Proposed Rule:
Revised Transfer Agent Form and Related Rule
SECURITIES AND EXCHANGE COMMISSION
17 CFR PARTS 240 and 249b
Release No. 34-41204; File No. S7-11-99)
RIN 3235-AH44
Revised Transfer Agent Form and Related Rule
AGENCY: Securities and Exchange Commission
ACTION: Proposed rule
SUMMARY: The Securities and Exchange Commission (Commission) is publishing for comment its proposal to amend Rule 17Ac2-2 and related Form TA-2 and its proposal to rescind Rule 17a-24 under the Securities Exchange Act of 1934. The amendment would make technical corrections and provide greater clarity to Form TA-2. Accordingly, the amendments are designed to clarify filing requirements and instructions; eliminate or change ambiguous terms and phrases; delete certain redundant or unnecessary questions; and add questions that would help the Commission to more effectively monitor the transfer agent industry.
DATES: Comments are due on or before (insert date 45 days after date of publication in the Federal Register).
ADDRESSES: Comments should be submitted in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549-0609. Comments also may be submitted electronically at the following E-mail address: rule-comments@sec.gov. All comment letters should refer to File No. S7-11-99; this file number should be included on the subject line if E-mail is used. All comments received will be available for public inspection and copying in the Commission's Public Reference Room, 450 5th Street, N.W., Washington, D.C. 20549. Electronically submitted comment letters will be posted on the Commission's Internet Web site (http://www.sec.gov).
FOR FURTHER INFORMATION CONTACT: Jerry W. Carpenter, Assistant Director, or Lori R. Bucci, Special Counsel, at 202/942-4187, Office of Risk Management and Control, Division of Market Regulation, Securities and Exchange Commission, Washington, D.C. 20549-1001.
Supplementary Information:
I. INTRODUCTION
Transfer agents play an essential role in the processing of securities transactions and recordkeeping for securities issuers. The Commission is reviewing the regulations that apply to transfer agents to determine whether changes are necessary or appropriate. In this release, we propose a variety of amendments to Form TA-2, 1 the annual reporting mechanism for all registered transfer agents.
Form TA-2 has not been reviewed since it was adopted in 1986. 2 Since that time, a variety of ambiguities and inconsistencies in the form have come to light. Also, we believe that the quality of the data obtained from transfer agents can be improved. It is essential that the Commission receive accurate information that can be processed and evaluated efficiently by our staff because there is no self-regulatory organization for transfer agents, resulting in more direct oversight responsibility for the Commission and the other appropriate regulatory agencies (ARAs). 3 The amendments proposed today are intended to enhance our oversight capabilities.
A. Rule 17Ac2-2 and Form TA-2
In 1975, Congress enacted legislation for the regulation of the securities processing industry. 4 The legislation requires transfer agents to register, and gives the ARAs the authority to develop registration requirements. Every transfer agent that is subject to registration must file a Form TA-1 with its ARA. 5 Congress gave the Commission broad rulemaking and enforcement authority over all transfer agents 6 although the bank regulatory agencies were given primary responsibility for oversight of bank transfer agents. 7
In 1986, the Commission adopted Rule 17Ac2-2, which requires all registered transfer agents to file an annual report of their business activities on Form TA-2. 8 As part of the Commission’s continuing efforts to improve and simplify rules and forms, the Commission proposes to amend Rule 17Ac2-2 and Form TA-2. The proposed amendments would allow the Commission to obtain clearer and more comprehensive information from transfer agents about their activities. Essentially, the proposed amendments would:
* elicit additional information regarding transfer agent business activities, such as direct purchase and dividend reinvestment plan accounts, buy-ins, and turnaround time for routine items;
* request more useful lost securityholder information;
* enhance service company information;
* eliminate the filing exception;
* clarify the filing requirements and instructions;
* conform reporting periods;
* delete unnecessary questions; and
* make technical changes.
B. Lost Securityholders
To address the problem of lost securityholders, 9 on October 1, 1997, the Commission adopted Rules 17Ad-17 and 17a-24. 10 Rule 17Ad-17 requires transfer agents to conduct data base searches in an effort to locate lost securityholders. Rule 17a-24 requires transfer agents to submit on Form TA-2 aggregate data regarding the accounts of lost securityholders. 11 The purpose of Rule 17a-24 is to gather data to assess the effectiveness of the search requirements of Rule 17Ad-17. As a result of its continuing review of this problem, the Commission now believes that it needs different information than that which is required by Rule 17a-24 to assess the effectiveness of the search requirements of Rule 17Ad-17. Therefore, the Commission is proposing to require transfer agents to report on Form TA-2 specific information about the results of the required data base searches for lost securityholders and to rescind Rule 17a-24.
II. PROPOSED CHANGES
A. Rule 17Ac2-2
Rule 17Ac2-2 requires every transfer agent to file Form TA-2 with the Commission by August 31 of each calendar year. The information furnished on Form TA-2 assists the Commission in its transfer agent oversight programs.
The Commission is proposing several modifications to Rule 17Ac2-2. First, to clarify whether a transfer agent must file Form TA-2 if it withdraws its registration during the filing period, Rule 17Ac2-2 would be amended to require every transfer agent that is registered on June 30 to file Form TA-2 by August 31 of that calendar year.
Second, current Rule 17Ac2-2 provides that a registered transfer agent is required to complete only Items 1 through 4 of Form TA-2 if it: received fewer than 500 items for transfer and fewer than 500 items for processing in the six months ending June 30, and did not maintain master securityholder files for more than 1,000 individual securityholder accounts as of June 30. The proposed amendment would revise this partial exception to the full filing requirement so that it applies to a registered transfer agent that received fewer than 1,000 items for transfer and fewer than 1,000 items for processing in the twelve months ending June 30 of the year for which the form is being filed. 12 Moving from a six month to a twelve month period would conform this exception to the rule’s twelve month reporting period and would provide more complete records regarding the volume of items transferred and processed during the entire reporting period.
