The Role of a Security Transfer Agent: What This Means to Your Business and Your Investments

The corporate finance and corporate governance literature describes security transfer agents as entities involved in the business of transfer of securities and management of security ownership data. This is why it is so important that whether you are an investor , business owner or corporate executive you need to know what a security transfer agent does and how selecting the appropriate one will affect your bottom line. In this article we will discuss on how security transfer agents are important, the facilities it offers and what aspects one should look for while selecting the right one for oneself.

What does it take to be a Security Transfer Agent?

A security transfer agent is an intermediary, which is involved in transferring ownership of security, for example, shares, bonds or mutuals from the seller to the buyer. The main function of transfer agents is to keep a record of the holders of securities that need to be transferred during the main transactions. Transfer agents also guarantee that the ownership is accurate and all legal requirements have been honoured to increase the aspect of transparency hence improving on the stock exchange.

Duties and Responsibilities of a Security Transfer Agent

Whatever the level of its activity, one of the major roles of an STA is management of shareholders’ register. When securities are bought or sold, transfer agents make ensure that records of the shareholder database are updated. In addition, they also manage relationships with the shareholders including the announcements in form of dividends, proxy materials and the annual reports.

Processing Stock Transfers: Transfer agents are those parties who undertake the physical transfer of the securities as well. Transfer agents guarantee that when a shareholder wants to sell his or her stocks, the transaction is effected and the new owner of the stock acquired. They also acknowledge new ownership and change records of the shareholders when necessary.

Payment Distribution and Dividend Management: Transfer agents also have the responsibility of paying dividend and interest for the security holders. To envisage that these payments are processed as soon as possible and get to the right people they preserve the interest of shareholders.

Corporate Actions like Stock Splits and Mergers: Certain corporate activities like stocks split, mergers, or acquisitions cannot be effected without participation of a transfer agent. They maintain proper shareholder list, make records of the change and make sure that it is updated with the new status.

Issuance of New Securities: A transfer agent is involved when a corporation floats new securities to the public for instance through an IPO or through issuing out more stock in the market.

How to Get the Best Security Transfer Agent

Selecting the right transfer agent is a significant consideration for organizations because shareholder management calls for precision, speed, and effectiveness and is borne by the chosen transfer agent. Here are some important factors to consider when selecting a security transfer agent:

1. Reputation and Experience
Any transfer agent that will be hired should get reviewed and should have good experience on security transfers. Select those firms who deal in the particular type of securities including common stocks, bonds or mutual funds, and such firm has transacted this type of business and have recorded efficiency on the transactions.

2. Technology and Security
Technology is crucial in today’s globalized society because decisions made through the internet and other digital means have to be processed effectively to protect users’ financial information. The most successful transfer agents also ensure they have invested on advanced equipment to ensure that their transfer processing is fast and that data on the transfer is well protected. It is crucial to check that the transfer agent has listened to the internet and have an encrypted and safe system from which they conduct business, maintain shareholders’ records as well as perform payments.

3. Customer Support
Customer support should therefore be one of the strongest recommendations with a security transfer agent. Often, you might require help with accounting services such as processing of transactions, management of records of shareholders and even the distribution of dividend it is essential to have an efficient customer service in place. Ensure that the transfer agent provides assistance through different means of contact; phone, email and by the live chat.

4. Cost Structure
Pricing is not the only factor to consider when thinking about cost, although this is a more significant factor than any other. Select a transfer agent who has a better rate while provoking efficient services. Evaluate what benefits you will gain for the money depending on the variety of services offered and their effectiveness and reliability.

5. Compliance and Legal knowledge
An efficient and exemplary security transfer agent will have adequate understanding as well as compliance with securities laws. Issue and transfer of securities, communication with shareholders, and tax reporting should not be a mystery to them. Their experience in these fields makes it possible for the organization to meet all the legal requirements of the local, state and federal jurisdictions.

Conclusion:

Understanding Why a Security Transfer Agent Is Crucially Important to Your Company
An STA is an important counter-party for business and investors with need for safe, fast and accurate processing of their securities. Prominent transfer agents perform all kinds of services of shareholders, including record keeping, providing dividend payments, and then making certain that the transactions being made are both smooth and legal.

For this reason, other relevant factors to consider when choosing a security transfer agent include but not limited to; Reputation, Technology, Customer support and compliance knowledge. A good transfer agent will assist you to manage your operations and protect your valuable assets, and at the same time assist in achieving your business objectives within a procedural financial management system. read more