According to FINRA, Drivewealth, LLC was censured and fined $100,000 for failing to take timely action on 1,206 customer requests to transfer securities positions and money balances to another broker-dealer.
The issue stemmed from the firm's omnibus clearing arrangement. Drivewealth had an agreement with a clearing firm to handle customer account transfers through the Automated Customer Account Transfer Service (ACATS) because Drivewealth itself was not eligible to process such transfers directly. Under this arrangement, the clearing firm did not know the identity of individual customers or the specific positions and balances in their accounts.
The firm and its clearing partner established a process with specific deadlines for Drivewealth to provide the necessary customer information for transfer requests. However, Drivewealth failed to expedite outgoing full transfer requests in accordance with these procedures. This failure caused the ACATS system to purge those transfer requests, leaving customers unable to move their accounts as requested.
The right to transfer assets between broker-dealers is a fundamental investor protection. When customers decide to move their accounts, whether due to better services, lower fees, or any other reason, they have a right to expect that transfer to be processed promptly. Delays in account transfers can prevent investors from taking advantage of market opportunities or consolidating their holdings as they see fit.
FINRA rules require member firms to expedite customer account transfers within established timeframes. These requirements exist specifically to prevent the kind of delays that occurred in this case, which can harm customers and undermine confidence in the securities industry.
Ultimately, Drivewealth terminated its agreement with the clearing firm and began timely processing its own ACATS requests. For investors, this case serves as a reminder that they have rights regarding account transfers and should follow up if transfers are not completed within expected timeframes.
