According to FINRA, National Financial Services LLC has been censured and fined $100,000 for failing to timely transfer over 5,600 Unit Investment Trusts (UITs) via the Automated Customer Account Transfer Service (ACATS).

The firm sought to configure its automated transfer system to block transfers of UITs within five days of redemption dates to avoid customer dissatisfaction. However, due to a coding error, the system blocked transfers of all UITs with a pending redemption, regardless of their redemption dates.

The firm effected the transfers an average of 19 business days after validating transfer instructions, far exceeding the required three-business-day deadline. Twelve UITs were not transferred until over 100 business days after validation. Because many UITs had already reached their redemption dates by the time of transfer, the firm transferred redemption proceeds for approximately 4,000 UITs instead of transferring them in kind as customers had instructed.

The firm also failed to establish a supervisory system reasonably designed to ensure timely completion of ACATS transfers for UITs with pending corporate events. Before November 2023, the firm had no supervisory system addressing UITs blocked due to pending redemptions, and even the system established afterward was not designed to achieve compliance with the three-business-day transfer deadline.

This case highlights the importance of the ACATS system for investors who wish to move their accounts between brokerages. FINRA rules require transfers to be completed within three business days to protect investors from being locked out of their assets. When firms fail to meet these deadlines, it can prevent investors from accessing their funds or making timely investment decisions.

Investors experiencing transfer delays should be aware of their rights under FINRA rules and can file complaints if transfers are not completed in a timely manner.