PHOENIX - The Securities and Exchange Commission has approved revised changes to the Municipal Securities Rulemaking Board's Rule G-26 on customer account transfers.
The SEC approved the changes on an accelerated basis on July 27 after the MSRB filed them in May and amended them on July 20.
Rule G-26 requires dealers to cooperate in the transfer of customer accounts and specifies procedures for carrying out the transfer process. A transfer occurs when a customer decides to transfer an account from one dealer, the carrying party, to another, the receiving party. G-26 lays out specific time frames during which the transfers must occur as well as limits on why the receiving party can protest a customer’s transfer instruction.
The rule was adopted in 1986 and is part of an industry-wide initiative to create a uniform customer account transfer standard, according to the MSRB. The standard is primarily driven by the National Securities Clearing Corp.’s Automated Customer Account Transfer Service. ACATS is a system that facilitates the transfer of securities from one trading account to another at a different brokerage firm or bank.
The changes will shorten the time for validating or taking exception to the transfer instructions to one day from three days, and shorten the time for completing a customer account transfer to three days from four days.
The changes will also update Rule G-26 to include the transfer of customer account residual credit positions, which are assets in the form of cash or securities that can result from dividends, interest payments or other types of assets received by the carrying party after the transfer process is completed or which were restricted from being included in the original transfer. The rule changes would also permit partial account transfers under the same time frames that apply to transfers of entire accounts, which the MSRB said would make transfers more efficient. These changes are similar to those previously made to the transfer rules adopted by the Financial Industry Regulatory Authority.
Dealer groups had some reservations about the changes. The Securities Industry and Financial Markets Association told the SEC that Rule G-26 should be amended to incorporate an existing FINRA rule and that there is no need for a muni-specific transfer rule. Both SIFMA and the Bond Dealers of America also requested that FINRA make some rule changes to harmonize with MSRB rules, which the SEC said was beyond the scope of the proposal. The MSRB, however, agreed to push the effective date six months from the date of SEC approval, rather than three months.
The changes to Rule G-26 would also allow electronic signatures as written notice to initiative a transfer and would shorten the time for validation of a transfer to one day from three and the time for completing a customer account transfer to three days from four.