On the Transfer Agency Scene

Huge news at Computershare - the acquisition in April of the Microsoft transfer agency business. As we write, Microsoft is the largest company in the world by market-cap - a major leader in the high-tech world, of course, which has, so far, and permanently we’d hope, stayed out of the growing lines of fire that have been issuing in the Congress - with a huge base of “retail investors” - both registered, in “the street” - and with a huge employee-ownership base to boot. A HUGE win for Computershare, for sure - and a major loss we’d say, for all of the other top-four agents, ranked by size, all of whom, we’re sure, were hoping to retain or seize the prize.

Somewhat mystifying news from Equiniti Group; a May 30th press release saying they are “delighted to announce completion of the technical separation of its EQ US division from Wells Fargo” from which they’d recently acquired the transfer agency business. “This technical separation allows the realization of operating synergies which are being delivered in line with expectations, and provides the foundation to scale operations to support growth. All business functions are now administered on Equiniti’s infrastructure and systems in Minneapolis, Milwaukee, Chicago and New York, and EQ US’s clients and customers will benefit from the latest web and mobile-optimized portals for both issuers and shareowners…Completing the separation is an exciting milestone for Equiniti’s business in the world’s deepest capital market. It provides an opportunity to transform our US operations into a market-leading, technology-enabled business with a broad range of transfer agency and supporting services.

“Equiniti’s growth is underpinned by strong client retention and blue-chip new client wins. This internationalization of the business positions Equiniti well for future growth with the opportunity to share expertise and cross-sell services to existing and prospective clients on both sides of the Atlantic.” Todd May, the CEO of EQ US, noted that “the separation will bring further benefits to our clients and their shareholders as we adopt Equiniti’s sophisticated technology and industry-leading servicing capabilities.  This includes our new innovative shareholder platform, EQ Insight, which we recently released. Our clients are already seeing benefits and we will continue to enhance this platform and many more.”

We must confess that we were unable to understand exactly what has been done, and whether, as we think, most clients will have to undergo some sort of records-conversion/records-enhancement processes along the way. It still sounds to be very much a ‘work in progress’ - and we will continue, of course, to dig for and report more info on their “transformation” as we get it.

Meanwhile, Broadridge continues to grow its Virtual Meeting business at a 15% rate, that’s been compounding  annually. A big and noteworthy  jump this year in VSMs of Fortune 500 companies - up by 19%. Since 93% of all VSMs are Virtual-Only, this is bad news for competitors - who are unable to offer a Virtual-Option to street-name holders.

Bad news for legitimate Transfer Agents - and for issuers too - from the SEC: “Alerts” - but mostly diddling at the SEC - where much-needed Transfer Agent Regulations are concerned:

• We are fast approaching the 30th year (!!!) since SEC Transfer Agency Rules were last revised - despite at least two attempts to collect info and recommendations for action, and a “discussion draft” that outlined potential areas for SEC action, but so far has produced nothing!.
• We were very pleased to see the SEC issue a “Risk Alert” in February, warning TAs - and TA clients who may have seen the Alert, but likely did not, even though they themselves are at risk if a TA spends or runs off with their money - about the need to segregate funds due to shareholders - and not spend or invest it. And several TAs have been caught doing just that in recent years.
• Also in February, the SEC sued broker-dealer Spartan Securities and Island Capital Management, which does business under the name Island Stock Transfer, for helping to manufacture deceptive float at public companies from December 2009 to August 2014. Both firms have publicly denied any wrongdoing, and we’d bet that Island Stock Transfer would not have any funds at all to settle, much less to make restitution or to pay appropriate fines or penalties in any case if found guilty. The need for firm rules to govern the handling of unregistered and/or otherwise “restricted” securities has been identified by the SEC itself as one of the most important concerns to safeguard investors for 30+ years now…
• But as we learned at the SSA conference, no action at all is expected this year (due in part to the government shutdown, and resulting backlogs) and MAYBE something will be done in 2020 - though it sure sounded unlikely. The SEC is really playing with fire here, in our book.