Third, Rule 17Ac2-2 currently requires the annual filing of Form TA-2 by all registered transfer agents except named transfer agents 13 that engage a service company 14 to perform all of their transfer and processing functions. 15 As a consequence, in processing Form TA-2 filings, the Commission’s staff frequently cannot determine whether a transfer agent that did not file Form TA-2 is properly using the exception or has simply neglected to file. To address this problem, the proposed rule amendment would eliminate the exception.
A named transfer agent that engages a service company to perform all of its transfer and processing functions would be required to complete only the first four questions and the signature section of Form TA-2. 16 Currently, Rule 17Ac2-2 requires a named transfer agent that engages a service company to perform some but not all of its transfer and processing functions to file a Form TA-2 and to enter zero (0) for those questions that relate to functions performed by the service company on behalf of the named transfer agent. This requirement would not be changed by the proposed amendments. Therefore, as a result of the proposed amendments every registered transfer agent would be required to file a Form TA-2 annually.
B. Form TA-2
Current Form TA-2 contains questions regarding the volume and nature of a transfer agent’s business activities. The Commission proposes to amend Form TA-2 to obtain more complete information regarding service companies, the transfer agent’s amendments to its Form TA-1, direct purchase and dividend reinvestment plan accounts, buy-ins, 17 lost securityholders, and turnaround time for routine items. The proposal also includes numerous technical and conforming changes.
1. Form TA-2 Instructions
Currently, the box at the top left corner of the first page requests the month, day, and year of the filing period. This format enables registrants to put in a date other than the required reporting period. The box at the top left corner of every page of Form TA-2 would be changed to "For the reporting period ending June 30, YYYY." This change would help ensure that the correct reporting period for which Form TA-2 is being submitted is indicated.
For clarity and to ease filling out Form TA-2, the proposed form would add definitions for the following terms to the form’s instructions: aged record difference, lost securityholder, named transfer agent, outside registrar, record difference, reporting period, and service company. These definitions are the same definitions currently set forth in the existing transfer agent rules. In addition, the proposal would revise the filing requirements to conform with the amendments to Rule
17Ac2-2 discussed above.
Currently, in determining the number of investment company securities for which they act as transfer agents, registrants are instructed to count each prospectus as one issue. The Commission believes that it is more informative to count investment company securities by CUSIP numbers rather than by prospectuses. Therefore, registrants would be instructed to count investment company securities as one issue per CUSIP number.
2. Form TA-2 Questions
Revised Form TA-2 would contain a question asking if the registrant has amended Form TA-1 as required by existing transfer agent rules. 18 In addition, the revised Form TA-2 would request that the transfer agent provide an explanation if it failed to file a required amendment to its Form TA-1. Form TA-2 also would contain a new question asking about the registrant’s use of service companies. This information would help the Commission to obtain more complete information about transfer agents and their business activities.
Throughout the form, the request for numbers with "000s omitted" or "in millions - 000,000s omitted" would be deleted to prevent confusion and to ease the staff’s analysis. The amended Form TA-2 would request the actual figures with no zeros omitted.
Currently, Form TA-2 requests transfer agents to report the number of items received for transfer and processing during the six months ending June 30. The proposal would amend this reporting period from six months to twelve months ending June 30 in order to have a uniform annual reporting period.
Currently, Form TA-2 elicits information regarding only the number of issues for which dividend reinvestment plan services are provided. However, the number of transfer agents providing direct purchase and dividend reinvestment plan services and the number of direct purchase and dividend reinvestment plan accounts have increased substantially in recent years. Revised Form TA-2 would require that transfer agents reflect direct purchase and dividend reinvestment plan accounts in the total number of individual securityholder accounts maintained, and separately state the number of individual securityholder direct purchase and dividend reinvestment plan accounts.
Currently, Form TA-2 requests the percentage of individual securityholder accounts maintained in six categories: corporate equity securities, corporate debt securities, investment company securities, limited partnership securities, municipal debt securities, and other securities. Revised Form TA-2 would clarify the question by renaming one of the six categories. The category of investment company securities would be renamed as open-end investment company securities. In addition, for purposes of clarification, the Form TA-2 instructions would be amended to state that the corporate equity category would include closed-end investment company securities.
Currently, Form TA-2 requires the transfer agent to determine the number and type of securities issues for which it acted in various transfer agent capacities. 19 Form TA-2 directs the transfer agent to combine corporate debt and equity into one category. In order that the Commission have more precise information on a transfer agent’s operations, revised Form TA-2 would require the transfer agent to report separately the number of corporate equity and corporate debt securities issues for which it acted in a specified capacity. 20
Where a change in transfer agents for an issuer has occurred, current Form TA-2 requests information about the number and aggregate market value of (1) securities record differences 21 that the current transfer agent received as an out of balance issue from the prior transfer agent, and (2) securities record differences resulting from the current transfer agent. The format of this section has been confusing to many registrants. Therefore, because the Commission believes that the current record difference information is the most significant, the form would be revised to require reporting of the current number and aggregate market value of securities differences with no detail as to whether the securities differences occurred before or after the change in transfer agents.
Revised Form TA-2 would add a question about the number of quarterly reports that were filed and that should have been filed by the registrant with its ARA during the reporting period pursuant to Rule 17Ad-11(c)(2). 22 The addition of this question to Form TA-2 should help the Commission monitor registered transfer agent over-issuance and buy-in activities.
The proposal would eliminate the collection of information about transfer agent custodian (TAC) arrangements. 23 The current question tends to glean erroneous responses from many transfer agents while accurate information is readily obtainable from The Depository Trust Company.
