Investor Bulletin: Transferring Your Investment Account
June 27, 2014
The SEC’s Office of Investor Education and Advocacy is issuing this Investor Bulletin to educate investors about transferring an investment account from one investment firm to another and to provide tips on how to avoid problems and delays.
Investors transfer their investment accounts for many reasons. Their broker or investment adviser may have retired and the investor wants to switch to a new broker or investment adviser. Or perhaps their current broker or investment adviser is switching firms and the investor is also transitioning to the new firm. While the account transfer process is not complicated, investors should keep in mind that it is a decision they should fully understand.
How the Account Transfer Process Works
Most account transfers between firms are made using the Automated Customer Account Transfer Service (ACATS). The National Securities Clearing Corporation (NSCC) operates ACATS, and both the New York Stock Exchange (NYSE) and the Financial Industry Regulatory Authority (FINRA) require their member firms to use ACATS. Transfers involving cash, equities, corporate and municipal bonds, government securities, mutual funds, and listed options are readily transferable through ACATS. If a transfer is made through ACATS, and there are no problems, the transfer should take approximately three to five business days to complete from the time the new firm enters the transfer form into ACATS.
All transfers start and end with your new firm. Customers initiate the transfer process by completing a Transfer Instruction Form (TIF) and sending it to the new firm. Most account transfer delays occur because the TIF is either incorrect or incomplete. It is critical that you use the correct form and fill it out very carefully. Be sure to provide the requested information exactly as it appears on your old account. Once the new firm receives the TIF, it begins the transfer validation process by sending the TIF to the old firm via ACATS, with a list of assets to be transferred.
The old firm has one business day to validate or reject the transfer request. If the assets in an account can be transferred through ACATS, the old firm can reject a transfer request only if the form has been completed incorrectly or there is a question about the ownership of the account or the number of shares.
Once the transfer request is validated by the old firm, the account is frozen for transfer to the new firm. The old firm will send a list of the assets to be transferred to the new firm, which can reject the transfer only if the account is not in compliance with the new firm’s credit policies or minimum asset requirements.
The old and new firms must act to complete the transfer so it is important to stay in touch with both of them. If there is a problem, ask for an explanation of how to correct it. If the old firm takes no action on the request or a problem is not resolved within two business days, the transfer request is purged (or deleted) from ACATS. If that happens, FINRA is notified and the new firm must start over by inputting the transfer request into ACATS. Once the transfer is complete and you receive your first statement from your new firm, it is a good idea to take the time to compare it with your last statement from your old firm to verify that all assets have been correctly transferred.
Questions You Should Consider Asking Before You Initiate Your Account Transfer
Discussing the transfer process with your new firm is the best way to become familiar with the account transfer process. If the answers to your questions are not clear, ask the new firm for a written response. You should ask questions, such as:
► Can you explain the transfer process to me?
► Can you tell me what fees I should expect to pay (including transfer fees and any other fees associated with the account (e.g. annual fees, brokerage commissions)?
► What documents or information do I need to transfer my account to your firm?
► What do I need to do to start the transfer process and what should I expect after that?
► What is the anticipated length of the transfer process given the specific type of account (such as cash, margin, IRA, custodial) and the assets held (such as stocks, bonds, options, limited partnership interests)?
► Can you identify any issues that may cause a delay during the account transfer process?
► How and when will you inform me that the transfer process is complete?
► Does your firm have any specific policies or constraints that might impact the account transfer? For example, if you have a margin account, ask if the new firm will accept a margin account and, if so, what its minimum requirements are. In short, make sure the new firm is a good fit for you as a customer before you attempt to transfer your account.
► Are there any restrictions on transactions I can execute during the transfer process? For example, buying and selling securities during the account transfer process can complicate and delay the transfer.
► Can you identify any securities or assets in my account that may not transfer and how they will be handled? Before initiating the transfer process, ask your new firm which assets in your account may not transfer. These securities may include:
- securities sold exclusively by your old firm;
- mutual funds or money market funds not available at the new firm, typically because the new firm does not maintain a relationship or arrangement with the fund necessary to hold the asset;
- limited partnerships that are private placements, typically because the asset is held at the issuer, not the broker or investment adviser who sold it to the customer;
- fractional shares of securities; and
- bankrupt securities.
