5 Things to Know About Transferring a Brokerage Account

When investors transfer securities account assets between broker-dealers, the process runs smoothly for the vast majority of the thousands of accounts transferred each year. But there are times when delays occur and investors have questions. Here are 5 things you should know about the account transfer process.

Laptop with Forex Chart
If you'd like to transfer
your securities account
assets from one broker-dealer
to another, you need to
initiate the process by
completing a Transfer
Initiation Form (TIF) and
send it to the firm you'd
like to start working with.

1. How are accounts transferred between broker-dealers?
Most customer account assets can be transferred through an automated process. The National Securities Clearing Corporation (NSCC) operates the Automated Customer Account Transfer Service (ACATS) to facilitate the transfer the assets in a customer account from one broker-dealer to another. Transfers involving the most common assets (for example, cash, stocks and bonds of domestic companies, and listed options) are readily transferable through ACATS.

2. What should I do to start the account transfer process?
If you'd like to transfer your securities account assets from one broker-dealer to another, you need to initiate the process by completing a Transfer Initiation Form (TIF) and send it to the firm you'd like to start working with. The new firm, called the "receiving firm," can give you this form. Once the receiving firm receives the completed TIF from you, it begins the process by communicating with the current or "delivering firm" via ACATS.

3. What's involved in the account transfer process?
Although automated, the account transfer process is somewhat complicated and affected by certain factors and regulations. This is a brief overview of what's involved. 

Once the receiving firm receives the TIF, it enters customer data into ACATS. Shortly after the data is entered, an automated function permits the delivering firm to see that a request to transfer the account has been made.

To best prevent the unauthorized transfer of customer account assets, delivering firms will reject any transfer request where certain data (for example, the customer's name or Social Security number) provided by the receiving firm does not match the information on the delivering firm's records. If the account request is rejected, the receiving firm may correct the data, or it may have to contact the customer to make sure the information on the TIF is correct. 

Once the transfer request is validated, the delivering firm will send a list of the assets in the account to the receiving firm via ACATS. The receiving firm will review the list of assets to decide whether it wishes to accept the transfer of the account. It's important to know that broker-dealers are not required to open or accept the transfer of an account; it's possible to initiate a transfer request only to find that the receiving firm has declined to accept the account. 
The most common reason for declining a transfer is due to the receiving firm's credit policies. For example, the receiving firm may decide not to accept the account due to the quality of securities supporting a margin loan, or because the account does not meet its minimum equity requirements.

When the customer account information is properly matched, and the receiving firm decides to accept the account, the delivering firm will move the assets to the receiving firm. 

4. What are realistic expectations of the time that is required to transfer an account?
Many events occur simultaneously during the account transfer process. Even with today's technology, a successful account transfer from the delivering firm to the receiving firm will usually take, at a minimum, about a week. It's best to plan ahead for any potential delays.

Transfers where the delivering entity is not a broker-dealer (for example, a bank, mutual fund or credit union) generally take more time. In addition, transfers of accounts requiring a custodian, like an Individual Retirement Account or a Custodial Account for a minor child, may take more time.

5. What can I do to ensure the account transfer is successful?
Before moving account assets from one firm to another, it's always a good idea to review and understand the transfer process for a specific firm. Ask the new firm questions about the anticipated length of their transfer process, what might cause a delay and how it informs customers when the transfer process is complete. You may also want to ask whether any policies or constraints might impact the transfer of your account. For example, if you have a margin account, you should ask if the new firm will accept it and, if so, what are its minimum requirements. Keep in mind that Brokerage firms can decide which investments they choose to accept. Specifically, if you own any proprietary products or non-securities products (such as insurance products) with your current firm, you probably can't transfer them to the new firm. In short, make sure the new firm is a good fit for you before you attempt to transfer the account. 

You should also consider that buying and selling securities during the account transfer process often complicates and delays the transfer. Some firms will even "freeze" an account that is in the process of being transferred, meaning that no trades will be permitted until the transfer is complete.

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