1.  Introduction

FINRA has issued Regulatory Notice 26-03, providing updated and consolidated guidance on the use of negative consent to effect the bulk transfer or assignment of customer accounts between broker-dealers. This new guidance is part of the FINRA Forward initiative, which is designed to reduce unnecessary regulatory burdens, while supporting member firms’ compliance efforts. For example, FINRA is eliminating the prior practice of submitting draft letters for the use of negative consent to FINRA staff for review and obtaining FINRA staff’s “no objection” prior to sending the letter. FINRA noted that it had “learned from experience and member feedback that this practice may impose unnecessary burdens, especially in situations where a transfer or an assignment of customers’ accounts is necessary for urgent business reasons under time constraints.”

This guidance is particularly significant for financial institution business expansions, including mergers and acquisitions (involving the acquisition of entire broker-dealer entities) and acquisitions of lines of business or registered representative teams, where the orderly transfer of customer accounts is a critical execution issue.

Although the general rule remains that customer accounts may not be transferred without affirmative customer consent, FINRA continues to recognize that, in certain limited circumstances, requiring affirmative consent for every account may be impracticable, disruptive, or potentially not in the best interests of the underlying customers. Regulatory Notice 26-03 consolidates FINRA’s prior guidance, reduces procedural burdens, and sets out effective practices and minimum disclosures for firms relying on negative consent in bulk transfer scenarios.

2.  Previous Guidance and Existing Rule 3260

2.1  Notice to Members 02-57

Notice to Members 02-57 (September 2002) established FINRA’s foundational position on the use of negative response letters for the bulk transfer of customer accounts. FINRA emphasized that affirmative customer consent is the default expectation and cautioned that over-reliance on negative consent may conflict with a firm’s obligation to observe high standards of commercial honor and just and equitable principles of trade.

2.1.1  Principal circumstances permitting negative consent under NtM 02-57

FINRA identified the following situations in which negative consent may be appropriate:

• An introducing firm experiencing financial or operational difficulties transferring all customer accounts;
• A clearing firm transferring accounts of an introducing firm that is no longer in business;
• Transfers following termination of a networking arrangement with a financial institution;
• Transfers in connection with a merger or acquisition of a member firm; and
• Transfers resulting from a change in clearing firm by an introducing broker-dealer.

2.1.2  Minimum disclosure expectations under NtM 02-57

Longstanding FINRA guidance recommends that negative response letters should include, at a minimum:

• A brief description of the circumstances necessitating the transfer;
• A clear statement that the customer has the right to object to the transfer;
• Instructions on how the customer may transfer the account to another firm;
• A response period of at least 30 days, absent exigent circumstances;
• Disclosure of any costs imposed as a result of the transfer (including post transfer costs); and
• A statement regarding the firm’s compliance with SEC Regulation S P (privacy of customer information)

2.2  Regulatory Notice 15-22

Regulatory Notice 15-22 (June 2015) arose from FINRA’s effort to consolidate rules governing discretionary accounts and transactions and proposed to codify and expand existing bulk transfer guidance within proposed FINRA Rule 3260.

Key developments relative to NtM 02-57 included:

• Formal codification of bulk transfer guidance in a FINRA rule framework;
• Expansion of permitted negative consent scenarios, including divestitures of business lines and additional “orphan account” situations;
• Explicit treatment of free credit balances and sweep programs;
• Additional procedural conditions, including Continuing Membership Application filing requirements (FINRA Rule 1017), where applicable; and
• Continued prohibition on use of negative consent by registered individuals.

2.2.1  30-day notice standard

Regulatory Notice 15-22 reaffirmed FINRA’s longstanding expectation that, absent exigent circumstances, firms using negative consent must provide customers with at least 30 calendar days’ advance notice before effecting a bulk transfer of accounts. The notice emphasized that this period is intended to give customers a meaningful opportunity to evaluate the proposed transfer, object if they choose, or affirmatively transfer their accounts to another firm. Shorter notice periods were contemplated only in rare and unforeseen exigent circumstances, such as a firm’s sudden inability to continue operations, and even then, firms were expected to provide as much notice as practicable consistent with investor protection.