You will need to make an informed decision regarding these non-transferable assets.
- You may be able to simply sell the non-transferable asset and transfer the cash proceeds, but you should consult your tax adviser first because selling the asset may affect your taxes. Also, before selling a mutual fund and buying a similar fund at your new firm, find out the fees that will be charged for the transactions by the old and new firms.
- If you choose to leave the non-transferable assets at the old firm in an inactive account, ask whether a fee will be charged.
- You may be able to take physical delivery of assets directly from your old firm. However, this may not be a wise choice. Taking possession of a physical security poses risks, such as the security being lost or stolen. Lost or stolen securities require significant time and money to replace. Also, it usually takes longer to sell a physical security than one your broker or investment adviser already holds electronically.
If you own some of these non-transferable securities, it may take longer to complete a transfer while you decide how to handle them. Your old firm is required to transfer whatever securities or assets it can through ACATS and ask you what you would like to do with the others.
Make sure you understand the fees you will pay in transferring your account. You should ask your old and new firms about their fees. Sometimes, transfer fees can be substantial. These fees are typically spelled out in your account agreements with the firms. (If you no longer have your account agreement handy, ask your broker to provide you with a copy of its fee schedule.) Your old firm may charge you a fee to cover the administrative expenses associated with the transfer, and the new firm may also charge a fee. If you are transferring a retirement account, you should be aware that some firms will charge a “transfer out” as well as a prorated retirement account custodial fee. Before you initiate your account transfer, you may want to approach your new firm and ask them to waive or reimburse you for any transfer fees. In addition to transfer fees, make sure you also understand the various fees and expenses associated with your account at the new firm. For additional information on account fees and expenses in general, please read our investor bulletin “How Fees and Expenses Affect Your Investment Portfolio,” at http://www.sec.gov/oiea/investor-alerts-bulletins/ib_fees_expenses.pdf.
Considerations If Your Financial Professional Moves to a New Firm
If your broker or investment adviser moves to a new firm, he or she may ask you to transfer your account to the new firm. In addition to the general questions about transfers discussed above, you should also consider asking your broker or investment adviser the following:
- Why are you moving to the new firm?
- What benefits or advantages will I receive from transferring my account to the new firm?
- Has the new firm offered you any incentives or compensation to get me to transfer my account to the firm?
Not All Customer Account Transfers Use ACATS
Banks, mutual funds, credit unions, insurance companies, and limited partnerships are not required to participate in ACATS. However, many banks voluntarily use NSCC’s “ACATS for Banks” program. If a bank participates in the program, then a transfer from a participating bank to a broker or investment adviser or vice versa should occur in the standard ACATS time frame of approximately three to five business days from the old firm’s receipt of a correct TIF from the new firm. If you are transferring your account to or from a bank, you should ask whether the bank participates in the “ACATS for Banks” program.
If ACATS is not used, the old firm and the new firm exchange forms between themselves and the customer. It is not uncommon for the account transfer process outside of ACATS to take up to thirty (30) days.
Dividends, Interest, or Other Assets Received After The Transfer Is Complete
If possible, time your transfer so that events such as dividends, interest, and proceeds from sales of securities will not arrive in your account after the transfer is due to be completed. If this does happen, however, your old firm is required to promptly transfer them to you at your new firm.
Transferring an Annuity
Chances are that if your annuity is appearing on your investment statement, you bought it from the broker or investment adviser who has a selling arrangement with the insurance company that issued the annuity. The annuity itself is held by the insurance company and your broker or investment adviser keeps a record of it and services the annuity (acts as a “go between”) for you. In this case, your old firm will use the ACATS system to change the “broker of record” to your new firm. This process should not be confused with transferring an annuity from one insurance company to another, which typically involves a sale of the annuity.
What If My Account Is Not Transferred and I Think It Should Have?
If you feel your account has not been transferred in a timely fashion, ask to speak to the compliance director at your old and new firm. If you are not satisfied, please contact the SEC, FINRA, or your state securities regulator to report the issue and get assistance.
North American Securities Administrators Association
750 First Street, NE
Washington, D.C. 20002
Finally, you should never hesitate to Ask Questions (http://www.sec.gov/investor/pubs/askquestions.htm). A simple error could significantly delay the transfer. Be certain your old and new firms have the information they need to make the transfer happen in a timely fashion.
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