.jpg)
The SEC’s transfer agent proposal puts fund administration at a crossroads
30 Sep 2026
Scott Gralnick, global head of Institutional Growth at IRACE Digital, explores how a recently issued proposal from the US Securities and Exchange Commission on transfer agent rules could impact fund administrators and advisors
Image: IRACE Digital
An investor moves shares of a tokenised money market fund to a new wallet on a Saturday. It settles onchain in seconds. On Monday morning, someone at the fund administrator still has to figure out who owns that wallet, whether they passed Know Your Customer (KYC), and whether the transfer was even allowed.
On 1 September, the US Securities and Exchange Commission (SEC) issued a proposal that would allow a blockchain or other distributed ledger to serve as the official record of securities ownership. The proposed change would amend rules for transfer agents, modernising the terminology to reflect contemporary electronic recordkeeping. That is a real step forward. But it does not make Monday morning go away.
The proposal, published in the Federal Register on 4 September, is the first substantial rewrite of the SEC’s transfer agent rules in roughly four decades. It would apply to an estimated 327 registered transfer agents. Alongside the distributed ledger provision, it would introduce new compliance policy requirements and remove long-standing exemptions for smaller firms.
The rule change would permit a transfer agent to maintain its master securityholder file (or golden record) on a distributed ledger, provided that the agent retains exclusive control over it. The SEC is also asking how onchain records, such as wallet addresses and quantities held, should connect to the offchain records that underpin the rest of the financial ecosystem.
The key condition is exclusive control. The SEC does not define what that means for a distributed ledger, and it openly asks how to handle records that exist only on a ledger the transfer agent does not control. A permissioned network where the agent is the only party able to write entries seems likely to qualify.
A public blockchain, where tokens can move without the agent’s involvement, may not. For administrators, this is more than a legal technicality. It determines which record is authoritative when the onchain balance and the official register disagree, and therefore which one they must reconcile against.
This gets to the heart of a problem the industry has not fully solved yet. Fragmented systems that do not talk to each other do not get better by adding one more. Anyone who has worked on a house knows you do not add a new room without tying it into the existing plumbing and electrical. Tokenisation is the same.
Moving activity onchain does not remove the administrator’s job. It changes where the work happens.
This adds another source of data that administrators must incorporate into their existing processes, and the SEC’s proposal makes that challenge clear.
If a security holder’s ownership is recorded onchain, the administrator still needs to establish who owns the asset, whether the transfer was permitted, and how that change should be reflected in the fund’s official records. The SEC is effectively asking how the two sides should connect. If an onchain transfer does not automatically flow into the records used for accounting, reporting, and compliance, the efficiency gained from putting the transaction onchain can simply create another reconciliation exercise for the administrator.
Go back to that Saturday transfer. On Monday morning, the administrator must establish who controls the receiving wallet, whether that party has passed KYC and is eligible to hold the fund, and whether the transfer complied with any restrictions in the fund’s documents. It then has to update the register, reflect the change in the fund’s accounting, and make sure investor reporting is correct. If any of those steps rely on someone manually checking the blockchain against an internal system, the speed of the transfer is lost. The administrator has simply inherited a new reconciliation break.
This is an issue that will extend beyond transfer agencies as onchain finance becomes more commonplace. Fund administrators will increasingly have to account for transactions taking place on blockchain networks alongside the activity they already manage. That could mean an investor subscribing to a tokenised fund, ownership changing onchain, or an asset settling outside traditional market infrastructure.
The administrator’s responsibilities remain the same: maintaining an accurate record, applying the necessary controls, and keeping a clear audit trail; but what changes is where the transaction happens and how quickly it can move. That creates a practical problem for systems built around periodic processes.
The proposal also makes clear that regulators will expect better data. Transfer agents would have to report on Form TA-2 whether they maintain securityholder records on a distributed ledger and which tokenisation model they use. Records would need a full audit trail showing who accessed, changed, or deleted an entry and when, and firms would have to retain them for six years. These requirements apply wherever the data lives, so systems will need to capture onchain and offchain activity to the same standard.
This is where updated infrastructure matters the most. There is little reason to expect traditional fund administration to disappear, and most managers will operate with a mixture of traditional and tokenised assets for some time. Administrators therefore need to support both within the same operating framework.
The firms that adapt most effectively will be those that can incorporate onchain activity into the systems and controls they already use, rather than creating a separate process for every new use case. In practical terms, that means systems that can take in onchain events as they happen rather than in an end-of-day batch. They need to maintain a reliable link between wallet addresses and verified investors and hold a single internal source of truth across onchain and offchain records. They also need exception handling that flags mismatches automatically and reconciliation that runs continuously rather than periodically.
As more financial activity moves onto blockchains, the advantage will come from making that activity fit into the existing infrastructure because, without these capabilities, every new tokenised product becomes another manual workaround.
With comments due by 3 November 2026, administrators and fund managers have a chance to shape how these questions are answered, particularly what exclusive control should mean in practice.
My view: exclusive control should be defined by outcomes, not by the type of network. If a transfer agent can enforce eligibility, stop or correct unauthorised transfers, and keep the register authoritative, the ledger underneath should matter less than the controls on top of it.
