My Transfer Agent

Transfer Agent's Future Trends

The Securities & Exchange Commission, (the regulatory authority in the United States), has endorsed the possibility of entrepreneurs who seek to raise capital, to do so online. The Internet has fully embraced online stock transactions, banking, and other financial services and current and projected trends suggest incredible growth for the future. All these activities suggest increased demand for stock transfer services as well as new and innovative product lines. Current and future trends indicate these are key issues and challenges: industry consolidation, more regulation, faster turnaround, international trading, 24 hour, 7 day-a-week availability, increased customer service, and connection into the financial network.

The ongoing trend is the move toward fewer, larger transfer agencies. This trend is expected to accelerate as agencies find the cost of moving into the new economy economically infeasible. Industry consolidation has always lead to fewer choices, less quality service and higher pricing. The result: a higher degree of Issuer dissatisfaction (approximately 40%) with their transfer agent and consequent changes to seek out better service. Transfer Agents will be monitored more closely for net capital requirements and come under higher regulatory scrutiny. Suggested minimums being looked at would require transfer agencies to stay funded at certain levels to stay in business. Minimum levels of fidelity bonding for Issuer security are also being suggested. This translates into increased industry consolidation as smaller agents are forced out of business.

Shorter settlement times will be required. Trade Date + 3 settlement is rapidly moving toward Trade Date +1 settlement, which mean that transactions will be settled on the same day they are made. Currently transfer agents have a 3-day turnaround time to receive, register, and change any transaction that they receive. In the future, that time could be cut to a 2 or 1-day window. These requirements support the trend to trade in electronic certificates as opposed to traditional paper certificates. Records would be held electronically for safekeeping and all book entries would be online.

The Internet has made markets accessible around the world. The trend will only increase as changes in regulations between stock markets become more compatible. The Internet has raised expectations for customers to be able to gain access to their accounts at any time, anywhere they are. Transfer Agencies will need to make portfolio information, as well as other services available online in order to meet this demand.

Issuers are expecting more from their Transfer Agents. As SEC regulations get more complex, companies need improved service to maintain accurate records. Technology will need to keep pace as only those agents that can use developing technology capabilities will remain competitive. Functions that can be done automatically or without personal intervention will be developed so that transfer agents can focus on their clients.

The future trend will be for transfer agencies to have the ability to integrate into the financial settlement process. Traditional transfer agents are facing the economic impact of upgrading legacy systems to accommodate industry trends. Many are unwilling or unable to do so. Conversions are expensive, especially for companies that need to go outside their organization for programming or software needs. The cost of maintaining a web site is another obstacle facing the industry as well as developing a new business model to support the move to an interactive, 24 hour, 7 day a week environment. Moving historic data into an electronic medium will be prohibitive for many organizations. Technical and financial challenges face any agency that want to convert data into an electronic format. Markets are moving toward shorter settlement times - only those who can master the technology and the flow of information will survive.

Transfer Agents (non-bank) must be registered with, and come under the regulatory supervision of, the Securities & Exchange Commission. After being approved and accepted as a transfer agent, there are ongoing regulatory and compliance issues as well as annual audits and examinations. Transfer agencies that want to expand onto the Web need to maintain compliance with all SEC regulations. Some innovative Web tools such as Direct Offering and Trading Boards require agencies to clearly define services available to the online consumer.

Issues such as network integrity and security, user help for login and online account access and site functions require agencies to have within their organization people who are Web-wise as well as industry-wise. What works for brick and mortar doesn't always translate into success online. Many traditional agencies lack the desire to go online. This can be for a variety of reasons: financial, technical, or the inability to initiate change rapidly. Companies unwilling to take strategic steps now, will only face greater challenges in the changing market place.