Key facts
- The SEC proposed updating transfer agent rules, largely unchanged since the early 1980s, to address blockchain and tokenized securities.
- New reporting requirements will ask agents to disclose issues on distributed ledgers and categorize tokenized securities.
- The proposed changes aim to modernize recordkeeping, safeguarding of assets, and securities transfers.
- The SEC is seeking public comment on the proposal for 60 days.
The U.S. Securities and Exchange Commission (SEC) has proposed the first substantive update to its transfer agent rules since the early 1980s, aiming to modernize regulations for a market increasingly utilizing blockchain technology and tokenized securities. The proposed changes, detailed in a 421-page release, address how transfer agents maintain securityholder records on distributed ledgers and manage tokenized assets. Current rules, largely from the late 1970s and early 1980s, do not adequately cover these emerging market infrastructures. New reporting requirements will compel agents to disclose issues recorded on distributed ledgers and to categorize tokenized securities by model, distinguishing between issuer-sponsored and third-party-sponsored tokens due to differing investor risks. The SEC is also seeking input on how to handle records held on ledgers not exclusively controlled by the agent and whether onchain transfers can be linked to offchain holder information. Commissioner Hester Peirce noted the proposal has been over a decade in the making, while Commissioner Mark T. Uyeda criticized past "regulation-by-enforcement" approaches. SEC Chairman Paul S. Atkins stated the rules would reflect the use of electronic communications and blockchain technology. The proposal also includes rescinding an exemption rule, setting a single retention period for most records, and reframing safeguarding as a risk-management requirement covering cybersecurity and business continuity. A 60-day public comment period is open following the proposal's publication in the Federal Register.