On December 22, 2015, the Securities and Exchange Commission (the "SEC") issued Exchange Act Release No. 34-76743 (the "Release"), which contains an Advance Notice of Proposed Rulemaking providing public notice that the SEC is considering new and amended rules governing transfer agents. The Release also contains a Concept Release addressing other aspects of transfer agent regulation.
The SEC first adopted transfer agent rules in 1977. These rules remain virtually unchanged, despite significant changes in the structure and operation of the securities markets. The Release covers the following matters:
- Sections II, III and IV of the Release contain a detailed and comprehensive description of the current clearing and settlement system, its history and the role of transfer agents in clearing and settlement.
- Section V provides a detailed account of the development of current transfer agent activities.
- Section VI, the Advance Notice of Proposed Rulemaking, contains a description of the transfer agent rules and rule amendments that the SEC intends to propose and lists some hundreds of questions, divided into 82 categories, that the SEC is seeking responses to in connection with the proposed rules and rule amendments.
- Section VII, the Concept Release, discusses additional regulatory policy and related issues beyond those raised in Section VI and lists some additional hundreds of questions, divided into 88 categories, that the SEC is seeking responses to in connection with the issues identified in Section VII.
The SEC has requested public comment on the Release. Transfer agents, and in particular transfer agents that provide services to mutual funds, may wish to submit comments in order to help shape any rules that the SEC may propose. Comments are due by February 29, 2016 (since extended to April 14, 2016, see below).
It has been the SEC staff's long-held position that all the activities of registered transfer agents are subject to SEC oversight, even an activity that in and of itself would not require the person performing the activity to register as a transfer agent. As a result, and in light of the increasing array of services provided by registered transfer agents, users of those services – including private funds, pension plans, employee and shareholder investment plans and issuers of various debt and asset-backed securities not registered under Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act") – may have an interest in both the rule amendments and proposals that the SEC is considering and the additional issues on which the SEC is requesting comment.
Click here for the Release.