As discussed above, the Commission proposes to use a uniform reporting period in Form TA-2. Accordingly, information relating to a transfer agent’s dividend disbursement and interest paying agent activities, and information relating to the volume of open-end investment company securities purchases and redemptions a transfer agent processes would be reported for the twelve months ending June 30 instead of for the preceding calendar year ending December 31. 24
Current Form TA-2 requests both the number of transactions processed on a date other than the date of receipt of the order and the "number of transactions processed on other than on date of receipt of order, expressed as a percentage of total transactions processed." Because the Commission can compute the percentage based on other data in the form, the percentage inquiry would be eliminated.
Finally, the proposal would add a question regarding turnaround time. Revised Form TA-2 would ask transfer agents to report the number of months during the reporting period in which the registrant was not in compliance with the specified turnaround time for routine items pursuant to Rule 17Ad-2. 25 Revised Form TA-2 also would ask transfer agents to report the number of written notices the transfer agent filed and should have filed during the reporting period documenting its noncompliance with turnaround time for routine items pursuant to Rule 17Ad-2.
C. Rule 17a-24
Rule 17a-24 requires registered transfer agents to report the aggregate number of lost securityholder accounts as of June 30 of each year and the percentage of total accounts represented by such lost securityholder accounts. These figures currently must be reported for lost securityholder accounts outstanding for: one year or less, three years or less, five years or less, or more than five years. As noted in the adopting release, the Commission adopted Rule 17a-24 to require the reporting of information on aged lost securityholder accounts in order to assess the effectiveness of search techniques employed by transfer agents. Rule 17a-24 also requires information on lost securityholder accounts that escheated to state unclaimed property administrators.
In 1998, transfer agents were required to report information on the aging of lost securityholder accounts for the first time on Form TA-2. Transfer agent representatives, however, have informed Commission staff that compiling information on the aging of lost securityholder accounts has proved to be extremely difficult. Many transfer agents have indicated that their record systems are not designed to produce such information and that to program their systems to provide such information would be extremely burdensome and in some situations not possible. 26
The Commission has reviewed the information required by Rule 17a-24. The Commission believes that the Commission should refine transfer agents’ reporting requirements so that the information transfer agents are required to file would give a better indication of the effectiveness of the data base searches. The new reporting requirements should also be less burdensome for transfer agents to implement. Therefore, the Commission is proposing that: (1) transfer agents be required to report on Form TA-2 the number of lost securityholders for which a first and for which a second data base search has been conducted and for which a correct address has been obtained as a result of these searches; (2) transfer agents continue, as required by Rule 17a-24, to report on Form TA-2 the current number of lost securityholder accounts and the number of lost securityholder accounts that were remitted to the states during the last year; (3) the remaining information (i.e., aging of lost securityholder accounts) will no longer be required; and (4) Rule 17a-24 then be rescinded.
III. GENERAL REQUEST FOR COMMENTS
The Commission solicits commenters’ views on all aspects of the proposed amendments to Rule 17Ac2-2 and Form TA-2 and the proposed rescission of Rule 17a-24 under the Securities Exchange Act of 1934 (Exchange Act). In particular, the Commission requests comment as to whether the proposed amendments would provide the most effective means for the Commission to obtain adequate information regarding transfer agent operations. Are there other questions that the Commission could ask on Form TA-2 to obtain useful information on transfer agent operations? Is there other specific information regarding transfer agent operations that the Commission should require to be provided on Form TA-2?
In addition, the Commission requests comments on whether the proposed change to the information on lost securityholders collected on Form TA-2 would be a more effective method to track the effectiveness of transfer agents’ data base searches than the account aging information currently required. Do transfer agents currently have the aging information readily available to report? Is the proposed change a more efficient and less costly method for transfer agents to report information on their outstanding lost securityholder accounts? What system changes and costs would transfer agents incur if they were only required to report the aging of lost securityholder accounts prospectively? (For example, it would only be five years from now that a transfer agent would be required to report the number of securityholder accounts that had been lost for five years.)
Finally, the Commission refers commenters to its policy statement establishing a regulatory moratorium to facilitate the year 2000 conversion. 27 The Commission anticipates that any amendments to Rule 17Ac2-2 and Form TA-2 would be adopted before the moratorium begins on June 1, 1999. However, the Commission requests comment on the specific extent to which the proposed amendments would require registered transfer agents to make major programming changes to their computer systems.
IV. COSTS AND BENEFITS OF THE PROPOSED AMENDMENTS AND THEIR EFFECTS ON COMPETITION
The Commission has identified certain costs and benefits relating to the proposals, which are discussed below, and encourages commenters to discuss any additional costs or benefits. In particular, the Commission requests comment on the potential costs for any necessary modifications to information gathering, management, and recordkeeping systems or procedures as well as any potential benefits resulting from the proposals for issuers, transfer agents, regulators, or others. Commenters should provide analysis and empirical data to support their views on the costs and benefits associated with the proposals.
A. Benefits
These amendments would help the Commission to:
• Keep complete records on all registered transfer agents. Currently, the Commission’s staff cannot easily determine whether a transfer agent who did not file a Form TA-2 is properly using an applicable exception or whether the transfer agent has simply neglected to file.
• Use the information gathered from Form TA-2 to monitor the annual business activities of registered transfer agents, including the use of service companies, amendments to Form TA-1, direct purchase and dividend reinvestment plan accounts, buy-ins, and turnaround time for routine items.
• Achieve a consistent reporting period which should eliminate confusion from varying reporting periods. In addition, as the volume of transfer business may not be consistent throughout the entire reporting period, the current reporting requirement of only six months of data is potentially skewed.
