The SEC Is finally modernizing transfer-agent rules. Wall Street must not repeat the ‘paperwork crisis’

On Sept. 1 the U.S. Securities and Exchange Commission unveiled a proposal that would modernize transfer-agent rules, marking the agency’s first significant update to that regime since the late 1970s. The commission’s package acknowledges how transfer agents operate today and signals openness to the use of distributed ledger technology in connection with securities offerings and transfers, while stopping short of broadly endorsing tokenization. Delanoue warns that tokenization can recreate a familiar operational hazard if the industry does not converge on a single authoritative system of record. He cites the 1960s Paperwork Crisis — when fragmented paper-based recordkeeping and surging trade volumes produced crippling back-office backlogs and prompted the creation of the Depository Trust Company in 1973 — as a cautionary precedent. The lesson, he says, is that ownership must be anchored to one official register, not multiple parallel ledgers. Fairmint, which registered as a transfer agent in 2023, operates on the premise that the cap table should be the system of record and issues and administrates equity directly onchain. Delanoue contrasts this native-onchain model with approaches that merely wrap off-chain securities in tokens, which risk divergence between the token ledger and the transfer agent’s official register. To make onchain registers work at market scale, Delanoue urges the SEC and industry to address operational realities in the proposed rules. He recommends that Form TA-2 explicitly distinguish native onchain registers from wrapped models, that holder identification requirements evolve beyond physical street addresses to permit cryptographic credentials or digital IDs, and that rules on legend removals and compliance (including Rules 17ad-30 and 17ad-31) recognize well-designed programmable, pre-trade smart contract controls overseen by registered transfer agents. He also underscores that a public blockchain can serve as the official record while transfer agents remain necessary to map onchain assets to identifiable owners and enforce regulatory duties.