Banking Association sends letter to SEC regarding Rule 17Ad-16

A letter was addressed to the SEC regarding Rule 17Ad-16 by Dale Baker on May 5, 2025. The American Bankers Association (ABA) along with its Corporate Trust Committee expressed gratitude towards the Securities and Exchange Commission (SEC) for allowing an opportunity to provide input on the requirement, usefulness, and efficiency of the SEC’s interpretation of Rule 17Ad-16 and associated examination procedures. The ABA pointed out that since the Rule’s inception, there have been advancements in the issuance, transfer, and recordkeeping methods in the securities industry due to technological progress and widespread adoption. This has enabled market participants to access more information at a faster pace compared to when the Rule was first introduced.

However, the ABA raised concerns about the evolving expectations of SEC examiners regarding compliance with the Rule by registered transfer agents (transfer agents). They feel that SEC examiners have started assuming that market participants have less information and delayed access to information, which is contradictory to the current reality. While they believe that there is no need to alter the Rule’s regulatory text, the ABA strongly asserts that SEC examiner expectations have strayed from the original intent of the Rule, leading to unnecessary burdens on the industry and jeopardizing the SEC’s overarching mission.

The ABA argued against the requirement for transfer agents to provide detailed notices to qualified registered securities depositories (depositories), as this information is often already collected and disseminated independently by the depositories themselves. They highlighted that this additional reporting could create errors that might undermine the clarity, quality, and practicality of information available to both the SEC and market participants, hindering further innovation in the industry.

The ABA recommended that the SEC issue Staff Guidance clarifying that depositories, such as the Depository Trust Company (DTC), serve as the primary and comprehensive source of information on securities issuances. They also proposed clarification that the Rule’s mandate for a transfer agent to notify the relevant depository when assuming transfer agent services for an issuer does not apply during a security’s issuance phase.

In conclusion, the ABA’s comment letter emphasized the need for the SEC to address the discrepancies in examiner expectations and to provide guidance that aligns with the current industry practices and technological advancements. They believe that this clarification would alleviate unnecessary burdens on the industry and promote further innovation and efficiency in the securities market.