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: :
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.
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.
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.
What is Stock Power?