Transfer Agency Fees: A Board’s Perspective

April 28, 2011

Transfer agents perform myriad services for their mutual fund clients, some of which fulfill regulatory obligations. The principal arrangements between a transfer agent and a fund, including a description of the services the transfer agent is obligated to perform for the fund and the fees to be paid by the fund for those services, are set forth in a written contract approved by the fund’s board. It has become increasingly challenging for mutual fund boards to analyze these contractual arrangements because of the changing dynamics of the transfer agent business, the expanding variety and complexity of services provided, and the changing service needs of funds. This outline discusses the role of transfer agents, the profit models they employ and the legal standards related to board consideration of transfer agency arrangements. This outline also seeks to provide an analytical framework for use when reviewing or approving transfer agency arrangements.

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