• Elicit information regarding the data base searches for lost securityholders. This information should enable the Commission to assess the effectiveness of the search requirements of Rule 17Ad-17 and the scope of the lost securityholder problem.
B. Costs
The proposed amendments to Rule 17Ac2-2 and Form TA-2 should not result in any significant additional costs to transfer agents. The majority of information required by Form TA-2 is available in the internal files of the transfer agents, and a large portion of the information is already required by the Commission to be calculated or maintained.
The primary cost associated with the proposal is the time that it will take transfer agent personnel to complete the form and file it with the Commission. The amount of time needed to comply with the requirements of amended Rule 17Ac2-2 and Form TA-2 would vary. There are approximately 1,210 registered transfer agents. Of this number, approximately 300 registrants would be required to complete only Questions 1 through 4 and the signature section of amended Form TA-2. Based on their low volume of transfer business and number of shareholder accounts, approximately 410 registrants would be required to answer only Questions 1 through 5, 10, and 11 and the signature section. The remaining registrants, approximately 500, would be required to complete the entire Form TA-2.
Additionally, there may be some incremental cost associated with modifying computer systems to report all items for the twelve months ending June 30. This likely would require a simple, one-time change to database reporting functions and should have a negligible cost on transfer agents. The Commission seeks comment on this assumption and specifically requests empirical data on the cost of modifying systems to report all items for the twelve months ending June 30.
C. Effects on Efficiency, Competition, and Capital Formation
Section 23(a)(2) of the Exchange Act precludes the Commission in amending rules under the Exchange Act from adopting any such rule or regulation that would impose a burden on competition not necessary or appropriate in furtherance of the purposes of the Exchange Act. 28 The Commission is considering the proposed amendments to Rule 17Ac2-2 and Form TA-2 in light of the standards cited in Section 23(a)(2). The Commission is proposing these amendments to enhance the Commission's ability to monitor more effectively the transfer agent industry. The amendments are also intended to make the Form TA-2 more efficient for both the Commission and transfer agents. Because transfer agents of a similar size and with similar business are required to complete the form in the same manner, there should be no negative impact on competition. The Commission solicits commenters' views regarding the effects of the proposed amendments to Rule 17Ac2-2 and Form TA-2 on competition, efficiency, and capital formation. For purposes of the Small Business Regulatory Enforcement Fairness Act of 1996, we also seek comments on the proposed rule’s potential impact (including any empirical data) on the economy on an annual basis, any increase in costs or prices for consumers, and any effect on competition, investment or innovation.
V. SUMMARY OF INITIAL REGULATORY FLEXIBILITY ANALYSIS
The Commission has prepared an Initial Regulatory Flexibility Analysis (IRFA), in accordance with the provisions of the Regulatory Flexibility Act, 29 regarding the proposed amendments to Rule 17Ac2-2 and Form TA-2 and the proposed rescission of Rule 17a-24 under the Exchange Act. As discussed more fully in the analysis, some of the transfer agents that the proposed amendments would affect are small entities, as defined by the Commission's rules.
The IRFA states the purpose of the proposal is to allow the Commission to obtain more comprehensive information from transfer agents about their activities while making Form TA-2 clearer and easier for transfer agents to complete. The proposed amendments would: elicit information regarding transfer agent business activities, such as direct purchase and dividend reinvestment plan accounts, buy-ins, and turnaround time for routine items; obtain more comprehensive lost securityholder information; enhance service company information; eliminate the filing exemption; clarify the filing requirements and instructions; conform reporting periods; delete unnecessary questions; and make technical changes.
The IRFA sets forth the statutory authority for the proposed amendments to Rule 17Ac2-2 and Form TA-2 and for the rescission of Rule 17a-24. The IRFA also discusses the effect of the proposal on transfer agents that are small entities pursuant to Rule 0-10(h) under the Exchange Act. 30 Rule 0-10(h) defines the term "small business" or "small organization" to include any transfer agent that: (1) received less than 500 items for transfer and less than 500 items for processing during the preceding six months (or in the time that it has been in business, if shorter); (2) maintained master shareholder files that in the aggregate contained less than 1,000 shareholder accounts or was the named transfer agent for less than 1,000 shareholder accounts at all times during the preceding fiscal year (or in the time that it has been in business, if shorter); (3) only transferred items of issuers with total assets of $5 million or less; and (4) is not affiliated with any person (other than a natural person) that is not a small business or small organization under Rule 0-10.
When the Commission adopted the new definition of "small entity" with respect to transfer agents, the Commission estimated that approximately 180 registered transfer agents would qualify as small entities under Rule 0-10. As a result, the Commission estimates that 180 small entities would be subject to the requirements of the proposed amendments to Rule 17Ac2-2 and Form TA-2.
The proposed amendments to Rule 17Ac2-2 would provide that a registered transfer agent that received fewer than 1,000 items for transfer and fewer than 1,000 items for processing in the twelve months ending June 30, and did not maintain master securityholder files for more than 1,000 individual securityholder accounts as of June 30, would have to complete only a portion of Form TA-2. All "small entities" as defined by Rule 0-10 would continue to have reduced reporting requirements under the proposal.
The IRFA states that the proposal would impose new reporting and compliance requirements on certain transfer agents because it would eliminate the filing exception for named transfer agents using service companies and would require every registered transfer agent to file Form TA-2 annually. In addition, questions regarding the use of service companies, amendments to its Form TA-1, direct purchase and dividend reinvestment plan accounts, buy-ins, lost securityholders, and turnaround time for routine items would be added to Form TA-2. The IRFA states that the incremental annual burden on all "small entities" would be approximately 81 hours and $2,552. The IRFA also states that the proposed amendments to Rule 17Ac2-2 and Form TA-2 would not impose any other reporting, recordkeeping, or compliance requirements, and that the Commission believes that there are no rules that duplicate, overlap, or conflict with the proposed amendments.
