U.S. SEC highlights digital identifier and unclaimed property questions in transfer agent rule modernization

In remarks to transfer agents, the U.S. Securities and Exchange Commission’s Division of Trading and Markets highlighted digital identification and state unclaimed property laws as key issues under the Commission’s previously issued proposal to modernize transfer agent rules. Questions include whether transfer agents handling tokenized securities should be allowed to replace traditional names and physical addresses with digital identifiers, such as email or wallet addresses. Another issue is how transfer agent rules should address inactivity standards under state escheatment laws. The remarks also revisited the Innovation Exemption approved Sept. 17, which grants qualifying Tokenized Securities Venues (TSVs) a conditional exemption lasting five years from the definition of an exchange. The framework allows permissioned participants to trade tokenized National Market System stocks through automated market makers. TSVs must be U.S. persons, operate on public, permissionless blockchains and observe volume limits, while eligible stocks must preserve all rights and privileges of the underlying securities. Issuers’ transfer agents could participate in this framework, but remain responsible for meeting their regulatory obligations whether they operate on or off blockchain or use third party vendors.