SEC Proposes New Standards for US Transfer Agents

The US Securities and Exchange Commission (SEC) has proposed overhauling decades-old rules governing transfer agents as blockchain-based recordkeeping and tokenized securities become more prominent in US markets.

The proposal would update requirements covering registration, recordkeeping, safeguarding and securities transfers, while introducing new rules aimed at risks emerging from increasingly digital and automated market infrastructure.

“Market participants are actively seeking to bring blockchain-native, or ‘onchain’ transfer agents into the U.S. market,” the SEC said, pointing to models for blockchain-based recordkeeping, tokenized fund administration and cross-chain interoperability.

The agency said its existing framework does not adequately address those developments, particularly risks involving cybersecurity, operational resilience and the safeguarding of securities and investor records.

Under the proposal, transfer agents would face expanded reporting requirements and new compliance standards, including rules governing restrictive legends on securities and the use of third-party service providers.

SEC’s proposed Transfer Agent Rules. Source: SEC

The SEC said its transfer agent rules have not been substantively updated since the late 1970s and early 1980s, when the industry still relied heavily on paper certificates and manual recordkeeping.

The regulatory agency is seeking public comment on the proposed changes, with comments due 60 days after the proposal is published in the Federal Register.

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SEC pursues broader securities rule changes

The SEC is “on a mission to simplify its rules,” according to analysis from law firm Cahill Gordon & Reindel sent to clients on Tuesday.

In May, the SEC proposed three major changes to public-company rules. The proposals would allow companies to opt for semiannual reporting, simplify the existing filer classification system and expand access to streamlined registered securities offerings.

Last week, the SEC sent a proposed overhaul of custody rules for investment advisers and investment companies to the White House for review, with potential changes covering how firms hold crypto assets for clients. The changes could provide clearer standards for how investment advisers and funds custody digital assets while complying with federal securities rules.

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