Automated Customer Account Transfer Service (ACATS): What Is It?
Securities transfers between trading accounts at various banks or brokerage firms are made more accessible via the Automated Customer Account Transfer Service (ACATS).
The prior manual asset transfer system was replaced with the completely automated and standardized ACATS system by the National Securities Clearing Corporation (NSCC). This significantly decreased human error and the time and expense of transferring assets across brokerage accounts.
How Accats, an Automated Customer Account Transfer Service, Operates
When the customer signs the necessary transfer documentation, the new receiving business initiates the ACATS system. The acquiring firm uses the client’s account number to request the delivery business after receiving the document in good condition. The ACATS procedure can start if the information is identical across the receiving and delivering firms. Typically, the procedure takes three to six business days to finish.
Transferring assets across brokerage firms is made more accessible by the ACATS. The receiving firm receives the precise holdings from the delivering business. For instance, if the providing companies possessed 100 shares of Stock XYZ belonging to the customer, the receiving firm would get the same quantity at the exact price. Customers will find it more convenient due to not having to sell their holdings and repurchase them from the new business. Clients can also benefit from not having to notify their prior adviser or brokerage business in advance. They may quickly start the transfer procedure with an unknown broker if dissatisfied with their existing one.
Securities Compliant with ACATS
Through the ACATS system, clients can transfer almost any publicly traded stock, bond, cash, exchange-traded funds (ETFs), or mutual funds
As long as the banking institution is a member of the NSCC, ACATS can also transfer certificates of deposit (CDs) from the institution via the ACATS system. Additionally, ACATS is compatible with all accounts, including trusts, taxable accounts, brokerage 401(k)s, and individual retirement accounts (IRAs).
It may take longer to transfer qualified retirement accounts (IRAs) since both the sending and receiving firms need to confirm the account’s tax status to prevent mistakes that may result in a taxable event.
Equities Not Qualified The ACATS system cannot process specific securities. Annuities are held in the hands of an insurance firm; they cannot be transferred through the system. The customer must complete the appropriate form to effect the change and start the process through a 1035 exchange to move the agent of record on an annuity.
Specific securities are not eligible based on the rules of the bank or brokerage company receiving them. Proprietary assets held by several institutions include non-transferable mutual funds and other investments that need to be liquidated and might not be repurchased through a new broker. Furthermore, certain companies could not allow the transfer of over-the-counter (OTC) financial instruments or unlisted shares.
How are ACATS transfers operational?
A brokerage customer at the receiving institution initiates an ACATS transfer by submitting a Transfer Information (TI) record. All the information required to determine the customer’s current brokerage account and delivery location is contained in the TI. Within one business day of receiving the output, the delivering firm must either accept the transfer or reject it and add the assets subject to it. A review period is established before delivery so that the sending and receiving firms may verify the assets to be transferred.
What sets an ACATS transfer apart from a non-ACATS transfer?
The primary distinction between an ACATS transfer and a manual (non-ACATS) transfer is that the former automates the process, reducing delivery times to three to six business days, while the latter can take up to a month or more. The automated system is also significantly less prone to errors, typos, and other types of human error, which is another distinction.
ACAT Out Fee: What Is It?
ACAT assets from an existing customer’s account are transferred to a new brokerage for a fee by certain brokers. Each transfer may incur a charge of up to $100. Brokerage firms impose this fee to increase the cost of closing an account and transferring assets to another location. Ensure your brokerage charges these costs before starting a transfer, as not all do.
Conclusion
- Investment goods such as equities, bonds, cash, unit trusts, mutual funds, options, and others can be transferred using the Automated Customer Account Transfer Service (ACATS).
- If an investor wants to transfer their account from Broker Company A to Broker Company B, the procedure could be necessary.
- The ACATS system is only available to Depository Trust Company member institutions and NSCC-qualifying members.
- It will take around three days for the delivery business to transfer the assets to the new firm if the client account information is correctly matched and the receiving firm chooses to accept the account. We refer to this as the delivery procedure.
- Certain brokerages impose ACAT fees on each transfer.
