Partial transfer including fractional shares

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Partial transfer including fractional shares

Postby frugle26 » Sun Mar 24, 2013 2:37 am

I'm planning a partial transfer of securities from a TDameritrade Roth IRA to a Wellstrade Roth IRA. When reading the Wellstrade Account Transfer form I came upon this clause in the Client Instructions to Delivering Firm: "I understand that fractional shares may not transfer in kind and may (be) required to be liquidated to complete a full transfer." Has anyone made a transfer like this? Will Ameritrade charge a commission for each transaction if those fractional shares are sold before transferring? Since all my shares have dividends reinvested, they all include fractional shares.
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Re: Partial transfer including fractional shares

Postby Default User BR » Sun Mar 24, 2013 12:11 pm

frugle26 wrote:I'm planning a partial transfer of securities from a TDameritrade Roth IRA to a Wellstrade Roth IRA. When reading the Wellstrade Account Transfer form I came upon this clause in the Client Instructions to Delivering Firm: "I understand that fractional shares may not transfer in kind and may (be) required to be liquidated to complete a full transfer." Has anyone made a transfer like this? Will Ameritrade charge a commission for each transaction if those fractional shares are sold before transferring? Since all my shares have dividends reinvested, they all include fractional shares.

When I transferred ETFs from TDA to WF, they did indeed liquidate the fractionals. There was no commission charged.


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Re: Partial transfer including fractional shares

Postby livesoft » Sun Mar 24, 2013 12:13 pm

I just wanted to say that mutual fund shares transferred in-kind keep the fractional shares, so I guess "securities" mean things like stocks and ETFs.
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Re: Partial transfer including fractional shares

Postby red5 » Sun Mar 24, 2013 2:29 pm

Default User BR wrote:When I transferred ETFs from TDA to WF, they did indeed liquidate the fractionals. There was no commission charged.


Brian


Same here. USAA liquidated fractional shares of ETFs and stocks before my IRA was transferred in-kind to Vanguard. No commission was charged. The cash from the sales of the fractional shares showed up a few days after the funds arrived. And like Livesoft mentioned, mutual funds kept their fractional shares.

I suppose it may depend on the brokerage firm as well, but that was my experience.
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Re: Partial transfer including fractional shares

Postby jon-nyc » Sun Mar 24, 2013 3:33 pm

livesoft wrote:I just wanted to say that mutual fund shares transferred in-kind keep the fractional shares, so I guess "securities" mean things like stocks and ETFs.


Yes, mutual funds are not securities.
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Re: Partial transfer including fractional shares

Postby jon-nyc » Sun Mar 24, 2013 3:34 pm

To the OP, no brokerage is going to transfer fractional shares since DTCC doesn't recognize them.
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Re: Partial transfer including fractional shares

Postby donall » Sun Mar 24, 2013 3:44 pm

frugle26 wrote:I'm planning a partial transfer of securities from a TDameritrade Roth IRA to a Wellstrade Roth IRA. When reading the Wellstrade Account Transfer form I came upon this clause in the Client Instructions to Delivering Firm: "I understand that fractional shares may not transfer in kind and may (be) required to be liquidated to complete a full transfer." Has anyone made a transfer like this? Will Ameritrade charge a commission for each transaction if those fractional shares are sold before transferring? Since all my shares have dividends reinvested, they all include fractional shares.


All those fractional shares will be added together. So the 1/2 and 1/2 and 1/2 shares that you bought as part of your reinvested dividends from your 10 shares will transfer as 11 shares and cash for the 1/2 fractional share. I don't think brokerage accounts hold fractional shares so I'm not sure why you are worried about fractional shares. Is this a DRIP?
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Re: Partial transfer including fractional shares

Postby Raymond » Sun Mar 24, 2013 4:11 pm

I recently transferred "in kind" shares from various DRIP plans (Computershare, JP Morgan, etc) to Vanguard Brokerage Services.

Any fractional shares left over after totalling all of the lots were liquidated, and commission & fees were charged by the DRIP plans.

