Certified Anti-Money Laundering Specialist Certification (CAMS) Practice Exam

What are the primary functions of a transfer agent?

1. Maintain investor records

2. Issue and cancel securities certificates, act as an intermediary, manage lost certificates

3. Perform credit checks on investors

4. Facilitate mergers and acquisitions

The correct answer is: Issue and cancel securities certificates, act as an intermediary, manage lost certificates

The primary functions of a transfer agent include issuing and canceling securities certificates, acting as an intermediary between issuers and shareholders, and managing lost securities certificates. Transfer agents play a crucial role in the securities industry by ensuring that the ownership of shares is accurately transferred when investors buy or sell them. They maintain comprehensive records of investors, which is essential for supporting the accurate calculation of dividends and interest payments, and assist in the timely update of the corporate books. By managing the issuance and cancellation of securities, transfer agents help mitigate the risk of double issuance or discrepancies in ownership records. This function is particularly critical in preventing fraud and maintaining the integrity of the capital markets. When a security is lost, transfer agents provide the necessary procedures to replace it, thus safeguarding investor interests. While maintaining investor records is indeed a significant function, the comprehensive duties that include acting as an intermediary and managing lost certificates encapsulate the broader role of transfer agents more effectively. The other options, such as conducting credit checks on investors or facilitating mergers and acquisitions, do not fall within the typical purview of transfer agents and instead relate to services offered by other financial entities or institutions.