The SEC has opened the door to onchain recordkeeping. Whether that makes operations simpler or more complicated will depend on how well the two sides are connected.
On 1 September, the US Securities and Exchange Commission (SEC) issued a proposal that would allow a blockchain or other distributed ledger to serve as the official record of securities ownership. The proposed change would amend rules for transfer agents, modernising the terminology to reflect contemporary electronic recordkeeping. That is a real step forward. But it does not make Monday morning go away.
The proposal, published in the Federal Register on 4 September, is the first substantial rewrite of the SEC’s transfer agent rules in roughly four decades. It would apply to an estimated 327 registered transfer agents. Alongside the distributed ledger provision, it would introduce new compliance policy requirements and remove long-standing exemptions for smaller firms.
The rule change would permit a transfer agent to maintain its master securityholder file (or golden record) on a distributed ledger, provided that the agent retains exclusive control over it. The SEC is also asking how onchain records, such as wallet addresses and quantities held, should connect to the offchain records that underpin the rest of the financial ecosystem.
The key condition is exclusive control. The SEC does not define what that means for a distributed ledger, and it openly asks how to handle records that exist only on a ledger the transfer agent does not control. A permissioned network where the agent is the only party able to write entries seems likely to qualify.
A public blockchain, where tokens can move without the agent’s involvement, may not. For administrators, this is more than a legal technicality. It determines which record is authoritative when the onchain balance and the official register disagree, and therefore which one they must reconcile against.
This gets to the heart of a problem the industry has not fully solved yet. Fragmented systems that do not talk to each other do not get better by adding one more. Anyone who has worked on a house knows you do not add a new room without tying it into the existing plumbing and electrical. Tokenisation is the same.
Moving activity onchain does not remove the administrator’s job. It changes where the work happens.
This adds another source of data that administrators must incorporate into their existing processes, and the SEC’s proposal makes that challenge clear.
If a security holder’s ownership is recorded onchain, the administrator still needs to establish who owns the asset, whether the transfer was permitted, and how that change should be reflected in the fund’s official records. The SEC is effectively asking how the two sides should connect. If an onchain transfer does not automatically flow into the records used for accounting, reporting, and compliance, the efficiency gained from putting the transaction onchain can simply create another reconciliation exercise for the administrator.
Go back to that Saturday transfer. On Monday morning, the administrator must establish who controls the receiving wallet, whether that party has passed KYC and is eligible to hold the fund, and whether the transfer complied with any restrictions in the fund’s documents. It then has to update the register, reflect the change in the fund’s accounting, and make sure investor reporting is correct. If any of those steps rely on someone manually checking the blockchain against an internal system, the speed of the transfer is lost. The administrator has simply inherited a new reconciliation break.
This is an issue that will extend beyond transfer agencies as onchain finance becomes more commonplace. Fund administrators will increasingly have to account for transactions taking place on blockchain networks alongside the activity they already manage. That could mean an investor subscribing to a tokenised fund, ownership changing onchain, or an asset settling outside traditional market infrastructure.
The administrator’s responsibilities remain the same: maintaining an accurate record, applying the necessary controls, and keeping a clear audit trail; but what changes is where the transaction happens and how quickly it can move. That creates a practical problem for systems built around periodic processes.
The proposal also makes clear that regulators will expect better data. Transfer agents would have to report on Form TA-2 whether they maintain securityholder records on a distributed ledger and which tokenisation model they use. Records would need a full audit trail showing who accessed, changed, or deleted an entry and when, and firms would have to retain them for six years. These requirements apply wherever the data lives, so systems will need to capture onchain and offchain activity to the same standard.
This is where updated infrastructure matters the most. There is little reason to expect traditional fund administration to disappear, and most managers will operate with a mixture of traditional and tokenised assets for some time. Administrators therefore need to support both within the same operating framework.
The firms that adapt most effectively will be those that can incorporate onchain activity into the systems and controls they already use, rather than creating a separate process for every new use case. In practical terms, that means systems that can take in onchain events as they happen rather than in an end-of-day batch. They need to maintain a reliable link between wallet addresses and verified investors and hold a single internal source of truth across onchain and offchain records. They also need exception handling that flags mismatches automatically and reconciliation that runs continuously rather than periodically.
As more financial activity moves onto blockchains, the advantage will come from making that activity fit into the existing infrastructure because, without these capabilities, every new tokenised product becomes another manual workaround.
With comments due by 3 November 2026, administrators and fund managers have a chance to shape how these questions are answered, particularly what exclusive control should mean in practice.
My view: exclusive control should be defined by outcomes, not by the type of network. If a transfer agent can enforce eligibility, stop or correct unauthorised transfers, and keep the register authoritative, the ledger underneath should matter less than the controls on top of it.
The SEC has opened the door to onchain recordkeeping. Whether that makes operations simpler or more complicated will depend on how well the two sides are connected.
NO FEE, NO RISK
100% ON RETURNS If you invest in only one asset servicing news source this year, make sure it is your free subscription to Asset Servicing Times
100% ON RETURNS If you invest in only one asset servicing news source this year, make sure it is your free subscription to Asset Servicing Times
