SEC Proposes Modernization of Transfer Agent Rules to Address Blockchain

The U.S. Securities and Exchange Commission (SEC) has released a proposal to overhaul the regulatory framework governing transfer agents, a set of rules that have not been substantively revised since the late 1970s and early 1980s.

Why the update is needed

The agency says the existing rules were designed for paper certificates and manual recordkeeping and do not adequately cover emerging risks tied to blockchain‑based recordkeeping, tokenized securities, and increasingly automated market infrastructure. Specific concerns include cybersecurity, operational resilience, and the safeguarding of investor records.

Key elements of the proposal

• Expanded reporting requirements for transfer agents.
• New compliance standards for restrictive legends on securities.
• Guidelines for the use of third‑party service providers.
• Recognition of “on‑chain” transfer agents and cross‑chain interoperability models.

Regulatory context

The proposal is part of a broader SEC effort to simplify and modernize securities regulations. Recent initiatives include proposals to allow semi‑annual reporting for public companies, simplify filer classifications, and revise custody rules for investment advisers holding crypto assets.

Next steps

The SEC is seeking public comment on the proposed transfer‑agent rules. Comments must be submitted within 60 days of the proposal’s publication in the Federal Register.