The interactions you have with your mutual fund company will be primarily with the fund company's transfer agent. The Investment Company Act of 1940 governs the function and organization of mutual fund companies. A fund's transfer agent will handle the requirements of the Act concerning the notification and protection of customer investments.
The mutual fund transfer agent is responsible for keeping track of the number of shares the individual fund investors have in their accounts and the value of those shares. The agent also maintains the database of investors in the fund. Mutual fund shares are created and redeemed on a daily basis as investors buy and sell their investments in a fund.
The fund transfer agent prepares and mails the various customer statements. Mutual funds are required to send account statements at least quarterly. Additional statement or confirmations will be sent when investments are made in the fund or shares are redeemed. Additional mailings performed by the transfer agent include year end tax statements for investors and quarterly and annual reports about the fund performance.
The transfer agent will calculate the dividend amount for each investor in the mutual fund when distributions are declared. The agent will then generate the dividend checks and mail them to fund investors or calculate the additional shares for investors who have elected to reinvest dividends back into the fund. Often dividend payments will be made by electronic transfer into a bank account. The transfer agent will maintain the records of how the payments will be made and insure payments are done in the manner requested by the investors.
The transfer agent operates the customer service department of the mutual fund. All customer communication with the fund concerning investor accounts will be handled by the staff of the transfer agent. Customer service representatives that answer phone calls or respond to email or instant messaging inquiries will be employees of the transfer agent.
Transfer Agent Organization
The transfer agent of a mutual fund must be registered and meet the legal requirements set forth by the Investment Company Act of 1940 and the Securities and Exchange Commission. A fund's transfer agent may be a third party company that only handles transfer agent duties or an in-house subsidiary of the mutual fund company. The transfer agent is separate from the fund's custodian, which is the company that actually holds the securities that make up the fund's investment portfolio.
- ICI Factbook; Appendix A: How Mutual Funds and Investment Companies Operate
- FDIC: Role of the Transfer Agent
- MySMP: Transfer Agent Definition & Functions
- U.S. Securities and Exchange Commission. "Mutual Fund Fees and Expenses," Pages 3-4. Accessed Nov. 4, 2020.
- Internal Revenue Service. "Publication 550: Investment Income and Expenses," Page 47. Accessed Nov. 4, 2020.
- Vanguard. "How to Convert to Admiral Shares." Accessed Nov. 4, 2020.
Tim Plaehn has been writing financial, investment and trading articles and blogs since 2007. His work has appeared online at Seeking Alpha, Marketwatch.com and various other websites. Plaehn has a bachelor's degree in mathematics from the U.S. Air Force Academy.