SEC Proposes To Modernize Transfer Agent Rules: What Issuers Need To Know

On September 1, 2026, the Securities and Exchange Commission (the “SEC”) proposed a sweeping overhaul of the rules governing registered transfer agents – the first substantive update to this regulatory framework since the late 1970s and early 1980s.¹ This proposed action, if accepted, would amend more than a dozen existing rules, rescind one rule, introduce two new rules, and update the registration and annual reporting forms that transfer agents use.² For issuers, who rely heavily on their transfer agents, this proposal carries significant practical implications.

Background to the Proposal

Chairman Paul S. Atkins stated in the press release that this proposal would “streamline and modernize the SEC’s rules to reflect transfer agents’ current processes and operations, including the use of electronic communications and blockchain technology in connection with securities offerings and the transfer of shares.” The proposal considers that existing rules were designed for a paper-certificate environment and have not kept pace with evolving technology for the maintenance of issuers’ security ownership records, the facilitation of the transfer of shares, processing of dividends, and proxy and other services which transfer agents have traditionally provided. The September 1, 2026, proposal follows the SEC’s 2015 concept release on transfer agent regulation, which solicited broad public comment but did not result in rulemaking at that time.³

Key Elements of the Proposal

The proposal addresses several core areas:

• Modernized definitions and terminology. The proposal updates transfer agent rules to reflect electronic and blockchain-based recordkeeping, uncertificated securities, and modern communications technology.
• Updated turnaround and processing standards. Transfer agents must establish written policies ensuring timely turnaround aligned to T+1 settlement. The proposal would raise the minimum performance standard in Rule 17ad-3 from 75% to 95%, meaning a transfer agent that fails to timely process at least 95% of routine items for two consecutive months – rather than the current 75% – would trigger “expansion limitations.” Those limitations bar the transfer agent from taking on new business and require it to notify the chief executive officers of each of its issuer clients of the performance failure.
• Enhanced risk management and safeguarding. Rule 17ad-12 (requiring registered transfer agents to safeguard funds and securities in their custody) would become a comprehensive risk management rule requiring policies to protect securities and funds, identify and mitigate material risks, maintain separate bank accounts for issuer and securityholder funds, and establish a business continuity plan.
• Updated recordkeeping and record retention. A single retention period would apply to most records, with modernized rules for electronic recordkeeping and third-party storage.
• Inactive securityholder notifications. Transfer agents and broker-dealers must notify inactive securityholders, with updated lost securityholder rules reflecting electronic communications and payments.
• New compliance program requirement. Proposed Rule 17ad-30 requires transfer agents to maintain written compliance policies reasonably designed to achieve compliance with applicable federal securities laws.
• Restrictive legend standards. Proposed Rule 17ad-31 establishes requirements for placing and removing restrictive legends, requiring transfer agents to have a reasonable basis to believe transactions do not violate Securities Act Section 5(a). Such reasonable basis is outlined in the Proposed Rule by the identified safe harbors: (i) a legal opinion from independent legal counsel, or (ii) written confirmation from the issuer (or its counsel) that a resale registration statement covering the securities is effective, in addition to the transfer agent’s assertion that they are not aware of any “red flags” for violation of Section 5(a). The proposal provides examples of potential red flags, including unusual transaction patterns or circumstances suggesting the securities may be part of an unlawful distribution.
• Rescission of Rule 17ad-4. The proposal eliminates legacy exemptions from turnaround, processing, and recordkeeping requirements, which the SEC views as obsolete given current transfer agent capabilities.

Action Items for Issuers

The public comment period will remain open for 60 days following publication of the proposed rule in the Federal Register. Issuers, particularly those with complex shareholder bases or that rely on transfer agents for a broad suite of services, should review the proposal carefully and consider whether to submit comments. We will continue to monitor this rulemaking and provide updates as the process unfolds.

Potential benefits. The modernized framework may improve service quality for issuers through enhanced risk management, mandatory business continuity plans, segregated accounts for issuer funds, and processing standards aligned with T+1 settlement. The compliance program requirement under proposed Rule 17ad-30 and the new restrictive legend rule may also give issuers greater confidence in their transfer agents’ regulatory compliance and reduce friction in secondary market transactions.

Potential concerns. Transfer agents will face meaningful compliance costs that may be passed through to issuers as higher fees. In particular, the proposed safe harbor for restrictive legend removal under Rule 17ad-31 would require opinions from counsel independent of the issuer, precluding reliance on in-house counsel and potentially increasing the cost and time burden of routine secondary market transactions. The rescission of Rule 17ad-4’s exemptions could significantly impact smaller transfer agents, including issuers that serve as their own transfer agents. Additionally, expanded Form TA-1 and Form TA-2 disclosure requirements could affect the competitive landscape for transfer agent services. 

Footnotes

1. https://www.sec.gov/newsroom/press-releases/2026-81-sec-proposes-modernize-rules-registered-transfer-agents

2. https://www.sec.gov/files/rules/proposed/2026/34-106246.pdf

3. https://www.sec.gov/files/rules/concept/2015/34-76743.pdf

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.