For example, 300.567 shares of Company ABC of various lots were transferred; the 0.567 shares were sold by the plan, and the resulting fees and commission completely ate up the proceeds :annoyed

300 shares showed up at VBS :happy

Don't forget to keep records of your cost basis - that information doesn't always transfer correctly to the new brokerage, if at all.
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Re: Partial transfer including fractional shares

Postby AAA » Sun Mar 24, 2013 6:24 pm

Can someone explain why in the 21st century there is still an issue with fractional shares? Can't computers handle 85.234 shares as easily as 85 shares?
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Re: Partial transfer including fractional shares

Postby Epsilon Delta » Sun Mar 24, 2013 8:24 pm

AAA wrote:Can someone explain why in the 21st century there is still an issue with fractional shares? Can't computers handle 85.234 shares as easily as 85 shares?

No. Computers can't handle decimals as easily as integers. They handle integers exactly, but floating point is an approximation, and there are several different approximations. You could lose a few ten-thousandths of a share moving from a Cobol platform to an IEEE one. After a while we could end up with substantial fractions of a company without a known owner, the general meeting would be inquorate and who knows what chaos would break loose. Either that or some bright spark would figure out a salami attack and get insanely rich.
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Re: Partial transfer including fractional shares

Postby frugle26 » Sun Mar 24, 2013 8:28 pm

Thanks for all the replies, everyone, especially Brian: I have ETF's and CEF's, as well as shares of individual stocks, so I hope TDA treats them all the same as yours, with no commission charged.
donall wrote: I don't think brokerage accounts hold fractional shares so I'm not sure why you are worried about fractional shares. Is this a DRIP?

TDA does indeed hold my fractional shares, for instance I have 21.391 share of DIA and yes, that is the result of dividend reinvestment.
Raymond wrote:I recently transferred "in kind" shares from various DRIP plans (Computershare, JP Morgan, etc) to Vanguard Brokerage Services.

Any fractional shares left over after totalling all of the lots were liquidated, and commission & fees were charged by the DRIP plans.

For example, 300.567 shares of Company ABC of various lots were transferred; the 0.567 shares were sold by the plan, and the resulting fees and commission completely ate up the proceeds :annoyed

300 shares showed up at VBS :happy

Don't forget to keep records of your cost basis - that information doesn't always transfer correctly to the new brokerage, if at all.


Raymond, were all of your various shares transferred from the same brokerage account? If so, can you tell us which brokerage?

And, I agree with AAA, at this point in time there should be no problems handling fractions.
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Re: Partial transfer including fractional shares

Postby Raymond » Mon Mar 25, 2013 1:51 am

The shares of the various companies all came from the DRIPs (Dividend Reinvestment Plans) at Computershare (3 companies) and JP Morgan (one company).

Strictly speaking, they're not really brokerages, in the sense that you could place buy or sell orders at any time - the plans only bought or sold shares once a month, and the price you got was whatever it was that particular day :annoyed

I moved all my individual stocks to VBS to consolidate and for "true" brokerage services.
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Re: Partial transfer including fractional shares

Postby jon-nyc » Mon Mar 25, 2013 4:56 am

AAA wrote:Can someone explain why in the 21st century there is still an issue with fractional shares? Can't computers handle 85.234 shares as easily as 85 shares?



Its not that it isn't feasible technically. The SEC could mandate that the exchanges allow trading in fractional shares and the DTCC be able to settle them. Then they would have to upgrade their systems, along with all broker/dealers, clearing firms, and service bureaus that operate in the markets. There would be industry-wide testing, and a cutover date. It would be analogous in scope and cost to decimalization, but without the corresponding benefits.

And as always with these things, its a question of priorities. The DTCC is still trying to dry off all the paper certs flooded in the basement of 55 Water, so it can resume its main focus of reducing systemic risk (maybe even moving to T+2). The SEC is worried about D/F implementation and enforcement issues. Fractional share trading and settlement is not on anyone's radar.
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