Senators Press Finra to Require Account Transfer Locks

Two Democratic Senators have pushed the brokerage industry’s self regulator to require firms to give customers the ability to lock their accounts to help fight fraud. Senators Elizabeth Warren (Massachusetts) and Ron Wyden (Oregon) warned the Financial Industry Regulatory Authority that their reviews of firms’ policies and practices had uncovered “a deeply concerning lack of standardized, consumer-controlled protections across the industry.” In a letter dated August 20, the lawmakers, who are ranking minority members on the Committee on Finance, asked Finra Chief Executive Robert Cook to “take immediate regulatory action” to address the growing threat of fraud perpetrated through the Automated Customer Account Transfer Service, which allows clients to move assets from one brokerage to another. ACATS, which are managed by the National Securities Clearing Corporation, allows customers to move funds, including stocks, bonds and cash, from one firm to another. Fraudsters can exploit the system by using stolen personal information to open an account in a victim’s name and then initiate a transfer from the victim’s legitimate account. “[C]riminals are exploiting the complete lack of an outbound verification step by the account holder,” Warren and Wyden wrote in the letter, earlier reported by The New York Times. In a press release about the letter, Wyden included a chart, shown below, based on his review of major brokerage firms, which showed that: “Only a few companies offer a way for consumers to protect their accounts.” Finra recommends that firms notify customers before transferring assets but does not have a requirement in place, the lawmakers said. Brokerage firms typically have one day to validate or object to a transfer and three business days to complete it. Some firms do not notify customers when an outgoing transfer has been initiated. Following inquiries from lawmakers, Interactive Brokers, Robinhood and Webull said they would develop self-service transfer locks, according to the letter. A Wells Fargo spokesperson confirmed the information on the chart about the firm but did not address questions about any planned changes. A Citi spokesperson declined to comment. A Morgan Stanley spokesperson did not respond to questions about the chart and potential changes. Bank of America spokespersons noted that the lock question did not pertain to advisor-led accounts and said in a statement that: “Merrill Edge customers can put a restriction on their account that blocks transfers by calling customer service.” A Schwab spokesperson said the firm would be adding passkey authentication later this year and “additional capabilities designed to give clients greater visibility into and control over outbound account transfers.” “Safeguarding our clients’ assets and information is our highest priority,” the Schwab spokesperson said. WHAT ABOUT RAYMOND JAMES ACCOUNTS? Is this really a problem? Been an advisor for 30+ yrs and I have never seen or heard an an account being stolen through ACATs – ever!! I’d think the issue should be the firm who allows a fraudulent account to be open. How does one open a fake account when you have Compliance all up FA’s arses about patriot act documentation. How about KYC procedures? It’s not an ACAT issue it’s idiot firms allowing identity theft to occur.