What is a Broker-Dealer? - Davis Polk & Wardwell

What Is a Broker-Dealer? § 1A:2.6
ensure that all applicable provisions of the federal securities laws,
including the record keeping and confirmation requirements, are
complied in connection with each sale. 150 Absent such responsibility,
supervision and record keeping by a broker-dealer, the entity that
provides confirmation services may be required to register as a
broker-dealer with the SEC. 151
[I][3] Transfer Agents and Stock Plan Services
The SEC has provided no-action relief to transfer agents 152 that act
as an intermediary between issuers and Registered Broker-Dealers
without effecting securities transactions. 153 The SEC has also granted
relief to issuers who are registered transfer agents, when they provide
services to their employees or shareholders as part of an employee
stock purchase plan or other similar programs, provided that they do
not execute transactions. For example, the SEC granted no-action
relief to Digital Equipment Corporation (“Digital”), a registered transfer
agent, for its employee stock purchase plan procedures (“Plan”) to
help its employees in the sale of shares. 154 Under the Plan, Digital
deducted certain amounts from the salary of each employee participating
in the Plan during each of the two payment periods in the year and
purchased Digital’s common stock for employees automatically under
options granted to the employees. 155 To assist employees in selling
150. See The Depository Trust Co., SEC No-Action Letter (Feb. 28, 1983);
Benal Beach Corp., S.A., SEC No-Action Letter (Apr. 5, 1974); Scotch
Whisky Investment Co., SEC No-Action Letter (Jan. 20, 1973).
151. See Benal Beach Corp., S.A., SEC No-Action Letter (Apr. 5, 1974); Scotch
Whisky Investment Company, SEC No-Action Letter (Jan. 20, 1973); The
Woodmoor Corp., SEC No-Action Letter (Mar. 5, 1972).
152. A “transfer agent” is defined in section 3(a)(25) of the Exchange Act as
“any person who engages on behalf of an issuer of securities or on behalf of
itself as an issuer of securities in (A) countersigning such securities upon
issuance; (B) monitoring the issuance of such securities with a view to
preventing unauthorized issuance, a function commonly performed by a
person called a registrar; (C) registering the transfer of such securities;
(D) exchanging or converting such securities; or (E) transferring record
ownership of securities by bookkeeping entry without physical issuance of
securities certificates.” Transfer agents are required to register with the
SEC under Section 17A of the Exchange Act.
153. See Columbia Transfer Co., SEC No-Action Letter (May 28, 1976)
(Columbia proposed to perform certain services incidental to the proposed
offering of an issuer for a fee; proposed services included reviewing
proposed offering and disseminating information regarding the proposed
offering to the participating broker-dealers, acting as an intermediary
between the issuer and any participating broker-dealers interested in acting
as underwriters, and facilitating the negotiation of terms regarding the
underwriting agreement).
154. See Digital Equipment Corp., SEC No-Action Letter (Oct. 2, 1978).
155. See id.
(Broker-Dealer Reg., Rel. #9, 9/10)
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