FINRA Streamlines Use of Negative Consent for Account Transfers Effective April 1

As part of the FINRA Forward initiative to modernize its rules, guidance, and processes for member firms, FINRA announced in Regulatory Notice 26-03 that member firms will no longer be expected (and effectively required) to obtain “no objection” from FINRA staff before using negative consent for the bulk transfer or assignment of customers’ accounts. The policy described in the notice becomes effective April 1, 2026.

KEY TAKEAWAYS

• FINRA explicitly eliminates its staff’s informal requirement that firms receive “no objection” for negative consent letters before they can be used for bulk account transfers between FINRA member firms.
• FINRA’s guidance in Regulatory Notice 26-03 consolidates prior guidance and reminds member firms of FINRA’s views on effective practices for using negative consent to effect account transfers and assignments.
• Member firms remain responsible for compliance with all applicable legal and regulatory obligations related to the use of negative consent, including customer notification, opt-out rights, and disclosure requirements.
• FINRA will be focusing on negative consent letters during examinations.

DETAILS OF GUIDANCE

Member firms are generally required to obtain affirmative consent or instruction from a customer before transferring or assigning the customer’s account to another member, as described in FINRA Rule 11870 (Customer Account Transfer Contracts). [1] However, FINRA previously issued guidance, notably Notice to Members 02-57, outlining specific scenarios in which negative consent could be used and the disclosures required in negative consent communications for customer protection. [2]

Subsequently, FINRA has issued additional formal and informal interpretive guidance and exemptive letters effectively expanding the number of scenarios in which negative consent can be a permissible means to obtain customer consent for account transfers.

In practice and through de facto requirements of FINRA staff, member firms in recent years have submitted draft negative consent letters to FINRA staff for review, feedback, and a “no objection” determination prior to sending the letters to customers when planning an event that would result in a bulk transfer of accounts.

This has been most common in connection with events that require FINRA approval of a Continuing Membership Application. This has resulted in administrative burdens on member firms and delays in finalizing transactions and related transfers, particularly as the pace and complexity of industry transactions has increased.

Starting April 1, 2026, member firms may use negative consent letters without first submitting such letters for review by FINRA to obtain a “no objection.” FINRA provides in Regulatory Notice 26-03 a consolidated list of the scenarios in which it has previously agreed, and continues to view as acceptable, negative consent could be used to transfer or assign customers’ accounts:

• An introducing firm seeks to transfer some or all of its customer accounts to a new clearing firm
• An introducing or clearing firm is going out of business and seeking to transfer all of its customer accounts to one or more introducing or clearing firms
• An introducing or clearing firm is divesting itself of a specific business line, such as retail brokerage business, and is seeking to transfer the affected customer accounts to one or more introducing or clearing firms
• A clearing firm and an introducing firm terminate their relationship
• A firm that is or expects to be acquired or merged with another member firm is seeking to transfer all of its customer accounts to the new firm or firms
• A firm and a financial institution terminate their networking arrangement pursuant to FINRA Rule 3160 (Networking Arrangements Between Members and Financial Institutions)
• An employee equity compensation plan or employer-sponsored retirement plan arrangement is terminated between a member firm and an employer, and the employer directs the transfer of customer accounts established under the arrangement to a new firm
• The broker-dealer of record on one or more directly held accounts changes in specified situations

FINRA clarifies that this list is only illustrative—not exhaustive—of some of the situations where negative consent has been used to transfer or assign customers’ accounts, and notes that its staff will continue to provide guidance “upon request regarding new or novel situations outside the scope of those” referenced above.

FINRA also reiterates and emphasizes its minimum expectations for negative consent letters:

• Customer Authorization: A firm must have prior written consent from a customer to use negative consent in transferring or assigning accounts. This may be obtained as part of account onboarding (e.g., in an account opening agreement) or when other changes requiring affirmative consent are made. Firms may wish to review their existing account documentation to determine whether existing provisions suffice for this purpose or whether modifications may be required, including how such modifications could be implemented in accordance with applicable law, such as state contract law.
• Compliance with Regulatory and Legal Requirements: Firms are reminded that “various regulatory and legal requirements may apply to the use of negative consent for the bulk transfer or assignment of customers’ accounts,” and they should ensure that the use of negative consent does not conflict with a member’s obligation to observe high standards of commercial honor and just and equity principles of trade.
• Description: Negative consent letters should include clear, concise explanations of the reason for the transfer, the receiving firm’s services, and any immediate impacts (such as trading restrictions during the transfer).
• Free Credit Balances: Firms may, as part of a transfer of accounts that includes a transfer of free credit balances, rely on negative consent to transfer the free credit balances consistent with Exchange Act Rule 15c3-3(j) and related guidance. [3]
• Timing: Member firms generally should provide at least 30 days’ notice prior to a transfer to be made pursuant to negative consent, absent exigent circumstances. FINRA emphasizes that exigent circumstances are rare, but an explicit recognition of such situations is helpful nonetheless. One important point that is not addressed in FINRA’s notice is how firms will be expected to sequence mailing of negative consent letters with approvals of Continuing Membership Applications. Often, the timing for approval of a Continuing Membership Application is uncertain. As such, while it may be permissible for a firm to mail negative consent letters prior to approval with the expectation of an imminent approval, firms would presumably be doing so at their own risk, as the transfers could generally not occur until approval is attained.
• Opt-Out Provisions: Negative consent letters should be clear about the process for opting out and should include instructions on how and by when to respond as well as information about customers’ alternatives if they choose not to proceed with the transfer.
• Fee Waivers and Disclosures: Customers who opt out of transfers should not be charged to close accounts or transfer accounts elsewhere, and any post-transfer costs or limitations should also be fully disclosed in the negative consent letters.
• Delivery: Negative consent letters may be delivered by mail, email, or other reasonable means, consistent with guidance regarding the electronic delivery of information to customers.

NEXT STEPS

While firms are no longer required to obtain staff “no objection” letters, they should remain attentive to ensuring compliance with regulatory requirements and expectations when they use negative consent letters for bulk transfers to reduce the risk of regulatory scrutiny or customer disputes.

Member firms should continue to retain robust documentation of their negative consent communications and practices as FINRA staff may look more closely at negative consent letters and their use during examinations now that there is no pre-use FINRA scrutiny.