Question

What are the duties of a stock registrar and a transfer agent? How does the use of their services affect the client's internal controls?

Answer 1

The Stock Registrar functions as the record keeper of shares and shareholders. He administers the entire proceedings of an IPO (both before and after the IPO). Hence, the company has to maintain a long term relationship with the stock registrar.

Any trust company, financial institution or a bank which is assigned by a company for maintaining its investors’ records and account balances is known as a transfer agent. The transfer agent’s responsibilities include recording transactions, processing investor mailings and dealing with investor problems like lost or stolen certificates and cancelling or issuing certificates.

The use of services of a stock registrar and a transfer agent may significantly affect internal controls of the client if the Internal Control System of these service providers is itself inefficient or compromised. The transfer agent is responsible for maintaining records of investors and account balances. Any weakness in the internal controls of the agent may result in misappropriation of the records and certificates which may significantly affect the clients business. Similarly, the registrar has key price sensitive information of the company which if leaked may result in crashing of the stocks.