Brokerage Glossary

The IRS tax form brokerages issue to report proceeds, cost basis, and realized gains/losses from securities sales during the calendar year. Brokerage bonuses paid as cash usually show up on 1099-MISC or 1099-INT; bonuses paid as free shares show up on 1099-B at the moment of sale.

Why it matters: Free shares are not a free gift. The fair market value at receipt is generally taxable income, and any appreciation between receipt and sale is also reportable.

Example: Most BB brokerage reviews note that free-stock bonuses are taxable; reviewers should treat them as ordinary income at receipt.

The NSCC-operated system used by US brokerages to move customer accounts (cash, stocks, ETFs, mutual funds, and some options) between institutions. ACATS transfers are full-position; partial ACATS is supported as a variant.

Why it matters: Most brokerage transfer bonuses pay only on completed ACATS transfers, not on cash deposits. The ACATS process takes 5–10 business days and locks the transferred assets during transit.

Example: Robinhood, Webull, and most BB-tracked brokerage transfer bonuses require an ACATS transfer of qualifying assets to unlock the bonus.

A non-ACATS funding method using ACH transfers, wires, or check deposits to add cash to a new brokerage. Some bonuses pay on cash funding instead of (or in addition to) ACATS transfers.

Why it matters: Cash-funding bonuses are easier to claim but generally smaller than ACATS-transfer bonuses. The bonus mechanic determines which funding path qualifies.

Example: Webull and similar brokerages have historically offered cash-funding tiers in addition to ACATS-transfer tiers.

The amount used to compute capital gain or loss when a security is sold. For purchased shares, cost basis is the purchase price plus commissions; for free shares received as a brokerage bonus, cost basis is the fair market value at receipt.

Why it matters: If cost basis is reported incorrectly by the brokerage, capital gains taxes will be miscalculated. Brokerage transfers must carry cost basis history with them via the ACATS process.

Example: BB brokerage reviews note cost basis handling because transferred positions must arrive with intact cost basis to avoid IRS reporting headaches.

The Financial Industry Regulatory Authority, the self-regulatory organization that oversees US broker-dealers. FINRA registration is the baseline regulatory check for any brokerage.

Why it matters: A broker that is not FINRA-registered is not a US broker-dealer. Verify FINRA membership via BrokerCheck before transferring significant assets.

Example: Every BB brokerage review confirms FINRA/SIPC status as a baseline trust signal.

A brokerage feature allowing purchase of a fraction of a single share (e.g., $10 of Berkshire Hathaway A class). Most modern brokerages support fractional shares; some legacy brokerages do not.

Why it matters: Free-share bonuses are often distributed as fractional shares of higher-priced stocks. Verify the brokerage actually offers fractional support before transferring assets in.

Example: Robinhood, Webull, and most BB-tracked brokerages support fractional shares; the free-share bonus may arrive as a fraction of one share.

The fair market value of a brokerage free-stock bonus on the day it is credited to the account. This is the figure that the IRS treats as taxable income.

Why it matters: Free shares of low-priced stocks (e.g., $5–$10 names) are often the cheapest the broker can issue. The expected value to the customer is typically $5–$30, not the headline "up to $200" cited on the landing page.

Example: Robinhood, Webull, and similar brokerages offer free shares as part of new-account promotions; the EV is determined by the distribution of share values offered.

The minimum length of time transferred or deposited assets must remain at the new brokerage for the bonus to vest. Common: 12 months for transfer bonuses, 24 months for premium-tier IRA match bonuses.

Why it matters: Closing an account or transferring assets back out before the hold expires triggers a clawback. Read the hold language before initiating the transfer.

Example: Robinhood Gold IRA match requires a multi-year hold on the matched contributions before the match fully vests.

A brokerage promotion that contributes a percentage match (commonly 1%, 2%, or 3%) on IRA contributions and/or IRA-to-IRA transfers. Match percentages above 1% usually require a paid premium-tier subscription.

Why it matters: A 3% IRA match on a $7,000 annual contribution is $210 of tax-advantaged growth — a meaningful boost compared to no-match accounts. Subscription and hold requirements determine the net.

Example: Robinhood Gold pays an IRA match on qualifying contributions and 401(k) rollovers, subject to a multi-year hold requirement.

A cash account requires settled funds before placing a trade. A margin account borrows from the broker against pledged securities and supports short selling and other strategies. Margin accounts have additional regulatory requirements (PDT rules, maintenance requirements).

Why it matters: Some brokerage bonuses are restricted to specific account types. Margin accounts carry interest expense and liquidation risk if equity falls below maintenance requirements.

Example: Robinhood Gold provides margin-account features as part of the paid subscription tier.

A FINRA rule designating any margin account that executes four or more day trades in a five-business-day rolling window as a "pattern day trader," subject to a $25,000 minimum equity requirement.

Why it matters: A small-balance margin account can be flagged PDT and frozen for 90 days. PDT does not apply to cash accounts because cash trades are settled before the next round-trip.

Example: BB brokerage reviews note PDT exposure on margin accounts, especially for free-stock promo plays where users may try to sell the bonus share quickly.

A nonprofit member corporation that protects brokerage-account holders against losses caused by broker failure (not market losses). SIPC coverage is $500,000 per customer, including up to $250,000 in cash claims.

Why it matters: SIPC is not FDIC. It does not protect against market declines, fraud against the customer, or losses in non-covered products (crypto, certain alt assets). Always confirm SIPC membership before transferring large balances.

Example: Every BB brokerage review confirms SIPC membership and notes any non-SIPC-covered asset classes the broker offers.

The practice of selling securities at a loss to offset realized gains elsewhere in the portfolio, reducing the current-year tax bill. Wash-sale rules restrict re-purchasing substantially identical securities within 30 days.

Why it matters: Tax-loss harvesting is the most common reason for high-volume ACATS activity in late December. Brokerage transfer bonuses that trigger ACATS can complicate harvesting plans.

Example: BB editorial does not provide tax-loss-harvesting advice, but does flag transfer-bonus timing relative to year-end activity.

A brokerage promotion that pays cash (or bonus shares) in proportion to the value of assets transferred in via ACATS from another brokerage. Common tiers: 1%, 2%, 3% of transferred value, capped at a maximum bonus.

Why it matters: Transfer bonuses are usually larger than deposit bonuses but require an existing brokerage relationship with sufficient assets to move. Hold periods of 12–24 months are standard.

Example: Robinhood Gold offers tiered ACATS transfer match bonuses on qualifying transfers from competing brokerages, subject to a multi-year hold requirement.

Vested bonus assets are owned outright and can be withdrawn or sold subject only to settlement rules. Unvested bonus assets are restricted — they cannot be withdrawn or transferred out and are forfeit if the account is closed before vesting.

Why it matters: A $1,000 unvested bonus tied to a 12-month account-retention clause is closer to a $500 promised payment than to $1,000 cash. Read the vesting schedule carefully.

Example: Brokerage transfer bonuses commonly require keeping the transferred assets at the new brokerage for 12–24 months before the bonus is fully vested and freely withdrawable.