In a Risk Alert, the SEC Office of Compliance Inspections and Examinations ("OCIE") urged transfer agents to review their policies to ensure that funds and securities are protected.
The OCIE said that observations from recent examinations of transfer agents that also serve as paying agents generally fall into two broad categories: (i) the safeguarding of funds and securities and (ii) the "notification to unresponsive payees and policies and procedures for lost securityholder searches." Examples of deficiencies that OCIE staff observed include:
- the misappropriation of shareholder funds and the theft of physical certificates;
- inadequate policies for the safeguarding of funds and securities;
- insufficient reconciliation controls and procedures;
- the failure to "secure access to vaults, computers and areas of the firm that handle disbursement operations";
- not meeting the database search requirements of SEA Rule 17Ad-17 (the "unresponsive payee rule");
- the failure to send notifications to unresponsive payees; and
- weaknesses in transfer agents' policies under the unresponsive payee rule.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.