Transfer agents can be registered or
non-registered. A registered transfer agent is a transfer agent that has registered
with the SEC or, in the case of banks serving as transfer agents, with an applicable
Federal bank regulatory agency. Whether a transfer agent must register depends on
whether the transfer agent transfers Section 12 Securities. Section
17A(c)(1) of the 1934 Act specifically states that "it shall be unlawful for any
transfer agent, unless registered in accordance with this section, directly or indirectly,
to make use of the mails or any means or instrumentality of interstate commerce to perform
the function of a transfer agent with respect to any security registered under Section 12
of this title or which would be required to be registered except for the exemption from
registration provided by subsections (g)(2)(B) or (g)(2)(G) of that
section." Section 12 requires the registration of the following types of
Securities traded on national securities exchanges,
e.g., the American Stock Exchange, the New York Stock Exchange, or NASDAQ.
NASDAQ applied for registration and received recognition as a national
securities exchange in 2006. To be traded
on a national securities exchange, the security is registered with the
national security exchange.
Securities requiring registration under Section 12(g)
of the 1934 Act, which requires registration when:
An issuer of a security has total assets exceeding $10 million (originally the
total asset size threshold for registration was $1 million, but SEC Rule 12g-1 raised the
total asset size threshold to $10 million), and more than 500 shareholders of
record. Note: An issue may deregister securities when the number of
shareholders of record falls below 300. Refer to the section on counting number of
shareholders of record.
In most instances, FDIC-supervised transfer agents
will act as transfer agent for securities registered pursuant to Section 12(g).
Instances where a state non-member bank serves as transfer agent for securities registered
on a national securities exchange or for mutual funds are relatively infrequent.
Certain types of securities are exempt from
registration under Section 12(g). Exempted categories of securities include:
Any security listed and registered on a national
securities exchange (e,g, American Stock Exchange, New York Stock
Exchange, NASDAQ, etc.). These are registered under Section 12(a)
Any security issued by an investment company
registered pursuant to Section 8 of the Investment Company Act of 1940
Any security, other than permanent stock, guaranty
stock, permanent reserve stock, or any similar certificate evidencing nonwithdrawable
capital, issued by a savings and loan association, building and loan association,
cooperative bank, homestead association, or similar institution, which is supervised and
examined by state or Federal authority having supervision over any such institution
Any security of an issuer organized and operated
exclusively for religious, educational, benevolent, fraternal, charitable, or reformatory
Any security of an issuer which is a "cooperative
association" as defined in the Agricultural Marketing Act.
Any security issued by a mutual or cooperative
organization which supplies a commodity or service primarily for the benefit of its
members and operates not for pecuniary profit, but only if the security is part of a class
issuable only to persons who purchase commodities or services from the issuer, the security
is transferable only to a successor in interest or occupancy of premises serviced or to be
served by the issuer, and n dividends are payable to the holder of the security
Any security issued by an insurance company, subject
to meeting certain conditions
Any interest or participation in any collective trust
funds maintained by a bank or in a separate account maintained by an insurance company
In addition, Section 3(a)(12) defines certain
categories or securities considered "exempted securities" for purposes of the
1934 Act. The registration requirements of Section 12(g) do not apply to
"exempted securities". Particularly important for transfer agents is the
designation of municipal securities as "exempted securities". As a result,
a transfer agent that transfers only municipal securities (typically bonds issued by local
political subdivisions, but can also include state issues and industrial development
bonds) is not required to register as a transfer agent with the SEC or, as appropriate,
with its primarily Federal banking regulator. Transfer agents that are not
registered pursuant to Section 17A(c)(1) of the 1934 Act are not subject to the
operational regulations contained in 17 C.F.R. §240.17Ad of the SEC's General Rules and
Regulations. The table below summarizes the registration requirements for transfer
agents based on the type of securities transferred.
Transfer Agent Registration Applies
Registered transfer agent use
required if the stock issue is:
listed on a national securities exchange (New York Stock Exchange, American Stock
Exchange, Chicago Stock Exchange, etc.) or listed on NASDAQ.
registered with the SEC (or federal banking agency) under federal securities laws.
