These instruments are called the trust mortgage, deed of trust, collateral trust, equipment trust, etc., depending on the type of collateral. First, they issue stock certificates, which constitute an increase in shares outstanding (e.g., original issues, stock dividends and splits, etc.). Associated with the indenture is the instrument that perfects a lien on collateral, if any, securing the bonds. Secondary Market Disclosures for Municipal Issues b. In addition to checking original issues, the registrar checks each transfer made by the transfer agent: to ensure the genuineness of the certificates presented for transfer; to make certain that the old certificates have been canceled; and to ensure that the number of shares represented by the new certificates does not exceed the number of shares represented by the old (canceled) certificates. A stock registrar performs the critical duty of guarding against the over- or under-issuance of a security, sometimes referred to as a record difference, out-of-proof or out-of-balance condition. Since bond issues often have a 20 or 30 year maturity, some bearer bonds, (and associated coupons) may still be encountered by examiners. A transfer agent is, therefore, needed to maintain records of ownership.
The indenture trustee and other agents owe the issuer of the security effective and efficient administration of the duties assigned under the indenture.
Under Section 149 of the Internal Revenue Code, in order to qualify for the Federal tax exemption for interest with respect to state, county, and municipal bonds, such bonds must be in registered form.
Today, however, most bond issues are registered for both principal and interest.
On rare occasions, however, there may be a separate bond registrar for an issue.
usually, the indenture trustee performs the function of bond registrar. Third, they cancel and reissue certificates to reflect changes in ownership.