Securities and Exchange Commission examiners are enforcing a rule governing transfer agent notifications in ways that unduly burden industry and undermine the SEC’s broader mission, the American Bankers Association said yesterday.
The roughly 30-year-old SEC rule requires registered transfer agents to provide written notice to a registered securities depository when terminating or assuming transfer agent services on behalf of an issuer or when changing its name or address. In comments to the commission, ABA said the securities industry’s issuance, transfer and recordkeeping practices have greatly improved since the rule was enacted. “Yet, ABA is concerned that, quite inexplicably, SEC examiners’ expectations of registered transfer agents’ (transfer agent) compliance with the rule appear to have evolved on the assumption that market participants increasingly have less information and less timely access to information,” it said.
ABA said no changes to the rule are necessary. Rather, the SEC should issue staff guidance making clear that depositories are the primary and comprehensive source of information on securities issuances, the association said. The guidance should also clarify the rule’s requirement that a transfer agent provide written notice to the appropriate depository when that agent assumes services on behalf of an issuer does not apply at a security’s issuance.
In addition, ABA suggested the SEC clarify that examination sampling and testing should only be performed for a post-issuance change of a transfer agent, that 90% rule compliance should be considered a “passing” score, and that the rule applies only to securities which are made eligible at issuance with a recognized depository – or, alternatively – that the rule does not apply to privately placed securities unless they are made eligible at issuance with a recognized depository.
