SEC proposed to update the transfer agent rules from the 1970s

The U.S. SEC has proposed amendments to the transfer agent rules, which have not undergone significant updates since they were introduced in the late 1970s. Transfer agents, as securities record keepers, maintain ownership records and handle corporate actions such as mergers and dividend distributions, while playing a key role in the clearing and settlement processes.

SEC Chairman Paul Atkins stated that the proposal will simplify and modernize the commission's rules to reflect the current processes and operations of transfer agents, including the use of electronic communications and blockchain technology in securities issuance and share transfers. The SEC noted that some market participants are exploring blockchain-based systems to maintain securities ownership records.

In the 421-page rule change document, the SEC stated that transfer agents interacting with tokenized securities, distributed ledger technology, and smart contracts must manage risks related to blockchain data integrity, the security of tokenized securities, and the operational models of distributed ledgers; those adopting artificial intelligence or automation technologies must ensure appropriate controls, accurate representations of system capabilities, and effective oversight of automated processes.