The Financial Industry Regulatory Authority (FINRA) said in a filing Wednesday that it has fined National Financial Services LLC (NFS) $100,000 and censured the firm for failing to process thousands of customer asset transfers in a timely manner over more than a decade.
FINRA Fines National Financial Services for Failing to Timely Transfer Customer Assets
According to FINRA, between April 2009 and May 2023, NFS failed to transfer over 5,600 Unit Investment Trusts (UITs) through the Automated Customer Account Transfer Service (ACATS).
Additionally, the firm reportedly did not process approximately 4,000 of these UITs as in-kind transfers, despite customer instructions, instead redeeming them for cash. FINRA found that some transfers were delayed by more than 100 business days.
The regulator explained that the issue stemmed from a coding error that prevented the transfer of UITs with pending redemptions.
FINRA noted that NFS attempted to block transfers only for UITs approaching redemption but inadvertently blocked all UITs with any pending redemption, causing widespread delays.
In addition to its operational failures, FINRA determined that NFS lacked adequate supervisory systems and written procedures to ensure compliance with customer transfer regulations, violating FINRA Rules 11870(e), 3110, and 2010.
As part of the settlement, NFS must certify within 120 days that it has corrected the deficiencies.
The firm updated its transfer system as of May 2023, but FINRA emphasised the need for further improvements in its supervisory processes.
NFS accepted and consented to the findings but did not admit or deny them.