The IRFA discusses the various alternatives considered by the Commission in connection with the proposed amendments to Rule 17Ac2-2 and Form TA-2 that might minimize the effect on small entities, including: (a) the establishment of differing compliance or reporting requirements or timetables that take into account the resources of small entities; (b) the clarification, consolidation, or simplification of compliance and reporting requirements under the proposed amendments for small entities; (c) the use of performance rather than design standards; and (d) an exemption from coverage of the rule or any part thereof for small entities.
Taking into account the burden that would be imposed on small transfer agents, the Commission is proposing that transfer agents that meet the definition of a "small entity" still be required to respond to only a portion of Form TA-2. Therefore, small entities would be subject to a minimal amount of compliance cost under the proposal. Accordingly, the Commission has determined that it is not feasible to further clarify, consolidate, or simplify the proposed amendments for "small entities." The Commission also believes that it would be inconsistent with the purpose of the Exchange Act to exempt "small entities" from the proposed amendments or to use performance standards to specify different requirements for small entities.
The Commission encourages the submission of written comments with respect to any aspect of the IRFA. Comments should specify costs of compliance with the proposed amendments to Rule 17Ac2-2 and Form TA-2, suggest alternatives that would accomplish the objective of proposed amendments, or indicate how many small entities, if any, would be subject to the rule change. A copy of the IRFA may be obtained by contacting Lori R. Bucci, Office of Risk Management and Control, Division of Market Regulation, Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549-1001.
VI. PAPERWORK REDUCTION ACT
Certain provisions of the proposed amendments to Rule 17Ac2-2 and Form TA-2 contain "collection of information" requirements within the meaning of the Paperwork Reduction Act of 1995, 31 and the Commission has submitted them to the Office of Management and Budget for review in accordance with 44 U.S.C. 3507(d) and 5 CFR 1320.11. The Commission notes that it proposes to rescind Rule 17a-24. However, the Commission proposes to keep two questions generated by Rule 17a-24 on Form TA-2 and to add a question to Form TA-2 about the results of the required data base searches for lost securityholders. The title for the collection of information is: "Transfer Agents Annual Report 17 CFR 240.17Ac2-2, Form TA-2." The OMB control number for the collection of information is 3235-0337.
Under the proposed amendments, Rule 17Ac2-2 would require the collection of additional information on amended Form TA-2. First, the proposal would eliminate the filing exception for named transfer agents and would require every named transfer agent using a service company for all of its transfer and processing functions to complete only the first four questions and the signature section of Form TA-2, which request only simple information. Second, registered transfer agents that meet the criteria based on volume of transfer business and number of shareholder accounts would be required to Questions 1 through 5, 10, 11, and the signature section of Form TA-2. Finally, registered transfer agents that file a complete Form TA-2 would be required to respond to new questions regarding the use of service companies, amendments to Form TA-1, direct purchase and dividend reinvestment plan accounts, buy-ins, lost securityholders, and turnaround time for routine items.
The Commission uses the information on Form TA-2 to monitor the annual business activities of registered transfer agents. The proposed collection of information under amended Rule 17Ac2-2 and Form TA-2 is intended to facilitate greater accuracy of transfer agents’ records. Furthermore, the information elicited from the additional question regarding lost securityholders should help the Commission to assess the effectiveness of the search requirements of Rule 17Ad-17 and the scope of the lost securityholder problem.
The collection of information required by the proposed amendments to Rule 17Ac2-2 and Form TA-2 should not result in any new significant burden to transfer agents. All information required by Form TA-2 is available in the internal files of the transfer agents and a large portion of the information is already required by existing Commission transfer agent rules to be calculated or maintained.
The amount of time needed to comply with the requirements of amended Rule 17Ac2-2 and Form TA-2 would vary. There are approximately 1,210 registered transfer agents. From this total number, approximately 300 registrants would be required to complete only Questions 1 through 4 and the signature section of amended Form TA-2, which the Commission estimates would take each registrant about 30 minutes, for a total of 150 hours (300 x .5 hours). Approximately 410 registrants would be required to answer Questions 1 through 5, 10, and 11 and the signature section, which the Commission estimates would take about 1 hour and 30 minutes, for a total of 615 hours (410 x 1.5 hours). The remaining registrants, approximately 500, would be required to complete the entire Form TA-2, which the Commission estimates would take about 6 hours, for a total of 3000 hours (500 x 6 hours). The Commission estimates that the total burden would be 3,765 hours (150 + 615 + 3000). 32
The collection of information pursuant to the proposed amendments to Form TA-2 and Rule 17Ac2-2 does not contain any new recordkeeping requirements. Providing the information will be mandatory. Responses to the collection of information will not be kept confidential. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid Office of Management and Budget control number.
Pursuant to 44 U.S.C. § 3506(c)(2)(B), the Commission solicits comments to:
(i) evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility;
(ii) evaluate the accuracy of the Commission's estimate of the burden of the proposed collection of information;
(iii) enhance the quality, utility, and clarity of the information to be collected; and
(iv) minimize the burden of collection of information on those who are to respond, including through the use of automated collection techniques or other forms for information technology.
Persons desiring to submit comments on the collection of information requirements should direct them to the following persons: Desk Officer for the Securities and Exchange Commission, Office of Information and Regulatory Affairs, Office of Management and Budget, Room 10202, New Executive Office Building, Washington, D.C. 20503; and Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549-0609, and refer to File No. S7-11-99. The Office of Management and Budget (OMB) is required to make a decision concerning the collection of information between 30 and 60 days after publication of this release in the Federal Register, so a comment to OMB is best assured of having its full effect if OMB receives it within 30 days of this publication.
