The function of a transfer agent is to maintain up-to-date records of the ownership of a corporation's securities and to execute transfers of the corporation's stock and other securities. A transfer agent may be an officer or clerk of the corporation, or an outside individual, bank, or trust company. Larger corporations may have their own transfer departments. It is common practice for corporations to utilize the services of a bank's transfer department to fulfill the duties of a transfer agent.

A transfer agent is responsible for seeing that stock and other securities transfers are properly executed. When a corporation's stock is sold, the transfer agent reregisters the securities that are to be transferred. The securities that have been sold must be canceled, and the transfer agent must establish the validity of the securities to be canceled. The transfer agent then cancels the old certificates and issues new certificates following transfer instructions. The transfer agent records the certificate numbers of the new stock, the new registration information, and the old certificate numbers and date of cancellation. At the end of each business day the transfer agent verifies all transactions by matching the number of shares canceled with the number of shares issued.

In the final step of a securities transfer, the transfer agent delivers the new securities according to instructions. The securities may be delivered to an individual, a brokerage firm, a bank, or a depository institution. It normally takes four working days for a stock transfer to be completed following the transaction date.

State laws governing the activities of a transfer agent are based on the Uniform Commercial Code (UCC), Article 8, which covers investment securities. The UCC spells out the rights and liabilities of the buyer, seller, and transfer agent in transactions involving securities. In addition, transfer agents are regulated by the Securities and Exchange Commission (SEC). SEC regulations are designed to ensure that transfer agents act promptly and accurately. Transfer agents for corporations listed on the New York Stock Exchange (NYSE) must meet additional requirements of the NYSE, among which is the requirement to maintain an office on Manhattan in New York City.

SEE ALSO : Banks and Banking

[ David P. Bianco ]

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