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Explorer ○

Sell order improperly rejected

 

Last week I requested that Vanguard transfer a specific number of mutual fund shares from my brokerage account to the brokerage account of a charity.  This amounted to 5% of the total shares of that fund in my account.

While the charity transfer was still being worked on by Vanguard (a 3-4 day process), on Dec. 12, 15 min. before market close, I entered an order to sell a specific number of shares of that same fund--amounting to 92% of the total shares.

The sell order was rejected, with no reason given.

I immediately called Vanguard, and there followed a series of conversations with various Vanguard representatives over the next 24 hours.

The entire mutual fund position had been frozen because of the pending request for transfer of 5% of the shares to a charity.  I protested that this made no sense, since both the charity transfer and sell order were for a specific number of shares adding up to less than the total in the account; and that it was wrong for Vanguard to prevent me from disposing of the shares not involved in the charity transfer however I wanted. Moreover, I had never been informed that initiating the charity transfer would freeze the entire mutual fund position. Had I known about this I would have chosen to hold off on the charity transfer until after the sell transaction.  I was told that Vanguard had acted in accordance with "standard industry practice."

I asked for a better  explanation, in writing, of Vanguard's reasons for freezing the entire position, and was told that I would never get an explanation in writing.  I asked if they would reimburse me for any gain lost resulting from selling later rather than the day I first tried. 

The upshot of all this is that the next day, Dec. 13, I got notice that the transfer to a charity had been completed, clearing the way for the sell transaction, and  Vanguard did agree to reimburse me for any lost gain if I sold the shares immediately. I did so,  for a larger gain.

So it all turned out well financially, but I am alarmed that something like this could happen, and there was never an adequate explanation.

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4 Replies
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Explorer ○○○

Re: Sell order improperly rejected

It probably had something to do with a frequent trading issue which involves market timing restrictions. 

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Frequent Contributor

Re: Sell order improperly rejected


@IBTrvlr-Sojrnr wrote:

It probably had something to do with a frequent trading issue which involves market timing restrictions. 


No. At Vanguard, market timing restrictions apply to round trip transactions [buys & sells], not to unidirectional transactions [sells only here].

My guess is that while in-kind transfer was pending, VG didn't like another sell order. It may have been better to reverse the sequence.

YBB
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Explorer ○○○

Re: Sell order improperly rejected

I stand corrected.

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Follower ○○

Re: Sell order improperly rejected

I've had a number of problems with Vanguard on-line trades. The people are pleasant enough and I love the products but they have the worst trading platform/customer orientation of any brokerage I've used. I have accounts at Schwab and Fido and they are much more user friendly.

I had a problem yesterday where I tried to sell two specific lots of an etf that both had fractional shares. Long story short - impossible to execute on-line and ended up calling. They had no real explanation for the problem after I walked them through the trade. He did mention problems with a few browsers - but not mine.

Forget about anything more complicated than basic round lot buy/sell.

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