Registration of stock is required when issued by any other corporate issuer with both
500+ shareholders of record and $10 million or more in
assets. Refer to section on counting the number of shareholders of record.
Corporate Debt (Bonds, Debentures,
Capital Notes, etc.)
registrar (transfer agent) must be registered if the bonds are listed
on a national securities exchange
(New York Stock Exchange, American Stock Exchange, Chicago Stock Exchange,
No registration requirement under
any circumstances. Also included in this exemption are industrial revenue and industrial
development bond issues, because they are issued by state or local agencies.
The transfer agent for a mutual
fund must be a registered transfer agent. No exceptions are allowed.
It is important to recognize,
however, that the Securities and Exchange Commission has opined (SEC Release 34-17111,
9-2-80) that once a transfer agent registers as a transfer agent that the transfer agent
must comply with all of 17 C.F.R. §240.17Ad for every security for which it serves as
transfer agent. This means that the same SEC operational requirements would pertain
to the transfer of municipal securities, despite the fact that municipal securities are
"exempted securities" under the 1934 Act. This requirement applies
regardless of which department or section of the transfer agent organization effects
securities transfers. For example, a bank could serve as transfer agent for its own
or its parent holding company stock, as well as serve as registrar for municipal
bonds. The fact that transfers of the bank's stock is effected in the bank's
Treasury Department, while the transfer of municipal bonds takes place in the trust
department would not relieve the trust department of its obligation to comply with SEC
operational requirements just on account of municipal bond transfers taking place in
another department of the institution. Once a transfer agent becomes subject to the
requirements of 17 C.F.R. §240.17Ad for any issue transferred, all other issues, whether
otherwise exempt or not under the 1934 Act, become subject to the same SEC requirements.
Voluntary Registration of Securities
Section 12(g)(1)(B) of the 1934 Act allows any issuer
of equity securities, not otherwise required to be registered, to register such securities
by filing a registration statement. According to the SEC's Office of Compliance
Inspections and Examinations, it is common practice for issuers to register voluntarily
(i.e. when not required by the 1934 Act).
Counting the Number of Shareholders of
there is a question whether an institution has 500 or more shareholders of record,
which would require its stock to be registered under federal securities laws. Determining
the number of shareholders of record may be difficult particularly when stockholders own
stock in varying names or under differing capacities (individually, joint, as a partner,
etc.). The difficulty may be further compounded when stock is held by a bank trust
department in nominee name or by a securities broker in street name.
In order to determine the number of
shareholders of record, it is necessary to refer to the SEC's definition of Securities
"Held of Record" which is addressed in SEC Rule 12g5-1. In principle, each
"person" who has an ownership interest in a security is counted as a holder of
record. In particular, Rule 12g5-1 identifies the following "persons" as
owners of record:
Securities identified as held of record by a
corporation, a partnership, a trust whether or not the trustees are
named, or other organization shall be included as so held by one person.
Securities identified as held of record by one or more
persons as trustees, executors, guardians, custodians or in other fiduciary
capacities with respect to a single trust, estate or account shall be included as held of
record by one person.
Securities held by two or more persons as co-owners
shall be included as held by one person.
Rule 12g5-1 includes an exception to the
"persons" described above. In particular:
Securities held, to the knowledge of the
issuer, subject to a voting trust, deposit agreement or similar arrangement shall be
included as held of record by the record holders of the voting trust certificates,
certificates of deposit, receipts or similar evidences of interest in such securities:
Provided, however, That the issuer may rely in good faith on such information as is
received in response to its request from a non-affiliated issuer of the certificates or
evidences of interest.
For trust departments this means that in most
instances, each trust account holding shares counts as one shareholder of record, without
regard to the number of beneficiaries. Trust accounts established with pass-through
voting, such as in some 401(k) plans, the individual participant accounts holding the
stock should be counted as shareholders of record.
When the bank has a single
stockholder "master" record name (nominee name) covering multiple persons (as
with a trust department or a securities broker), the bank is obligated to make reasonable
efforts to determine how many stockholders of record are represented by the
In the case of the bank's own
trust department, the bank is expected to obtain the requisite information, since it has
control over the trust department's records. In other trust institutions, the bank should
request the information.