Here is some great information for the series 24 exam regarding customer account transfers / ACATS. Series 24 exam students sometimes get tripped up on the ACAT process. Reading the flowing information can greatly help you master the account transfer process for the series 24 exam.
Account Transfer
Clients from time to time will wish to have their accounts transferred from one brokerage firm to another. This is usually accomplished through an Automated Client Account Transfer, or an ACAT. The ACAT provides transfer and delivery instructions to the firm, which will be required to deliver the account to the client’s new firm. Once transfer instructions are received, no new orders may be accepted and all open orders must be cancelled, except for open orders for options that expire within seven days. The firm that receives the transfer instructions is required to validate the instructions or take exception to them within one business day. Upon validation, the transfer instructions must be sent back to the receiving firm with a list of the positions to be transferred, the value of the positions and a description for any securities that do not have a CUSIP number. Once the instructions have been validated, the firm has another three business days to complete the account transfer. A firm may only take exception to the instructions for the following reasons:
The customer’s signature is missing or invalid
The account title does not match the carrying firm’s account title
The social security number does not match
The account number is wrong
A difference in securities positions and free credit balances is not a reason to take exception to the transfer instructions. From time to time, certain investment positions will not be able to be transferred from the old firm to the new firm. The customer must be informed of this fact in writing and the customer is required to give specific instructions as to what should be done with that investment. The customer may elect to:
Leave the investment at the old firm
Have it liquidated
Have it shipped to them
If the position is liquidated, the proceeds must be forwarded to the customer within five business days. If the customer is transferring an account that has a checking account, debit, or credit card connected to the account, the customer must return or destroy the checks and the card. Broker dealers that engage in partial account transfers from one broker dealer to another use the DTC to settle the transfers. If the old firm fails to deliver a position to the new firm, the old firm has a fail to deliver and the new firm has a fail to receive. Securities or cash positions that are transferred to the new firm that were not on the ACAT form are known as “residual credits”. Occasionally after the account has been transferred dividends and interest payment may get posted to the customer’s account at the original carrying firm. If this happens the original firm is required to continue to send any residual credits for six months and must make the transfer within 10 business days of the credit being posted to the customer’s former account.
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