Before Changing Transfer Agents, Consider This

On occasion public companies want to change their stock transfer agent.  This is not as common as it was 15 – 20 years  ago, because there are many fewer agents left to choose from and the survivors are generally quite good.  Perhaps, however, the current agent has announced the sale of its business, or raised its fees substantially, or tried to pass on too high a “regulatory change assessment,” or just fallen out of favor with the company for a combination of subtle reasons.

With the general improvement in transfer agent quality, and use of technology by agents, a conversion of records to another provider is easier than it has ever been.  However, there are other things to consider before changing transfer agents that do not often come to mind:

  • The change requires board approval
  • The current agent may have a penal termination clause in its contract that first needs to be amended, or “waited out”
  • Drastically lower fees at the new agent could indicate the company will be that much less important there (a potentially meaningful unintended consequence)
  • Not just fees but contract terms need to be negotiated with the new agent – and the successful completion of this negotiation should be a prerequisite to official appointment
  • There may be not-so-obvious functionalities or procedures the company likes at the current agent which the new agent will or cannot replicate
  • Certificate inventory may need to be re-ordered, or re-silvered
  • The new relationship manager may not have the same “chemistry” with the company as the old one did
  • Shareholders may need to be provided with a new 800 number, and navigate a new interactive voice response menu and learn new on-line access procedures
  • The new agent might not be as committed to providing stock transfer service long-term as its sales people say it is
  • A conversion needs to be properly timed relative to dividend payment, proxy and tax-reporting activities
  • The new agent may, in fact, be no better than the current one

Having said all this, changes in transfer agent happen all the time and, as pointed out above, they are readily do-able from an operational and technological standpoint.  We are simply suggesting that, before a company makes the psychological leap to a new stock transfer agent, it thinks through all necessary considerations and steps required well in advance, to be sure it is the right choice.

And the company should not be surprised or dismayed if it realizes that the right choice is staying where it is, eliciting necessary fixes to what is broken at its current agent.…by itself or with the help of people like us.   “Staying put” happens all the time, too.