the following articles to learn more –

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