SEC Commissioners Aguilar and Gallagher Urge Rethink of Transfer Agent Rules (with Lofchie Comment)

SEC Commissioners Luis Aguilar and Daniel Gallagher issued a joint statement pushing for the SEC to modernize its transfer agent rules, asserting that "there are critical reforms requiring immediate action."

According to the Commissioners, the SEC has not "significantly" revised its transfer agent rules in almost thirty years. The Commissioners indicated that the Division of Trading and Markets has been working on a concept release seeking public comment on possible updates and improvements to the regulatory framework for transfer agents; however, the Commissioners are of the view that a proposed rulemaking would be more appropriate.

The Commissioners stated that they have presented Chair White with a number of recommendations for proposed updates and improvements to the transfer agent rules and that they hope the recommendations will "catalyze" SEC action. The Commissioners said that, among other things, their recommendations would help to ensure that transfer agents:

• safeguard investor assets, in part by requiring transfer agents to be appropriately insured or bonded;
• establish written agreements with their issuer clients so that both parties fully understand their rights and obligations;
• process dividends and other payments in a timely manner, and promptly notify shareholders about the status of their payments;
• develop business continuity and disaster recovery procedures;
• prevent fraud, particularly with regard to microcap securities;
• avoid or properly disclose and manage conflicts of interest;
• develop procedures to govern their use of information technology; and
• disclose key information in their annual filings with the SEC, including the identities of all issuers and securities for which they perform services.

Lofchie Comment: Regardless of how mundane rules regarding transfer agents may seem, this is a type of activity on which the SEC should be focused (i.e., looking to improve market structure and existing regulations where it can). Instead, Congress (primarily through Dodd-Frank) has largely diverted the resources of the SEC to matters that are completely outside of its scope (e.g., conflict minerals) or that have little relevance to its core mission and seem only to to advance political agendas (e.g., pay ratio disclosure). If Congress would instead allow the SEC to focus its limited resources (and all resources - governmental and otherwise - are limited) on what it is supposed to be doing, investors would be better served and protected.

See: SEC Commissioners' Statement; Michael S. Piwowar and Commissioner Kara M. Stein Joint Statement of Support.