Publicly traded companies are subject to stricter standards and must operate under the watchful eye of regulators. Most companies hire a number of vendors to handle non-core administrative and regulatory tasks.
In the United States, every publicly traded company is required to retain (or themselves be) a Transfer Agent to manage their shareholder register.
Transfer Agents play a crucial role in keeping their clients compliant. Their responsibilities are broad-sweeping, including shareholder management and communication, restricted and unrestricted stock transactions, dividend distribution, regulatory compliance, and corporate actions. Anything that impacts the shareholder register begins and ends with the transfer agent.
Here are five key ways transfer agents benefit their clients:
Shareholder Recordkeeping: You can think of transfer agents as the company’s official shareholder recordkeeper in the eyes of the SEC.
Interestingly, in our experience, many TAs aren’t particularly good at keeping records because of manual processes, human tendency for error, and decades of paper records poorly transcribed into digital contexts. Ask a public company if they trust their legacy transfer agent, and they’ll probably give you a lukewarm reply.
Vinyl has built its platform on an immutable ledger. Every transaction on the platform is tracked down to the individual who altered the record. As a result, there’s never a question as to who did what, when, or why.
Management of Restricted Securities: Most brokers won’t hold restricted securities for their clients (though, in rare cases, some will make exceptions). Transfer Agents are uniquely qualified to manage your restricted securities.
With that said, most transfer agents don’t make it easy to remove restrictive legends and instead burden issuers and shareholders with unnecessary and archaic, paper-based processes to deliver shares to brokers.
Vinyl’s technology guides shareholders and issuers through the process of delegending shares in minutes (rather than days or weeks), eliminating concerns, questions, and compliance risks imposed on shareholders and issuers alike.
Dividend Disbursement: Dividend distribution is a critical responsibility that requires precision and timeliness. Companies work with transfer agents to ensure dividends are distributed to shareholders correctly and on time.
These payments can often be held up by registration issues, bad account information, and UI/UX issues that prevent shareholders from easily providing information to the transfer agent to receive these payments.
Vinyl’s easy-to-use user interface and workflow solutions leverage modern payment technology to deliver timely payments to your most critical shareholders.
Corporate Actions Support: Corporate actions, such as mergers, acquisitions, stock splits, or rights offerings, require careful coordination. Transfer agents help manage the logistics, communication, and execution of these actions, ensuring efficiency and regulatory compliance.
We often hear painful stories about transfer agents taking weeks to execute a stock split because their systems aren’t nimble enough to process them in a timely manner without manual intervention. One issuer stated that they were blocked from doing a reverse split prior to their IPO because they were told it would take their transfer agent months to execute, which would have caused them to miss their IPO window!
Working with an agile transfer agent capable of meeting your transactions' needs and timelines is critical. Don’t let your transfer agent be a blocker!
Regulatory Compliance: Transfer agents help organizations meet compliance standards by handling required documentation and regulatory reporting. Their support is particularly valuable for navigating the complexities of securities regulations.
The reality is that most companies aren’t built to manage compliance matters, and shareholder registry can be complex and burdensome for the internal teams overseeing it.
Most transfer agents require redundant, manual workflows that put this compliance at risk. Ensuring that systems are in place and don’t rely on manual efforts (and consequently, expose the company to the risk of manual error) is critical.
At Vinyl, we’ve taken an integrative approach, leveraging our modern technology stack to integrate with issuer service providers, using APIs to eliminate repetitive tasks and data transfer risk.
Transfer agents are critical to publicly traded companies. Their expertise in managing shareholder relations, upholding regulatory compliance, facilitating stock transfers and payments, and supporting corporate actions helps companies operate smoothly, strengthen investor confidence, and navigate the complexities of the public markets.
Please don’t hesitate to contact us if you have any questions about transfer agency!