The Automated Customer Account Transfer Service (ACATS) is a crucial tool that facilitates the seamless transfer of securities from one trading account to another at a different brokerage firm or bank, making asset management more straightforward for investors.
Developed by the National Securities Clearing Corporation (NSCC), ACATS replaced the cumbersome manual asset transfer system with a fully automated and standardized solution. This upgrade minimized transfer costs, reduced processing times, and significantly cut down on human error—resulting in smoother transitions for both individuals and financial institutions.
Key Benefits of ACATS
- Efficient Transfer Process: ACATS handles the transfer of stocks, bonds, cash, unit trusts, mutual funds, options, and other investment products efficiently.
- Seamless Account Transitions: Ideal for investors looking to move their accounts from one brokerage firm (e.g., Broker Company A) to another (e.g., Broker Company B).
- Restricted Access for Security: Only NSCC-eligible members and Depository Trust Company member banks can utilize the ACATS system, ensuring secure transfers.
- Quick Delivery: Once the customer’s account information is confirmed and accepted by the receiving firm, the delivery process usually completes within three days.
- Fee Awareness: Some brokerages might charge their customers an ACAT fee for each transfer, so it’s wise to check in advance.
How Does ACATS Work?
The Process Simplified
The ACATS process kicks off when the receiving firm receives the signed transfer documents from the client. Upon receipt, the receiving firm submits a request to the delivering firm using the client’s account number. Once the information from both parties matches, the transfer process begins. Typically, the entire transition completes within three to six business days.
Through ACATS, exact asset holdings transfer smoothly. For instance, if a client holds 100 shares of Stock XYZ at the delivering firm, the receiving firm will obtain the same amount with the identical purchase price. This eliminates the need for clients to liquidate and repurchase their positions, making transitions more convenient and less stressful. They also don’t need to inform their old brokerage firm or advisor, adding an element of anonymity if they’re dissatisfied with their current service.
Eligible Securities for ACATS
ACATS can handle the transfer of all publicly traded stocks, ETFs, cash, bonds, and most mutual funds. Additionally, it can transfer Certificates of Deposit (CDs) from banking institutions that are members of the NSCC across various accounts, including taxable accounts, Individual Retirement Accounts (IRAs), trusts, and brokerage 401(k) plans. However, additional validations might be necessary for qualified retirement accounts to prevent taxable events.
What Cannot Be Transferred via ACATS?
Certain securities, such as annuities held by insurance companies, cannot be transferred through ACATS. Other ineligible securities depend on the receiving brokerage firm’s regulations. Investments such as non-transferrable mutual funds, some alternative investments, and unlisted or over-the-counter (OTC) financial products might need to be liquidated first. Always check with the receiving broker to ensure seamless transitions.
ACATS vs. Non-ACATS Transfers
The primary difference between an ACATS and a non-ACATS transfer is the level of automation. While ACATS processes transfers within 3-6 business days, a non-ACATS manual transfer could take up to one month or longer, making the automated option notably more efficient and error-resistant.
Understanding ACAT Out Fees
Certain brokers levy a fee on customers to transfer their assets to a new brokerage. Sometimes, this fee can reach $100 or more per transfer—a deterrent for closing accounts. However, not every brokerage charges these fees, so it’s essential to verify before going through with the transfer.
Embrace the power of ACATS for a hassle-free experience when managing your security transfers between different brokerage firms or banks. Life’s too short for cumbersome financial moves—let automation work for you.
Related Terms: NSCC, securities, brokerage account, certificates of deposit, individual retirement accounts, annuities.
References
- The Depository Trust and Clearing Corporation. “Automated Customer Account Transfer Service (ACATS)”.
- U.S. Securities and Exchange Commission. “Transferring Your Brokerage Account: Tips on Avoiding Delays”.
- The Financial Industry Regulatory Authority (FINRA). “Understanding the Brokerage Account Transfer Process”.
- The Financial Industry Regulatory Authority (FINRA). “1035 Exchanges”.
