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

  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. 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. Telegraphic Transfer - TT

    A telegraphic transfer (TT) is an electronic method of transferring ...
Related Articles
  1. Investing

    How Real Estate Agent and Broker Fees Work

    Buying or selling a home? What you need to know about real estate agent and broker fees.
  2. 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.
  3. Financial Advisor

    A Day In The Life Of A Real Estate Agent

    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.
  4. Personal Finance

    8 Low-Cost Ways To Transfer Money

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

    5 Money Transfer Tips For Foreign Workers

    If you are working in the U.S. as a foreign worker, here are some tips for sending money back home.
  6. Investing

    What Real Estate Agents Don't Want You To Know

    While they can be instrumental in helping you buy or sell a home, real estate agents may ulterior motives.
  7. Investing

    Old Stock Certificates: Lost Treasure or Wallpaper?

    What if you've discovered some old shares in bearer form? Follow our tips to find out what they're worth.
  8. 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.
  9. 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.
  10. Investing

    6 Questions For Your Realtor

    Before you start working with a real estate agent – especially if you're the one paying the agent's commission – make sure you've made the right choice.
  1. I hold stock certificates in a company that just had a stock split. What happens ...

    The short answer is that a stock split will have little effect on the holder of stock certificates. In most cases when an ... Read Answer >>
  2. What protects an investor’s interest in the case of terrorist sabotage, or act of ...

    Currently, most stock ownership is done electronically thru the combined effort of the brokerage firms and the transfer agents ... Read Answer >>
Hot Definitions
  1. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
  2. Income Statement

    A financial statement that measures a company's financial performance over a specific accounting period. Financial performance ...
  3. Leverage Ratio

    A leverage ratio is any one of several financial measurements that look at how much capital comes in the form of debt, or ...
  4. Annuity

    An annuity is a financial product that pays out a fixed stream of payments to an individual, primarily used as an income ...
  5. Restricted Stock Unit - RSU

    A restricted stock unit is a compensation issued by an employer to an employee in the form of company stock.
  6. Monero

    Monero is a digital currency that offers a high level of anonymity for users and their online transactions.
Trading Center