Transfer Agent

Updated on May 15, 2024
Article byWallstreetmojo Team
Edited byAaron Crowe
Reviewed byDheeraj Vaidya, CFA, FRM

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.

Key Takeaways

Roles and Responsibilities of Transfer Agent

Transfer Agent

You are free to use this image on your website, templates, etc, Please provide us with an attribution linkHow to Provide Attribution?Article Link to be Hyperlinked
For eg:
Source: Transfer Agent (wallstreetmojo.com)

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.

Accounting for Financial Analyst (16+ Hours Video Series)

–>> p.s. – Want to take your financial analysis to the next level? Consider our “Accounting for Financial Analyst” course, featuring in-depth case studies of McDonald’s and Colgate, and over 16 hours of video tutorials. Sharpen your skills and gain valuable insights to make smarter investment decisions.

#1 – Maintaining Records

Most companies appoint these agents to issue new shares to the company’s shareholdersShareholdersA shareholder is an individual or an institution that owns one or more shares of stock in a public or a private corporation and, therefore, are the legal owners of the company. The ownership percentage depends on the number of shares they hold against the company's total shares.read more. 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 certificatesShare CertificatesStock Certificate, also called a Share Certificate, is a legal document evidencing the ownership of stocks in a Company, including details like the stockholder’s name, issuing date, the total number of stocks issued, identification number, and the corporate seal & sign. read more

They look at how many outstanding sharesOutstanding SharesOutstanding shares are the stocks available with the company's shareholders at a given point of time after excluding the shares that the entity had repurchased. It is shown as a part of the owner's equity in the liability side of the company's balance sheet.read more 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 dividendDividendDividends refer to the portion of business earnings paid to the shareholders as gratitude for investing in the company’s equity.read more 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 Stock Stock splits refer to the process whereby a company increases its number of shares, reducing the per-share price of the stocks. read moresplit 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 mergersMergersMerger refers to a strategic process whereby two or more companies mutually form a new single legal venture. For example, in 2015, ketchup maker H.J. Heinz Co and Kraft Foods Group Inc merged their business to become Kraft Heinz Company, a leading global food and beverage firm.read more, 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 offeringInitial Public OfferingAn initial public offering (IPO) occurs when a private company makes its shares available to the general public for the first time. IPO is a means of raising capital for companies by allowing them to trade their shares on the stock exchange.read more (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.

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 –