The purpose of this document stems from the following:
- Review of the budding digital asset Transfer Agent industry.
- End of the reporting deadline (March 31, 2021) for the calendar year 2020.
- Trend analysis of 2019 & 2020 filings.
This document is not intended to be interpreted as financial or legal advice. It is for informational and educational purposes only. The document is an account of Transfer Agent activity submitted to the SEC by select Transfer Agent companies.
TA-2 report data from 2019 & 2020:
For calendar year 2019, only Securitize reported volume. Harbor and Vertalo both filed a TA-2 form, but reported no volume. Tokensoft did not file a TA-2 form and is assumed to have had no volume.
Calendar year 2020 is the first full calendar year for each TA to service customers since their licenses went into effect in 2019.
**Not all items in a TA-2 form are applicable to each Transfer Agent and not all items are included in the graphs.
If a Transfer Agent has not submitted a TA-2 report for the reporting year, the values in the graphs are assumed to be zero. If a Transfer Agent files a TA-2, but with zero volume, the values in the graphs are zero.
Digital securities and asset Transfer Agents (TA) are new entrants into the well established transfer agent industry regulated by the Securities & Exchange Commission (SEC). This document evaluates the data reported to the SEC by four start-up digital asset TAs.
Transfer Agents are SEC registered and approved service providers that manage a variety of record keeping activities related to securities. This includes trades, dividend payments, etc. Transfer Agents are an intermediary between the company where the shares, dividend payments, etc., originate and the investor.
New to the scene are TAs that work with digital securities and digital assets. There are only a hand full that claim this capability.
In late July 2019, Securitize, LLC was granted license as the first TA servicing digital securities and assets. Securitize was quickly followed by Harbor Digital Transfer Agent, LLC, Vertalo SEZC and Tokensoft Transfer Agent, LLC (was DTAC, LLC).
Each of these start-ups operates in a well entrenched space of incumbents servicing millions upon millions of record keeping volume. With that, there is a bit of a hill to climb in gaining market share. However, each of these start-ups has the unique opportunity to establish themselves as distinct players in an evolving market and grow their volume.
Transfer agents are required to file yearly activity and audit reports as well as report business changes within 60 days of change. Activity and business change reports are available to the public at any time by visiting the SEC look up website and running a query against the Transfer Agent company name. Data from these publicly available reports provide the basis of this document.
To become a Transfer Agent, a company must register itself with the SEC or an appropriate regulatory agency (ARA) like a federal bank. This is done via a TA-1 form. Once the TA-1 form has been successfully accepted, the SEC issues a Notice of Effectiveness report named EFFECT. This is the official certificate of license.
The TA-1 can be amended in the future by filing a TA-1/A form. Typical changes may include business name, address, controlling company, etc. There may be multiple TA-1/A filings in a given calendar year.
To track record management activity for each calendar year, the Transfer Agent must file an annual form disclosure named TA-2 with the SEC. This form is an account of all the activities required by the SEC. The report must be filed by *March 31 of the following calendar year for the previous calendar year’s activities up to December 31.
Negligent or incomplete filings result in direct action taken by the SEC against the Transfer Agent.
Transfer Agents who choose to withdraw their business from being a Transfer Agent do so by filing a TA-W form.
Transfer Agents must also file independent annual audit reports with the SEC. These reports do not appear to be publicly available.
These are early days for start-up companies performing digital securities and asset transfer agent functions. Although it has been a mixed bag in this cohort of start-ups, low numbers are expected. In comparison, incumbent Transfer Agents process millions of transactions for a large public companies. Start-ups in this cohort not meeting compliance requirements is a concern.
So what do these numbers tell us? First, whether the TA start-up is in compliance with the filing requirements, notably TA-2 rules. This is important for investors and customers as well as regulators.
Second, how well the TA start-up is executing against a plan, if any at all. It takes time for strategies to play themselves out. However, once they do, year over year performance may grow exponentially and the TA may become competitive with incumbents. If nothing is happing or staying compliant is challenging, the plan, or lack thereof, may need to change.
