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Stock transfer is an important function for public companies, which is why all but a relative handful of them have entrusted it to outside professional transfer agents. At the same time, however, the number of transfer agents itself has shrunk to a relative handful, lessening competition and the associated engine for fee containment in the industry.
How can a corporation keep its stock transfer costs down, at the same time ensuring its transfer agent earns a fair return for its efforts and a cushion for R&D investment? We will start with some straight-forward but often over-looked tools:
- Review the last six months of transfer agent invoices and, if there is a particularly large dollar amount or an item you don't understand, get clarification on it from the transfer agent right away
- If there are out-of-pocket expenses in these bills that are priced higher than would seem logical (like $.47 for postage on a letter), get an explanation there too
- Ask your transfer agent if your current fees are "competitive," in light of the probable drop in registered shareholders the agent is handling for you
- Invite a competitive bid or two from alternative stock transfer providers, from time to time
And here are some less obvious sources of stock transfer savings you should consider:
- Discuss the use of lighter weight paper for shareholder communications with your transfer agent
- Discuss the use of no paper, by eliciting agreement from shareholders to receive more company communications electronically (incenting them to so choose via "tree-planting" or "donation to charity" options)
- Discuss with the transfer agent what is involved with the new Notice & Access methodology for shareholder meeting proxies
- Investigate delivery of all shareholder communications to employees who have a computer via the intranet, on an implied-consent basis
- See if "householding" proxy materials would be cost-effective for the company
- Discuss the combination of communications in the same envelope to the same holder owning stock in multiple forms (e.g., common and preferred)
- Selectively "drop ship" shareholder material depending on its quantity, weight and urgency
- Ask the transfer agent if there are postal (volume) discounts it could be passing on to you, and is not
- Consider an odd-lot shareholder reduction program administered by your transfer agent, or your proxy solicitor (gets bids from each)
- If you are a dividend paying company, pursue more use of "direct deposit" into shareholders' bank accounts via ACH
- If you have a DRIP or Direct Stock Purchase Plan, see if you can elicit consent from odd-lot, non-plan holders to have their dividends automatically reinvested in the plan
- Have the transfer agent fully explain their duplicate shareholder elimination practices
- Have the transfer agent fully explain their inactive/closed account purge and archiving practices
- Question OFAC screening fees
- Question SAS70 report fees
- Question fees to keep up with regulatory changes, essentially stress-testing the difference between a "sudden expense" to the transfer agent and what it should have anticipated as a cost of doing business
- Question fees charged by the transfer agent to process record keeping updates from other vendors hired by the company, like a post-merger lost shareholder search firm
- Question relationship termination fees
These are examples of areas you could investigate with your transfer agent, and you could also retain Shareholder Service Solutions® to do this for you so that you stay focused on your immediate priorities, get this due diligence done promptly, and save considerably more money on a recurring basis than our modest, one-time fee.
If you would like a short proposal for our applicable Shareholder Services
Check-Up®, just go to the "Contact Us" section of this web site.
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