A:

Common stock shares are most commonly transferred from one broker to another by a system known as the Automated Customer Account Transfer Service (ACATS). Prior to ACATS, a manual transfer system was used.

The National Securities Clearing Corporation (NSCC) developed ACATS, which can transfer stocks, bonds, cash, unit trusts, mutual fund options and other investment products. However, only NSCC-eligible members and Depository Trust Company member banks can use ACATS.

Both the firm delivering the stock as well as the firm receiving it have individual responsibilities in the ACATS system. For example, if a shareholder wants to transfer his or her share of common stock from Firm A to Firm B, Firm B will initially be responsible for contacting Firm A to request the transfer. Once Firm B has submitted the transfer request with instructions, Firm A must either validate the instructions or respond with an exception within three business days. If there is no exception, Firm A has four days in which to complete the transfer after validating the request.

Validation includes confirming that the customer's name and social security number match the information provided by Firm B. After receiving the transfer request and validation, Firm A must cancel all open orders and it cannot accept any new orders on the client's account. Firm A must also return the transfer instructions to Firm B with a list of securities positions and any money balance on the account.

Once the stock is transferred, Firm B is responsible for all reporting to the shareholder. Brokers are required to provide clients with a financial statement at least once every quarter. Experts also recommend that customers maintain proper records and make their own calculations to double-check that all assets are properly transferred and accounted for.

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