Reducing Burdens and Providing Guidance on the Use of Negative Consent for the Bulk Transfer or Assignment of Customers’ Accounts

Summary

In general, a member must obtain a customer’s affirmative consent or instruction to transfer or assign the customer’s account to another member. However, for large bulk transfers of customer accounts, obtaining affirmative customer consent to such transfers or assignments may sometimes be unworkable. Thus, in some situations, members seek to transfer customer accounts by sending letters to their customers that their accounts will be transferred unless a customer expressly objects to the transfer of his or her account (negative consent). FINRA has previously stated its view that the use of negative consent to transfer or assign customers’ accounts may be appropriate in some bulk transfer circumstances. 

In furtherance of the FINRA Forward initiative to support member compliance, this Notice reduces unnecessary burdens by eliminating the current practice of submitting draft letters for the use of negative consent to FINRA staff for review and obtaining FINRA staff’s “no objection” prior to sending the letter. In addition, the Notice consolidates guidance FINRA previously issued regarding the use of negative consent and provides members with effective practices to help guide their use of negative consent in future bulk transfers or assignments.

This Notice does not create new legal or regulatory requirements, or new interpretations of existing requirements, nor does it relieve firms of any existing legal or regulatory obligations. Members may consider the information in this Notice in developing new, or modifying existing, practices that are reasonably designed to achieve compliance with relevant regulatory obligations based on their size and business model.

Questions concerning this Notice should be directed to: 

• Afshin Atabaki, Vice President and Associate General Counsel, Office of General Counsel (OGC), by email or (202) 728-8902;
• Kris Dailey, Vice President, Office of Financial and Operational Risk Policy, by email or (646) 315-8434; or
• Ilana Herscovitz Reid, Associate General Counsel, OGC, by email or (202) 728-8268. 

Background & Discussion

FINRA is committed to modernizing its rules and guidance and empowering member compliance.¹ This Notice supports those initiatives by consolidating guidance FINRA has issued, reducing unnecessary burdens, and providing members with effective practices regarding the use of negative consent in bulk transfers or assignments.

Over time, members have sought to transfer or assign customers’ accounts in bulk for various reasons, including when members are leaving the business or ceasing a particular line of business.² Also, after introducing firms have ceased business without transferring customers’ accounts, clearing firms have sought to assign the customer accounts to other introducing firms on the clearing firms’ platforms. Obtaining affirmative customer consent to these transfers or assignments sometimes is unworkable, so many firms have sought to transfer or assign customers’ accounts using negative consent. In such situations, FINRA believes the use of negative consent may be appropriate in limited circumstances to transfer or reassign accounts in bulk. Typically, such situations are driven by a change in a firm’s operations or business model and use of negative consent will enhance efficiency and minimize disruptions to customer account access. Under certain circumstances, however, FINRA has stated that transfers of customers’ accounts by a member using negative consent may conflict with a member’s obligation to observe high standards of commercial honor and just and equitable principles of trade.³

In Regulatory Notice 25-07 (April 2025), FINRA requested comment on modernizing its rules, guidance and processes for the organization and operation of member workplaces, including specifically requesting comment regarding members’ use of negative consent to transfer or assign customers’ accounts. Several comments addressed this topic. 

In light of the comments, FINRA issues this Notice to provide guidance regarding the use of negative consent to transfer or assign accounts. FINRA believes this Notice will help members whose business models and practices are rapidly evolving, and customers who need improved transparency and awareness of potential changes to their accounts and the opportunity to experience as seamless a transition as possible.

