Comments on the SEC Transfer Agent Regulations

Re: Release no 34-106246 File No. S7-2026-30                                   

Regarding Transfer Agency Regulation

Dear Ladies and gentlemen of the SEC; November 3, 2026

Twenty years ago, the Securities Transfer Agents Association, responding to dramatic changes in the business – and to the rapidly changing technological environment since the first Transfer Agent Rules were issued in the late 1970s and early 80s - submitted a petition, and a plan, for the SEC to make the Regulations for Transfer Agents much more similar to those required of publicly traded companies. Sadly, that effort –which was keenly focused on the protection of investors - which, of course, is meant to be the SEC’s top priority – came to nothing. 

Ten years ago, on September 13, 2016 - in response to a request for comments - I submitted a similar call, for the SEC to significantly upgrade the regulatory environment, which addresses many of the questions being asked in the latest release – and many other issues that the current release fails to address – and where I am happy to append this file, since most of the comments are still valid, and germane to the current release:     Sadly, that effort came to naught as well.

Accordingly, we are gratified to see at long last (and in what, as 50+ year participants in the Transfer Agency business, consider to be the understatement of the decade) that “the Commission concludes that there is a disconnect between the transfer agent rules…and both the manner in which transfer agents perform their critical functions and the technology they use to do it” and recognizes that “Despite the highly sophisticated electronic and automatic systems utilized by modern transfer agents …the current rules are silent with respect to information security, cybersecurity, disaster recovery, operational risk, or other requirements related to their use of connected and automated electronic systems.” 

There are several other important developments on the Transfer Agency scene that we feel require attention as the SEC contemplates new rulemaking:

• First and foremost, we are in the beginning stages of “the largest generational wealth transfer in the history of the world” as the “Gen Z cohort” begins to inherit an estimated ninety-three trillion dollars – much of it in stocks and bonds – and where most of the cohort has had little or no experience. So this is a truly urgent matter. The SEC needs to pay much more attention to investor education, where today, there is virtually NONE.
• Very important to note is the sudden explosion of interest in and experimentation with totally new forms of “investment vehicles” such as “tokenized securities” – which may not be “securities” at all_ - and in new, and so far, mostly experimental technologies. Many of the experimenters seem to be domiciled outside the United States and perhaps beyond the reach of the SEC – and many of the newcomers are small, seriously underfunded, and, in many cases, seriously underinformed about the transfer agency business, which puts potential customers – and U.S. investors in serious peril 
• Especially troubling, as the SEC has also noted, is the rise of “Gamification” – which is a very far cry from “investing” we say.
• Most troubling of all is the meteoric rise of “hacking” and of fraud – and outright theft - witness the truly astounding failures of internal controls at one of the oldest and largest transfer agents in your 2014 filing - and the recent theft of over $6.3 billion from Binance systems that claimed to be ‘hack proof’ thanks to Blockchain.

With this as background, here is a list of our own top priorities for SEC action: 

• First and foremost, we say, the SEC needs to insist that every Transfer Agent BE properly ‘registered’ with them – NOW - and to spring into action immediately. We are aware of at least two entities that meet the SEC’s definition of a transfer agent – neither of which is registered with the SEC as far as we can see; one a “depository” with a NYC address that appears regularly in their-offer tombstones and another, equally mysterious company with a NY address that makes unsolicited tender offers to U.S. shareholders directly - by name – to buy their shares at an outrageous 37 percent discount from the current market prices. There is no information about the ownership, operational capabilities or financial condition of these companies that we can find on the web. This needs fixing – immediately! 
• Equally important, as we noted in 2016, and remind yet again, the SEC needs to establish minimum standards for capital and insurance that are commensurate with the size and nature of the TA’s customer base. The ancient system of allowing stock exchanges to set the rules here is totally useless today – when “exchanges” are competing for listings and entirely new venues and forms of trading are emerging at rapid rates on “exchanges” of their own making.
• Registered Transfer Agents need to be required to quickly report to the SEC on any material changes to their Registration Statement and financial condition, on any unfavorable auditor opinions, on any material losses due to theft or fraud, on any and all cybersecurity breaches and on potential and pending legal actions against the TA. 
• Clearly, the SEC needs to greatly increase staffing – and budgeting – to conduct more, and much more probing onsite audits of Transfer Agents.

While it is impossible to comment at length on the details of the ponderous 400+ page Release, given the very short window period allowed for comments, I do want to mention that the description of the critically important Control Book is seriously deficient: Aside from providing a running record of all of the shares that are currently Authorized for Issuance, currently OUTSTANDING and held as Treasury Shares there should be sections for all shares Reserved for Issuance – say upon conversion or exchange of eligible securities, and/or for the execution of Stock Options - item by item – and ALL of the Reserves should be adjusted before any changes are made to the official Shareholder Records.

Here is the link to my 2016 comments, which answer many of your questions – and outlines the need for a much stronger regimen of Transfer Agent Registration and supervision, along with my qualifications as an “expert” here. s72715-19.pdf  There’s something important I forgot to add, which is also germane here: “Remember Rico!” In the late 1970s when the law was passed, our Bank regulators required us to have written procedures for every single operating area in the Stock and Bond Transfer, Recordkeeping and Disbursement areas – that had to describe the Internal Control Systems to guard against theft, fraud, acts of God – and honest MISTAKES – in detail. I was charged with reviewing, editing, and often with needing to write sections from scratch. It was a life-changing - and a highly positive business-changing experience.

Please feel free to contact me with any questions you may have about this project.

Respectfully submitted, with all my best wishes for the SEC.

Carl T, Hagberg, Chairman and CEO