Every investor relies on a transfer agent or stock transfer agent. The transfer agent, however, is generally an unseen role in the buying and selling of stocks and bonds. Here is a more in-depth look at the roles and responsibilities of a transfer agent.

What is a Transfer Agent?

The term “transfer agent” refers to a financial institution like a bank or trust company that keeps and maintains the stock and bond investment records of individuals and legal entities for a corporation. In some cases, a company can act as its own transfer agent. Sometimes a transfer agent may be called a stock transfer agent as the responsibilities involve managing stocks and bonds.

What Does a Transfer Agent Do?

A transfer agent has three primary roles: :

  1. To issue certificates to show changes in ownership of securities. When an individual or entity buys a stock or bond, a certificate must be issued to record the change of ownership. If a corporation does a stock split or dividend, the transfer agent is responsible for the issuing and recording of the new shares. Most of the time, ownership is recorded through book-entry securities, electronically recorded ownership certificates.
  2. To act on a corporation’s behalf in communicating with stock and/or bond holders. The transfer agent often pays out the dividends, interest or other distributions for a corporation. It may also mail quarterly and annual reports, serve as a tender agent during a tender offer, exchange stocks and bonds during a merger and send out proxy materials as required.
  3. To provide service to shareholders whose stock or bond certificates have been lost, stolen or destroyed. Some individuals and legal entities choose to hold physical stock certificates, rather than have them held in book-entry form. As is the case with any physical item, it can be lost, stolen or destroyed. In a case such as this, the transfer agent would help the investor replace the certificate.

Transfer agents also regulate the buying and selling of physical certificates by investors. Any individual or entity that wants to sell or transfer (such as after the passing of the stock/bond owner) would need to provide the transfer agent a medallion signature guarantee . This guarantee certifies that the individual has the right to sell or transfer the security and is required for the transaction to be accepted.

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