Will Artificial Intelligence be used by U.S. Stock Transfer Agents?

Yes and no.  First one must distinguish between AI and “Generative AI.”

If simple AI is defined as (or is the de facto equivalent of) the automated, electronic performance of a simple task, then yes – transfer agents (TAs), the larger ones anyway, do this and have done so for years.  We can think of many TA functions where a computer takes in a client company or shareholder request, “processes” it and produces a corresponding answer or action:

  • Address changes
  • Dividend direct deposit election
  • Provision of dividend reinvestment and direct stock purchase plan materials
  • Dividend reinvestment and direct stock purchase plan enrollment
  • Generating a dividend funding letter to the company’s Treasury Department
  • Provision of Medallion Guarantee instructions to a shareholder
  • Transferring/selling stock online
  • Legal transfer processing
  • eDelivery of proxy statement and voting card, and follow-on eVoting by the shareholder
  • Virtual Shareholder Meeting (VSM) dial-in, question posing, and voting
  • Mailing due diligence letters to shareholders appearing to be “lost” (e.g., due to bad address)
  • Letter of Transmittal mailings in the context of a corporate action
  • And many more

AI goes further, too.  It has the “intelligence” to anticipate that a call or electronic message from a shareholder is a likely follow-on to his or her prior inquiry or instruction, so is programmed to then suggest a sensible next step….if applicable.  It could, for example, tell a shareholder where the closest place to get a Medallion Guarantee is, based on the shareholder’s address on file.

All this makes perfect sense, helps keep TAs’ costs down and, given the lack of human intervention, arguably and ironically serves to minimize mistakes.

Now, Generative AI is a different thing altogether.  Its purpose is to take language, images and other media and create NEW data that has similar characteristics, using special software and programming – the word “generative” essentially meaning “procreative.”  Generative AI is exciting (and somewhat scary?) for fields like the Arts, and Sciences – and even in much more mundane scenarios like the drafting of a public company press release.

Stock transfer, in contrast, while not the boring “commodity” function some would cynically label it – far from it! – is a set of processes and procedures prescribed by law and regulation.  There is, therefore, a built-in limit to how “creative” a TA can be in its activities.  That doesn’t mean TAs cannot be innovative, automating and adding new services from time to time – the use of AI itself being a good example – but it does mean stock transfer is not fertile ground for Generative AI, from our perspective.

Of course, that being said, who knows what the future will bring?