SEC targets 40-year-old transfer rules: Can tokenized securities finally hit main street?

The Securities and Exchange Commission (SEC) has proposed a major overhaul of U.S. transfer agent regulations. This is an area that has experienced little regulatory change in nearly four decades.

The proposal updates registration, reporting, recordkeeping, asset safeguarding, transfer processing, and restrictive-legend requirements across securities markets.

Importantly, this regulatory reform recognizes new technology such as electronic records and security tokens represented using blockchain.

As securities markets continue to evolve to accommodate faster transaction processing, including same-day settlement and potentially same-day or real-time transactions, this represents a significant change from the current regulatory structure.

Historically, all of the current regulatory requirements were based upon paper stock certificates and slower settlement processes.

Additionally, establishing common standards for processing related to T+1 settlement could also help prevent operational slowdowns and enhance investor protection.

Instead of reducing the level of regulation regarding transfer agents’ responsibilities, the SEC is seeking to modernize the way they operate.

Together, these changes could give transfer agents clearer operating standards while creating more defined infrastructure for tokenized securities.