SEC Proposes Transfer Agent Rule Overhaul For Tokenized Securities And Blockchain Recordkeeping

SEC Targets Transfer Agents

The SEC’s proposal would update registration, recordkeeping, transfer processing, and asset-safeguarding requirements, including controls for onchain transfer agents covering digital records, cybersecurity risks, and business continuity.

The agency said its existing transfer-agent requirements date from the late 1970s and early 1980s, when investors commonly held paper certificates and firms processed ownership changes manually.

In the proposal, the SEC said it would update Rule 17ad-7 to require controls protecting integrity, availability, reproducibility, redundancy, and continuity of records for transfer agents using electronic recordkeeping systems.

The SEC also said public comments would remain open for 60 days after Federal Register publication.

Cybersecurity and Safeguards

The SEC said its existing framework does not fully address information security, cybersecurity, disaster recovery or the operational risks created by connected systems as securities records move away from paper.

Under proposed amendments to Rule 17ad-7, transfer agents using electronic recordkeeping systems would need controls protecting records against unauthorized alteration, deletion, or destruction, and an audit trail identifying who accessed, changed, or deleted a record.