VII. STATUTORY BASIS
Pursuant to the Exchange Act and particularly Sections 17, 17A, and 23(a) thereof, 15 U.S.C. 78q, 78q-1, and 78w(a), the Commission proposes to amend § 240.17Ac2-2 and Form TA-2 (referenced in 17 CFR 249b.102) of Chapter II of Title 17 of the Code of Federal Regulations in the manner set forth below.
LIST OF SUBJECTS
17 CFR Parts in 240 and 249b
Reporting and recordkeeping requirements, Securities.
TEXT OF AMENDMENT
For the reasons set forth in the preamble, the Commission proposes to amend Chapter II of Title 17 of the Code of Federal Regulations as follows:
Part 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 1934
1. The authority citation for Part 240 continues to read in part as follows:
Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78f, 78i, 78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78o, 78p, 78q, 78s, 78u-5, 78w, 78x, 78ll(d), 77mm, 79q, 79t, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4 and 80b-11, unless otherwise noted.
* * * * *
2. Section 240.17a-24 is removed.
3. Section 240.17Ac2-2 is revised to read as follows:
§ 240.17Ac2-2 Annual reporting requirement for registered transfer agents.
(a) Every transfer agent registered on June 30 shall file an annual report on Form TA-2 (§ 249b.102 of this chapter) by August 31 of that calendar year. Form TA-2 shall be completed in accordance with the instructions contained in the form.
(1) A registered transfer agent that received fewer than 1,000 items for transfer and fewer than 1,000 items for processing in the reporting period and that did not maintain master securityholder files for more than 1,000 individual securityholder accounts as of June 30 of the reporting period shall complete only Questions 1 through 5, 10, 11, and the signature section of Form TA-2 (§ 249b.102 of this chapter).
(2) A named transfer agent, as defined in § 240.17Ad-9(j), that engaged a service company, as defined in § 240.17Ad-9(k), to perform all of its transfer and processing functions during the reporting period shall complete only Questions 1 through 4 and the signature section of Form TA-2 (§ 249b.102 of this chapter).
(3) A named transfer agent, as defined in § 240.17Ad-9(j) that engaged a service company, as defined in § 240.17Ad-9(k), to perform some but not all of its transfer and processing functions during the reporting period shall complete all of Form TA-2, (§ 249b.102 of this chapter) but shall enter zero (0) for those questions which relate to functions performed by the service company on behalf of the named transfer agent.
(b) For purposes of this section, the term reporting period shall mean the 12 months ending June 30 of the year for which the form is being filed.
PART 249b--FURTHER FORMS, SECURITIES EXCHANGE ACT OF 1934
4. The authority citation for Part 249b continues to read in part as follows:
Authority: 15 U.S.C. 78a, et seq., unless otherwise noted;
* * * * *
5. Form TA-2 (referenced in § 249b.102) is revised to read as follows: (Note: Form TA-2 does not and the amendments will not appear in the Code of Federal Regulations.)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
INSTRUCTIONS FOR USE OF FORM TA-2
Form TA-2 is to be used by transfer agents registered pursuant to Section 17A
of the Securities Exchange Act of 1934 for filing the annual report of
transfer agent activities.
ATTENTION: Certain sections of the Securities Exchange Act of 1934 applicable to transfer agents are referenced below. Transfer agents are urged to review all applicable provisions of the Securities Exchange Act of 1934, the Securities Act of 1933, and the Investment Company Act of 1940, as well as the applicable rules promulgated by the SEC under those Acts.
I. General Instructions for Filing and Amending Form TA-2.
A. Terms and Abbreviations. The following terms and abbreviations are used throughout these instructions:
1. "Act" means the Securities Exchange Act of 1934.
2. "Aged record difference", as defined in Rule 17Ad-11(a)(2), means a record difference that has existed for more than 30 calendar days.
3. "ARA" means the appropriate regulatory agency, as defined in Section 3(a)(34)(B) of the Act.
4. "Form TA-2" includes the Form TA-2 itself and any attachments.
5. "Lost securityholder", as defined in Rule 17Ad-17, means a securityholder: (i) to whom an item of correspondence that was sent to the securityholder at the address contained in the transfer agent’s master securityholder file has been returned as undeliverable; provided, however, that if such item is re-sent within one month to the lost securityholder, the transfer agent may deem the securityholder to be a lost securityholder as of the day the re-sent item is returned as undeliverable; and (ii) for whom the transfer agent has not received information regarding the securityholder’s new address.
6. "Named transfer agent", as defined in Rule 17Ad-9(j), means a registered transfer agent that has been engaged by an issuer to perform transfer agent functions for an issue of securities but has engaged a service company (another registered transfer agent) to perform some or all of those functions.
7. "Outside registrar", as defined in Rule 17Ad-1(b), means a transfer agent which performs only the registrar function for the certificate or certificates presented for transfer and includes the persons performing similar functions with respect to debt issues. See also Section 3(a)(25)(B) of the Act.
8. "Record difference" means any of the imbalances described in Rule 17Ad-9(g).
9. "Registrant" means the transfer agent on whose behalf the Form TA-2 is filed.
10. "Reporting period" means the 12 months ending June 30 of the year for which Form TA-2 is being filed.
11. "Rule" or "Rules" are found in Volume 17, Section 240 of the Code of Federal Regulations (CFR) (e.g., Rule 17Ad-1 is found at 17 CFR 240.17Ad-1).
12. "SEC" means the United States Securities and Exchange Commission.
13. "Service company" means the registered transfer agent engaged by a named transfer agent to perform transfer agent functions for that named transfer agent, as defined in Rule 17Ad-9(k).
14. "Transfer agent", as defined in Section 3(a)(25) of the Act, means any person who engages on behalf of an issuer of securities or on behalf of itself as an issuer in at least one of the functions enumerated therein.
