The US Securities and Exchange Commission has proposed a broad rewrite of long-standing rules for transfer agents, arguing that the current framework no longer reflects how securities records and related infrastructure are evolving. The agency said blockchain-based recordkeeping, tokenized securities and more automated market systems are becoming more relevant in US markets, while the rulebook still largely reflects an era of paper certificates and manual processing.

In the proposal, the SEC outlined changes to registration, recordkeeping, safeguarding and securities transfer obligations. It also pointed to growing interest in blockchain-native, or onchain, transfer agent models and said the existing rules do not adequately account for the operational and investor-protection risks tied to those systems.

Why the SEC says the rules need updating

According to the SEC, transfer agent regulations have not been substantively updated since the late 1970s and early 1980s. The agency framed that gap as increasingly difficult to justify as market infrastructure becomes more digital and automated.

The proposal specifically references blockchain-based recordkeeping, tokenized fund administration and cross-chain interoperability as examples of developments pushing beyond the assumptions built into the current regime. In the SEC’s view, those changes require a framework that is better suited to modern methods of recording ownership and processing securities activity.

New risks highlighted in the proposal

The SEC said its present rules do not sufficiently address risks associated with newer market structures and technology. It singled out cybersecurity, operational resilience and the safeguarding of securities and investor records as areas where updated standards may be needed.

The agency also noted that market participants are actively seeking to bring onchain transfer agents into the US market. That trend, as described in the proposal, is one reason the commission is trying to set clearer expectations before such models become more established.

What the proposal would change

The planned overhaul would revise core requirements that apply to transfer agents, including registration, recordkeeping, safeguarding and the processing of securities transfers. The SEC said the proposal would also expand reporting obligations for these firms.

In addition, the agency wants to introduce new compliance standards in specific areas. Those would include rules governing restrictive legends on securities and requirements tied to the use of third-party service providers, reflecting the SEC’s focus on outsourced functions and digital operational dependencies.

Comment period and next step

The proposal is not yet a final rule. The SEC is seeking public comment, and the formal comment window will run for 60 days after the proposal is published in the Federal Register.

That process will determine how market participants, including firms exploring blockchain-native transfer agent models, respond to the commission’s attempt to modernize a regulatory framework that has changed little in decades. For now, the confirmed next step is publication in the Federal Register followed by the public comment period.

Source: cointelegraph.com