12 Myths About Stock Transfer Service Contracts
The individual components of stock transfer service contracts, and their fee schedules, cover the full range of these four scenarios:
- Obviously make sense
- Not so obviously make sense
- Obviously do not make sense
- Not so obviously do not make sense
Examples of the first would be straightforward representations and warranties of the contract parties, the need for absolute data confidentiality, and “force majeure.”
Examples of the second are the agent’s limitation on liability for errors or omissions it commits, and coverage of certain out-of-pocket expenses by the issuer.
Examples of the third are eye-popping fees, expenses or termination charges.
Examples of the fourth are charges for items on invoices that you will not find in a dictionary or even a shareholder services glossary, or services that “sound” special but in fact require no extra time, staff or resources for the agent to handle.
We allude to a number of the “not-so-obviously” items in these 12 myths; i.e., statements that are not true::
- Stock transfer contracts should always have term limits.
- A simple “flat” dollar amount per month is usually the best fee arrangement for a corporate client.
- Contracts should have service guarantees that penalize the agent if there is a performance hiccup.
- Termination of a stock transfer relationship is a costly exercise for an agent.
- You must be a dividend paying company to benefit from having a “DRIP.”
- DWAC charges should be cheap, and paid either by a broker or the company.
- Functional outsourcing is always bad, and in-sourcing is always good.
- Good technology is the answer to virtually every stock transfer service need.
- If you can use a single agent for multiple shareholder services, you should.
- A stock transfer service annual survey accurately reflects the upcoming service a corporate client will receive from a particular agent in that survey.
- Governing law for a stock transfer contract must be dictated by the agent.
- Stock transfer service is essentially a “commodity,” and can be priced and contracted accordingly.
Are stock transfer contracts and their pricing “intuitive,” and thus easy for corporate employees or even their purchasing departments to understand, and negotiate, without help? We believe our remarks above show this is not the case. Indeed, that is why we exist, and why we are becoming more and more popular as a corporate resource every day.
For more information (with no obligation) please call Andrew Wilcox at 928-862-2048.