The National Association of Securities Dealers (NASD) in the US says investors trying to transfer their accounts from one brokerage firm to another through the Automated Customer Account Transfer System (Acats) face unnecessary delays that can be avoided.
Acats is an electronic account system developed by the National Securities Clearing Corporation (NSCC) to automate and standardise the transfer of accounts. Assuming that there are no problems with the transfer process, an Acats transfer should typically take about six to 10 business days.
Over 17,000 accounts are transferred through Aacts every day, but a significant number have not been transferred in a timely way, leading to a high level of customer dissatisfaction with the process, says the NASD.
More than 700 customer have submitted complaints about the system to NASD over the past two years, while brokerage firms have received more than 6000 account transfer complaints during the same period.
Last year the regulator set up a task force to investigate the process following a high number of customer complaints. Chaired by NASD CEO Mary Schapiro the task force included operations experts from various sectors of the brokerage industry as well as representatives of The Depository Trust & Clearing Corporation (DTCC) and the New York Stock Exchange (Nyse).
In its report, the task force listed several concerns about the process, but says the most signifinant cause of delay is the failure of some firms to follow rules about expediting account transfers. Those rules require the firms on both sides of the transfer to "expedite and coordinate activities" related to a requested account transfer and to cooperate to "promptly resolve" any exceptions or impediments to the transfer, but some firms may not be meeting this standard.
"Customers have the right to move their accounts freely to the firms of their choice, without encountering unnecessary delays and frustration," says Schapiro. "Investors have the right to decide the best business location for meeting their investment services needs, and both they and the industry as a whole suffer when that right is impeded for any reason."
The report found that often carrying firms - the one the cutomer is leaving - reject transfer instructions that can be easily corrected, rather than giving "24-hour soft rejects" which allow time to fix simple mistakes. However, the task force also found that 80% of these "soft rejects" aren't corrected in time to avoid cancellations.
Furthermore, the task force also noted that some firms whose customers are leaving request paper copies of the transfer initiation form (TIF) - despite the fact that the Acats system is designed to eliminate the need for hard copies of customer signatures.
The report says firms may sometimes request paper copies "in order to delay the transfer process, particularly when a registered representative has left the carrying firm for the receiving firm". Such purposeful delays are explicitly prohibited.
The NASD is publishing a notice to members about firms' obligations to cooperate in the transfer process.
Read the task force's report here:» Download the document now 73.4 kb (Adobe Acrobat Document)