Terms of the Month
(in alphabetical order)

Assignment (of a Stock Transfer Contract)

This is a common clause in stock transfer service agreements, where the transfer agent wants the ability to assign the company contract (and relationship) to a successor provider if the agent sells its business – without company approval.  The language in the clause is often ambiguous, perhaps to distract the company from the underlying message, but the intent is clear and consistent.  Our advice is to make this clause as short and simple as possible:  No assignment of the contract by either party without the express written consent of the other – period.

Ballot vs. Proxy

While these two terms are often used interchangeably at annual or special stockholder meetings, they are fundamentally different.   A ballot is a document through which a stockholder can directly vote his or her shares at the meeting.   A proxy is a document through which a stockholder can vote his or her shares before the meeting, and thus not have to attend – by having the company’s “proxy committee” (made up of a small number of senior  company executives) vote the shares according to the stockholder’s instructions.  At the meeting the proxy committee votes such shares via “ballot of appointed proxies.”   A stockholder owning stock beneficially through a broker can bring a “legal proxy” to the meeting issued by the broker, empowering the stockholder to vote directly there – via ballot.


A public ledger developed by and for “Bitcoin,” the digital asset and payment system first introduced in 2008.  Blockchain verifies, clears, time-stamps and forever stores every transaction occurring within it, creating a chain of activity blocks.  Advantages of Blockchain include its alleged impregnability against both hackers, due to extremely powerful cryptography, and also potentially corruptible “managers” due, ironically, to its decentralized structure.  It is a concept being studied not only by Nasdaq but also by stock transfer agents, who today either have their own proprietary record keeping systems or use those provided by outside software specialists.

Certain Stock Labels

Authorized – Total number of shares approved for issuance by a company’s articles of incorporation, or by a shareholder vote at the request of the board of directors.

Issued – Total number of authorized shares actually issued by the company.

Outstanding – Total number of issued shares apart from treasury shares.

Treasury – Issued shares kept in reserve by the company, and thus technically not outstanding.

Client Advisory Board

The “CAB” is a concept in the stock transfer industry that has been around since the 1980s.   It is where a transfer agent enlists 12 to 20 clients who are large and/or complex in their service requirements, who are willing to convene one to four times a year, and who can honestly discuss with the agent’s senior management what the agent is doing right and wrong, the functionalities the agent intends to develop and invest in, and what functionalities it plans to correct or divest.   The meetings should be face-to-face, although conference calls can sometimes work, relating for example to subcommittee meetings.   We at Shareholder Service Solutions® give a gold star to transfer agents who have a CAB.   Embraced properly, this institution provides the transparency and sense of client-agent teamwork that fosters constructive communication and healthy long-term relationships across the agent’s entire client portfolio.

Control Book

This mundane-sounding term refers to an actually quite important part of a stock transfer agent’s job.  It is the real-time record of a company’s shares i) authorized for issuance, ii) “reserved” for issuance (by plan, if applicable to options or restricted stock, or an employee stock purchase plan), iii) issued and outstanding, and iv) treasury shares, which are issued but technically not outstanding.  The Control Book is the ultimate data repository to which all shares owned by a company’s investors should balance.  It is also the best information source to confirm the transfer agent is meeting its obligation as Registrar, i.e. not allowing more shares to be issued than are authorized.


This is a term used every day in the financial services industry, but few know its origins and auspices. Like a lot of improvements in financial services, especially securities ownership and transfer, the term and concept were born in the 1960s.   The securities industry at that time had grown so big that it was a) buried in its own paperwork, and b) not sufficiently “talking to itself” to avoid duplication and inefficiency.   A byproduct was the frequent inability of industry participants to tell different securities issues apart, because there was no uniform identification medium in place.   Thus, in 1964, the New York Clearing House Association approached the American Bankers Association to develop the Committee on Uniform Security Identification Procedures, and the resultant acronym CUSIP was launched.   A securities issue was now made unique by its CUSIP number, and that standard continues to this day – not only for stocks but also bonds, U.S. Treasury securities, even certificates of deposit, commercial paper and bankers acceptances.   Indeed, over 9 million securities issues have their own CUSIP number today.

