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CONFIDENTIAL – NOT FOR DISTRIBUTION
[19340]
November 7, 2005
TO: OPERATIONS COMMITTEE No. 24-05
TRANSFER AGENT ADVISORY COMMITTEE No. 57-05
RE: DRAFT LETTER RELATING TO REGULATION OF CERTAIN TPAS UNDER
TRANSFER AGENT RULES
In connection with the SEC’s development of rule proposals in the area of transfer agent
registration and regulation, the Institute has prepared a draft letter to the SEC recommending
that it consider whether certain third-party administrators (“TPAs”) to retirement plans and
other employee benefit plans (“Plans”) should be required to register and be regulated as
transfer agents. The most significant aspects of the draft letter are summarized below.
If you have any comments on the draft letter, please contact Ari Burstein by e-mail at
aburstein@ici.org or by phone at 202-371-5408 no later than November 14.
The draft letter states that, in carrying out their responsibilities in connection with
mutual fund holdings, TPAs engage in certain transfer agent functions that fall within the scope
of the definition of transfer agent in Section 3(a)(25) of the Securities Exchange Act of 1934. For
example, TPAs often process Plan participants’ purchases, redemptions and exchanges and
update their accounts accordingly. In addition, in some cases, TPAs interface directly with a
fund to update a Plan’s position on the fund’s books. As such, the draft letter states that these
TPAs are engaged in registering the transfer of securities and transferring record ownership of
securities on the books of the issuer – several of the core transfer agent functions delineated in
Section 3(a)(25). [Members: Are there any other functions that TPAs perform that fall within
the scope of the definition of transfer agent?] The draft letter recommends that the SEC
consider whether TPAs that perform such functions should be required to be registered under
transfer agent rules.
The draft letter states that there are clear public policy benefits to requiring TPAs that
meet the definition of a “transfer agent” under the federal securities laws to register with the
SEC. First, the registration of such TPAs would provide important protections to Plan
participants. Second, the registration of TPAs would allow the SEC to impose appropriate
regulatory responsibilities on TPAs in connection with certain Plan trading activity, such as, for
example, to address abusive short-term trading.
2
The draft letter states that while TPAs that meet the definition of a “transfer agent”
should register as a transfer agent with the SEC, subjecting TPAs to all the requirements
applicable to registered transfer agents may not be necessary for the protection of Plan
participants. Accordingly, the draft letter states that it may be appropriate for the SEC to adopt
specifically tailored exemptions from some of those requirements for TPAs based on the
functions they perform and the resulting investor protection needs.
Ari Burstein
Associate Counsel
Attachment (in .pdf format)