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What Are Transfer Agents?

March 15, 2019 by Lape Runsewe

What are transfer agents?

We thought it would be helpful to unravel some of the contents of the ‘black box’ which is the UK financial services industry – estimated to be worth well over £176 billion in 2018. (Source: Finance Feeds) .

This week – transfer agents! Critical ‘cogs’ in the financial system and their work is usually done behind the scenes – invisible but absolutely crucial to the smooth and efficient workings of the system.

So a transfer agent is a trust company, bank or similar financial institution assigned by a company as a Third Party, to maintain records of investors and account balances.

Overall they do two things:

  • Record transactions, cancel and issue certificates, process investor mailings and deal with other investor problems, such as lost or stolen certificates.
  • Work closely with a registrar to ensure investors receive interest payments and dividends when they are due and send monthly investment statements to mutual fund shareholders. They manage and keep track of registered shareholders for companies that issue stocks and shares.

 

We’ve tried to sum up their role into five areas:

  1. Ensuring companies correctly abide by the right rules & regulations
    Transfer agents help publicly owned companies stay on top of regulatory changes and implement appropriate action on their behalf. They also make sure any regulatory policies align with experts in the industry, plan consistently for new regulations and advocate for clients, when the regulations are fuzzy or unclear.
  2. Working with registered (not beneficial) shareholders
    The transfer agent maintains contact information for ‘registered’ shareholders and handles the purchase or issuance, dividend payments, transfer or sale of their shares. These shareholdersare individuals or entities who purchased or were issued stock directly from the company.  In contrast. ‘beneficial’ shareholders, such as investors, own the economic value and benefits of their shares, but in contrast these shares aren’t registered under the holders’ names, but rather a “street name,” and held by a middleman, like the broker or dealer.
  3. Maintaining the right records at the right time
    One of the core responsibilities of a transfer agent is to maintain and manage records for their clients. This is the official listing of all registered shares and shareholders, and it includes the shareholder’s name and contact information, along with records of dividends paid and other important shareholder information. The transfer agent ensures that dividends and distributions get to the right person, at the right place, at the right time.
  4. Making payments & reporting in a timely manner
    Transfer agents are also responsible for making dividend payments to registered shareholders, and reporting that income in a timely manner every tax season. A transfer agent’s technology system is the backbone of such operations.

 

  1. Offering shares to the public for the first time
    When a private company decides to go public, they hire a transfer agent to issue shares during their ‘Initial Public Offering’ (IPO). The transfer agent performs a critical role in making sure the whole IPO goes smoothly.

Ultimately, the transfer agent becomes the face of a company to its shareholders, helping these stakeholders make informed decisions about those companies. Quite a responsibility!

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