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Stock transfer agents have come a long way in the past decade in terms of what they can do for their corporate clients - and even how they think about their service offerings. Evidence of these changes can be seen in what the better transfer agents consider key "deliverables" to clients these days.
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These are Securities and Exchange Commission (SEC) forms that largely reflect the agency's control over stock transfer agents in the U.S.
TA-1
This form is used by an entity registering as a transfer agent with the SEC for the first time.
It elicits a great deal of information about an applicant which should provide comfort to both issuers and shareholders that not just any outfit is allowed to perform this function. The entity must show who owns and controls it; how it is funded/financed; whether it has pled guilty to or been convicted of a felony or misdemeanor in the past 10 years, or even "made a false statement or omission" or been proven "dishonest, unfair or unethical"; and where its operating locations will be. There is also a supplemental level of scrutiny placed on the applicant de facto by requiring it to give information such as its Financial Industry Number Standard (FINS number), which is assigned by the Depository Trust Company after its own vetting process. And finally, the TA-1 must be signed by the applicant's qualifying executive officer.
TA-2
This form is an annual report by transfer agents to the SEC on its activities in the preceding year. It elicits not only raw data like number of shareholders managed and transfers performed, but also disclosure about transfer turn-around times not met; transfer imbalances more than 30 days old ("aged record differences") and associated "buy-ins" where the transfer agent had to purchase and retire shares in the amount they were over-issued; plus changes in the agent's modus operandi such as whether it newly engaged an outside service provider to perform any of its functions (and, if so, whom). The form also requires disclosure on the frequency and number of "lost" shareholders searched by the transfer agent, and how many new addresses were found as a result of those searches.
So transfer agents have to toe a strict line with the SEC just to started, and then to stay in the business – not to mention also passing annual muster with bank regulators (if a bank transfer agent), their independent registered public accountants, as well as having corporate client satisfaction levels broadcast to the world by at least two outside surveying firms that post their results on-line.
For more on this topic, see our Fall 2008 article on "Performance Standards".
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