SEC would require transfer agents to adopt risk controls and contact inactive shareholders

The Securities and Exchange Commission proposed its first substantive overhaul of federal transfer-agent rules since the late 1970s and early 1980s. The package would add risk controls, notifications for inactive shareholders and standards for placing and removing restrictive legends from securities.

Nothing changes yet.

The proposal would require transfer agents to keep issuer, shareholder and third-party funds in a separate bank account and maintain a business continuity plan. A new compliance rule would require written policies designed to meet the federal securities laws that apply to the business.

Registration would take longer

An initial registration would become effective 45 days after Form TA-1 is filed, rather than 30. A transfer agent that finds materially inaccurate, incomplete or misleading information in an annual Form TA-2 would have 60 days to amend it.

The SEC also proposes to rescind an exemption rule that covers some securities and transfer agents. Comments are due 60 days after the proposal appears in the Federal Register.