Account Transfers
Quick Answer
The FINRA account-transfer requirement governs broker-to-broker customer account transfers through the Automated Customer Account Transfer Service (ACATS) operated by the National Securities Clearing Corporation (NSCC). The receiving member starts the transfer with a customer-signed Transfer Initiation Form (TIF); the carrying member must validate or take exception within 1 business day, and after validation must complete the transfer within 3 business days. The FINRA transfer-interference prohibition prevents a member firm from interfering with a customer's transfer request when a registered representative changes employment; the only permitted delay is for a bona fide lien against the customer.
The account-transfer requirement is the operational rule (how transfers work). The transfer-interference prohibition is the customer-protection rule (you cannot block transfers to punish a departing rep). The exam pairs them because the second is the principal-supervision angle on the first.
ACATS: The Transfer Mechanism
ACATS is the Automated Customer Account Transfer Service operated by the National Securities Clearing Corporation (NSCC), a subsidiary of the Depository Trust & Clearing Corporation (DTCC). It is the standard mechanism for transferring most customer brokerage assets between FINRA member firms.
ACATS handles:
- Equity securities, mutual funds, ETFs, options
- Most fixed-income securities (Treasury, corporate, municipal bonds)
- Cash balances
- Most retail margin balances
ACATS does not handle:
- Annuities (separate insurance-industry transfer process)
- Limited partnerships and other nontransferable assets (these require manual transfer)
- Some proprietary mutual funds and structured products (require non-ACATS workflows)
The ACATS Workflow
| Step | Action | Responsibility | Timing |
|---|---|---|---|
| 1 | Customer signs Transfer Initiation Form (TIF) authorizing transfer | Customer | Day 0 |
| 2 | Receiving member submits TIF to ACATS | Receiving member | Day 0 |
| 3 | Carrying member validates the TIF (positions match, no restrictions) OR takes exception | Carrying member | Within 1 business day of receipt |
| 4 | Following validation, carrying member completes the transfer of customer assets | Carrying member | Within 3 business days after validation |
| 5 | Receiving member confirms receipt and credits customer account | Receiving member | Upon delivery |
Think of it this way: The receiving firm is the one who starts the transfer; the carrying firm is the one who executes it. The customer signs once (the TIF) and the rest happens between the two firms electronically.
Exam Tip: Gotchas
- ACATS timeline: 1 business day to validate, 3 business days to deliver after validation. The exam will sometimes ask the total elapsed time. From TIF submission to assets received: 1 + 3 = 4 business days, plus the customer's signing time on day 0.
- The receiving member starts the transfer; the carrying member executes it. The exam may flip the roles; the firm where the customer is moving to is the receiving member and starts the process.
Validation and Exceptions
The carrying member must validate the TIF within 1 business day. The carrying member may instead take exception (refuse to validate) for legitimate reasons. Common exception categories:
- Name or SSN mismatch: customer name or TIN on the TIF does not match the carrying-firm record
- Account restriction: account is subject to a court order, IRS levy, or similar legal restraint
- Lien: customer owes the carrying firm money (margin debit, unpaid trade losses, advisory fees)
- Account flat: no positions to transfer (the account is empty)
- Pending corporate action: a corporate action (merger, tender, dividend) is pending, and the asset cannot be moved until it resolves
- Duplicate request: a previous TIF is already in process for the same account
Exceptions must be promptly resolved by both firms. An exception is not a denial; it is a flag that the parties must clear before the transfer can proceed.
Exam Tip: Gotchas
- A lien is a legitimate exception, but only for amounts the customer owes the firm, not the reverse. If the firm owes the customer money, that is not a lien. The exception applies to margin debits, unpaid trade losses, and similar customer obligations to the firm.
- An exception is a flag, not a denial. The firms must work to resolve it. A carrying firm that takes exception and then ignores the receiving firm's resolution attempts violates the ACATS promptness requirement.
Interference With Customer Transfers
When a registered representative changes employment, the customer often follows the rep to the new firm. The FINRA transfer-interference prohibition prohibits the prior (carrying) firm from interfering with that customer's transfer request.
The rule states that it is inconsistent with just and equitable principles of trade for a member or associated person to interfere with a customer's request to transfer the account in connection with a change in employment of the customer's registered representative.
What Is Prohibited
- Seeking judicial orders or decrees to bar or restrict a customer transfer request
- Imposing conditions on the transfer that are not imposed on transfers in the ordinary course (delay tactics, additional documentation requirements, etc.)
- Contacting the customer to dissuade the transfer in a manner that misrepresents the rep, the new firm, or the customer's rights
What Is Permitted
- Delay for a bona fide lien: if the customer owes the firm money (margin debit, unpaid fees), the firm may delay the transfer until the lien is satisfied
- Delay for any other bona fide claim against the customer's account assets
- Pursuing claims against the departing rep: the rule protects the customer's right to transfer, not the rep's right to leave without consequence. Non-compete clauses, garden-leave provisions, and other employment claims against the departing rep are not restricted by the transfer-interference prohibition
Exam Tip: Gotchas
- A firm that owes a customer money cannot block the customer's transfer request. The lien exception applies to amounts the customer owes the firm, not the reverse. The exam will sometimes describe a customer with a credit balance, and the firm trying to delay; the credit balance is not a lien.
- the transfer-interference prohibition protects the customer, not the firm or the departing rep. Employment disputes between the firm and the rep continue under the rep's employment agreement and the FINRA arbitration code; the customer's account moves regardless.
How the ACATS Mechanics and the Transfer-Interference Prohibition Interact
The ACATS rule sets the mechanics (1 day to validate, 3 days to deliver). The transfer-interference prohibition sets the integrity (no improper interference). A firm that complies with the ACATS timing but takes exception on a pretextual ground (for example, demanding additional documentation that is not required for ordinary transfers) violates the transfer-interference prohibition even though the timeline looks correct.
A firm that taps the brakes on every transfer request from departing reps' customers will eventually face a transfer-interference charge regardless of how clean the ACATS paperwork is.
Exam Tip: Gotchas
- Compliance with the ACATS timing does not cure a transfer-interference violation. The exam will sometimes describe a firm that meets the 1-day / 3-day windows but invents pretextual exceptions. That firm violates the transfer-interference prohibition even though the transfer timing is satisfied.