The U.S. Securities and Exchange Commission on Tuesday proposed new transfer agent rules that could allow a blockchain to become the official record of share ownership. The proposal, the first major update to transfer agent rules since the early 1980s, would also require registrars to disclose which securities they tokenize and which blockchain networks host them.
What the rules would change
Transfer agents maintain the master securityholder file — the issuer's legal list of ownership — and handle dividend routing and transfer processing. Under the proposed rules, a blockchain could serve as that official record, a shift that SEC Chairman Paul Atkins tied to modernizing rules for current processes, including the use of blockchain in securities offerings and share transfers.
SEC Commissioner Hester Peirce said the proposal took more than a decade to develop. The package amends existing rules and forms, rescinds one rule, and adds several new ones.
The CFTC case that shows the problem
The same day, the Commodity Futures Trading Commission settled with swaps trader John Patrick Gorman III, who deleted WhatsApp threads and a text message after being ordered to preserve documents in March 2019. Gorman falsely claimed he had destroyed no documents, both in a written response and under testimony in November 2019. The CFTC fined him $90,000 and permanently barred him from repeating the conduct.
CFTC Enforcement Director David Miller said attempts to impede investigations go to the heart of the division's ability to detect wrongdoing and enforce the law. The case highlights a weakness the SEC's proposal could address: relying on traders to preserve records.
Tokenization is already underway
Companies including Securitize, Computershare, and Equiniti have already begun work on tokenization, according to the article. A shared ledger, the thinking goes, could remove the weakness of relying on individual traders to keep records — the exact failure that landed Gorman in trouble.
The SEC's proposal is a concrete step toward letting that shared ledger become the legal record. Whether it holds up through the rulemaking process is another question, but the direction is clear.
