A standing letter of authorization, often shortened to SLOA, is a written instruction you sign that tells your brokerage or custodian to send money from your account to a specific third party on a recurring or on-demand basis without requiring a new signature each time. The form locks in who receives the money, the bank details for that recipient, and any limits you set on transfer size or frequency. Once it’s on file, your adviser or the firm itself can execute transfers within those boundaries until you revoke the instruction in writing.
SLOAs are common for retirees who want monthly distributions sent to a checking account at another bank, parents funding an adult child’s account, and clients paying regular obligations like tuition or trust distributions. They save you from signing a new form every month. They also concentrate risk, because a document with your signature now controls an outgoing pipe from your account. Understanding how the form is structured, what protections are built in, and where the boundaries sit is the difference between a convenient tool and an expensive mistake.
What an SLOA Authorizes, and What It Doesn’t
An SLOA authorizes transfers only to the specific third party named on the form, using the exact bank details you provided. It does not give your adviser or the firm discretion to redirect the money somewhere else. That single limit is the foundation of the entire arrangement.
The point matters because federal rules treat an adviser who can move client money as having “custody” of that money, which normally triggers an expensive annual surprise audit. To sidestep that, advisers rely on a 2017 SEC staff no-action letter that lists conditions the SLOA must meet. The most consequential one is that the adviser cannot change the third party’s name, address, or account details on your instruction.1U.S. Securities and Exchange Commission. Investment Adviser Association, February 21, 2017 If your adviser ever hands you a form that would let them update recipient details on your behalf, treat that as a warning sign and raise it with the custodian directly.
An SLOA also does not override the tax character of the money moving through it. It is a transfer mechanism, not a tax structure. Money leaving a retirement account is still a distribution. Money going to a relative may still be a gift.
Information You’ll Need to Set One Up
The form asks for specific details, and getting any of them wrong is how transfers end up rejected or sent to the wrong bank. You will need:
- The recipient’s full legal name and physical address.
- The account number at your brokerage or custodian the money will come from.
- The recipient’s bank name, account number, and nine-digit ABA routing number for domestic transfers. International transfers require a SWIFT code or an IBAN depending on the destination country.2Board of Governors of the Federal Reserve System. ABA Number – Micro Data Reference Manual
- Whether the instruction is one-time or recurring, the frequency, and any dollar limits per transaction or per year.
Setting a maximum dollar amount per transfer is one of the simplest protections available. If someone gains access to your account, a per-transaction cap limits what can leave before the custodian’s fraud monitoring catches it. Many firms let you set both a per-transfer ceiling and an annual aggregate limit. Use both.
Most firms still require an original wet signature, though some now accept digital signatures through encrypted platforms. Either way, check every digit of the account and routing numbers before submitting. Recovering misdirected funds is far harder than preventing the error.
How Firms Verify and Activate the Instruction
After you submit the signed form, the custodian runs a verification process before activating it. The most common step is a callback: a representative phones you at a number already on file to confirm the recipient details, transfer limits, and your identity through security questions. This callback is the primary defense against forged signatures and fraudulent instructions. Full review and activation typically take a few business days.
Business accounts often require dual-control authorization, meaning two authorized people must approve the instruction before it activates. One initiates, another reviews and approves. Dual control protects against both internal fraud and setup errors.
Once the SLOA is active, your custodian should send you written confirmation of the standing instruction, a notice after each transfer, and an annual reconfirmation of the instruction itself. If those confirmations stop arriving, contact the custodian immediately. Their absence is itself a compliance failure worth flagging.
The Seven Conditions Behind the Form
The reason your form is structured the way it is comes from seven conditions the SEC staff laid out in the 2017 no-action letter. If all seven are met, an adviser directing SLOA transfers avoids the surprise-audit trigger under Rule 206(4)-2 of the Investment Advisers Act.3eCFR. 17 CFR 275.206(4)-2 – Custody of Funds or Securities of Clients by Investment Advisers Miss one and the adviser could be treated as having custody of your account.1U.S. Securities and Exchange Commission. Investment Adviser Association, February 21, 2017
- You give written instructions directly to your custodian, signed by you, naming the third party and providing either their address or account number.
- You separately authorize the adviser, in writing, to direct transfers to that third party on a schedule or as needed.
- Your custodian verifies each instruction and sends you a notice promptly after every transfer.
- You can cancel or modify the instruction to the custodian at any time.