An interesting final note is CUSIP Global Services, the parent organization keeping track of all CUSIP numbers, is managed by Standard & Poor’s on behalf of the American Bankers Association.   And Standard & Poor’s is owned by The McGraw-Hill Companies, Inc.   So, the “keeper of the keys” on securities identification in the largest financial marketplace in the world is actually under the control of a public company subsidiary rather than a government entity.

Death Master File

This database has been made available to the public by the Social Security Administration since 1980, and with few exceptions shows all persons with social security numbers who died since 1962.  The DMF has obvious benefits and uses, ranging from medical research to detection of identity fraud.  It is also, not surprisingly, a useful tool for shareholder recordkeepers and escheatment auditors.

Dematerialization vs. Immobilization of Shares

Like other pairs of terms often confused as synonymous, dematerialization and immobilization are not the same thing.    Dematerialization is the complete replacement of a paper security (like  a stock certificate) with an electronic record, while immobilization is the combining of many paper securities into one “master certificate” – made of  paper – with book-entry transactions happening around it to update beneficial positions in the master certificate shares.  In 2012 there began a renewed push to dematerialize all remaining immobilized shares, spearheaded by the Depository Trust & Clearing Corporation (DTCC).   That push received an extra nudge when Hurricane Sandy damaged numerous immobilized master certificates in DTCC’s Manhattan vaults.

Depositary Receipt

This is medium through which people can own stock in a foreign company that they otherwise could not, because the stock is traded far away in its home country…in its own currency.  DRs are issued by a trust company or security depository in the buyer’s home country, and evidence ownership interests in the underlying foreign stock.   DRs are traded like stock on the buyer’s domestic exchanges.  Holders of DRs receive dividends, can participate in dividend reinvestment, and experience share appreciation (or loss) just like with the underlying stock.  There are dozens of American Depository Receipts (ADRs) traded on the NYSE, NASDAQ and AMEX, evidencing ownership in prominent foreign companies like Reuters and BASF.

Direct Stock Purchase Plan

This is a plan having all the functionality of a Dividend Reinvestment Plan (DRIP), with the added investor benefit of not already having to be a registered shareholder in the company to join the plan (like with a DRIP).   Joining a Direct Stock Purchase Plan (DSPP) as a first-time holder of a company’s stock can be, as the name suggests, “direct,” just by sending in a minimum amount of cash.   A DSPP also sends the message, by the absence of “dividend reinvestment” in its name, that reinvestment of dividends through the plan is possible (if the issuer is a dividend payer) but not necessary.   What really drives DSPPs are steady, smallish investments of cash by individuals into the company’s stock on a hopefully regular basis, including by monthly direct-debit from a bank account.   The individual can thus buy stock in small amounts cost-effectively over time (often, at no charge!), eventually amassing a sizable share block; and the company can see its stock price enhanced by these purchases, and even raise substantial equity capital (quietly) if the plan permits original share issuances.   Indeed, see our term “Waiver Discount” elsewhere in this section for more information on the capital raising potential of a DSPP.   These plans can be structured to meet any public company’s budget and goals, and should therefore be offered by every company in our opinion.

Dutch Auction

Essentially the reverse of a regular auction.   In a regular auction a price is bid up so the highest price can be achieved for the seller.   In a Dutch auction the price is lowered to a point where both the seller is satisfied and a transaction can be fully consummated.   Dutch auctions may be used to determine the highest stock price at which the full amount of subscriptions for a share offering can be achieved, or to fulfill the desired amount of a corporate share repurchase program at the lowest stock price for the company.   Interestingly, “odd-lot” shares can be repurchased in this latter context before other (larger) holders’ shares — if the company wishes — to facilitate the reduction of such holders who cost the company the most in record keeping and maintenance charges as a percentage of their lower investment value.

DWAC Centralized Billing

Deposit/Withdrawal  at Custodian (DWAC) is a service within the Depository Trust and Clearing  Corporation’s (DTCC) Fully Automated Securities Transfer (FAST) system, which allows  transfer agents (TAs) and brokers to move shares electronically between each  other.   This facilitates the debit of employee  plan shares from a company’s transfer agent reserve account and credit to the  employee’s brokerage account, among other things.   Traditionally the billing for DWAC services  happened independently between TAs and brokers; however, in 2013 DTCC agreed to  offer centralized billing for the various parties, greatly streamlining this  cumbersome process.   Still, it is  interesting that different TAs continue to charge different DWAC fees, ranging  from $75 to $100.


