The North American Securities Administrators Association (NASAA) is advising brokerages that State securities regulators oppose any actions by firms that interfere with customers' requests to transfer their accounts to rival financial institutions.
Many securities firms routinely enter into written non-solicitation agreements with their brokers as a condition of employment. These agreements are designed to prohibit brokers from soliciting former customers when they move to new firms.
However, in an attempt to enforce the non-solicitation agreements, some firms seek temporary restraining orders that restrict the new firm from accepting account transfers requested by the customers (Automatic Customer Account Transfers, or ACATs). In some cases, customers have complained that their ability to trade was restricted while firms litigate the employment dispute.
In a statement, the NASAA says firms are free to litigate their employment contracts, but customer accounts "should not be held hostage during the dispute". Customers should not be exposed to the risk of losses or lost opportunities as a result of competition among firms, says the agency.