Cashiering and Account Transfers

The whole unit on one sheet: how money and securities move, how an account transfer from one firm to another proceeds, when a firm may not block that transfer, and the check practices operations must control.

Which One-Liners Win Points?

• A Letter of Authorization (LOA) instructs; a medallion signature guarantee protects. The LOA is the customer's written instruction; the medallion program guards against an unauthorized securities transfer.
• Reinvestment buys; a sweep parks. Reinvestment uses proceeds to acquire more investments, while a sweep automatically parks free credit balances until the customer orders liquidation.
• ACATS is automated broker-to-broker; a non-ACATS partial transfer runs on authorized alternate instructions sent to the carrying member.
• The drawer writes, the drawee bank pays, the payee receives. Picture the check on a three-stop trip: the drawer draws it, the drawee bank pays it, and the payee gets paid.
• Kiting creates the appearance of funds, never actual funds, by exploiting timing differences between financial institutions.

How Does Money Move, Inside the Firm or Outside It?

• Wires and ACH transfers move funds externally between financial institutions; a journal moves cash or securities internally between accounts at one firm, fitting the account's registration, ownership, and transfer requirements.
• Currency Transaction Report (CTR): required for qualifying currency transactions under Bank Secrecy Act requirements.
• A sweep moves free credit balances automatically into a money market mutual fund or a bank account insured by the Federal Deposit Insurance Corporation (FDIC). The customer orders liquidation to bring the proceeds back.

How Does an Account Transfer From One Firm to Another?

• ACATS is the automated broker-to-broker process for a whole or designated-asset transfer, started by the customer's authorized instructions to the receiving member, who immediately submits it.
• A non-ACATS partial transfer runs on authorized alternate instructions to the carrying member, or on a partial Transfer Instruction Form the carrying member receives directly from the customer.
• Upon validation, the carrying member attaches all securities positions, safekeeping positions, and money balances shown on its books, with no exception for a dispute about positions or the money balance.
• A validated whole-account transfer freezes the account: the carrying member cancels open orders and accepts none. A permitted rejection after validation applies to the entire account, not to selected assets.
• For a nontransferable proprietary product in a whole-account transfer, the carrying member lists it for the customer and requests further instructions in writing.
• Residual credit is cash or securities that accrue after a transfer completes. Residual processing moves it from the carrying member to the receiving member when the automated facility can do that, and each member must transfer an ex-clearing credit balance after it accrues.

When Can a Firm Interfere With a Transfer Request?

• A firm and its associated persons may not interfere with a customer's transfer request merely because the representative changed employment.
• A judicial order or decree sought to bar or restrict that written request is prohibited interference, unless the account carries a lien for money the customer owes or another bona fide claim.
• That same lien or bona fide claim may permit interference; otherwise the ordinary account-transfer process governs.

Which Gotchas Trip Students Up?

• A check blotter supports two functions, tracking and reconciliation, not just a record of checks awaiting payment.
• An extended check hold is not neutral. The firm must process a customer check without unnecessary delay, and both members must expedite and coordinate an authorized account transfer.
• A position or balance dispute never excuses the carrying member from an attached transfer.
• Residual credits can arise after a transfer completes; the automated facility moves them when it can.
• An employment dispute alone never justifies blocking a customer's transfer. Only a lien for money owed or another bona fide claim does.

One-Breath Recap

Cashiering runs on two tracks: money and securities move through external systems, a wire transfer or an Automated Clearing House transfer, or through the firm's own books, a journal, and every movement needs the right authorization, a Letter of Authorization, a medallion signature guarantee, or a customer's sweep and reinvestment instructions. Account transfers move through the Automated Customer Account Transfer Service for a whole or designated-asset transfer, or outside it for a partial transfer, and once validated, the carrying member attaches what its books show, freezes a whole account, and later moves any residual credit. A customer's transfer request stays protected when a representative changes firms, defeated only by a lien or another bona fide claim, and a check moves only through controlled, traceable issuance, a blotter, and freedom from kiting, alteration, or an extended hold.

Need more than the recap? Read the full Cashiering and Account Transfers unit.