Transfer Agent (TA) is a term that you would have come across if you trade in shares or securities. It is a financial service provider that keeps the records for a public company as to who owns its stock or bonds. TA performs a host of other services also, such as issuing stock certificates, managing lost or stolen certificates, transmitting dividends, reports and more.
Basically, it is the responsibility of the TA to keep track of who owns a company’s stock and bonds. Also, a TA must determine if a particular security is registered under the name of a broker house or an individual investor.
For example, Company ABC has 10,000,000 outstanding shares. If it shares trade daily, how does it keep track of who owns the shares and how much. This is what the transfer agent does.
Transfer Agent is usually a bank or a trust company or any other financial institution that a company appoints to keep a record of its securities. In some cases, a company can act their own TA. When TA performs the functions of a Registrar also, we may refer to them as Registrar And Transfer Agents or TRA.
The use of technology has made things very easy for the TR. Now, using the direct registration system (DRS), one can directly register the stock with the issuer or the transfer agent. Even though ownership records are electronic, a TA may issue stock and bond certificates in physical form to the new investors.
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Functions of Transfer Agent
TA performs the following functions:
TA is responsible for maintaining and managing records of the public companies. The records include a 4, along with the information such as the name of the shareholder, contact information, dividend information (if any), or any other useful info. Moreover, the TA must ensure that all the information is up-to-date, such as updating records with new contact information, change in address and more.
It is the job of TA to pay timely dividends to the registered shareholders. They pay the dividends on the basis of registrar’s records. Also, they are responsible for sending interest payments to the bondholders, and the face value of the bond as well once the due date arrives.
Along with dividend and interest, TAs also sends shares at the time of the stock split. Suppose, if a public company announces a stock split in the ratio 2:1, then TA’s issue additional shares to the existing shareholders.
TA needs to report the dividend and interest payment to the IRS for tax purposes as well. Also, they are responsible for mailing monthly investment statements to the investors in mutual funds. They also provide the shareholders with the company’s annual reports and audited financial statements.
Handling One-time Events
Companies also use the services of TA for handing major corporate events, such as mergers, acquisitions, annual meetings, spin-offs etc. For such events, a company may use the services transfer agent they already have, or use another TA specializing in such things. Many TA also offers IPO services, i.e., help companies to go from private to public. TA’ role is to make sure that IPO process goes smoothly.
Different classes of shareholders have different voting rights on various corporate decisions, such as acquisition, merger, and more. TA’s facilitate such votes by sending proxy information to the shareholders.
From the above points, it is very clear that Transfer Agents are very important for the financial world. They remain behind the scenes and perform several crucial functions, including protecting the right to information disclosure of even the smallest shareholder or bondholders. In their absence, public companies will have to create an entire department to manage the record of the shareholder or bondholders.1,2