B. Who Must File; When to File.
1. Every transfer agent that is registered on June 30 shall file Form TA-2 in accordance with the instructions contained therein by August 31 of that calendar year.
a. A registered transfer agent that received fewer than 1,000 items for transfer and fewer than 1,000 items for processing during the reporting period and that did not maintain master securityholder files for more than 1,000 individual securityholder accounts as of June 30 of the reporting period is required to complete only Questions 1 through 5, 10, and 11, and the signature section of Form TA-2.
b. A named transfer agent that engaged a service company to perform all of its transfer and processing functions during the reporting period is required to complete only Questions 1 through 4 and the signature section of Form TA-2.
c. A named transfer agent that engaged a service company to perform some but not all of its transfer and processing functions during the reporting period must complete all of Form TA-2 but should enter zero (0) for those questions that relate to functions performed by the service company on behalf of the named transfer agent.
2. The date on which any filing is actually received by the SEC is the Registrant’s filing date provided that the filing complies with all applicable requirements. A filing that does not comply with applicable requirements may be rejected by the SEC. The SEC’s receipt of a filing, however, shall not constitute an SEC finding that the filing has been filed as required or that the information therein is accurate, current, or complete.
C. Number of Copies; How and Where to File. The Registrant must file the original and two copies of Form TA-2 with the SEC. The original copy of Form TA-2 must be manually signed and any additional copies may be photocopies of the signed original copy. All copies must be legible and on good quality 8 1/2 X 11 inch white paper. The Registrant must keep an exact copy of any filing for its records.
The Registrant must file Form TA-2 directly with the SEC at:
Securities and Exchange Commission
Office of Filings and Information Services, Mail Stop A-2
450 5th Street, N.W.
Washington, DC 20549
II. Special Instructions for Filing Form TA-2.
A. Indicate the year for which Form TA-2 is filed in the box at the upper left hand corner. A transfer agent registered on June 30 shall file Form TA-2 by August 31 of that calendar year even if the transfer agent conducted business for less than the entire reporting period.
B. In answering Question 4, indicate the number of items received for transfer and the number of items received for processing during the reporting period. Omit the purchase and redemption of open-end investment company shares. Report those items in response to Question 9.
C. In answering Questions 5 and 6, include closed-end investment company securities in the corporate equity securities category.
In answering Question 5.a, include direct purchase and dividend reinvestment plan accounts in the total number of individual securityholder accounts maintained. In Question 5.b., include dividend reinvestment plan accounts only. In Question 5.c., include direct purchase plan accounts only. In Question 5.d., include American Depositary Receipts (ADRs) in the corporate equity or corporate debt category, as appropriate, and include direct purchase and dividend reinvestment plan accounts in the corporate equity or open-end investment company securities category, as appropriate.
In answering Question 6, all series of debt securities issued under a single indenture are to be counted as one issue. Open-end investment company securities portfolios are to be counted as one issue per CUSIP number.
D. In answering Question 8.c., exclude coupon payments and transfers of record ownership as a result of corporate actions.
E. In answering Question 9, exclude non-value transactions such as name or address changes.
III. Federal Information Law and Requirements.
SEC’s Collection of Information: An Agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid control number. Under Sections 17, 17A(c) and 23(a) of the Act and the rules and regulations thereunder, the SEC is authorized to solicit from registered transfer agents the information required to be supplied on Form TA-2. The filing of this Form is mandatory for all registered transfer agents. The information will be used for the principal purpose of regulating registered transfer agents but may be used for all routine uses of the SEC or of the ARAs. Information supplied on this Form will be included routinely in the public files of the ARAs and will be available for inspection by any interested person. Any member of the public may direct to the Commission any comments concerning the accuracy of the burden estimate on the application facing page of this Form, and any suggestions for reducing this burden. This collection of information has been reviewed by the Office of Management and Budget in accordance with the clearance requirements of 44 U.S.C. 3507. The applicable Privacy Act system of records is SEC-2. This form is subject to the routine uses set forth at 40 FR 39255 (Aug. 27, 1975) and 41 FR 5318 (Feb. 5, 1976).
File Number:
For the reporting period ending June 30, _______
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM TA-2
FORM FOR REPORTING ACTIVITIES OF TRANSFER AGENTS
REGISTERED PURSUANT TO SECTION 17A OF THE SECURITIES EXCHANGE ACT OF 1934
1. Full name of Registrant as stated in Question 3 of Form TA-1:
(Do not use Form TA-2 to change name or address.)
________________________________________________________________
2. a. During the reporting period, has the Registrant engaged a service
company to perform any of its transfer and processing functions? (Check
appropriate box.)
__ All __ Some __ None
b. If the answer to subsection (a) is all or some, list on the lines
provided the name(s) and address(es) of all service company(ies)
engaged.
________________________________________________________________
________________________________________________________________
________________________________________________________________
________________________________________________________________
3. a. Appropriate regulatory agency (Check one box only.)
__ Comptroller of the Currency
__ Federal Deposit Insurance Corporation
__ Board of Governors of the Federal Reserve System
__ Securities and Exchange Commission
b. During the reporting period, has the Registrant amended Form TA-1 within
60 calendar days Following the date on which information reported
therein became inaccurate, incomplete, or misleading?
(Check appropriate box.)
__ Yes, filed amendment(s)
__ No, failed to file amendment(s)
__ Not applicable
c. If the answer to subsection (b) is no, provide an explanation on the
lines provided.
