BIG Troubles In T-A Land

Five events in late 2023 startled us into realizing that most Transfer Agents seem to be in a big heap of trouble these days:

The first and second were the two calls we received - one about bad TA service and one about bad TA behavior – described in detail elsewhere in this issue.

Third, and sort of out-of-the blue, one of our old articles on “Small Transfer Agents” popped up on our screen as we were browsing some of our back issues – and WOW! Virtually every one of the “small agents” that passed our sniff-test for respectability in 2009 is now GONE! One was closed down by the SEC, after the owner was caught using issuer and shareholder funds to fund his own failed expansion efforts. Another escaped an impending SEC shut-down by selling out precipitously - but profitably, to our surprise - in a sort of shotgun marriage arrangement. Two other small agents we deemed respectable ones back then sold out to slightly bigger ones.

And WOW AGAIN! - while we are always hoping to have some reputable ‘small agents’ run an ad – or sign up for our Directory of Pre-Vetted Service Suppliers – we could not come up with a single one that we’d even approach, much less admit to our Directory, all things considered – some because of recent regulatory problems and some because of the low levels of protection they can offer issuers in the event of a major mistake, or worse, a defalcation on the part of a key employee – or the owner.

Fourth – and the biggest shocker to us of all – two of the three biggest Transfer Agents – one of which had advertised in every one of our annual magazines since the first one, in 1994 – dropped out of the magazine – and our much-visited print and online Directory altogether!

What can possibly be going on here, we asked ourselves. Are they that short of money these days? Here’s what we concluded:

Most issuers seem to be way too busy with other priorities to shop around – and are definitely not looking to jump from the frying pan into the fire, where so many were burned before. The “shopping-around market” is almost nonexistent these days.

But most transfer agents are not looking to rock the boat either. And WHY? First, because they have not been having much success at getting issuers to switch to them: 2023 had, by far, the lowest number of TA searches – and actual moves – we’ve seen in our 50+ years as TA watchers.

And WHY is that? - In part, it is because most TAs do not have a ‘better mousetrap’ to induce new clients to switch. But in larger part, it’s because they don’t want to trigger a fee-war – especially when they can cut sales and marketing expense while quietly milking their own market for the “high 20th century fees” they’re collecting for “low touch, low tech and low volume 21st century services.” [Please see our article on THIS, elsewhere in this issue.]

Another important thing to note, historically, the main driver of T-A-switching has been a surge in major ‘service issues’ – usually triggered by systems-conversions and mismanaged systems ‘upgrades.’ And today, we say, the customer and shareholder complaint levels are way, way down: Not due to great service, as our two horror stories illustrate – but due to the very low transaction volumes that most TAs are dealing with these days!The fifth thing that has caught our attention, as keen, and fairly well-known observers of the Transfer Agency world, is that we have had THREE interactions this year with would-be disrupters of the entire marketplace – promising to provide simpler, superior and far more secure 21st century services - at much lower prices.

The fifth thing that has caught our attention, as keen, and fairly well-known observers of the Transfer Agency world, is that we have had THREE interactions this year with would-be disrupters of the entire marketplace – promising to provide simpler, superior and far more secure 21st century services - at much lower prices. Here, we say, low-tech, high-priced and low-value-added TAs are extremely vulnerable – IF, that is, the newcomers can deliver - AND, most important, if they have the financial backing needed to achieve the size, scale, trustworthiness and financial resources to cover the significant financial liabilities that come with being a Transfer Agent. Fair warning, TAs – we think that one of the wannabies can actually pull it off!