SEC proposes overhaul of transfer agent rules to cover blockchain

The Securities and Exchange Commission proposed revisions to transfer agent rules that date to the late 1970s and early 1980s. The plan would update how agents register, keep records, safeguard assets and process transfers.

The proposal adds standards for cybersecurity, operational resilience and the protection of securities and investor records. It also creates new reporting and compliance obligations for transfer agents.

The agency noted market interest in blockchain-based recordkeeping and tokenized securities. The SEC wrote, “Market participants are actively seeking to bring blockchain-native, or ‘onchain’ transfer agents into the U.S. market,” and pointed to experiments with tokenized fund administration and cross-chain interoperability.

The draft rules include guidance on restrictive legends, new requirements for use of third-party service providers and expanded reporting duties. The agency wrote the rules would apply to traditional functions such as record changes and distributions as well as to activities tied to tokenized securities and onchain recordkeeping.

The SEC noted its transfer agent rules have not been substantively updated since the era of paper certificates and manual recordkeeping. The proposal seeks to align the regulatory framework with current technology and likely developments in digital asset markets.

The agency is seeking public comment. Comments must be filed within 60 days after the proposal is published in the Federal Register; the SEC will review feedback before deciding whether to finalize the rules.

The transfer agent proposal is part of a broader set of recent SEC rule proposals. In May the agency proposed allowing some public companies to switch to semiannual reporting, suggested changes to the filer classification system and proposed expanding access to streamlined registered offerings. The SEC also submitted proposed custody rule changes for investment advisers and funds to the White House for review; those changes could affect how firms hold crypto assets.

Law firm Cahill Gordon & Reindel told clients the agency appears “on a mission to simplify its rules.” The firm added the transfer agent proposal aims to set clearer expectations for entities that will act as intermediaries in a more digital securities marketplace.