FINRA Rule 11870 · Broker-dealers

FINRA Rule 11870: customer account transfers, explained

FINRA Rule 11870 sets how member firms transfer customer accounts between broker-dealers, usually through ACATS. In short: the carrying (delivering) firm must validate or take exception to a transfer instruction within one business day, and complete the transfer within three business days after validation. Firms cannot hold an account hostage over fees or an outstanding balance.

The rules at a glance

Validate or take exception: Within one business day of receiving the transfer instruction
Complete the transfer: Within three business days after validation
Usual system: NSCC's ACATS for eligible accounts and assets
Not allowed: Delaying a transfer over unpaid fees or a disputed balance

Who this applies to

FINRA member broker-dealers that carry customer accounts
Introducing firms that coordinate transfers with a clearing firm
Operations and compliance staff supervising ACATS activity
RIAs whose clients move accounts between custodians

Why it matters

• Late or blocked transfers are a frequent source of customer complaints and FINRA findings
• Weak exception handling can look like an attempt to keep the customer's assets
• Missing records make it hard to show you met the one- and three-day timelines

How to get current

1Map who handles incoming and outgoing transfer instructions at your firm and clearing firm
2Write procedures for validation, allowed exceptions, and residual credits
3Add exception reports for transfers that miss the one- or three-day timelines
4Review a sample of transfers each quarter and record the results
5Train operations staff and keep the procedures in your WSPs

Have us handle it

FINRA operations rule review

Included in Silver and above, or scoped quote

We review your account-transfer procedures and exception reports and update your WSPs. Standalone engagements are subject to the $2,500 annual minimum.

$2,500 minimum engagement. Smaller items are available to existing clients as add-ons or combined in the $2,500 Missed Deadline Rescue Bundle. Government and issuer fees pass through at cost.

Common questions

What does FINRA Rule 11870 require?

It governs customer account transfers between member firms. The carrying firm must validate or take exception to a transfer instruction within one business day and complete the transfer within three business days after validation.

Can a firm delay a transfer because the customer owes fees?

No. Unpaid fees or a disputed balance are not a valid reason to hold up the transfer. The firm can pursue those amounts separately.

Does Rule 11870 apply to RIAs?

It applies to FINRA member broker-dealers. RIAs are affected when their clients move accounts between custodians, so it helps to know the timelines.

Official sources: FINRA Rule 11870

Public-record status does not confirm a violation. Confirm deadlines and requirements with the regulator before filing. This guide is general information, not legal advice.