SEC proposes first overhaul of transfer agent rules since 1980s, seeks comment on tokenization

Key changes and focus on blockchain

Transfer agents play a critical role in financial markets by maintaining official records of security ownership, handling processes such as issuance, cancellation, and transfer for issuers. The SEC’s current set of rules largely dates back to the late 1970s and early 1980s.

The proposed update responds to evolving technological trends, particularly the integration of blockchain and distributed ledger technology in financial services. Market participants are now actively developing blockchain-native, or “onchain,” transfer agent models for the US market. Such models would task agents with maintaining securityholder records on distributed ledgers, facilitating tokenized fund administration, and ensuring interoperability across blockchain networks via smart contract-driven processes.

Under the draft rules, transfer agents would face new reporting obligations, including the disclosure of issues tracked on distributed ledgers. Agents would also be required to break out tokenized securities by their operational model, reflecting the growing diversity of tokenization approaches.

The SEC has asked market participants to comment on several points, including how to handle records held solely on blockchains the agent does not fully control, and whether the rules allow agents to link wallet addresses and asset holdings to offchain records containing holders’ names and addresses. This would enable onchain transactions to automatically update master securityholder files.

Mini dictionary: Transfer agent — A regulated entity that keeps official records of security ownership and manages shareholder services including transfers, dividend payments, and issuances for public companies.

Commissioners’ perspectives and next steps

SEC Commissioner Hester Peirce emphasized that the proposal is the result of over a decade’s work and welcomed industry feedback on its treatment of tokenization and emergent technologies.

Commissioner Hester Peirce described the proposal as the culmination of more than ten years of effort and invited public input, especially regarding its potential impact on tokenization.

Commissioner Mark T. Uyeda commented that after a prior review in 2015, the Commission pursued enforcement action rather than substantive rulemaking, resulting in a piecemeal approach that lacked clarity and predictability. Uyeda noted that distributed ledger technology and tokenization, almost nonexistent in 2015, now substantially shape transfer agents’ core responsibilities.

SEC Chairman Paul S. Atkins stated that the new rules are designed to reflect the use of “electronic communications and blockchain technology” by transfer agents. He indicated that, beyond technical updates, the proposal would eliminate certain exemptions, standardize record retention periods, and frame safeguarding as a risk-management requirement for cybersecurity and business continuity.

Public comment and broader regulatory context

The SEC has opened a 60-day public comment period on the transfer agent proposal, which will close two months after its publication in the Federal Register. The Commission also announced the agenda for a September 17 roundtable focused on the expansion of 24-hour trading, which will include participants from Robinhood, Nasdaq, DTCC, Blue Ocean, and 24X, illustrating its broader interest in market modernization and technology-driven reforms.

The Commission’s extensive proposal addresses critical questions about integrating blockchain into transfer agent operations and seeks input from all stakeholders over a 60-day period.