From time to time, customers may look to move their account to a new brokerage firm for a wide variety of reasons, such as better or wider variety of services or lower costs. It may also be that the customer has learned the broker is under investigation by regulators or has apparently committed rule violations in connection with the account. Whatever the reason, your firm must respect customer account transfer instructions.

Automated Customer Account Transfer Service (ACATS)

This can be accomplished by using the Automated Customer Account Transfer Service or ACATS for short. The receiving member firm will initiate the transfer by submitting a Transfer Information (TI) record, also known as a TIF (Transfer Initiation Form), to ACATS. ACATS then assigns a control number to the transfer and puts up a “Request” status in the ACATS. The delivering member (old firm) must respond within one business day by either adding the assets that are subject to the transfer or by rejecting the transfer.

After the delivering member loads the customer assets into ACATS, both the receiver and deliverer have an opportunity to review the list of assets in the account. The ACATS transfer remains in “Review” status, which can last the remainder of the day that the deliverer added assets and through the next business day. During this review period, the delivering member can add, delete, or modify an asset listed in the transfer. If the deliverer takes any of these actions, ACATS updates the transfer to “Review Adjust-Deliverer” status and adds an additional business day for the parties to review the transfer.

Generally, within three business days following the validation of the transfer instruction, the carrying member must complete the transfer of the customer’s security account assets to the receiving member. In short, that’s one day validate, three days ship. If the asset is non-transferable, the firm has five business days to send the proceeds from liquidation.

Fail-To-Receive and Fail-To-Deliver

When the transfer take place, the receiving member and the carrying member must immediately establish fail-to-receive and fail-to-deliver contracts at then-current market values upon their respective books of account against the long/short positions, including options, that have not been delivered/received, and the receiving/carrying member must debit/credit the related money amount.

For purposes of this rule, customer authorization could be the customer’s actual signature or an electronic signature.

Check out FINRA Rule 11870 for more information on customer account transfers.

MasterCompliance provides expert consulting, outsourcing, and implementation tools in planning and budgeting for your firm’s compliance responsibilities. If there are any areas where you would like to explore additional assistance or services, please contact us.