Why it Matters: The SEC’s Approval of Securitize as a Transfer Agent
Last month, Securitize became a SEC-registered transfer agent. Recently, Brian Farber— General Counsel to Securitize— sat down with the Security Token Academy’s Digital Wrapper for an interview. One topic of discussion was the importance of Securitize becoming a transfer agent.
What it Means to Be an SEC-Registered Transfer Agent Explained
Securitize is a San-Francisco based firm which provides the technology for companies to tokenize regulated assets on a blockchain.
Companies that wish to create or digitize existing traditional financial securities can leverage Securitize’s technology to incorporate a blockchain and create digital securities— also referred to as security tokens.
So far, they’ve aided in the process of tokenizing more than ten assets, which have a combined value of nearly $200 million.
In late-August 2019, Securitize made headlines by becoming an SEC-registered transfer agent.
Last week, Securitize General Counsel Brian Farber explained precisely why that matters.
In discussing the general role that transfer agents typically play in securities markets, Farber said,
“Transfer agents usually act as the intermediary between an issuer of securities and shareholders of securities. They’re an agent of the issuer, but they serve multiple roles. Primarily, they keep what is known as a master security holder file for the issuer, or a cap table, which shows the issuer who holds its securities. This allows the issuer to conduct corporate actions through the transfer agent.”
Farber went on to discuss a few examples of such corporate actions that can involve transfer agents:
“If an issuer is paying a dividend or an interest payment — they can work with the transfer agent. The transfer agent can act as a paying agent and flow the payments, which could be dividends or interest, for example, through the transfer agent to the holders, since the transfer agent keeps all the info on who those holders are. They make it so the transaction is pretty easy. They can also work as a voting or tabulation agent to tabulate votes for a shareholder vote, or work with issuers to conduct redemptions or tender offers of securities. They can also work with investors to help mitigate issues that come up.”
One issue, for example, could be an investor who loses their wallet and subsequently has no access to their asset. In this case, Farber says,
“We have procedures in place where holders can come to us and the issuer, prove to us that they are who they say they are and that they actually owned the existing wallet, and then we’re able to burn those inaccessible tokens and reissue them to a new wallet of that holder’s choosing so there’s no change in the overall float of securities. We can also help issuers with stolen securities. As the transfer agent, we try to act as a gatekeeper for the securities and the information and the records relating to the securities.”
In terms of the larger picture, Farber says transfer agents “are part of the plumbing of capital markets”. He explained,
“As an SEC-registered transfer agent, we have to maintain accurate real time and historical information such that if the issuer or regulator requests it — we can produce it for them. If they want to pay a dividend on a certain record date, we can produce the entire cap table at that point in time, with all their wallet addresses, email addresses, and other contact information. And all of this is tied to the blockchain, which to my knowledge, no other registered transfer agents can do at this point. In terms of paying dividends — we have capabilities to do all of this on chain and off chain — across the country and internationally.”
In terms of regulation, Farber says the interaction between Securitize and the SEC has been “highly positive”, which also summarizes the interaction he has seen between the SEC and the digital securities industry as a whole.
In describing his vision for the industry, Farber concluded,
“We think digital securities are fundamentally better than paper, and while we continue to push the message out, we’ve started to delivering better products for investors and issuers. We’re starting to see the early signs of liquidity appear in the market. That’s what we’re most excited about in 2019 — the legitimate start to this industry.”
What do you think about Securitize becoming an SEC-registered transfer agent? What does this say about the development of the digital securities industry? We want to know what you think in the comments section below.
Image courtesy of Securitize.