Transfer Agent

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

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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 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 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 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 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 dividendDividendDividend is that portion of profit which is distributed to the shareholders of the company as the reward for their investment in the company and its distribution amount is decided by the board of the company and thereafter approved by the shareholders of the company.read more 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 Stock Stock split, also known as share split, is the process by which companies divide their existing outstanding shares into multiple shares, such as 3 shares for every 1 owned, 2 shares for every 1 held, and so on. The company's market capitalization remains unchanged during a stock split because, while the number of shares grows, the price per share decreases correspondingly.read moresplit 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 reportsAnnual ReportsAn annual report is a document that a corporation publishes for its internal and external stakeholders to describe the company's performance, financial information, and disclosures related to its operations. Over time, these reports have become legal and regulatory requirements.read more 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.

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 mergersMergersA merger is a voluntary fusion of two existing entities equal in size, operations, and customers deciding to amalgamate to form a new entity, expand its reach into new territories, lower operational costs, increase revenues, and earn greater control over market share.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 OfferingInitial Public Offering (IPO) is when the shares of the private companies are listed for the first time in the stock exchange for public trading and investment. This allows a private company to raise the capital for different purposes.read more (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.

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 –