Transfer agents are intermediaries between investors and companies. They may be a company employee, or they may work for a trust company or bank. A transfer agent’s role is to provide information and services to the company’s shareholders. Transfer agents perform the following tasks:
- Issue, transfer, and cancel a company’s securities
- Maintain a list of all shareholders
- Ensure compliance with federal and state securities regulations
- Handle transfers of stock ownership for mergers and acquisitions
- Issue shareholder dividends and bondholder interest payments
In their role, transfer agents benefit investors in a company in the following ways:
Ensure Accurate Brokerage Account Information
Transfer agents monitor information in the company’s brokerage account. They ensure new transactions and new offerings of stock shares are error-free and legal. By maintaining and providing such accurate, reliable, and fair records, transfer agents provide the necessary transparency that allows shareholders to efficiently sell their shares.
Provide Smooth and Accurate Changes in the Case of Mergers, Acquisitions, and Bankruptcy
Mergers, acquisitions, and stock splits can cause complex changes in shareholder ownership. Transfer agents ensure that such corporate changes proceed smoothly and that certificate records remain accurate for both the companies involved as well as for all shareholders. All the while, they ensure the dividends are faithfully and accurately paid out every quarter. Without transfer agents providing this crucial role for investors, there are a number of dangers:
- Delays in dividend disbursement
- Unforeseen tax liabilities due to unclaimed assets
- Financial loss when other market transactions are missed
- Losses due to legal battles over shareholder status
Keep Shareholders in the Loop
Transfer agents provide the communications between shareholders and the company. Agents ensure that shareholders receive investor mailings. They also reply to shareholder requests for information. When a corporate action requires a proxy vote, it is the transfer agent that oversees the process.
A key part of the transparency the transfer agent provides between the company and its investors is maintaining the cap table. In order to maintain strict transparency, the cap table is a record of the corporate structure. This includes a report on how many shares are in circulation and the number of shares owned by each party. Having access to the information in the cap table helps investors monitor their investments through events such as new equity offerings, mergers, acquisitions, and stock splits.
Assist With Stock Certificate Ownership Problems
If an investor has had their stock certificates stolen, transfer agents help investors regain possession of their stolen shareholder certificates and reinstate their ownership records. Also, transfer agents assist investors with lost stock certificates.
Provide Strict Adherence to SEC and State Guidelines
Transfer agents are registered by the SEC. They are mandated to ensure that everything related to the investors and their stock ownership follows all state and federal guidelines.
Whether during transfers of ownership of individual shares, new stock offerings, dividend disbursement, mergers, acquisitions, or bankruptcies, transfer agents provide the shareholders in a company accuracy, reliability, and transparency. They are bound to follow state and federal regulations to ensure a fair playing field and smooth transitions for shareholders.
