SEC proposes transfer agent overhaul for tokenized securities

The U.S. Securities and Exchange Commission has proposed its first major transfer-agent rule overhaul in more than four decades as blockchain recordkeeping, tokenized securities and automated systems enter regulated U.S. markets.

The SEC, in a proposed rule, said most of its transfer-agent requirements date from the late 1970s and early 1980s, when investors commonly held paper certificates and firms processed ownership changes manually.

Transfer agents maintain an issuer’s official ownership records, register securities transfers and monitor whether a company issues more securities than authorized. Many also process dividends, interest payments, fund redemptions, and other corporate actions.

Under the proposal, the commission would update rules covering transfer-agent registration, reporting, recordkeeping, processing times, and the protection of securities and client funds. The package also introduces requirements for restrictive legends, paying-agent activity, and the oversight of third-party service providers.

“Market participants are actively seeking to bring blockchain-native, or ‘onchain,’ transfer agents into the U.S. market,” the SEC said.

According to the regulator, firms are developing systems for blockchain-based ownership records, tokenized fund administration and cross-chain interoperability. Such models may require transfer agents to store shareholder information on distributed ledgers and manage processes run through smart contracts.

SEC transfer agent rules would cover digital records

As securities records move away from paper, the SEC said its existing requirements do not fully address information security, cybersecurity, disaster recovery or the operational risks created by connected systems.

Proposed amendments to Rule 17ad-7 would require transfer agents using electronic recordkeeping systems to install controls protecting the integrity, availability, reproducibility, redundancy, and continuity of their records. Firms could continue using current technology if their systems meet the proposed standards.

Records would need protection against unauthorized alteration, deletion, or destruction. Transfer agents would also have to maintain an audit trail identifying who accessed, changed, or deleted a record, along with the date and time of each action or attempted action.

For regulatory examinations, firms would need systems capable of immediately producing records in both human-readable and reasonably usable electronic formats. Recovery controls would also be required for information that becomes damaged, altered, or lost.

Although the proposal would apply to blockchain systems, the SEC described its approach as technology-neutral. The rules would not prescribe one type of database or require transfer agents to adopt distributed ledgers.

Recent registrations show why the distinction matters. In August, Injective Institutional Services secured transfer-agent registration, allowing the company to perform regulated functions connected to maintaining and changing securities ownership records.

The same report noted that Superstate registered its blockchain-based transfer agent in March 2025 to support tokenized funds, including its Short Duration U.S. Government Securities Fund and Crypto Carry Fund. Such registrations do not exempt the firms or their products from federal securities laws.

Safeguarding standards would include cyber risks

Proposed changes to Rule 17ad-12 would replace requirements centered on physical certificates with a risk-management framework covering paper and uncertificated securities.

Registered transfer agents would have to adopt written policies designed to protect securities and funds from theft, loss, misuse, damage, destruction, and unauthorized access. The framework would also require firms to identify, monitor, and reduce material custody, operational, and cybersecurity risks tied to their services.

Client and issuer funds held by a transfer agent would need to remain in a separate bank account designated as a “for the benefit of” account. Under the SEC plan, separating such funds from the transfer agent’s operating money would reduce commingling and help keep customer assets outside the firm’s general estate during insolvency.

Business continuity plans form another part of the proposal. Each transfer agent would need written procedures for events that could disrupt operations, including steps for restoring records and resuming its responsibilities. Firms would have to test, review, and update their plans periodically.

Data included in the proposal show the scale of the regulated activity. Of 253 transfer agents that submitted Form TA-2 for the 2025 reporting year, 152 acted as recordkeeping transfer agents, and 126 provided paying-agent services. Together, transfer agents distributed about $5 trillion in dividends and interest payments during the year.

Reliance on outside companies has also become common. SEC data show that 44% of transfer agents either used a service company for at least part of their work or provided services to another transfer agent in 2025.

Under the proposed framework, using an outside technology or processing company would not remove the registered transfer agent’s regulatory duties. New reporting and oversight requirements would give the SEC more information about the services performed by third parties and the risks created by those arrangements.

Tokenized securities put ownership records in focus

For U.S. investors, a token’s presence on a blockchain does not by itself determine who legally owns the underlying security. Transfer agents remain responsible for the official shareholder register, including changes arising from purchases, sales and corporate actions.

Ownership records can affect voting rights, dividend payments, stock splits, tender offers, and claims during insolvency. Two transfer-agent groups warned the SEC in July that tokens created without an issuer’s approval may not provide the same ownership rights as issuer-backed shares.

Continental Stock Transfer & Trust Company and the Securities Transfer Association asked the regulator to distinguish securities tokenized by an issuer from products created by unrelated platforms. According to the groups, an unaffiliated token may track a stock price or provide an indirect interest in shares without making its buyer a registered shareholder.

Restrictive legends present another recordkeeping issue addressed by the SEC proposal. Such legends identify limits on whether a security can be resold, but the commission’s current rules do not specify a transfer agent’s obligations when investors or issuers request their removal.

The proposed standards would require written policies for handling legend-removal requests and related documentation. Processing controls are intended to reduce delays while preventing restricted securities from entering the public market without a valid legal basis.

U.S. tokenization projects need regulated infrastructure

Traditional market operators are building systems that depend on the same transfer-agent functions covered by the proposal. Intercontinental Exchange agreed in August to invest in tZERO and use its blockchain patents while developing infrastructure for an NYSE-affiliated tokenized securities platform.

Under the arrangement, tZERO will help design digital transfer-agent and broker-dealer systems for issuing, trading, and settling public securities onchain. As crypto.news reported on Sept. 1, the planned platform still needs regulatory approvals before it can begin round-the-clock trading and immediate blockchain settlement.

The commission is separately considering a regulatory route that could let qualified platforms test tokenized U.S. securities under defined conditions. Its 24/7 trading plan could allow eligible products to trade outside regular exchange hours, although the SEC has not announced final eligibility rules or an implementation date.

Transfer-agent oversight forms only one part of the agency’s current rulemaking program. On Aug. 25, the SEC sent proposed custody-rule changes for investment advisers and investment companies to the White House Office of Management and Budget for review. Full requirements covering qualified custodians and crypto assets will not become public until the review ends and commissioners vote on whether to release the proposal.

In May, the regulator also proposed allowing domestic public companies to replace three quarterly Form 10-Q reports with one semiannual Form 10-S. Separate amendments would simplify filer classifications and allow more companies to use streamlined registration procedures for securities offerings.

None of the transfer-agent amendments is final. Interested parties will have 60 days from the proposal’s publication in the Federal Register to submit comments, after which SEC staff may revise the text before placing a final rule before the commission for another vote.