Automated Customer Account Transfer Service (ACATS) Definition

What is Automated Account Transfer Service (ACATS)?

The Automated Client Account Transfer Service (ACATS) is a system that facilitates the transfer of securities from one trading account to another with a different brokerage firm or bank.

The National Securities Clearing Company (NSCC) has developed the ACATS system, replacing the old manual asset transfer system with this fully automated and standardized one. This has dramatically reduced the cost and time of moving assets between brokerage accounts as well as human error.

Key points to remember

  • The Automated Client Account Transfer Service (ACATS) can be used to transfer stocks, bonds, cash, mutual funds, options and other investment products.
  • The system may be needed when an investor wants to move their account from brokerage firm A to brokerage firm B.
  • Only eligible members of the NSCC and member banks of the Depository Trust Company can use the ACATS system.
  • Once the customer account information is correctly matched and the receiving company decides to accept the account, the delivering company will take approximately three days to transfer the assets to the new company. This is called the delivery process.
  • Some brokerages will charge their clients an ACAT fee per transfer.

How the Automated Account Transfer Service (ACATS) works

The ACATS system is initiated when the new receiving company has the client sign the appropriate transfer documents. Once the document is received in good condition, the receiving firm submits a request using the customer’s account number and forwards it to the delivering firm. If the information matches both the delivering company and the receiving company, the ACATS process can begin. The process usually takes three to six business days.

ACATS simplifies the process of switching from one brokerage firm to another. The transferring company transfers the exact assets to the receiving company. For example, if the client owned 100 shares of XYZ stock with the delivering company, the receiving company receives the same amount, with the same purchase price.

This makes it more convenient for clients as they do not need to liquidate their positions and then buy them back from the new company. Another advantage is that clients do not need to inform their former brokerage firm or adviser beforehand. If they are unhappy with their current broker, they can simply check out a new one and start the transfer process.

Securities eligible for ACATS

Clients can transfer all listed sharesexchange-traded funds (AND F), cash, bonds and most mutual funds through the ACATS system.

ACATS can also transfer certificates of deposit (CDs) from banking institutions through the ACATS system, as long as it is a member of the NSCC. ACATS also works on all types of accounts, such as taxable accounts, Individual Retirement Accounts (IRAs), trusts, and brokerage 401(k).

Transfers involving qualified retirement accounts like IRAs can take longer because both the sending company and the receiving company must validate the tax status of the account to avoid errors that could result in a taxable event.

Securities not eligible for ACATS

There are several types of securities that cannot pass through the ACATS system. Annuities cannot be transferred through the system, as these funds are held with an insurance company. To transfer the registration agent to an annuity, the client must complete the correct form to make the change and initiate the process via what is called a 1035 exchange.

Other ineligible securities depend on the regulations of the brokerage firm or the receiving bank. Many institutions have proprietary investments, such as non-transferable mutual funds and alternative investments that may need to be liquidated and may not be available for redemption through the new broker. In addition, some companies may not transfer unlisted stocks or financial products that trade over the counter (OTC).

How does an ACATS transfer work?

An ACATS transfer is initiated by a brokerage client to the receiving institution by submitting a transfer information (TI) record. The TI contains all the information necessary to identify the customer’s existing brokerage account and where it will be delivered. The transferring company must respond to the exit within one business day, either adding the assets being transferred or refusing the transfer. Before the delivery is made, a review period is opened during which the sending company and the receiving company can confirm the assets to be transferred.

What is the difference between an ACATS and non-ACATS transfer?

The main difference between an ACATS transfer and a manual (non-ACATS) transfer is mainly the automation of the process so that it reduces the delivery time to 3-6 working days for ACATS against up to a month or more for a non-ACATS. -ACATS transfer. The other difference is that the automated system is much less prone to errors, typos, and other forms of human error.

What is an ACAT Out Fee?

Some brokers charge existing clients a fee on the ACAT assets in their account to a new brokerage. These fees can reach $100 or more per transfer. Brokerage firms charge these fees to make it more expensive to close the account and transfer the assets elsewhere. Not all brokerages charge this fee, so check with yours before initiating a transfer.

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