There are three primary purposes underlying the FDICs examination program for
banks engaging in registered transfer agent activities. First, regulatory examinations of
registered transfer agents play a very large role in realizing the important public policy
objectives of maintaining efficient and orderly securities markets and in safeguarding
investor securities and the funds related thereto. In addition, the Corporations
registered transfer agent examination program is designed to fulfill the oversight
responsibilities delegated to it as the primary federal regulator of state-chartered
nonmember banks by the Securities and Exchange Act of 1934. Finally, to accomplish the
FDICs primary mission of protecting depositors, the Corporation must examine the
transfer agent activities of the banks it supervises in order to detect and prevent
situations which might threaten the viability of banks through diminution of their capital
Public Policy Concerns
In enacting the Securities and Exchange Act of
1934 (1934 Act), Congress recognized the role that fair, efficient, and orderly securities
markets play in promoting trade and commerce and in maintaining a prosperous and efficient
economy. Since FDIC-insured banks act as transfer agent for most of the corporate equity
and debt securities issued in the U.S., as well as acting as bond registrar for most
municipal debt securities, the FDIC carries out an important function for realizing the
objectives of the 1934 Act. The Corporations transfer agent examinations are designed
to ensure that banks perform their securities transfer activities in a highly efficient
manner and in full compliance with applicable laws and regulations.
The Statutory Framework
The statutory basis of the Corporations
registered transfer agent examination program is provided by the 1934 Act. Specifically,
Section 17A(c)(1), added to the 1934 Act in 1975, requires all transfer agents to register with
the appropriate regulatory agency (ARA) prior to conducting transfer agent activities for
securities registered under Section 12 of the 1934 Act. As a result a multi-agency regulatory
structure for transfer agents was created. Banks, bank holding companies, and their
subsidiaries that transfer registered securities must first register with both ARA and with the Securities and Exchange Commission (SEC).
Section 3(a)(34) of the 1934 Act designates the FDIC as the ARA
for FDIC-insured state-chartered banks that are not members of the Federal Reserve System.
The FDIC is also the ARA for subsidiaries of such banks.
The Federal Reserve is responsible for state member banks and trust companies and their
subsidiaries, as well as bank holding companies and their subsidiaries. The Office
of the Comptroller of the Currency is responsible for National banks and their
All other registered transfer agents, including thrifts and thrift holding companies
supervised by the Office of Thrift Supervision, register with the Securities and Exchange
Section 17A(d)(1) of the 1934 Act requires registered transfer agents to comply with
all rules and regulations established by either the SEC or the ARA. Section 17A(d)(2) makes
transfer agents for whom the SEC is not the ARA subject to the enforcement provisions of
Section 8 of the FDI Act. All persons doing business with a such a
transfer agent are deemed to be depositors as defined in Section 8(c) of the FDI Act.
Section 17A(d)(3)(A)(ii) assigns the ARA the primary responsibility of examining and
enforcing compliance with applicable rules and regulations. The statute, however,
preserves the SECs right to make rules governing transfer agent activities or to
enforce compliance with laws, rules and regulations governing registered transfer agent
operations. In fact, Section 17A of the 1934 Act establishes a cooperative framework in which
the SEC and the ARA will work together to ensure that the purposes of the 1934 Act are
achieved. Under this framework the SEC must solicit the views of the ARA before proposed
rules and regulations are released for public comments.
Section 17(c)(3) of the 1934 Act requires that the SEC and the ARA notify each other of
any examination conducted by it, and to furnish the report, and any other data in
connection with such examination, to the other. Currently, the SEC has a standing request
for a copy of any FDIC registered transfer agent examination report meeting certain
In addition, the SEC has the right to conduct examinations of any registered transfer
agent, and on occasion, has exercised this right. In such cases, however, the SEC is
required to give notice of its intent to conduct such an examination, and to consult with
the ARA concerning the feasibility and desirability of coordinating such an examination
with examinations conducted by the ARA with a view to avoiding unnecessary regulatory
duplication or undue regulatory burden for affected registered transfer agents.
Safety & Soundness Considerations
To the extent that a registered transfer agent
fails to conduct transfer agent operations in a safe and efficient manner, or fails to
comply with applicable laws and regulations, the transfer agent function could incur
contingent liabilities or estimated losses which could adversely impact the banks
capital accounts. For example, a registered transfer agent might have to buy-in an over
issuance of securities, or delays in completing transfers of securities might lead to
monetary losses among securityholders. The Corporations registered transfer agent
program is designed to ensure that bank transfer agents conduct securities transfer
activities in a controlled, accurate, and prompt manner and in accordance with all
applicable rules and regulations.
The role of the FDIC examiner in the examination of registered transfer agents of
insured state-chartered nonmember banks, or their subsidiaries, is threefold:
To evaluate the overall operations of securities transfer activities and to determine
that such activity has been, and continues to be in compliance with applicable rules and
To report conditions that have, or could have, adversely affected consumers or the bank.
To recommend corrective action when weaknesses and deficiencies are noted.
When necessary, the FDIC's Board of Directors or a Regional Director will institute
enforcement actions against a bank that is either unwilling or incapable of correcting
serious deficiencies in its transfer agent operations.