The US Securities and Exchange Commission (SEC) has proposed the most significant overhaul in decades of the rules governing transfer agents, as blockchain-based recordkeeping and tokenized securities gain traction in US financial markets.
The proposed SEC transfer agent rules would update requirements for registration, recordkeeping, securities safeguarding and transfers. They would also introduce new compliance measures addressing risks linked to increasingly digital and automated market infrastructure.
“Market participants are actively seeking to bring blockchain-native, or ‘onchain’ transfer agents into the U.S. market,” the SEC said, citing potential applications including blockchain-based recordkeeping, tokenized fund administration and cross-chain interoperability.
The agency said its current regulatory framework does not adequately address these developments. In particular, the SEC identified risks involving cybersecurity, operational resilience and the protection of securities and investor records.
Under the proposal, transfer agents would face expanded reporting obligations and additional compliance standards. The changes would include requirements covering restrictive legends on securities and the use of third-party service providers.
SEC transfer agent rules date back decades
The SEC said its transfer agent rules have not undergone substantive updates since the late 1970s and early 1980s, when the industry still depended heavily on paper certificates and manual recordkeeping.
The regulatory agency is seeking public comment on the proposed changes. Comments will be due 60 days after the proposal is published in the Federal Register.
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SEC advances broader securities rule changes
The SEC is “on a mission to simplify its rules,” according to an analysis from law firm Cahill Gordon & Reindel that was sent to clients on Tuesday.
In May, the SEC proposed three major changes to public-company reporting and securities rules. The proposals would allow companies to choose semiannual reporting, simplify the current filer classification system and expand access to streamlined registered securities offerings.
Last week, the SEC sent a proposed overhaul of custody rules for investment advisers and investment companies to the White House for review. The potential changes include provisions on how firms hold crypto assets for clients.
The proposed custody changes could establish clearer standards for investment advisers and funds holding digital assets while they comply with federal securities regulations.
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