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What is a Transfer Agent?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 27 November 2016
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Transfer agents are individuals or entities that are charged with the responsibility of maintaining the shareholder records of a given company. The transfer agent may be a bank, a trust company, or even an individual who is hired by the company to oversee shareholder records. As part of the basic duties, a transfer agent will ensure that older share certificates are invalidated and destroyed, while new certificates are issued and assigned to the correct shareholder.

Along with keeping the current listing of shareholders up to date, the transfer agent will also handle any troubleshooting that may arise. A transfer agent can intervene in the event that issued certificates are damaged or destroyed. Should the certificates be stolen, a transfer agent will take steps to replace the stolen certificates, after taking care to invalidate the older certificates. When a shareholder has any issues that concern the current status of the number of shares assigned to his or her account, the transfer agent is the entity that will log the concern and conduct research to resolve the issue.

A transfer agent can work with any type of security arrangement, including the management of stocks that are included in mutual fund investment packages. In this scenario, the agent may work with stock certificates associated with a number of different companies. Commercial banks and trust companies often deal with mutual funds, and employ transfer agents to help keep all relevant documents and records in working order.

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One common but very important task of the transfer agent is to transfer ownership of stock certificates from a seller to a buyer. This involves canceling the older certificates that cover the shares that were sold and issuing a new certificate to cover the shares acquired by a different shareholder. By following a pattern of invalidating older certificates and issuing a new one, a document trail is created that helps to minimize the chance for duplications to take place.

The typical transfer agent will have some educational background in finance. A firm understanding of investment strategies, general corporate organization, and basic accounting are essential for anyone to function as a transfer agent. Many banks and trust companies insist that a transfer agent have a degree in a relevant field of study.

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