Complaints about delays when transferring accounts to another dealer grew from roughly 150 in 2015 to more than 500 by 2024.Eoneren/iStockPhoto / Getty Images
The Canadian Investment Regulatory Organization has responded to industry comments on its proposed rules to shorten account transfer times with proposed amendments that soften its original hard 10-day deadline.
CIRO’s original proposals, presented a little more than a year ago, were a response to delays when clients transfer their accounts to another dealer. According to the self-regulatory organization, the complaints about transfer delays grew from roughly 150 in 2015 to more than 500 by 2024.
The regulator pointed out in its white paper last year that these delays stemmed from outdated processes, inconsistent standards and fragmented communication.
The amendments, which are out for comment until Oct. 21, include a new restriction on “Hail Mary” calls to clients.
Previously, a dealer could reserve the right to contact their client after an account transfer request. They can no longer reserve that right. That means no more awkward attempts to stop the transfer and retain the client’s business.
More notable is a slight relaxation of transfer deadlines. The original proposals called for a hard, 10-day limit on account transfers between institutions. The amendments break the transfer process into discrete parts, allowing for an extended timeline should an impediment arise.
A client transferring their account to a new dealer (the receiving dealer) authorizes the receiving dealer to send an account transfer request to their current dealer.
Under the new rules, the receiving dealer must do that within one day of that authorization. The current dealer, which will be transferring the client’s account, must respond with asset and cash balance information within two days of receiving the transfer request.
If either dealer spots an impediment that could affect the transfer, they must raise it within two days of that asset and cash balance information deadline and the receiving dealer must inform the client about the problem.
The transfer must be settled within five working days of confirming that no impediments remain. That leaves an open-ended window for the current dealer to resolve any impediments.
“While the objective of faster transfers has not changed, the revisions recognize that speed cannot come at the expense of investor protection,” said CIRO spokesperson Ariel Visconti in an e-mail to Globe Advisor.
“Certain scenarios need additional consideration, such as the client desire to take additional time to make an informed decision on how they wish to resolve their account transfer impediments, or the firm needing to impose a temporary account hold when fraudulent activity is suspected.”
Although the amended timeline might not be ideal, Jean-Paul Bureaud, executive director of investor protection organization FAIR Canada, says it’s better than what the industry had before, which was no deadline at all.
“Setting a clear deadline for all CIRO members is a meaningful improvement and a step forward,” he says. “If you get 90 per cent within 10 days, you know that’s a meaningful shift in terms of transfer times.”
Jason Pereira, partner and senior financial planner at Woodgate Financial Inc. in Toronto, says transfer delays aren’t usually an issue between securities dealers using the electronic ATON (account transfer online notification) system.
“This largely happens when we’re talking about moving stuff from bank branches to anywhere else,” he says.
The amendments seem tailored to prevent such foot-dragging, he says, as they include new language that forces transferring dealers to “make best efforts to settle the client account transfer request as soon as practically possible.”
Simply making transfers a digital process would alleviate any staffing problems that dealers might encounter, Mr. Pereira adds, because digital transfers are faster and less error-prone than manual paper-based transfers.
That’s a direction CIRO wants the industry to take: the rules call for dealers to communicate electronically during the account transfer process.
However, what’s still needed is a more efficient, integrated and automated ecosystem, says William Donegan, principal consultant and lawyer at W Donegan Wealth Compliance.
The proposed rules will cause dealers to “expend significant resources to meet these deadlines using a system which is already inefficient,” he says.
Although investment dealer account transfers are relatively smooth, things are more difficult for mutual fund dealers.
“In the mutual fund world, in which firms are using Fundserv or they’re holding mutual funds directly with the fund manager in client name, it becomes much more complicated,” Mr. Donegan says.
An integrated, automated system remains a goal for CIRO.
In the meantime, Fundserv is working on a service called “transferserv” that provides transfer services for nominee accounts, in which the assets are registered in the dealer’s name on behalf of the client.
Matthew Latimer, executive director at the Federation of Independent Dealers, has some pointers for dealers that handle nominee accounts.
“They should be reviewing their transfer processing process to map it to the expected timelines and ensure that the tools are available to follow those in anticipation of Fundserv’s rollout,” he says.
But even dealers not served by the current or forthcoming technology options (particularly dealers handling transfers in client name accounts) should still prepare to meet the timelines.
“Ensure everything’s on track with your back office and platform vendors on electronic communications,” Mr. Latimer says.