SEC proposes transfer agent overhaul for tokenized securities

The U.S. Securities and Exchange Commission (SEC) has released its first comprehensive update to transfer‑agent rules in over 40 years. The proposal aims to modernize registration, recordkeeping, transfer processing, and asset‑safeguarding requirements as blockchain‑based ownership records and tokenized securities become more common in regulated markets.

Why the rules are changing

Current transfer‑agent requirements date back to the late 1970s and early 1980s, when investors typically held paper certificates and ownership changes were processed manually. Today, many firms are developing on‑chain transfer agents that store shareholder information on distributed ledgers and execute processes via smart contracts.

Key elements of the proposed rule

• Electronic recordkeeping standards: Amendments to Rule 17ad‑7 would require controls to protect the integrity, availability, reproducibility, redundancy, and continuity of digital records. Firms must maintain audit trails for any access, modification, or deletion of records and be able to produce them in both human‑readable and electronic formats.
• Cybersecurity and risk management: Proposed changes to Rule 17ad‑12 replace paper‑centric requirements with a risk‑management framework covering both certificated and uncertificated securities. Transfer agents must adopt written policies to protect securities and client funds from theft, loss, misuse, damage, destruction, and unauthorized access, and must identify and mitigate custody, operational, and cybersecurity risks.
• Fund segregation: Client and issuer funds must be held in separate “for the benefit of” accounts to prevent commingling and to protect assets in the event of insolvency.
• Business continuity: Transfer agents would need documented procedures for restoring records and resuming operations after disruptions, with periodic testing and updates.
• Restrictive legends: New policies would be required for handling legend‑removal requests, aiming to reduce delays while ensuring restricted securities are not improperly resold.
• Third‑party oversight: Use of outside technology or processing companies would not relieve the registered transfer agent of its regulatory duties. Additional reporting would give the SEC more insight into third‑party services and associated risks.

Industry response and recent registrations

Recent registrations illustrate the emerging landscape. In August, Injective Institutional Services secured transfer‑agent registration, and in March 2025, Superstate registered its blockchain‑based transfer agent to support tokenized funds such as a Short Duration U.S. Government Securities Fund and a Crypto Carry Fund. These entities remain subject to federal securities laws despite their blockchain focus.

Impact on tokenized securities

Even when a token resides on a blockchain, the transfer agent retains responsibility for the official shareholder register, affecting voting rights, dividend payments, stock splits, tender offers, and insolvency claims. Industry groups have urged the SEC to distinguish issuer‑backed tokenized securities from tokens created by unrelated platforms, noting that the latter may not confer the same ownership rights.

Next steps

The SEC will publish the proposal in the Federal Register, after which a 60‑day public comment period will begin. The agency may revise the text before submitting a final rule for commission vote.