As of 2023 this is the official name of the stock transfer agency created by the merger of EQ Shareowner Services and AST Financial, which were both acquired by Siris Capital Group in 2021.  AST had a long history as American Stock Transfer & Trust Company (headquartered in Brooklyn); and EQ, stemming from Equiniti Group plc (headquartered in London), had venerable U.S. roots originating as Norwest Bank and Wells Fargo Shareowner Services.  EQ and Computershare are now the largest stock transfer agents in the U.S.

Exempt Solicitation

The process of soliciting annual meeting votes which is exempt from conventional proxy solicitation rules – including in proxy fights.  It requires that the soliciting shareholder file a PX14A6G with the SEC.  The primary criterion for exemption is the shareholder cannot solicit votes from more than 10 investors; but this can still be quite influential if voting power at the company is concentrated in relatively few hands.  Exempt solicitations cost a small fraction of conventional solicitation campaigns.

Flat Fee

This is a common term in the billing practices of stock transfer agents.   Like a lot of things, it has positive and negative ramifications.   Flat fees typically mean that no matter how many stock transfers or shareholder inquiries an agent handles in a month, it will charge the corporate client a set monthly fee.   Variable fees are when there is a charge for a transfer, for a shareholder letter, for a dividend check, etc.   Flat fees by and large are preferable, because they tend to make budgeting and billing simpler.   However, corporations still need to periodically a) confirm the flat fee remains appropriate, or has perhaps become a little high relative to the company’s likely falling registered shareholder base; b) verify what in fact is included in the flat fee, so it knows what isn’t (poison pill agency?   OFAC charges?); and c) check whether flat fees that shareholders pay continue to “fit the transaction,” like what a holder pays to replace a lost dividend check that is a small dollar amount (if such fee is not covered by the company)

Inactive Shareholders

Transfer agents not only have to keep track of registered shareholders with share balances, but also those with zero balances who nonetheless need to remain on the agent’s record keeping system – like those who received a dividend in the previous 12 months and must still be issued a 1099DIV.   When an investor has zero shares and no residual reporting obligation attached to him, he is now considered an “inactive” shareholder (or “closed account” to some agents).   Issuers should monitor how many such holders they are being charged for by their transfer agent, because some agents do not “purge” (archive) them as promptly as they should, like every 12-18 months.

Letter of Transmittal (LT)

This is a critical ingredient in the processing of corporate actions – like mergers, exchanges or tender offers.   It is the “cover letter” that tells a stockholder (of shares to be surrendered) how and when to endorse the shares for transfer into new shares of the company (e.g. in a “reverse split”), or shares and/or cash of a new (acquiring) company.     In addition it is the official document to be signed by the stockholder, taking the place of a stock power to make the tendered shares negotiable.   If applicable, the LT can also include payment (via proceeds netting) of an indemnity bond for lost certificate share replacement.

Limitation of Liability (for a Stock Transfer Agent)

As regular viewers of this web site know, we often take issue with the pricing and contract terms and conditions presented to corporations by some stock transfer agents.   It will thus likely come as a surprise that we support transfer agents in their common practice of limiting their own liability on wayward stock transfers to the amount of fees the corporate client paid the agent in the preceding 12 months.  Why?   Because not only are such mistakes rare (and when they happen are usually corrected), but also because transfer agents handle thousands of transfers involving millions of shares and billions of dollars every week — in some periods daily — and they are simply not compensated nor financially set up to take on transaction risk beyond a client’s annual fees.   We, and consumers of the stock transfer product, should accept this as a simple matter of fact.

Mail Date vs. Payable Date

The definition of these terms is simple, but the “treatment” of them by dividend-paying companies and stock transfer agents is not.   Mail date is when dividend checks and advices  of electronic dividend payment are mailed by the transfer agent to individual shareholders  who are not in a dividend reinvestment plan.    Payable date is when dividend payment by the company officially happens.

Transfer agents can require the company to fund 100% of the  dividend money on mail date, or 100% on payable date, or a hybrid arrangement  where, say, funding of checks and electronic credit advices happens on mail  date, and funding of the remainder (mostly for institutional investors owning  through the Depository Trust Company) takes place on payable date.   This hybrid scenario is actually becoming  most common.   Full funding on mail date  used to be the norm; however, as corporate cash managers caught on to the  substantial loss of “float” in such situations, they successfully pushed back  against their transfer agent on the practice.   In fact, going to the other extreme (full funding on payable date) is not uncommon now;  however, this tends to be offered only to transfer agents’ highest paying corporate clients.

