Transfer cash between 2 S&S ISAs and "broker might need to sell shares" question

Ulrich

Hi All,

I have stock&shares ISAs with 2 brokers (B1 and B2).
I have some cash in my ISA with B2 and want to transfer it to my ISA with B1.
When I fill in a transfer request with B1, they add to it a checkbox that states "I understand that my other broker might need to sell shares in order to fulfil this transfer request" that is always checked and cannot be unchecked even though I indicate it's a cash transfer.
I contacted B1 explaining that I am not happy to give B2 permission to sell anything because it's a cash transfer and I have enough funds in my account with them.
B1 responded that "this was added to the form resulting from occurrences where other brokers involved were selling investments to facilitate the transfer of cash to us. Following communications with various brokers, this continued to happen and due to this not being something we can control, we decided to add that section to its transfer form. To avoid your broker closing any investments in any future transfers you instruct, I recommend you ensure you have sufficient funds available and inform your broker not to close any investments on upcoming transfers."

It sounds like by adding this checkbox (always checked) B1 want to make themselves not liable for their customers'  potential claims if other brokers sell shares during a transfer.
But in the same time B1 force all they customers to give other brokers permission to sell shares and if they do so for whatever reason, it would be hard to hold them accountable.

It does not sound right to me because if during cash transfer B2 sells my shares despite me having enough cash in my account, B2 couldn't be held liable as I gave them my permission when in fact the permission was introduced by B1 and is not negotiable (i.e you either have it checked or you cannot initiate a transfer).

Am I missing anything important here or B1 introduced a really bad thing?
Are there any rules and regulations regarding transfers at all or brokers can do whatever they want?

Alexland

Provided they both support partial transfers in the required directions and you maintain enough cash in the right account balance then there should be no requirement to sell down investments. The key word in this permission is "need" so provided you maintain enough cash there is no need for it to happen so there is no harm in providing this permission. If they did this when there was no need you would have grounds for a complaint. This is just the terms of business so you either accept it or do something else.

Ulrich

Alexland said:

Provided they both support partial transfers in the required directions and you maintain enough cash in the right account balance then there should be no requirement to sell down investments. The key word in this permission is "need" so provided you maintain enough cash there is no need for it to happen so there is no harm in providing this permission. If they did this when there was no need you would have grounds for a complaint. This is just the terms of business so you either accept it or do something else.

They both support partial transfers.
The reason why I'm looking into it is because B2 recently introduced that permission so they changed something in their terms of business, apparently because of some transfer issues.

I understand your point about grounds for a complaint but I'd rather have a healthy arm than an arm that was broken and then mended somehow.
They could always say "Oh we thought we need that but it turned out not to be the case.. oops" and would they return the shares to my ISA? I bet they wouldn't.

"Do something else" here means change the broker.
Well, before doing so I wanted to see if that's the only option I have if I'm not happy with that permission.

Alexland

The permission is harmless as it's appropriately caveated to only apply if needed. You are not giving permission to sell shares "for whatever reason" just if there is insufficient money to facilitate the transfer. You are saying there is enough money to support the transfer so it's fine. If you dig deep into the T&Cs of many financial providers you will find conditions like this eg they will repossess your house if you fail to pay the mortgage which you have to accept in the knowledge they should not happen because you fully intend to make payment on the mortgage, etc.

Seems reasonable to me.

Ulrich

According to the B1, the permission materialised after multiple cases of other brokers selling shares to facilitate cash transfer.
I cannot see what adding the permission changes from clients' perspective.
And the mortgage example is not really applicable here as I'm not breaking any rules by requesting a transfer but brokers do.
I'd expect a cash transfer to fail in case there is not enough money in my account or be completed successfully otherwise.

Alexland

It was probably multiple cases where investments needed to be sold at the old ISA manager so they designed the form to cater for both scenarios but with the caveat that the sale would only happen if it's needed which IMHO is completely reasonable. If the transfer failed if investment sales were required it means that it would not be possible to transfer from those ISA managers that do not even support uninvested cash where all money is invested in a fund at all times.

masonic

Ulrich said:

I'd expect a cash transfer to fail in case there is not enough money in my account or be completed successfully otherwise.

Once a transfer instruction is received, the sending ISA manager is obliged to complete it if it is possible to do so. One ISA manager cannot impose additional terms on a second ISA manager regarding how they fulfil the request, or make any promises to you, as they are not in possession of the relevant facts. You can, as advised, discuss it with the sending provider directly.

The receiving ISA manager is not obliged to accept a transfer instruction that doesn't conform to its requirements. They are allowed not to support certain types of transfer.

Do you have the option to transfer a specific holding in specie? That would be a workaround.

Alexland

masonic said:

One ISA manager cannot impose additional terms on a second ISA manager regarding how they fulfil the request, or make any promises to you, as they are not in possession of the relevant facts.

By including this conditional instruction from the account holder on the transfer form it saves the old provider the delay and effort of going back to the customer to gain their authorisation to sell down the assets if required.

They may still want to go back to the customer to agree any trade fees that may be incurred (or even if the assets are illiquid enough they cannot be sold). They may feel trade charges have already been agreed under the account terms. In most cases where a sale is required then both ISA Mangers are probably satisfied this makes their life easier and is more likely to give the customer a prompt transfer.

It's only there for if needed, when it sometimes will be, so it's not a hill worth dying on.

masonic said:

Do you have the option to transfer a specific holding in specie? That would be a workaround.

From what I can tell there isn't actually a problem here other than the OP doesn't want to agree the possibility their assets would be sold if required on the standard form which in this case they are confident will not be required.

Ulrich

masonic said:

Ulrich said:

I'd expect a cash transfer to fail in case there is not enough money in my account or be completed successfully otherwise.

Once a transfer instruction is received, the sending ISA manager is obliged to complete it if it is possible to do so. One ISA manager cannot impose additional terms on a second ISA manager regarding how they fulfil the request, or make any promises to you, as they are not in possession of the relevant facts. You can, as advised, discuss it with the sending provider directly.

The receiving ISA manager is not obliged to accept a transfer instruction that doesn't conform to its requirements. They are allowed not to support certain types of transfer.

Do you have the option to transfer a specific holding in specie? That would be a workaround.

Your last question kinda makes me think we're talking about different things.
I want to transfer cash form one broker to another.
What I'm not happy about is the clause allowing the receiving ISA manager to sell my shares and I don't understand the reasoning behind the sending ISA manager's decision to add that clause.
In fact, I feel like they are trying to cover themselves up from potential claims while making me responsible for any unfavourable outcomes.

Alexland

Ulrich said:

In fact, I feel like they are trying to cover themselves up from potential claims while making me responsible for any unfavourable outcomes.

It's more for efficiency to avoid the transfer being delayed while the old provider goes off to seek your permission. By providing the permission upfront, if needed (which it isn't if you have enough cash at the old provider), it speeds up the process.

Ulrich

Alexland said:

Ulrich said:

In fact, I feel like they are trying to cover themselves up from potential claims while making me responsible for any unfavourable outcomes.

It's more for efficiency to avoid the transfer being delayed while the old provider goes off to seek your permission. By providing the permission upfront, if needed (which it isn't if you have enough cash at the old provider), it speeds up the process.

I get your point in theory.
In practice (happened just now) I receive an email/a message/a call from B2 and they ask me to confirm the transfer.
So I'd say in case of cash transfers it makes no difference but B1 is adamant the clause is needed and I don't understand the logic.