Investment Account Transfer Delays
OBSI's approach to complaints related to investment account transfer delays
When an investor decides to move their investments from one firm to another, they generally expect the transfer to go smoothly – almost automatically. However, the transfer process can be more complicated than consumers expect and things sometimes go wrong, leading to complaints about errors or delays during the account transfer process. Consumers who escalate their complaints to OBSI generally feel that transfer errors and delays have resulted in:
- Actual financial losses: For example, when there was a delay in selling their investments and the value of the investments dropped, so they have received lower proceeds than they expected.
- Lost opportunity for gains: For example, if they were prevented from making an investment they intended to make because of a delay and the investment's price increased.
Transfers involve a sending firm (also referred to as a “relinquishing firm” or a “delivering firm”) and a receiving firm. Regulators expect both firms to handle transfer requests quickly, often within certain timeframes, and to work together to ensure a prompt transfer of accounts. This includes clear and effective communication between firms regarding transfer issues.
Usually, when a complaint involves an account transfer problem, we recommend that the consumer raise their complaint with both firms involved, so that both firms can review the situation and work towards resolution before we begin our investigation. If the consumer has only complained to one firm, we may place our investigation on hold while the other firm considers the complaint. If the consumer only wishes to complain against one firm, we will continue with our investigation of the single firm, using the evidence and data available to us. However, if our investigation determines that there was shared responsibility between the firms, we will only recommend partial compensation in an amount that reflects the responding firm’s share of responsibility.
What does OBSI consider when it is investigating a transfer complaint?
When we investigate complaints involving account transfers, we will first determine whether there has been an unreasonable delay. In evaluating the reasonableness of a delay, we will consider the regulatory rules and accepted business practices that applied at the time of the request as well as the firm's internal policies. Some of the other factors we investigate include:
- Whether the transfer request by the receiving firm was complete and accurate, or if it was missing information.
- If the transfer request has all the needed details, it is considered 'in good order.' If it is in good order, the transfer time is usually calculated from when the receiving firm gets the request.
- If the transfer request is missing some essential information, it is said to be 'not in good order.' This might be because of wrong account numbers, incomplete forms, or missing signatures or documents.
- If there was an error in the transfer request, whether the sending firm and the receiving firm worked reasonably to identify and address the errors in a timely manner.
- Whether the transfer could be completed electronically (sometimes called an "ATON" transfer) or needed to be done manually (sometimes called a "non-ATON" transfer). Manual transfers usually require a longer timeframe to complete because they require documents to be exchanged between the sending and receiving firms. Manual transfers may be necessary for:
- Special accounts, or those with restrictions. For example, Registered Retirement Income Fund (RRIF) accounts can only be transferred after the minimum RRIF payment is made.
- Accounts held in the consumer’s name directly rather than held in a nominee’s name.
- Certain investments, such as those with restrictions or hold periods, specific insurance products, labor-sponsored funds, and investments held in certificate form.
- Whether there is a valid reason for a delay, such as if the security is thinly traded or difficult to market, requiring longer to sell.
In some cases, transfers can be reasonable but take longer than the consumer expects. Transfers that must be completed manually or involve complex investments can sometimes take weeks to complete and consumers should be aware of this.
If there was an unreasonable transfer delay, who bears responsibility for the delay?
If we determine that there was an unreasonable delay in completing a transfer, we will consider who was responsible for the delay. We will investigate:
- Who completed the transfer forms and whether there were any mistakes or missing information. If there were errors, we look into who made them and if they could have been prevented.
- If there were errors, whether the firm that identified the errors took reasonable steps to fix them and/or notified the other firm of any errors or missing information promptly, and the reasons for any delay.
In determining the harm a consumer has incurred because of a delay, we will consider what the consumer was told about how long the transfer should take and look at any evidence that supports this and consider whether they reasonably relied on any misinformation they received.
When do we recommend compensation?
If the transfer took place within a reasonable timeline, there may be no basis for us to recommend compensation, even if the transfer took longer than the consumer expected or if they incurred financial losses during the transfer process. However, if the transfer did not take place within the appropriate timeline or one or both firms did not act reasonably, we will then determine if any financial harm occurred for which the consumer should be compensated and calculate the amount of appropriate compensation. If a consumer argues that they have incurred an opportunity loss during a transfer delay, strong evidence of how they would have invested will be required.
Where both the sending and receiving firms share responsibility for a delay, we will consider the facts and apportion responsibility based on what is fair in the circumstances of the case. If the consumer has only complained against one firm, we may recommend partial compensation against the firm the consumer has complained to.
Related case studies
Consumer seeks compensation due to transfer delay from RRSP to RRIF