Consolidated Guidance Regarding Situations in Which a Member May Rely on Customer Negative Consent to Effectuate a Bulk Transfer or Assignment of Accounts

As discussed previously, members generally are required to obtain a customer’s affirmative consent or instruction to transfer or assign a customer’s account to another member. Transferring accounts without customer consent could conflict with a member’s obligation to observe high standards of commercial honor and just and equitable principles of trade under FINRA Rule 2010.⁴

For individual account transfers, FINRA Rule 11870 (Customer Account Transfer Contracts) describes the process by which a customer can transfer his or her account from one member (the carrying firm or delivering firm) to another (the receiving firm). In general, the process requires the customer to submit a completed transfer instruction to the receiving firm and sets forth specific procedures pursuant to which the receiving firm and carrying firm coordinate their efforts to accomplish the transfer. Most account transfers occur through the Automated Customer Account Transfer Service (ACATS), an electronic transfer system developed by the National Securities Clearing Corporation (NSCC) to automate and standardize the transfer of accounts. Members generally are also required to obtain a customer’s affirmative consent to assign the customer’s account to another member where the customer’s account assets are not being transferred (e.g., to assign the brokerage relationship from one introducing firm to another while the account assets remain at the same clearing firm).

As previously referenced, FINRA believes the use of negative consent may be appropriate in limited situations to transfer or assign customer accounts to another member in bulk. As noted above, using negative consent can enhance efficiency and minimize disruptions to customer account access, especially in situations where obtaining affirmative customer consent is unworkable due to immediate circumstances beyond a member’s control.

FINRA previously published guidance on the use of negative consent to transfer customers’ accounts from one member to another in NTM 02-57. NTM 02-57 also addresses the use of negative consent in situations involving a change in brokerage relationship without an underlying transfer of accounts, such as an assignment of customers’ accounts to a new introducing broker-dealer without a change in clearing firm. 

Since the publication of NTM 02-57, FINRA staff has engaged with members regarding the use of negative consent in various other situations. The following is an illustrative, not exhaustive, list of some of the situations where negative consent has been used to transfer or assign customers’ accounts:

• an introducing firm that has entered into one or more clearing arrangement(s) with one or more different clearing firm(s) is seeking to transfer some or all of its customer accounts to the new clearing firm(s);
• an introducing firm or a clearing firm that is going out of business—including, but not limited to, because of financial or operational difficulties—is seeking to transfer all of its customer accounts, including in the case of a clearing firm all of the accounts carried by such clearing firm, to one or more introducing firm(s) or clearing firm(s);
• an introducing firm or a clearing firm that is divesting itself of a specific business line or area (e.g., retail brokerage business) is seeking to transfer the affected customer accounts to one or more introducing firm(s) or clearing firm(s);
• following the conclusion or termination of a clearing relationship between a clearing firm and an introducing firm, including where the introducing firm has gone out of business, the clearing firm is seeking to assign customer accounts that were not transferred by the original introducing firm to one or more other introducing firms with which the clearing firm has a relationship;
• a firm that is acquired by or merged with one or more other members is seeking to transfer all of its customer accounts to the new firm or firms;
• upon the conclusion or termination of a networking arrangement between a firm and a financial institution pursuant to FINRA Rule 3160 (Networking Arrangements Between Members and Financial Institutions), the firm is seeking to transfer some or all customer accounts established under the arrangement to one or more new firm(s) with which the financial institution has formed a networking arrangement pursuant to Rule 3160, as directed by the financial institution;
• upon the conclusion or termination of an arrangement relating to an employee equity compensation plan or employer-sponsored retirement plan between a firm and an employer, the firm is seeking to transfer all customer accounts established under the arrangement to a new firm with which the employer has formed an arrangement, as directed by the employer;⁵ and
• to change the broker-dealer of record on directly held accounts in specified situations.⁶

Reducing Unnecessary Burdens Related to FINRA Staff’s Review of Draft Letters 

Following the guidance in NTM 02-57, members developed the practice of submitting draft letters for the use of negative consent to FINRA staff for review.⁷ The staff would then review the draft letters to determine whether the letter includes information and disclosures consistent with NTM 02-57, and where appropriate, inform members that the staff has “no objection” to the use of the letter for the transfer or assignment of accounts. 

