When searching for a suitable securities account, investors today now have a choice between a wide variety of providers and can use comparison portals and online tools, for example, to obtain information about the providers’ terms and conditions. In most cases, the most important selection criteria are likely to be the securities account provider’s customer service, the account management and order costs, and the trading options and market access they offer. Investors who are particularly active in buying and selling securities can save money through flat rate transaction fees, for example. But investors should also be guided by the question of which products they want to trade on which trading venues when making a decision on a securities account. That is because not all providers offer trading on foreign stock exchanges, for instance. And over-the-counter (OTC) trading or trading in certificates and exchange traded funds (ETFs) also cannot be taken for granted everywhere. That is why anybody intending to move to another securities account provider should find out all they need to know in advance.

The timing of a securities account transfer is also a critical factor because investors cannot access their securities while they are being transferred, meaning that they cannot be sold during this time. For example, they cannot react to collapsing prices or take profits during this period. For this reason, critical securities should preferably be transferred only when the markets are calm.

The path to a successful account transfer

Transferring a portfolio requires both the old and the new securities account to be active. Following a careful study of the requirements for the new securities account, the first step is therefore to open the account with the new provider. This requires the customer to submit an account application to open a new account, which can be done on paper or, in most cases nowadays, using an online form. The application form should be easy to understand with a clear structure. The securities account provider also has to comply with a range of legal requirements. For example, it must unequivocally identify the new customer. The new account can be opened once these steps have been completed.

If customers have not asked for their securities to be transferred at the same time as opening the new account, they can now submit the transfer application to the receiving or the transferring bank. As a rule, the banks will coordinate the transfer of the securities to the new account. The securities will be available in the new account as soon as the transfer has been completed.

However, if they no longer intend to use the old securities account, investors should also ensure that it is cancelled in line with the applicable notice period to avoid paying unnecessary account management fees. By contrast, transferring the portfolio does not cost anything, because securities account providers are only complying with their statutory duty when they transfer securities, which is why they cannot charge any fees for the transfer. However, any third-party fees actually incurred, such as fees charged by a foreign depository, can be passed on to the investor. This should be indicated in the schedule of services and charges published by the transferring provider. (See also info box on page xy: At a glance – what you can do as a customer.)

Complaints about the processing time

Many of the complaints that BaFin receives relating to securities concern account transfers, in particular the time they take. Despite the progressive digitalisation of financial transactions, it is often just not possible to transfer securities by clicking a button. Transferring a securities account may well take several weeks to complete. The processing time does not depend solely on the institution that is transferring the securities, but also on the cooperation of the receiving institution and the depositories for the securities. It may also happen that other entities are involved in the transfer process. And even today, portfolio transfers are, at least in part, still being processed manually.

Because a customer’s securities are not necessarily held at a single depository, and may also be held by foreign depositories, the delivery routes may differ considerably. That is why processing delivery of the securities depends on current market practice applicable to the relevant depository and the settlement terms for each security. To transfer securities held in safe custody abroad, identical instructions from the transferring and receiving institutions generally have to be received by the foreign depository. That is why investors usually have to expect a longer processing period when foreign securities are transferred.

What can BaFin do?

The custody agreement between investors and their custodians forms the basis of the safe custody business. This is an agreement under civil law that is supplemented by the banks’ general terms and conditions as well as other special terms and conditions. In addition to the custody function, these terms and conditions also govern the administrative services that the custodian provides for the investor and the custodian’s duties to inform the customer. There is also specific legislation in Germany governing the safe custody and acquisition of securities in the shape of the Safe Custody Act (Depotgesetz – DepotG). The primary function of the DepotG is to eliminate legal and economic risks in favour of the securities account customer and to ensure that the ownership rights regarding the securities are clear. However, many of the requirements set out in the DepotG are also important for answering the question of the extent to which the securities account provider must comply with the prudential conduct of business rules overseen by BaFin. Securities account transfers are not specifically covered by the regulatory regime, and there are for example no prudential requirements addressing the period in which a securities account transfer has to be completed. However, the general rules of conduct set out in section 63 (1) of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG) also cover the requirements applying to the safe custody business. These require the provider of safe custody services to provide the safe custody business honestly, fairly and professionally in accordance with the best interests of its clients. This obligation also extends to processing portfolio transfer instructions. BaFin therefore takes complaints by investors suggesting that a provider of safe custody services does not process portfolio transfers satisfactorily because of organisational deficiencies as an opportunity to examine whether the provider is behaving correctly in respect of its customers or if there are flaws in the provider’s organisation. If BaFin does indeed identify deficiencies, it will take corresponding measures under supervisory law in order to quickly eliminate the deficiencies.