Running a company is a complicated endeavor that has been described as juggling chain saws with one hand while paddling a canoe forward with the other. Simultaneously keeping the day-to-day operations humming along while also pursuing strategic goals is a combination that challenges even the most successful executives. Unsurprisingly, many CEOs and boards engage outside specialists to help lighten the administrative load, and for many companies, few such specialists are as important as the transfer agent.

A critical but often unheralded job, transfer agency is the fulcrum on which a company’s relationship with its investors rests. The transfer agent handles the administration, settlement and clearing of securities transactions, issues certificates, manages proxies, distributes tax forms, and helps process dividend payments, stock splits and other corporate actions. When paired with an experienced, capable and proactive transfer agent, these tasks are blessedly invisible to the CEO; with the opposite, the administrative headaches and distractions that land on the CEO’s desk can become never-ending. Indeed, like many back-office functions, the real value of a good transfer agent is often best understood once you are stuck dealing with a bad one.

How does a company ensure they select a transfer agent is up to the job? A few key questions can help determine both the competence of the agent and whether it will be a good long-term fit with your company:


1. Experience Matters

There is certainly no shortage of companies in the transfer agent business, but some are vastly more established and focused than others. It’s not enough to just throw together a few databases and a public website; with experience comes the ability to handle problems and the dizzying array of details and requirements necessary to not only do this job well, but do it very well. Hint: Watch out for firms that do transfer agent services as an adjunct to other lines of work that are considered more ‘important’. A transfer agent’s job is important and complex enough that it should be the core business of the company you choose.


2. Expertise Matters

Make sure your transfer agent can offer a wide spectrum of services and can grow with you as your company expands into more complicated capital structures, compliance requirements and forms of equity compensation. Smaller companies and startups often skimp on transfer agent services due to cost and because the job seems simpler in the early stages of a corporation’s lifecycle, but this approach can become a liability down the road. Can your transfer agent handle multiple types of securities? Restricted stock? DTC eligibility? What about quickly adapt to new rules and requirements? A good transfer agent must be both on top of, and able to influence, the regulations that govern the securities industry. One way to ensure your transfer agent is an expert is to refer to independent transfer agent surveys covering client satisfaction.


3. The What-if’s Matter

Check on your transfer agent’s disaster recovery planning, cybersecurity policies and business continuity measures to see how much thought has been given to various “what if” scenarios. With the focus on daily administrative tasks, this area of a transfer agent’s businesses is often overlooked by management teams, but as we’ve learned with 9/11 and Hurricane Sandy, you and your investors will depend on your transfer agent’s ability to roll with a punch if needed. Ask them how often they review these policies and procedures, and whether they’ve run exercises or simulations to test them. Your investors are trusting you with their personal data so it is important that you do your best to protect it. Working with a transfer agent with robust data security measures is the best way to do that.


4. The Technology Matters

Some transfer agents have made only modest progress in bringing technology to their processes, particularly with regards to investor interactions. Is your transfer agent’s website mobile friendly? Can investors easily and quickly access their information and get their questions answered? How good is their call center, and are the employees there knowledgeable and able to communicate effectively? Does the transfer agent alert investors using text messaging? Investors that grow frustrated with their interactions with your transfer agent will make their next call to your company, so make sure you’re not working with a transfer agent stuck in the proverbial dark ages – your investors will thank you.


5. The Infrastructure Matters

Most companies don’t have the internal infrastructure to deal with things like state-by-state escheatment requirements, Foreign Account Tax Compliance Act (FATCA) compliance and Office of Foreign Asset Control (OFAC) submissions, so make sure these highly complex matters, each of which is fraught with compliance and reporting risk, can be handled at the transfer agent level. This is where the experience and expertise mentioned above also comes into play – don’t be the company through which your transfer agent finally learns what FATCA means.

Depending on the company, other considerations might matter. Does the transfer agent share your ethos with regards to social responsibility, such as the provision of electronic statements, and help you with good governance practices? Is it located in a reasonable time zone in line with your business hours? Can it help you repair a mess left behind from your previous transfer agent?

A transfer agent’s value to your company comes not only in what it is able to do, but what it can help you avoid doing, or at least dealing with. In a perfect world, the mechanics of investor records, communications and transfers all run very smoothly, and most of the time that’s the case. But surprises, changes and problems do occur, so creating and maintaining an open and collaborative relationship with a professional, experienced and adaptable transfer agent will pay enormous dividends down the road.

It’s also important to keep your long term goals in view. A transfer agent that serves both private and public companies can help you through some major transitions such as completing a traditional IPO, going through a merger, acquisition, stock split or conversion of debt/preferred securities into common. For your company, these types of events are generally watershed moments and may be a first-time experience for you – choosing a transfer agent that has seen clients through many of these events can provide much needed bench strength for your company.

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