It is an interesting area of negotiation with transfer agents that we at Shareholder Service Solutions help our clients with all the time.


National Change of Address (NCOA) is a service provided by the United States Postal Service.   It facilitates the updating of people’s addresses so that misrouted and misplaced mail is minimized, and it saves mailing cost because NCOA participants receive pre-sort discounts.   The way it works is large record keepers, like stock transfer agents, qualify for pre-sort mail discounts as NCOA participants by checking all its (shareholder) addresses against the NCOA file twice a year.   Addresses that “differ” are then verified with the individual by the record keeper.   As a corporate client you should ask your transfer agent 1) if it is, in fact, an NCOA participant, and 2) if you, the corporation, benefit from pre-sort discounts NCOA gives to the agent.   “Yes” to #1 means there is less chance certificates, statements, dividend checks and proxy materials fail to reach shareholders in a timely manner, and “yes” to #2 means you are saving money.


The Office of Foreign Assets Control (“OFAC”) of the U.S. Department of the Treasury administers and enforces sanctions against targeted foreign countries, terrorists, international narcotics traffickers and similar individuals.  Stock transfer agents are among asset record keepers required to prevent these individuals or entities from using its systems without detection, and interception, by Treasury authorities.  Public companies should ask their transfer agent how it performs this function exactly, and how the agent’s cost to perform the function is passed back to its clients.

Out-of-Pocket Expenses

This innocuous-sounding term, well known to most people, deserves a few words as it relates to the stock transfer business.   Some transfer agents religiously pass back expenses associated with handling stock transfer clients and their shareholders…   “at cost.”  Others do in many cases, others in some cases, others rarely do; meaning, they add a little something on to their cost.   Their justification for this is they have to manage the relationships with the “expense creators” (printers, distributors, sub-contractors, insurers) which their clients would otherwise have to do themselves; so, why shouldn’t they be compensated for that?   Our answer: That’s fine!…   Just as long as you make this practice crystal clear to your clients on a regular basis.

Paperless Legals

Paperless Legals are transfers of stock that historically required the physical accompaniment of legal documentation, such as birth certificates or letters testamentary, and now only require a medallion guarantee from the initiator of the transfer, like a broker, that such documentation is in its possession.  This makes these stock transfers way more efficient and prompt.  The Paperless Legals Program began in 2005, and was the result of a joint effort by the Securities Transfer Association, the Securities Industry Association and the Depository Trust Company.

Proxy “Notice & Access” vs. eDelivery

What’s the difference?  Both involve NOT sending full sets of physical/paper proxy materials to shareholders.  With Notice & Access (N&A), however, a one-page paper notice of online proxy material availability DOES have to be mailed.  With eDelivery, even the “notice” is paperless – usually an e-mail.  eDelivery requires shareholder consent.  N&A is non-consensual; it is up to the company whether it uses N&A or not.  That said, since 2007 a public company must make its proxy materials accessible online, regardless of whether N&A or eDelivery is used.  eDelivery is cheaper, faster, “greener” and, by its nature, more attractive to millennials and younger shareholders.  But both eDelivery and N&A are good, and much more efficient than delivery of full paper proxy materials.  Full paper materials are still preferred by many (older?) shareholders, however, they must be delivered upon request, and arguably elicit a higher voting percentage rate.

Records Conversion

This is the movement of a corporation’s shareholder information from one transfer agent’s record keeping system to another.  It usually occurs when a company picks a new transfer agent, although a corporation doing stock transfer in-house (using outside database software) could conceivably switch to a commercial transfer agent using that same software and thus avoid a conversion.

Is a records conversion a “big deal?”  Not really, for three reasons:  1) data is now fully electronic, so it can readily be moved via magnetic tape or disk; 2) the better transfer agents update and balance their records daily, so a pre- and post-conversion data “scrub” is no longer necessary (or should involve minimal effort); and 3) electronic data conversions have taken place for decades, so the major transfer agents already have software programs in place to convert corporate records from any of their competitors to their own system, on fairly short notice.

