Role Of A Stock Transfer Agent

by | Jan 24, 2018 | Investing Stocks

Other than for debt issued by the US government, the purchaser of securities, stocks, or bonds, is entitled to a certificate, which is registered in the purchaser’s name. In the case of government securities, the ownership is recorded electronically, and the US Treasury maintains the records. No physical certificate is issued.

The role of the stock transfer agent:

Stock transfer agents play a pivotal role in the issuance and transfer of securities as a result of sale or purchase. These agents are responsible for issuing stock certificates, which represent an increase in the number of outstanding shares. Issued shares are traded openly in the market. When a trade has been consummated, the certificates are given to the transfer agent, who, in turn, cancels the shares that are registered in the name of the seller and issues a new certificate registered in the name of the buyer.

It is of paramount importance that the ownership of securities is accurately maintained. The owner of the security has the rights to benefit from any dividends and to vote his or her shares. The stock transfer agent is responsible for the maintenance of all records that relate to the security in question.

Speed and accuracy are of the essence:

The number of securities that are traded on a typical day runs into the millions. As such, stock transfer agents must act quickly and exercise a great deal of accuracy. Without this, the markets simply will not function proficiently. It is the mandate of the transfer agent to ensure that all documentation is examined. This ensures accurate transfer of the security. Furthermore, the transfer agent revises the stock ownership and verifies that the number of stocks being transferred is the same as the number of stock certificates canceled. In this way, there is a guarantee that the security will not be over-issued. The final task of the stock transfer agent is to secure all canceled certificates to avoid any possibility of a fraudulent transaction. For more information visit Colonial Stock Transfer Company, Inc.

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