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Key Takeaways
- The SEC’s proposal is its first major transfer agent rule update in roughly four decades, targeting blockchain-based recordkeeping.
- Proposed changes would require cybersecurity controls, audit trails and a technology-neutral approach to electronic records.
- Industry groups have asked the SEC to distinguish issuer-backed tokenized securities from unaffiliated tracking products.
The Securities and Exchange Commission proposed sweeping changes Monday to the rules governing transfer agents, the firms that maintain official ownership records for stocks and bonds.
The proposal marks the agency’s first substantive update to those rules since the late 1970s and early 1980s and directly addresses transfer agents that maintain security holder records on blockchains rather than paper or traditional databases.
Rules Written for Paper Certificates Face an Update for Digital Records
The SEC’s proposing release states that most existing transfer agent rules were adopted at a time when investors commonly held paper stock certificates and firms processed ownership changes by hand.
The agency said those rules do not adequately address information security, cybersecurity, disaster recovery or the operational risks created by the connected electronic systems modern transfer agents now use.
The proposal specifically acknowledges that market participants are actively working to bring blockchain-native transfer agents into the U.S. market.
According to the filing, some firms are developing models for blockchain-based ownership records, tokenized fund administration and cross-chain interoperability, which would require transfer agents to store shareholder information on distributed ledgers and run some processes through smart contracts.
Proposed Amendments Would Require Cybersecurity and Audit Trail Controls
Under proposed amendments to Rule 17ad-7, transfer agents using electronic record keeping systems would need controls protecting the integrity, availability, reproducibility, redundancy, and continuity of their records.
Firms would be allowed to keep using their current technology as long as it meets the new standards, and the SEC described its approach as technology-neutral rather than one that mandates blockchain or any specific database structure.
The proposal would also require transfer agents 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 producing records immediately in both human-readable and electronic formats.
Safeguarding Rules Would Extend Beyond Physical Certificates
Proposed changes to Rule 17ad-12 would replace safeguarding requirements built around physical stock certificates with a broader risk-management framework covering both paper and uncertificated securities.
Registered transfer agents would need written policies to protect securities and funds from theft, loss, misuse, damage or unauthorized access, along with procedures to identify and reduce custody, operational and cybersecurity risks.
The proposal would also require client and issuer funds held by a transfer agent to sit in a separate bank account designated for the benefit of those clients. This structure is intended to keep customer assets outside a transfer agent’s own estate in the event of insolvency.
Separately, the SEC’s proposed Rule 17ad-31 would set the first standards specifically governing how transfer agents handle requests to remove restrictive legends, which limit whether a security can be resold.
Scale of the Transfer Agent Industry Underscores the Stakes
Data included in the SEC’s proposal shows the size of the activity the new rules would cover. Of 253 transfer agents that submitted annual reports for the 2025 reporting year, 152 acted as recordkeeping transfer agents and 126 provided paying-agent services, together distributing about $5 trillion in dividend and interest payments during the year.
The proposal also notes that 44% of transfer agents either relied on an outside service company for part of their work or provided services to another transfer agent in 2025.
Tokenized Securities Raise Separate Questions About Who Owns What
A token’s presence on a blockchain does not, by itself, establish who legally owns the underlying security. Transfer agents remain responsible for the official shareholder register that determines voting rights, dividend payments and claims during insolvency proceedings.
Continental Stock Transfer & Trust Company and the Securities Transfer Association, two industry groups, told the SEC in a July letter that tokens created without an issuer’s direct approval may not carry the same ownership rights as issuer-backed shares.
The groups asked the agency to distinguish securities tokenized directly by an issuer from products created by unaffiliated platforms that may only track a stock’s price without conferring registered ownership.
Wall Street’s Own Tokenization Push Depends on the Same Infrastructure
The proposal arrives as traditional market operators build systems that rely on the same transfer agent functions it would update. Intercontinental Exchange agreed in August to invest in tZERO and use its blockchain patents to help build infrastructure for a planned NYSE-affiliated tokenized securities platform.
This, under an arrangement in which tZERO will help design the digital transfer-agent and broker-dealer systems needed to issue, trade and settle public securities on-chain. That platform still needs regulatory approval before it can launch.
Separately, Injective Institutional Services secured its own transfer-agent registration with the SEC in August, and Superstate registered a blockchain-based transfer agent in March 2025 to support its tokenized fund products. Registration alone does not exempt any of these firms or their products from federal securities laws.
The transfer agent proposal is not final. The public will have 60 days to submit comments after the rule is published in the Federal Register, after which SEC staff may revise the text before bringing a final rule to the commission for a vote.
