The Role of Transfer Agents in Corporate Actions

When it comes to corporate actions, some are routine and some are highly complex, but no two are exactly alike. But they all require a competent and experienced transfer agent.

A corporate action is any undertaking by an organization, public or private, that impacts the stock, the way it is traded or the company’s bondholders or shareholders. An action can be as simple as paying a dividend, or as complex as a Reverse Morris Trust transaction. More complicated events tend to involve the exchange of securities, a new entity or the creation of a new shareholder base. Any corporate action that involves shareholders requires a transfer agent; if two companies are involved, they can select either company’s transfer agent to handle the action.

Common corporate actions include:

  • deSPACs
  • Mergers and acquisitions
  • Initial and secondary public offerings
  • Spin-offs
  • Dutch auctions
  • Tender offers
  • Reorganizations
  • Exchanges
  • Emergence from bankruptcy
  • Corporate rebranding
  • Forward or reverse stock splits
  • Rights offerings

Corporate actions can be stressful for everyone involved. There’s a high level of complexity, involving several different entities, with lots of moving parts. These actions require knowledge, excellent communication and perfect timing. If something goes wrong, there are no do-overs.

An experienced transfer agent can take the pressure off the company’s shoulders and guide everyone through the process. They work with the legal, trading, and settlement teams to make sure everyone fully understands the transaction and the timing. Part of that is knowing and following best practices for each type of corporate action to anticipate and prevent problems.

Five Things to Help See the Bigger Picture
Communication is the most important aspect of a successful corporate action. The involvement of multiple entities means greater coordination — everybody needs to be on the same page. A transfer agent can orchestrate this process and provide the consistency of a single point of contact. Most companies rely heavily on their legal advisors to guide them through a corporate action. While a law firm may fully understand the objectives and the legalities of the transaction — depending on the complexity of the transaction — they may not always be familiar with the trading aspect or the settlement aspect. There may also be inconsistencies with handlings various tasks at a law firm. That’s where a transfer agent comes in.

5 important things to consider:

  1. There is no “one size fits all” process.
  2. Actions may involve a high level of complexity with numerous entities.
  3. It’s critical that everyone is on the same page.
  4. Companies have a choice in who they engage to handle this process.
  5. Firms have only one chance to get it right.

A transfer agent with lots of corporate actions experience is often the best choice to facilitate the process. An agent acts as the conduit from the legal team to the trading team (wherever the stock is traded or not traded), to the settlement team at the Depository Trust Company (DTC). They know who to talk to and when, what’s expected and how it has to work. They will layout a timeline, down to the day, for each step.

The transfer agent is not just a facilitator; they’re a trusted partner acting on behalf of the company that engaged them. In addition to strategic advice, the transfer agent assists with the vital functions of payments, reporting and mailings, including:

  • Shareholder materials
  • Shareholder communication
  • Processing and mailing of proceeds
  • Advice regarding communication with exchanges and settlement facilitators
  • Tax reporting
  • Post-merger services

Engaging a transfer agent can help your next corporate action or transaction go smoothly and keep shareholder engagement strong.

ClickSWITCH: Friend or Foe


Transferring accounts has long been considered a cumbersome process. Now with a simple click, the company ClickSWITCH has created an easy system that will allow its users the ability to transfer their accounts from one bank to another. ClickSWITCH further eliminates the need to contact each individual biller to transfer bill pay services. The process isn’t 100 percent automated yet (currently about 60 percent of deposits can be digitally transferred without paper documents), and it isn’t instantaneous. However, it does dramatically reduce the effort the consumer must make to switch accounts or open new ones.

The automated account transfer solution is a white label service that banks can use to offer new account holders the ease and speed of digital onboarding. When the transfer is complete, it gives the consumer the option to close the previous account. It takes 5 to 15 days to complete the transfer, although bill pay and automatic deposit data transfer immediately.

The company touts its product as a way to increase customer engagement, a retention tool for banks that have acquired another bank, and as a way to reduce the amount of time that employees spend onboarding new customers manually in the branch.

ClickSWITCH gets paid a fee of approximately $30 for every account onboarded. By speeding up the transfer of direct deposits, the banks get a profitable new customer faster. The company is using resellers instead of creating a large sales team. Most banks using ClickSWITCH range between $500 million to $10 billion in assets, with some larger institutions also using the product.

Banks inevitably will be concerned about data and security issues. That said, over 300 financial institutions in the U.S. and Canada have found a way to get comfortable enough to use the platform. ClickSWITCH is SSAE16 SOC1 certified. (SSAE16, or Statement on Standards for Attestation Engagements No. 16, is a new internal controls standard put forth by the American Institute of CPAs). The company is bullish about its security practices.

The bigger and broader question: If this works, why wouldn’t every bank have ClickSWITCH or ClickSWITCH-like capabilities? If seamless transfer becomes an industry standard like bill pay, how will banks retain their assets? Deposit flows could become far more volatile, and competition for consumer and business deposits would push banks to create better user experiences. Nontraditional banks and nonbanks that are pouring resources into user interfaces and customer engagement would have a better chance to win the hearts and wallets of customers.

ClickSWITCH is a friend that wants to change how you compete if you’re ready to compete on the strength of your products and customer service. However, for those preferring to rely on the tedious process of changing accounts as a disincentive to prevent your customers from going elsewhere, clickSWITCH is clearly a foe.