The MSRB is requesting comment on draft amendments to MSRB Rule G-26 related to customer account transfers. The draft amendments are primarily designed to modernize the rule and promote a uniform customer account transfer standard for all broker-dealers.
Rule G-26 requires broker-dealers to cooperate in the transfer of customer accounts and specifies procedures for carrying out the transfer process. Such transfers occur when a customer decides to transfer an account from one broker-dealer, the carrying party to another, the receiving party. The rule establishes specific time frames within which the carrying party is required to transfer a customer account; limits the reasons for which a receiving party may take exception to an account transfer instruction; provides for the establishment of fail-to-receive and fail-to-deliver contracts; and requires that fail contracts be resolved in accordance with MSRB close-out procedures. In addition, the rule requires the use of the automated customer account transfer service in place at a registered clearing agency registered with the SEC, when both broker-dealers are direct participants in the same clearing agency. Finally, the rule contains a provision for enhancing compliance by requiring submission of transfer instructions to the enforcement agency with jurisdiction over the broker-dealer carrying the account, if the enforcement agency requests such submission.
The MSRB designed Rule G-26 in 1986 as part of an industry-wide initiative to create a uniform customer account transfer standard by applying a customer account transfer procedure to all broker-dealers that are engaged in municipal securities activities. The uniform standard is that of the National Securities Clearing Corporation’s (NSCC) Automated Customer Account Transfer Service (ACATS).
The MSRB adopted Rule G-26 in conjunction with the adoption of similar rules by other SROs—NYSE Rule 412 and NASD Rule 11870. Those rules are not applicable to certain municipal securities firms, particularly those with municipal security-only accounts and bank broker-dealers.
The MSRB has, from time to time, modified the requirements of Rule G-26 to conform to enhancements made to ACATS that had relevance to municipal securities, as well as to certain provisions of the parallel FINRA and NYSE customer account transfer rules. However, these amendments have been limited and there have been none to Rule G-26 since 2001. The NYSE and FINRA each has made additional amendments to its rule to maintain consistency with updates to NSCC Rule 50 and ACATS. Therefore, the MSRB is considering updates to Rule G-26 to better maintain consistency with NSSC Rule 50 and ACATS, and with the NYSE and FINRA rules to promote a uniform customer account transfer standard for all broker-dealers.
The primary purpose of the draft amendments is to re-establish consistency with ACATS and the rules of other SROs by conforming to significant updates by the NSCC, the NYSE and FINRA that have relevance to municipal securities. The MSRB believes that including certain provisions from the other rules in the draft amendments would make the transfer of customer securities account assets more flexible, easier, faster and more efficient, while reducing confusion and risk to investors and allowing them to better move their securities to their broker-dealer of choice.
For more information regarding the proposed rule change, please refer to MSRB Regulatory Notice 2017-01.