- The adviser has no authority to alter the third party’s name, address, or account details.
- The adviser keeps records showing the third party is not a related party of the adviser and does not share the adviser’s address.
- The custodian confirms the SLOA when first established and reconfirms it at least once a year.
Read together, the conditions do one thing: they keep the decision about where the money goes in your hands and put verification obligations on the custodian.
Types of Transfers an SLOA Can Cover
The transfer method affects timing and cost.
- ACH transfers move electronically between domestic banks through the Automated Clearing House network. They’re the standard choice for recurring monthly distributions and typically settle in one to two business days.
- Domestic wires generally clear the same day or the next business day. International wires take longer and involve currency conversion, so plan on two to three business days at minimum depending on the receiving country.
- Journal transfers move assets between accounts at the same brokerage. A first-party journal moves money to another account you own; a third-party journal sends it to someone else’s account at the same firm.
Third-party transfers draw tighter verification than transfers between your own accounts, regardless of method. That heightened review is by design.
Tax Consequences to Plan For
Retirement Account Distributions
If your SLOA directs recurring transfers out of an IRA or other qualified retirement plan, each transfer is a taxable distribution. The custodian reports any distribution of $10 or more on Form 1099-R for your annual tax filing.4Internal Revenue Service. Instructions for Forms 1099-R and 5498 (2025) The default federal income tax withholding on IRA distributions is 10%, though you can elect a different rate or opt out for most payment types.
If you’re younger than 59½, an additional 10% tax penalty applies to the taxable portion of each distribution on top of regular income tax.5Office of the Law Revision Counsel. 26 USC 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts Several exceptions exist, including distributions after disability, as part of substantially equal periodic payments, or after separation from service at age 55 or older. Setting up a recurring SLOA from a retirement account without accounting for these tax hits is a common and expensive mistake.
Gift Tax Considerations
When your SLOA sends money to a third party who isn’t providing goods or services in return, the transfer may count as a gift for federal tax purposes. In 2026, you can give up to $19,000 per recipient per year without triggering a gift tax return.6Internal Revenue Service. Gifts and Inheritances If recurring monthly transfers to a family member exceed that amount over the year, you’ll need to file Form 709. The filing requirement doesn’t necessarily mean you owe gift tax, because it offsets against a much larger lifetime exemption, but missing the return itself can create problems with the IRS.
If Something Goes Wrong
If an unauthorized transfer leaves your account, Article 4A of the Uniform Commercial Code governs your rights. When a bank processes a payment order that was not authorized and was not properly verified under the agreed security procedure, the bank must refund the payment and pay interest from the debit date to the refund date.
Two deadlines matter. You must exercise ordinary care to review your account statements and notify the bank of any unauthorized transfer within a reasonable time, with 90 days from the bank’s notification as the outer limit. Miss that window and you keep the right to a refund but lose the right to interest. The harder deadline sits at one year: fail to object to an unauthorized debit within one year of receiving notification and you lose the right to challenge it entirely.7Legal Information Institute. UCC 4A-505 – Preclusion of Objection to Debit of Customer’s Account The clock starts when the statement or notice arrives, not when you read it.
Review every transfer confirmation your custodian sends. If a transfer hits your account that you didn’t expect, or the amount doesn’t match your instructions, report it to the custodian the same day. Speed strengthens your legal position.
Changing, Canceling, and What Happens at Death
An SLOA stays active indefinitely until you revoke it in writing. To cancel, send a written notice of revocation to the custodian’s compliance or operations team. Most firms process the cancellation within one to two business days. If you suspect fraud, call the custodian first to request an immediate hold on outgoing transfers while you submit the written revocation.
Changing details like the recipient’s bank account number almost always requires a brand-new form rather than an amendment. Firms want each active instruction backed by a full set of current data and a fresh signature, which forces the custodian to re-verify the instruction from scratch.
Keep a running list of your active SLOAs. Orphaned instructions pointing to closed bank accounts or former payees generate failed transfers, trigger compliance flags, and create confusion in your account records. A quick annual review, timed to the custodian’s annual reconfirmation notice, is the easiest way to stay current.
An account holder’s death revokes standing authorizations. Once the custodian learns of the death, transfers should stop, though they may continue briefly if the custodian hasn’t yet been notified. The estate’s executor or administrator then provides a death certificate and new instructions. If you are a beneficiary or executor, notifying the custodian promptly prevents transfers from continuing to flow under the deceased person’s SLOA.