The board of NASD Regulation has approved a plan to publish for comment, a rule interpretation that prohibits brokerage firms from interfering with retail account transfers.

The issue of account transfer procedures remains a contentious one for both brokers and clients on both sides of the border.

The NASD says it has determined that the practice of brokerage firms obtaining temporary restraining orders to prohibit the transfer of customer accounts when brokers move firms, “is not consistent with just and equitable principles of trade for a firm to take any action that interferes, delays or impedes a customer’s right to transfer his or her account”.

The interpretation does not restrict employment contracts that may prevent brokers from soliciting a previous employer’s customers. It also does not prevent a firm from seeking a court order when a former employee violates an employment contract.

The interpretation provides exceptions for situations where the account contains nontransferable assets, proprietary funds, for example, or when the transfer request does not provide adequate information to identify the account to be transferred.

“In developing this rule interpretation, we have sought to balance the needs of customers to access and control their brokerage accounts with real competitive concerns of firms,” said Robert Glauber, CEO and president of the NASD. “A customer should not be deprived of brokerage services while the broker servicing the customer’s account tries to resolve an employment dispute with his or her former firm. Customers should have the freedom to choose the registered representative and the securities firm that service their brokerage accounts.”

NASD-member firms, industry participants and the general public are invited to comment on the proposal. Following the comment period and consideration of the comments received, the NASD will file the interpretation with the Securities and Exchange Commission.

The NASDR board also passed a separate rule change that would allow a receiving member firm to perform an asset inventory of an incoming account prior to the actual transfer to determine which assets they would be able to support. This would enable the firm to inform the customer of available options for the assets. The proposed rule change will be filed with the SEC for approval.