However, FINRA has learned from experience and member feedback that this practice may impose unnecessary burdens, especially in situations where a transfer or an assignment of customers’ accounts is necessary for urgent business reasons under time constraints. To reduce those potential burdens, and with this Notice as a resource, FINRA intends to discontinue that prior review process. This change will become effective on April 1, 2026.

Thus, where appropriate under the circumstances, members may use such letters without obtaining the staff’s “no objection” to the proposed transfer or assignment of customers’ accounts by negative consent. FINRA staff will continue to provide interpretive guidance upon request regarding new or novel situations outside the scope of those discussed below.⁸ Furthermore, through its examination process, FINRA will continue reviewing member’s use of negative consent in transferring and assigning accounts.

Effective Practices, Minimum Disclosures and Other Considerations for Members Using Negative Consent 

To facilitate member compliance,⁹ FINRA sets forth, below, effective practices for the use of negative consent to effect a bulk transfer or assignment of accounts. This guidance is generally based on the recommended minimum disclosures listed in NTM 02-57 and the staff’s experience reviewing the use of negative consent. It is not intended to impose any new obligations on members. 

A. Customer Authorization

FINRA reminds members of the importance of obtaining customers’ prior written authorization to make changes to their accounts by negative consent.¹⁰ Members may consider obtaining such authorization during the client onboarding process, for instance, in an account opening agreement.¹¹

With such authorization, members may reasonably determine that the use of negative consent to transfer or assign customers’ accounts in bulk to another member is appropriate in situations similar to those listed above.

B. Compliance with Regulatory and Legal Requirements

Various regulatory and legal requirements may apply to the use of negative consent for the bulk transfer or assignment of customers’ accounts. While the requirements noted here are not exhaustive, FINRA reminds members to ensure that the transfer or assignment is consistent with all applicable laws, rules and regulations. For example, if required under FINRA Rule 1017 (Application for Approval of Change in Ownership, Control, or Business Operations), a member must file a Continuing Membership Application (CMA) with FINRA with respect to the proposed transfer or assignment and satisfy the applicable requirements in conjunction with the transfer or assignment.¹² Likewise, letters that constitute retail communications would be subject to applicable content standards of Rule 2210 (Communications with the Public). Another applicable regulation is Regulation S-P, which governs the protection of financial and personal customer information.¹³ Other laws, rules and regulations may apply depending on the nature of the account, such as investment advisory accounts and retirement accounts. In addition, other legal and contractual obligations may apply.¹⁴

C. Free Credit Balances and Sweep Programs

A transfer of accounts may involve the transfer of free credit balances in the accounts of customers at the delivering firm to the receiving firm, including a transfer of free credit balances that results from the liquidation of products in a sweep program.¹⁵ In these instances, the delivering and receiving firms may rely on the letters that were used to effect the bulk transfer of customers’ accounts via negative consent to transfer the free credit balances, provided that the transfer is consistent with Exchange Act Rule 15c3-3(j) and the guidance issued by Securities and Exchange Commission (SEC) staff.¹⁶

In addition, a transfer of customers’ accounts may result in a change in sweep program offerings available to customers where the receiving firm offers different sweep program products than those offered by the delivering firm. In such situations, the receiving firm may also rely on the letters that were used to effect the bulk transfer of customers’ accounts via negative consent to immediately reinvest customers’ free credit balances in products (either a money market mutual fund or an FDIC-insured bank deposit account) offered through its sweep program, provided that the reinvestment is consistent with Exchange Act Rule 15c3-3(j) and the guidance issued by SEC staff.¹⁷ In particular, Exchange Act Rule 15c3-3(j)(2)(ii) provides that a broker or dealer may transfer a customer’s interest in one product in a sweep program to another product in a sweep program, provided that the customer gives prior written affirmative consent to having free credit balances in the customer’s securities account included in the sweep program and after being notified that, among other things, the broker or dealer may change the products available under the sweep program.¹⁸ When determining the type of sweep product in which to immediately reinvest free credit balances, the receiving firm should consider whether customers have provided prior written affirmative consent to the delivering firm (e.g., through the customer agreement) to have their free credit balances invested in different sweep products.

