The U.S. Securities and Exchange Commission (SEC) has proposed a new draft regulation targeting transfer agents. This marks the first substantive revision of the relevant rules since the early 1980s, with blockchain ledger technology, tokenized securities, and smart contract processes included in the discussion.
New on-chain record disclosure
The transfer agent is responsible for maintaining the register of security holders and handling matters such as issuance, cancellation, and transfer. In this 421-page proposal, the SEC proposes amending the Form TA-2 disclosure requirements to require institutions to disclose how many securities holdings are maintained on distributed ledgers.
The proposal also requires the disclosure of tokenized securities broken down by model, including issuer-led and third-party-led models. The SEC believes that the investor risks associated with these two models differ and therefore must be tracked separately.
How does a wallet address correspond to real-name information?
The SEC also sought market input on several on-chain registration issues, including how existing rules should apply when records are stored solely on a distributed ledger that no single agent can exclusively control.
Another key focus is whether the agency can link on-chain wallet addresses and holding amounts to off-chain, real-name information such as the holder’s name and address. If this practice is incorporated into the rules, on-chain transfers could simultaneously update the official holder master records.
Synchronize adjustments to retention and risk control requirements
SEC Chairman Paul S. Atkins stated that the new rules will reflect the use of electronic communication and blockchain technology in transfer agency services. In addition to on-chain provisions, the proposal also plans to eliminate an exemption rule and establish a uniform retention period for most records.
The current asset preservation requirements will also be rewritten as risk management requirements, covering cybersecurity and business continuity. SEC Commissioner Hester Peirce stated that this proposal has been in development for over a decade and invited market participants to submit feedback on its impact on tokenization.
Additional information: This proposal will initiate a 60-day comment period after publication in the Federal Register. The SEC also announced that a roundtable discussion on 24-hour trading will be held on September 17, featuring participants including Robinhood, Nasdaq, DTCC, Blue Ocean, and 24X.