2.3  FINRA Rule 3260 (Discretionary Accounts and Transactions)

FINRA Rule 3260 governs the exercise of discretionary authority in customer accounts and provides the regulatory framework into which FINRA has embedded its bulk transfer and negative consent guidance. As reflected in Regulatory Notice 15-22 and later consolidated in Regulatory Notice 26-03, Rule 3260:

• Prohibits discretionary activity absent prior written customer authorization;
• Codifies conditions for bulk exchanges of money market funds, including timing, disclosure, and fee comparison; and
• Serves as the principal rule reference for FINRA examinations and enforcement relating to negative consent practices.

Compliance with Rule 3260 is therefore important to evaluating bulk account transfers in the context of broker-dealer mergers, acquisitions, and restructurings.

3.  Regulatory Notice 26-03

Regulatory Notice 26-03 (February 6, 2026) provides FINRA’s current, consolidated guidance on the use of negative consent to effect the bulk transfer or assignment of customer accounts.

The notice states that it is not intended to create new legal or regulatory requirements, but to modernize prior guidance and reduce regulatory burdens on the industry.

3.1  Illustrative circumstances permitting negative consent

FINRA identifies a non-exhaustive list of situations for which the use of negative consent is permitted, including:

• Changes in clearing arrangements;
• Broker-dealers or clearing firms going out of business;
• Divestitures of specific business lines or operations;
• Mergers and acquisitions of member firms;
• Termination of networking arrangements under FINRA Rule 3160;
• Termination of arrangements relating to employee equity compensation plans or employer sponsored retirement plans; and
• Certain changes to the broker-dealer of record on directly held accounts.

3.2  New or expanded situations highlighted

Compared with earlier guidance, Regulatory Notice 26-03 expressly highlights:

• Transfers driven by employer-directed equity compensation and retirement plan arrangements;
• Assignments following termination of those arrangements; and
• Broader recognition of clearing firm initiated assignments where customer accounts were not previously transferred by an introducing firm.

3.3  Elimination of FINRA staff “no objection” review

FINRA eliminated the prior practice of requiring firms to submit draft negative consent letters for staff review and obtain a “no objection.” Effective April 1, 2026, firms may proceed without prior FINRA approval, subject to examination oversight.

3.4  Effective practices and minimum disclosures

Regulatory Notice 26-03 consolidates FINRA’s expectations into the following guidance:

• Customer authorization: FINRA notes that in order to use negative consent in connection with bulk transfer, it is important that the broker-dealer have prior written authorization permitting the use of negative consent generally in connection with changes to contract terms, often obtained at onboarding;
• Regulatory compliance: Adherence to FINRA Rules 1017 and 2210, Regulation S-P, and other applicable laws;
• Free credit balances and sweep programs: Compliance with Exchange Act Rule 15c3-3 and SEC Staff guidance;
• Timing: At least 30 days’ notice, absent exigent circumstances;
• Clear description: Explanation of the transfer and its impact on the account;
• Opt-out ability and mechanics: Clear deadlines, methods, and alternatives for customers;
• Fees: No fees for involuntary transfers; waiver of ACATS fees where customers opt out; and
• Delivery: Mail or electronic delivery consistent with FINRA guidance.

4.  Summary and Conclusion

Regulatory Notice 26-03 is an important development for broker-dealers and financial institutions engaged in mergers, acquisitions, divestitures, and team or platform transactions. By consolidating prior guidance and eliminating pre use FINRA review of negative consent letters, FINRA has increased transactional flexibility while maintaining strong investor protection principles. Firms contemplating transactions involving FINRA members should carefully evaluate this guidance when planning and executing customer account transfers. Additionally, individual registered representatives or small groups of registered representatives functioning as high volume producers looking to move to a new firm should not consider Regulatory Notice 26-03 as an automatic “green light” to use negative consent for the transfer of their underlying customer accounts.

Regulatory Notice 26-03 certainly appears more in the vein of disclosure-based regulation as opposed to prudential regulation, very much consistent with many of the principal underpinnings of the FINRA Forward initiative. We expect to see more rulemaking and guidance from FINRA, especially efforts designed to reduce regulatory burdens, as it continues to review requirements and seek industry guidance through the FINRA Forward initiative.