D. Timing

Customers benefit from sufficient notice of changes to their accounts. When customers receive a letter, they need time to decide whether the transfer or assignment is right for them. As stated in NTM 02-57, absent exigent circumstances, a member should provide customers with at least 30 days’ notice before transferring or assigning their accounts via negative consent to another member.¹⁹ Exigent circumstances are rare and include situations such as a firm going out of business on short notice for unforeseen or unexpected reasons. 

In some instances, customers would benefit from having more than 30 days’ notice, or receiving more than one letter informing them of upcoming changes to their account.²⁰

E. Description

Customers need to understand the reason for the change and how it will affect their account to determine whether the change is right for them. As stated in NTM 02-57, members should provide customers with a clear and concise description of the circumstances necessitating the transfer or assignment. In addition, members may consider providing customers with other relevant information that would assist the customers’ decision (e.g., a brief description of the receiving firm’s services and whether the products offered by the receiving firm are similar to those offered by the delivering firm).²¹ Members may also consider providing customers with information about any immediate impacts of the change (e.g., disclosure of any trading restrictions during the transfer or assignment process).²² This will enable customers to make an informed decision as to whether to opt out of the transfer or assignment.     

F. Opt-Out Provisions

Providing customers with the opportunity to opt out of a change to their account is fundamental to the use of negative consent. As stated in NTM 02-57, the letter should include a statement that the customer has the right to object to the proposed transfer or assignment. In connection with this option, customers can best decide whether to opt out if the letter informs them of:

• the date by which they need to respond if opting out;
• how to opt out (e.g., by telephone, email or another method); and
• the alternatives available to the customer if opting out, including information about how the customer can effectuate a transfer to a different firm and the consequences of opting out without effectuating a transfer to a different firm.²³

G. Fee Waivers and Disclosures

Customers who do not opt out should not be charged for any transfer or assignment based on negative consent. Some customers who receive a letter may decide to opt out of the transfer or assignment via negative consent and instead affirmatively transfer their accounts to another member, other than the receiving firm, either before or after the opt-out deadline. In these cases, the delivering firm should waive any ACATS fees related to such transfers by customers, regardless of whether the transfer occurs before or after the opt-out deadline.²⁴

In addition, customers who do not initially opt out of the transfer or assignment may nevertheless decide to affirmatively transfer their accounts to another member within a short period after their accounts have been transferred or assigned to the receiving firm. Thus, the receiving firm may consider waiving ACATS fees for some period (e.g., 30 to 60 days) following the transfer or assignment, which would effectively provide customers with additional time to decide whether to transfer their accounts to another member without incurring any fees. This is especially important for customers who receive less than 30 days’ notice of the transfer or assignment due to exigent circumstances, as discussed above.

In any event, as stated in NTM 02-57, the letter should disclose any cost that will be imposed on the customer as a result of the transfer or assignment.

H. Delivery

Members may choose among various delivery methods for sending letters, including regular mail or electronic delivery, consistent with the guidance regarding the electronic delivery of information to customers.

Conclusion

FINRA believes members and investors will benefit from this Notice, which reduces burdens associated with the process for reviewing draft letters and consolidates prior guidance on the circumstances in which members have used negative consent to effect a bulk transfer or assignment. In addition, the effective practices outlined in this Notice will enable members to develop new or modify existing practices with respect to the use of letters in a manner that promotes consistent compliance expectations and efficiency of the customer account transfer process while protecting investors. FINRA notes that it has received comments on the use of negative consent in response to Regulatory Notice 25-07 as part of its broad rule modernization review and, in the spirit of continuous improvement, FINRA looks forward to further engagement on this topic.

In addition, to empower member compliance, FINRA will make available other resources on its website.

Effective Date

As stated above, the changes regarding FINRA staff’s review of draft letters will become effective on April 1, 2026.

Endnotes