The biggest issue with a records conversion is therefore not the technical aspect of it (which means it should also not be an expensive undertaking anymore) but rather the process of learning how records are newly captured/arranged, and how they can subsequently be retrieved by issuers and their shareholders.  Bottom line:  companies should consider a records conversion a speed bump worthy of respect, but not a brick wall that has to be avoided at all costs.


The Revised Uniform Unclaimed Property Act (RUUPA) was developed by the Uniform Law Commission (ULC) in 2016.  The ULC provides states with non-partisan, expert legislation in draft form on various issues, which states can then individually amend and adopt as they wish.  Since only states have the power to address the escheatment of lost assets like stock and dividends (the feds only legislate abandoned property searches), it relied on the ULC to create RUUPA – which laudably addresses new asset types in the technology age, owner outreach procedures, records retention requirements and statutes of limitations.

Stock Power

This is the most common document for transferring, changing names on or adding a beneficiary to shares of stock held in directly registered form — i.e., shares evidenced by a stock certificate, a direct registration book-entry position (aka “DRS shares”) or those held in a plan administered directly by the issuer’s transfer agent like a dividend reinvestment plan (DRIP).  The form simultaneously certifies tax ID numbers, and captures necessary “cost basis” information.  For the stock power to be effective the signatures of current share owners must be “Medallion Guaranteed.”

TA-1 and TA-2

These are Securities and Exchange Commission (SEC) forms that largely reflect the agency’s control over stock transfer agents in the U.S.

TA-1 This form is used by an entity registering as a transfer agent with the SEC for the first time.   It elicits a great deal of information about an applicant which should provide comfort to both issuers and shareholders that not just any outfit is allowed to perform this function.   The entity must show who owns and controls it; how it is funded/financed; whether it has pled guilty to or been convicted of a felony or misdemeanor in the past 10 years, or even “made a false statement or omission” or been proven “dishonest, unfair or unethical”; and where its operating locations will be.   There is also a supplemental level of scrutiny placed on the applicant de facto by requiring it to give information such as its Financial Industry Number Standard (FINS number), which is assigned by the Depository Trust Company after its own vetting process.   And finally, the TA-1 must be signed by the applicant’s qualifying executive officer.

TA-2 This form is an annual report by transfer agents to the SEC on its activities in the preceding year.   It elicits not only raw data like number of shareholders managed and transfers performed, but also disclosure about transfer turn-around times not met; transfer imbalances more than 30 days old (“aged record differences”) and associated “buy-ins” where the transfer agent had to purchase and retire shares in the amount they were over-issued; plus changes in the agent’s modus operandi such as whether it newly engaged an outside service provider to perform any of its functions (and, if so, whom).  The form also requires disclosure on the frequency and number of “lost” shareholders searched by the transfer agent, and how many new addresses were found as a result of those searches.

So transfer agents have to toe a strict line with the SEC just to get started, and then stay in the business – not to mention also pass annual muster with bank regulators (if a bank transfer agent) and their independent registered public accountants, as well as enjoy at least “good” grades from Group Five, the primary transfer agent satisfaction surveying firm that posts its results on-line.

Voting – Over and Empty

Over Voting – the voting of shares by both the nominal holder of the stock as well as the party to whom those shares have been lent, typically by a broker; or, by both the seller as well as buyer of shares, where the sale was not fully consum-mated on annual meeting record date.

Empty Voting – the voting of shares by an investor whose right to vote is based on he/she owning the shares back on record date, but where he/she subsequently sold the shares before the meeting.  Thus, the shareholder has voting power but no financial interest in the stock, or company.

Over voting could and should be solved by a more rigorous pre-reconciliation of voting rights.  There is no imminent “solution” to empty voting.

Waiver Discount

Direct Stock Purchase Plans (“DSPPs”) can be offered by most public companies listed on a major stock exchange.  They are a means for registered shareholders to buy more stock directly from the company, paying purchase fees comparable to and sometimes lower than a broker’s.  DSPPs typically impose maximum monthly and/or annual investment amounts, and no share price discount, but a waiver discount feature allows a waiver of such maximums and a share price discount, if the right (large) investor came along.  Corporations can raise substantial equity capital quietly and cost-effectively through “Waiver Discount DSPPs.”