ABCs of ACATs: Brokerage Account Transfers

Everything Investors Need to Know about Brokerage Account Transfers

If you’re not happy with your broker, you shouldn’t let the fear of transferring your accounts stop you from changing brokerage firms through an ACAT. The United States Securities and Exchange Commission (SEC) has rules and regulations that both delivering and receiving firms must comply with to facilitate the freedom to change brokerage firms. Most transfers take no longer than a couple of weeks and the fees associated with them are generally minimal. If you feel like your brokerage firm is holding your account ransom by refusing to transfer your assets to your new firm, you should speak to an experienced brokerage account attorney about making a claim please call us at 800-767-8040 to discuss your case.

How To Get The ACAT Process Started

Once you’ve decided that you’d like to transfer your account, you must initiate the transfer process by filling out a Transfer Initiation Form (TIF) with the receiving firm. Once the receiving firm has your executed TIF, they will contact your old firm and begin the transfer process. Transfers of most common brokerage account assets, such as cash, stock, domestic bonds, and listed options are easily accomplished through the Automated Customer Transfer Service (ACATs) that’s overseen by the National Securities Clearing House Corporation (NSCC). In order to prevent fraudulent transfers, the delivering firm will not transfer the account unless your identifying information matches their records. Brokerage firms are required to follow up with customers that request transfers that are rejected to rectify any discrepancies and move the transfer process forward. If there is significant delay in transferring your account due to the negligent or intentional mishandling of your request, you may have an actionable claim.

Review ACAT Process By Receiving Firm

Once your transfer has been validated by the delivering firm, they will send the information about the contents of your account to the receiving firm via ACATS. The receiving firm will then commence a review of your account and decide whether or not to accept it. It’s important to discuss the contents of your account with your new firm before initiating the process to find out if they accept accounts like yours. It’s a waste of time to initiate a transfer process only to find out that your new firm won’t accept your account. There are many reasons why a brokerage firm will reject an account, but these are the most common:

• Credit policies;
• Quality of securities supporting a margin loan;
• Accounts that don’t meet the firm’s equity requirements.

If your account is accepted, the transfer moves into the delivery process. The transfer of your assets from the delivering firm to the receiving firm shouldn’t take more than a few days. The total process from start to finish usually takes about six business days to complete.

How Much Time do Brokerage Firms Have to Honor an ACAT Request?

There are large and small problems that can cause a delay in the transfer process. These are some of the most common causes of delay:

• The initial transfer form has errors;
• The wrong transfer form is used;
• The transfer includes a request to liquidate assets;
• A margin account[1] is being transferred that requires scrutiny of the supporting securities;
• The transfer is from one type of account to another type of account;
• The transfer involves a change in ownership;
• The transfer involves a retirement account.

These are some examples of issues that can normally cause delays that you should be aware of when transferring brokerage houses. If your transfer is taking weeks or months, and you’re not getting a straight answer from your old or new brokerage firm, it’s time to speak to an investor fraud attorney about investigating the transfer…

What Happens if all Your Securities Cannot be Transferred on an ACAT?

One of the things that could be holding up your transfer is that your account contains securities that cannot be transferred. There are some examples of types of securities that are not eligible for transfer;

• Bankrupt Securities;
• Annuities[2];
• Private placement limited partnerships;
• Money market funds or mutual funds that are not available from the new firm you’ve chosen;
• Securities that are only sold by your old firm.

If your portfolio contains these types of securities, your old firm will transfer your other assets with ACATS and contact you to discuss what to do with the remaining securities. Your choices include selling the security and transferring the cash, leaving the security at your old firm, or taking possession of the security yourself. It can be risky to take personal possession of a security, and it might not be prudent to do this for a retirement plan, so it’s a good idea to consult with an experienced investor attorney before making this decision.

Should I Transfer My Securities to Another Firm?

Most brokerage firms have comparable products and services, so there’s no reason to change unless you’re extremely unhappy with the service you’re receiving or you’d like your account handled by a particular broker at another firm. There are costs involved with the transfer, charged both by your old and new firm that should be considered before making the decision. You should also be aware that a transfer can cause delays in receiving interest, dividends, and the proceeds of securities sales. If you’re transferring your account because your account has decreased in value due to unethical methods at your old firm such as churning fees, you should speak to an investor fraud attorney as soon as possible about making a claim.