2021 should show substantial growth for TAs in this cohort. All except BitGo (Harbor) have forged partnerships that give each access to more volume. It is worth noting that this is not a winner take all market as these start-ups are competing against large incumbents. There is plenty of opportunity for those who plan and execute successfully.
Transfer Agent Review
Securitize is demonstrating success executing against a strategic plan. Being the first in its class to obtain the TA license, Securitize has reported substantial year over year growth.
- 933 individual securityholder accounts for which the TA maintained master securityholder files
- 97 items received for transfer during the reporting period.
For the 2020 calendar year, Securitize filed a TA-2 form. TA-2 activity:
- 14,241 (1,426% increase) individual securityholder accounts for which the TA maintained master securityholder files.
- 414 (326% increase) items received for transfer during the reporting period.
- $71,211.99 in dividend disbursement and interest paying agent activities conducted during the reporting period 2020 against $0.00 reported in 2019.
Notable TA Achievements:
- Recruiting Transfer Agent industry veteran Scott Harrigan as Head of Issuer Services.
- Partnering with Pacific Stock Transfer (PST).
- Shortlisted as Best Transfer Agent by Fund Intelligence for 2021.
- Open employment position for TA support role.
Securitize should see exponential growth in TA volume and customers due to many factors, but namely executing against what appears to be a well planned strategy resulting in demonstrable performance year over year and successful strategic recruiting.
Harbor Digital Transfer Agent, LLC
For the 2020 calendar year, Harbor has failed to submit any form. It does not appear to be in compliance with the TA-2 filing requirement for the 2020 reporting period.
Notable TA Achievements:
BitGo acquisition in February 2020
It is unclear if BitGo is aiming to maintain or grow the TA part of the Harbor acquisition. Transfer Agent services are not advertised on the BitGo website and a TA-2 was not filed by the 2020 due date of March 31, 2021. A TA-W form filing may be the best move for BitGo in 2021.
For the 2020 calendar year Vertalo filed a TA-2 form. TA-2 activity:
- 730 individual securityholder accounts for which the TA maintained master securityholder files.
Notable TA Achievements:
The North Capital partnership should add significant volume to Vertalo’s TA business. The 2020 TA2 numbers align with the details in the recent press release. This is good news. There needs to be many successful TAs servicing digital assets for the market to grow.
Tokensoft Transfer Agent, LLC (was DTAC, LLC)
For the 2019 calendar year, DTAC filed TA-1, but no TA-2 form. It is assumed Tokensoft has 0 items received for transfer and 0 securityholder accounts to report.
DTAC does not appear to be in compliance with the TA-2 filing requirement for the 2019 reporting period.
For the 2020 calendar year, a name and location change occurred to Tokensoft Transfer Agent, LLC, Austin, TX via TA-1/A filing in 2021 and Tokensoft filed a TA-2 form. TA-2 activity:
28 individual securityholder accounts for which the TA maintained master securityholder files.
16 items received for transfer during the reporting period.
Notable TA Achievements:
Recruiting Alex Levine to run DTAC.
The tZero partnership should boost Tokensoft’s TA volume. Tokensoft is also acting as the TA for INX and others it launched in 2020. It will be interesting to see how 2021 shapes up.
The data sources for this document originate from the following:
- SEC Transfer Agent Market Requirements
- SEC Annual Audit Requirements
- SEC Covid-19 Relief Press Release
- SEC TA-1 Form
- SEC TA-2 Form
- SEC TA-W Form
- TA Market Share Analytics
- Company websites: Securitize, BitGo (Harbor), Vertalo, Tokensoft, DTAC
- *Due to Covid-19, the SEC provided “relief” to Transfer Agents with regards to deadlines to submit forms and other information for calendar year 2019. This relief was extended up to June 30, 2020.
- **The items being graphed from the TA-2 Form are 4(a) and 4(b).
- Based on data available on April 13, 2021, 1 pm ET