ICI Supports Registration of Certain Third-Party Administrators, January 2006

Washington, DC, January 4, 2006 - In a recent letter to the SEC, the Institute recommends a requirement that third-party administrators (TPAs) to retirement plans and other employee benefit plans that perform the functions of transfer agents delineated under the Securities Exchange Act of 1934 register as transfer agents, and that appropriately tailored regulatory requirements apply to registered TPAs.

Background
The term "transfer agent" is defined in the Exchange Act as a person who engages in one or more of the following functions with respect to securities:

countersigning securities upon issuance;
monitoring the issuance of securities with a view to preventing unauthorized issuance, a function commonly performed by a person called a registrar;
registering the transfer of securities;
exchanging or converting securities; or
transferring record ownership of securities by bookkeeping entry without physical issuance of securities certificates.

Except in certain limited circumstances, the Exchange Act provides that transfer agents must be registered with the SEC to perform the function of a transfer agent with respect to any security issued by a registered investment company. In its letter, ICI states that the need for rulemaking in this area has become increasingly important as retirement plan assets have grown in recent years.

ICI Position
The Institute's letter states that, in carrying out their responsibilities in connection with mutual fund holdings, TPAs engage in transfer agent functions that fall within the scope of the definition of "transfer agent" under the Exchange Act. Under the Exchange Act, persons that perform such functions are required to be registered with the SEC.

ICI also states that SEC registration of TPAs engaged in these activities will provide important protections to retirement plan participants. In particular, the registration of TPAs will enable the Commission to impose appropriate regulatory responsibilities on TPAs in connection with certain trading activity, such as the responsibility to address abusive short-term trading.

While TPAs that meet the definition of a "transfer agent" should be required to register with the Commission, the Institute does not recommend subjecting TPAs to all the requirements applicable to registered transfer agents. Instead, the SEC should develop specifically tailored exemptions from certain regulatory requirements based on the functions TPAs perform and the resulting investor protection needs.