FINRA Eases Rules for M&A Account Transfers

- The prior process required firms to submit draft "negative consent" letters to FINRA for a "no objection" review, which could delay time-sensitive M&A transactions. This pre-clearance step was often on the critical path for deal execution, especially in divestitures and wind-downs. - This rule change is part of a broader "FINRA Forward" initiative, which is focused on modernizing regulations and reducing unnecessary burdens on member firms to reflect the current market and technological environment. - Firms now have greater responsibility to ensure their negative consent letters are clear, provide a minimum of 30 days' notice for customers to object, and comply with other regulations like FINRA Rule 2210 on communications and SEC's Regulation S-P for consumer privacy. - In "exigent circumstances," such as a firm unexpectedly going out of business, a shorter notice period for account transfers may be permissible. - For customers who choose to opt-out of the bulk transfer, the transferring firm is now expected to waive any Automated Customer Account Transfer Service (ACATS) fees, which can range from $55 to $100 per account. - This updated guidance applies to specific M&A-related scenarios, including the acquisition of a member firm, a firm divesting a specific business line, or a change in a firm's clearing arrangements. - The new rule does not permit individual financial advisors to use negative consent to move their personal book of business when changing firms; that process is still governed by the more affirmative requirements of FINRA Rule 11870. - While the pre-approval step is gone, FINRA will continue to review firms' use of negative consent letters during its regular examination process to ensure compliance.