How brokerage transfers actually work
Summary
Patrick McKenzie explains ACATS, the system for transferring brokerage assets, highlighting its reliance on trust over verification and the resulting fraud risks. He details how brokerages often skip customer confirmation to meet strict deadlines, leaving accounts vulnerable to identity theft. The episode covers recent FINRA proposals to add fraud "speed bumps" and analyzes industry comment letters from Fidelity, Apex Clearing, and Robinhood regarding these regulatory changes.
Topics discussed
Introduction to ACATS and account transfers
FINRA, Rule 11870, and the Fool Rule
The nature of stock ownership and ACATS history
The ACATS transfer process and lack of verification
The three-day rule and signature validity
ACATS fraud mechanics and regulatory response
Sponsor reads: Mercury and Granola
Medallion guarantees and penny stock anecdotes
New FINRA proposals on fraud and vulnerable adults
Industry feedback from Fidelity, Apex, and Robinhood
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