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March 30, 2023 at 01:57 PM
The Financial Industry Regulatory Authority is warning broker-dealers of a rise in the fraudulent transfer of client accounts through the Automated Customer Account Transfer Service, or ACATS.
In just-released Regulatory Notice 23-06, which is a follow-on to Regulatory Notice 22-21, FINRA cites potential indicators of ACATS fraud and shares effective practices to mitigate risks of such fraud.
Notice 22-21 alerted broker-dealers on how bad actors effect fraudulent transfers of client assets using ACATS and listed several existing regulatory obligations that may apply in connection with ACATS fraud and provided contact information for reporting the fraud.
FINRA states that its regulatory programs — through examinations and investigations, review of customer complaints and member firm engagement — have identified increased instances of ACATS fraud.
“Through recent industry engagement, FINRA has gained further insights from member firms and other industry representatives about their approaches to detect and mitigate the risk of ACATS fraud,” FINRA states.
ACATS is an automated system that facilitates the transfer of customer account assets from one firm to another. Notice 23-06 provides an overview of indicators of ACATS fraud and the practices some firms apply to address it.
