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What is a Transfer Agent?

Every corporation that issues stock (a.k.a. issuer) either engages a stock transfer agent or manages their stock transfer and recordkeeping in-house. Because of the numerous regulatory requirements, most corporations outsource this responsibility to companies like Colonial that exclusively act as the transfer agent for the issuer.

A transfer agent's role is to maintain records of shareholder ownership, answer shareholder inquiries, issue and transfer shares, disburse dividends and other shareholder payments, and process corporate actions for the company. Transfer Agents may also coordinate company mailings, manage and tabulate shareholder votes for annual and special meetings, and provide several other specialized services for both public and private corporations. With these roles, transfer agents are regulated by the SEC and IRS and must maintain records in accordance with these institutions' requirements.

Transfer Agent and Broker Differences

Unlike transfer agents, stock brokers provide investment services and stock advice to individual investors. In most cases, it is necessary for shareholders to go through their broker for the buying and selling of securities, stock valuations, and other financial related investments, however, brokers aren't authorized to actually issue stock. Stock must be issued directly from the company to the shareholder through the transfer agent. Typically, after shares are issued, the physical certificates are deposited into your brokerage account. Then, the brokerage firm automatically converts the shares into electronic form (a.k.a. "street name").

When shareholders purchase stock directly from an issuer through private placements or other transactions, the transfer agent will issue the stock directly to those individuals usually in Physical Stock Certificate or Direct Registration Form. Due to the increasing demand to eliminate certificates, more issuers (through transfer agents) are issuing stock in Direct Registration Form.

Individual shareholders are able to hold their certificates in the following three registration types:

• Direct Registration- Shareholders may hold their shares directly on the books of the corporation's transfer agent in book-entry form without issuing a physical stock certificate. As transfer agent, Colonial will send you, the shareholder, periodic statements reflecting ownership, along with mailings, proxies, dividends and any other correspondence.
• Street Name Registration- Shareholders may hold their shares in book-entry form directly with their broker dealer, not through the corporation's transfer agent. Your broker will send you periodic statements reflecting your ownership, along with mailings, proxies, dividends and any other correspondencer.
• Physical Stock Certificates- Shareholders who hold their shares in physical certificate form are considered registered owners held directly with the corporation's transfer agent. As transfer agent, Colonial will send you, the shareholder, mailings, proxies, dividends and any other correspondence. Physical stock certificates should be safeguarded as they carry the risk of being lost. Shareholders who lose their certificates will have to pay to replace them.