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. SEC Form TA-1

    SEC Form TA-1 is used to apply for registration as a transfer ...
  2. Dirty Stock

    A dirty stock is a stock that fails to achieve good delivery ...
  3. Paying Agent

    A paying agent is an agent who accepts payments from the issuer ...
  4. Transfer

    A change in ownership of an asset, or a movement of funds and/or ...
  5. SEC Form TA-2

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

    A settlement agent coordinates all paperwork and conditions required ...
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. Personal Finance

    8 Low-Cost Ways To Transfer Money

    If cost is your primary concern, there are several cheap(er) ways to move funds.
  3. Investing

    How Do Real Estate Agents Get Paid?

    Most real estate agents are paid a commission based on the sale price of a property and split between the agents and brokers involved.
  4. Personal Finance

    How to Transfer Credit Card Balances to a New Card

    Before you read that new credit card's zero percent interest balance transfer offer, see our guide to help save money and pay down your existing debt.
  5. Investing

    Would You Make A Good Real Estate Broker?

    How to tell if you'd be good in this field. It is a common second career for many people, but isn't a good match for everyone.
  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. Personal Finance

    Sending Money? These are the Top Money Transfer Services

    Need to send money in a hurry? Here's a list of the major players in the money transfer business. Compare rates, times and other details before deciding.
  8. Managing Wealth

    Medical Power of Attorney: Which Child to Choose?

    Don’t compromise for the sake of family harmony when you pick an adult child to fill this role. But be sure you fully explain your decision to all.
  9. Insurance

    Becoming a Life Insurance Agent

    Few careers match the opportunity for as quick and large a paycheck as being a life insurance agent, but it takes the right personality.
Trading Center