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. According to the SEC proposal, 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. The commission stated that market participants are actively seeking to bring blockchain-native, or 'onchain,' transfer agents into the U.S. market. SEC Chairman Paul Atkins emphasized that the proposal would streamline and modernize the Commission'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 updates registration, reporting, recordkeeping, asset safeguarding, transfer processing, and restrictive-legend requirements across securities markets, recognizing new technology such as electronic records and security tokens represented using blockchain.
The 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. Records would need protection against unauthorized alteration, deletion, or destruction, along with an audit trail identifying who accessed, changed, or deleted a record. For regulatory examinations, firms would need systems capable of immediately producing records in both human-readable and reasonably usable electronic formats. The SEC described its approach as technology-neutral, stating the rules would not prescribe one type of database or require transfer agents to adopt distributed ledgers. Digital ownership records must also be replicable and must provide evidence of authorized modification, addressing major concerns associated with tokenization by providing assurance that proof of ownership remains valid when moving a security through multiple layers of digital intermediaries.
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. 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, reducing commingling and keeping customer assets outside the firm's general estate during insolvency. Business continuity plans would require written procedures for events that could disrupt operations, including steps for restoring records and resuming responsibilities.
The proposal shifts attention toward execution, raising the expansion-limitation threshold from 75% to 95%, meaning transfer agents will now have to develop written policies and procedures related to the timely registration and cancellation and processing of all transactions under all operating systems. Today, transfer agents must complete 90% of routine items within three business days. The SEC is effectively pairing infrastructure flexibility with tougher accountability for how securities actually move, ensuring that blockchain-based transfers will be expected to perform at the same speed as traditional methods and cannot be used as an excuse for less efficient execution. Transfer agents could maintain ownership files and process transfers through distributed ledgers, removing the need for blockchain to have its own distinct framework while preserving existing obligations around safeguarding, compliance, registration, and transaction processing.
Data included in the proposal shows the scale of regulated activity, with 253 transfer agents submitting Form TA-2 for the 2025 reporting year, of which 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. 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. Recent registrations include Injective Institutional Services securing transfer-agent registration in August and Superstate registering its blockchain-based transfer agent in March 2025 to support tokenized funds. The proposal could give transfer agents clearer operating standards while creating more defined infrastructure for tokenized securities, bringing tokenized securities deeper into regulated U.S. market infrastructure.
