Since the mid-1970s, transfer agents have been subject to federal regulation by the SEC in accordance with the Securities Exchange Act of 1934. Transfer agents must comply with all applicable rules of the SEC, primarily sections 17Ad-1 through 17Ad-20 of the Securities Exchange Act of 1934. These regulations include strict requirements for the accuracy and timeliness of processing shareholder transactions. Given wide fluctuations in trading volume and shareholder inquiries, transfer agents must also be prepared to handle associated periods of peak transfer volume. Activities that are governed by these regulations include:
- Turnaround times for processing
- Prompt responses to inquiries
- Accuracy of recordkeeping
- Retention of records
- Posting, transportation and destruction of certificates
- Safeguarding of funds and securities
- Evaluation of internal accounting controls
- Searches for lost shareholders
- Notifications to "unresponsive payees"
Securities industry participants, such as transfer agents, must also comply with regulations designed to prevent fraud in connection with missing, lost, counterfeit or stolen securities, in addition to other data security requirements. These data security requirements also extend to industry participants' employees, who must be fingerprinted and undergo background checks. In addition, transfer agents are required to comply with certain provisions of the Anti-Money Laundering (AML) regulations and can also be subject to regulations of the Office of Foreign Assets Control (OFAC). Transfer agents may also be subject to the laws of the states of incorporation for both issuers and their shareholders by virtue of the services they provide, including laws pertaining to data privacy and escheatment. Transfer agents are additionally required by IRS regulations to track and report the dividend income and share sale activity they facilitate on behalf of issuers via Form 1099 reporting. Transfer agents must follow IRS requirements concerning tax.