________________________________________________________________
________________________________________________________________
________________________________________________________________
________________________________________________________________
If the response to any question is none or zero, enter "0"
4. Number of items received during the reporting period:
a. Transfer......................................................__________
b. Processing (outside registrar function).......................__________
5. a. Number of individual securityholder accounts, including
direct purchase and dividend reinvestment plan accounts,
maintained as of June 30:.....................................__________
b. Number of individual securityholder dividend reinvestment
plan accounts maintained as of June 30:.......................__________
c. Number of individual securityholder direct purchase plan
accounts maintained as of June 30:............................__________
d. Approximate percentage of individual securityholder accounts,
including direct purchase and dividend reinvestment plan accounts, from
subsection (a) maintained in the following categories as of June 30:
Corporate
Equity
Securities
Corporate
Debt
Securities
Open-End
Investment
Company Securities
Limited
Partnership
Securities
Municipal
Debt
Securities
Other
Securities
6. Number of securities issues for which Registrant acts in the following
capacities, as of June 30:
a. Receives items for transfer and maintains the master securityholder
files:
b. Receives items for transfer but does not maintain the master
securityholder files:
c. Does not receive items for transfer but maintains the master
securityholder files:
Corporate
Equity
Securities
Corporate
Debt
Securities
Open-End
Investment
Company
Securities
Limited
Partnership
Securities
Municipal
Debt
Securities
Other
Securities
a.
b.
c.
7. a. Number and aggregate market value of securities aged record differences,
existing for more than 30 days, as of June 30:
i. Number of issues ...................... ________________
ii. Market value (in dollars) ...................... ________________
b. Number of quarterly reports regarding buy-ins filed by the Registrant
with its ARA (including the SEC) during the reporting period pursuant to
Rule 17Ad-11(c)(2)......................................________________
c. During the reporting period, has the Registrant been notified
by its ARA (including the SEC) that it failed to file quarterly
reports regarding buy-ins pursuant to Rule 17Ad-11(c)(2)?
__ Yes __ No
d. If the answer to subsection (c) is yes, provide an explanation for each
notification on the lines provided.
________________________________________________________________
________________________________________________________________
________________________________________________________________
8. Scope of certain additional types of activities performed:
a. Number of issues for which dividend reinvestment plan
services are provided, as of June 30......................_______________
b. Number of issues for which direct purchase plan services
are provided, as of June 30..............................._______________
c. Dividend disbursement and interest paying agent activities
conducted during the reporting period:
i. number of issues....................................._______________
ii. amount (in dollars).................................._______________
9. Number of open-end investment company securities purchases and redemptions
("transactions") excluding dividend and distribution postings processed
during the reporting period:
a. Total number of transactions processed..................._______________
b. Number of transactions processed on a date other than date of receipt of
order ("as ofs")........................................._______________
10. a. Number of lost securityholder accounts as of June 30..._______________
b. Percentage of total accounts represented by lost
securityholder accounts as of June 30.................._______________
c. Number of lost securityholder accounts that have
been remitted to states during the reporting period...._______________
d. Percentage of total accounts represented by lost
securityholder accounts that have been remitted to
states as of June 30..................................._______________
11. Number of lost securityholder accounts listed on the transfer agent's master
Securityholder files during the reporting period:
a. For which a first data base search has been
conducted..............................................._______________
b. For which a correct address has been obtained
through the first data base search......................_______________
c. For which a second data base search has been
conducted..............................................._______________
d. For which a correct address has been obtained through
the second data base search............................._______________
12. a. During the reporting period, has the Registrant (except when
acting as an outside registrar) always been in compliance with the
turnaround time for routine items as set forth in Rule 17Ad-2(a)?
__ Yes __ No
If the answer to subsection (a) is no, complete subsections (i) through
(iii).
i. Provide the number of months during the reporting period in
which the Registrant was not in compliance with the
turnaround time for routine items according to Rule 17Ad-
2(a) ........................................._______________
ii. Provide the number of written notices Registrant filed
during the reporting period with the SEC and with its ARA
pursuant to Rule 17Ad-2(c) that reported its noncompliance
with turnaround time for routine items according to Rule
17Ad-2(a) _______________
iii. Provide the number of times during the reporting period that
the Registrant was notified by its ARA that it failed to
file written notices with its ARA pursuant to Rule 17Ad-2(c)
to report its noncompliance with turnaround time for routine
items according to Rule 17Ad-2(a)............._______________
b. Has the Registrant, acting as an outside registrar, always been in
compliance during the reporting period with the turnaround time
for routine items as set forth in Rule 17Ad-2(b)?
__ Yes __ No
If the answer to subsection (b) is no, complete subsections (i) through (iii).
i. Provide the number of months during the reporting period in
which the Registrant was not in compliance with the
turnaround time for routine items according to Rule 17Ad
-2(b).........................................______________
ii. Provide the number of written notices Registrant filed
during the reporting period with the SEC and with its ARA
pursuant to Rule 17Ad-2(d) that reported its noncompliance
with turnaround time for routine items according to Rule
17Ad-2(b)...................................._______________
iii. Provide the number of times during the reporting period that
the Registrant was notified by its ARA that it failed to
file written notices with its ARA pursuant to Rule 17Ad-2(d)
to report its noncompliance with turnaround time for routine
items according to Rule 17Ad-2(b)............_______________
ATTENTION: INTENTIONAL MISSTATEMENTS OR OMISSIONS OF FACT
CONSTITUTE FEDERAL CRIMINAL VIOLATIONS.
See 18 U.S.C. 1001 and 15 U.S.C. 78ff(a)
SIGNATURE: The Registrant submitting this Form, and the person signing the
Form, hereby represent that all the information contained in the
Form is true, correct, and complete.
Manual signature of Official responsible for Form:
Title:
Telephone number:
Name of Official responsible for Form:
(First name, Middle name, Last name)
Date signed
(Month/Day/Year):
By the Commission.
Jonathan G. Katz
Secretary
Dated: March 23, 1999
