Registrar and Transfer Agents

Proposed Readoption: N.J.A.C. 3:12

Authorized By: Holly C. Bakke, Commissioner, Department of Banking and Insurance

Authority: N.J.S.A. 17:1-15(e) and 17:9A-213

Calendar Reference: See Summary below for explanation of exception to calendar requirement.

Proposal Number: PRN 2002-269

Submit comments by October 4, 2002 to:

Karen Garfing, Assistant Commissioner

Office of Legislative and Regulatory Affairs

New Jersey Department of Banking and Insurance

PO Box 325

Trenton, NJ 08625-0325

Fax: (609) 292-0896



The agency proposal follows:


The Department of Banking and Insurance ("Department") proposes to readopt N.J.A.C. 3:12, Registrar and Transfer Agents, which was scheduled to expire on July 21, 2002. Pursuant to N.J.S.A. 52:14B:5.1c, the submission of this notice of proposal to the Office of Administrative Law extended that expiration date 180 days, to January 17, 2003.

The Department has reviewed these rules pertaining to registrar and transfer agents, and has determined them to be reasonable, necessary and proper for the purpose for which they were originally promulgated, as required by Executive Order No. 66 (1978).

Chapter 12 implements N.J.S.A. 17:9A-213, which provides that the Commissioner establish standards for corporations to act as registrar and transfer agents in this State. Registrar and transfer agents have physical custody of valuable stock certificates and other securities and it is necessary to ensure that they have adequate capital, vault facilities and fidelity insurance to protect the public.

Subchapter 1, General Provisions, sets forth chapter definitions and the effect of the rules upon depository institutions.

Subchapter 2 establishes required reportings and filings with the Department of Banking. This readoption has been amended to include that the Department may request additional information during the filing of annual reports.

Subchapter 3 establishes capital requirements for qualified corporations.

Subchapter 4 sets forth insurance requirements.

Subchapter 5 sets forth premises and records requirements.

This proposal provides for a comment period of 60 days, and, therefore, pursuant to N.J.A.C. 1:30-3.3(a)5, is not subject to the provisions of N.J.A.C. 1:30-3.1 and 3.2 governing rulemaking calendars.

Social Impact

The rules proposed for readoption have a beneficial social impact by ensuring that entities that have custody of valuable stocks and securities are adequately capitalized, insured and have secure vaults for that purpose.

Economic Impact

The rules proposed for readoption require the Commissioner to set capital requirements for entities that seek to become qualified corporations. The impact of this requirement is that only companies with significant financial resources may act as qualified corporations. The rules also provide that qualified corporations be adequately insured. Although there is a cost to maintain such insurance, the amount of insurance required has not been changed in this proposed readoption.

In addition, the costs of filing annual reports has not been raised on proposed readoption. The Department believes these costs to be minimal and the report is necessary to ensure that qualified corporations continue to meet the capital and insurance requirements. The annual report filing fees remains $100.00 and the application fee is unchanged at $250.00. The readoption of these rules will have no economic effect on the general public or the public regulated.

Federal Standards Statement

There are no Federal standards that apply to the subject matter of these rules proposed for readoption. Therefore, no Federal standards analysis is required.

Jobs Impact

The Department does not anticipate that any jobs will be generated or lost as a result of the rules proposed for readoption. No changes in the requirements to be a registrar or transfer agent are being proposed.

Agriculture Industry Impact

The Department does not expect any agriculture industry impact from the rules proposed for readoption.

Regulatory Flexibility Analysis

The rules proposed for readoption impose reporting, recordkeeping and other compliance requirements on "small businesses." The Regulatory Flexibility Act, N.J.S.A. 52:14B-1 et seq., defines a "small business" as any business resident in this State that employs fewer than 100 employees, is independently owned and operated and is not dominant in the field. Many of the entities affected by the proposed readoption are small businesses.

The rules proposed for readoption require that qualified corporations file an annual report with the Department. This report includes most of the information required from applicants and ensures that the entity continues to meet the qualifications to act as a Registrar and Transfer Agent.

The rules proposed for readoption include compliance requirements whereby qualified corporations must disclose their most recent financial information upon request by a client and provide the corporate issuer with a copy of its transfer transaction journal at least once a year. Qualified corporations are also required to maintain a system for the reconstruction of a stockholder ledger, a record of all items held in safekeeping and unclaimed cash dividends. These compliance requirements are good basic business practices and should not require the hiring of professionals. No separate standard for small business would be appropriate.

The rules proposed for readoption require that applicants demonstrate that they have a secure vault for the storage of stocks and securities. This implements N.J.S.A. 17:9A-213, which states that an adequate vault facility is one of the three criteria for registration as a qualified corporation. The safe storage of stocks and securities is the reason for the existence of registrar and transfer agents, and no different requirements based on business size can be made.

Smart Growth Impact

The rules proposed for readoption have no impact on the achievement of smart growth and implementation of the State Development and Redevelopment Plan.

Full text of the proposed readoption may be found in the New Jersey Administrative Code at N.J.A.C. 3:12.