Loading the player...

What is a 'Transfer Agent'

A transfer agent is a trust company, bank or similar financial institution assigned by a corporation to maintain records of investors and account balances. The transfer agent records transactions, cancels and issues certificates, processes investor mailings and deals with other investor problems (e.g., lost or stolen certificates). A transfer agent works closely with a registrar to ensure that investors receive interest payments and dividends when they are due and to send monthly investment statements to mutual fund shareholders.

BREAKING DOWN 'Transfer Agent'

When an investor purchases a security, the new owner is issued some form of a certificate and most certificates are now issued in book-entry form. Rather than invest the time and expense to issue physical securities, book-entry securities record ownership electronically and a transfer agent issues and cancels these types of certificates.

Factoring in Ownership

Different investments issue book-entry securities in different forms. Bonds, for example, are issued at a face amount of $1,000 and in $1,000 multiples, while stocks are issued in shares. In addition, unit investment trusts are sold in units, and mutual funds are issued in shares, and the transfer agent processes all of these securities.

Owners of common and preferred stock have the right to vote on major corporate decisions, such as a merger or company sale, and the transfer agent sends proxy information to shareholders so that they can vote their shares. The transfer agent also sends the annual report to shareholders, which includes the company’s audited financial statements.

At year-end, the transfer agent and registrar work together to send federal tax information to investors, including dividends and interest paid, along with reporting on security trades during the year.

How Funds Are Distributed

Investors receive several types of distributions and the transfer agent pays those distributions based on the records kept by the registrar. Interest payments are sent to bondholders, and these investors also receive the face amount of their bonds when the bond issue matures or is called by the issuer. Stock investors, on the other hand, receive cash dividend payments when the company generates sufficient earnings and when a dividend is declared by the board of directors.

The transfer agent also sends shares to investors due to a stock split or when a stock dividend is paid to shareholders of record. If the company has a 3-for-1 stock split, for example, each shareholder receives two additional shares for every share they already own. On the other hand, when a 10% stock dividend is paid, a shareholder who owns 100 shares would receive another 10 shares from the transfer agent.

Mutual Fund Transfer Agents

The primary difference between a mutual fund transfer and stock transfer is that mutual fund shares do not involve physical certificates, whereas stock shareholders may demand a physical certificate. Therefore, mutual fund transfers are limited to recordkeeping in the transfer agent's computer system. 

Mutual fund transfer agents perform many important tasks, like keeping record of shareholders' accounts, overseeing dividend payments, and responding to shareholder requests for account statements, income tax forms, transaction confirmations, account balances and other information. Often, a shareholder service department that is part of the transfer agent will maintain customer relations. The registered transfer agent a mutual fund employs can generally be found in a mutual fund prospectus

RELATED TERMS
  1. Transfer Procedures

    The procedure by which ownership of a stock moves from one party ...
  2. Shareholder Services Agent

    A shareholder services agent is a third party that partners with ...
  3. Paying Agent

    A paying agent is an agent who accepts payments from the issuer ...
  4. SEC Form TA-2

    A form completed by transfer agents when submitting its annual ...
  5. Agent

    An agent is any person who has been legally empowered to act ...
  6. Agent Bank

    An agent bank is a bank that performs services in some capacity ...
Related Articles
  1. Investing

    Do You Need A Real Estate Agent?

    There's no guarantee that realtors will act in your best interest, but it may be worth hiring one anyway.
  2. Financial Advisor

    A day in the life of a real estate agent

    There are no set hours and no set days. While every day is unique for a real estate agent, there are some activities that may be a typical part of an agent's day.
  3. Investing

    Top 5 Signs Of A Bad Real Estate Agent

    The signs of a bad agent go beyond whether your home sells quickly.
  4. Personal Finance

    Transferring Credit Card Balances To A New Card

    Before you take advantage of that new credit card's 0% interest balance transfer offer, read our step-by-step guide.
  5. Investing

    Understanding Real Estate Commissions: Who Pays?

    When you set out to buy or sell a house, one factor worth considering is the real estate agent's fees.
  6. Insurance

    What Your Life Insurance Agent Makes – On You

    Being paid by commission gives life insurance agents an incentive to sell bigger policies and specialized financial products. Remember that before you buy.
  7. Investing

    How to Choose the Right Real Estate Broker

    Buying or selling a home can be the largest financial transactions of your life. Here's how to choose the right real estate broker or agent.
  8. Investing

    Why You Don't Need A Real Estate Agent

    While there are times when a real estate agent earns the commission, there are other times when you can do it yourself.
  9. Investing

    Job description for commercial real estate agent

    Learn more about the qualifications, daily and regular responsibilities, and average yearly salaries of commercial real estate agents.
  10. Investing

    8 reasons to sell your home with an agent

    The standard real estate agent cost you 6% of the total house sales, learn what value do they bring you. See if it is worth to hire a sales agent in a housing sales.
RELATED FAQS
  1. Are there any regulations on transfer pricing?

    Learn about transfer pricing, its role in intra-business calculations, and how the U.S. government regulates transfer pricing ... Read Answer >>
Hot Definitions
  1. Fibonacci Retracement

    A term used in technical analysis that refers to areas of support (price stops going lower) or resistance (price stops going ...
  2. Ethereum

    Ethereum is a decentralized software platform that enables SmartContracts and Distributed Applications (ĐApps) to be built ...
  3. Cryptocurrency

    A digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of ...
  4. Financial Industry Regulatory Authority - FINRA

    A regulatory body created after the merger of the National Association of Securities Dealers and the New York Stock Exchange's ...
  5. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs are often issued by companies seeking the capital to expand ...
  6. Cost of Goods Sold - COGS

    Cost of goods sold (COGS) is the direct costs attributable to the production of the goods sold in a company.
Trading Center