Understanding DWAC: Accelerate Stock Transfers Electronically
Deposit/Withdrawal at Custodian (DWAC) is a streamlined process for electronically transferring new shares or paper share certificates to and from the Depository Trust Company (DTC) using the Fast Automated Securities Transfer (FAST) service with a transfer agent as the intermediary. DWAC is a preferred method among investors and brokerage firms for transferring securities due to its speed, cost-effectiveness, and reduced risk compared to physical delivery.
What is DWAC and How Does It Work?
DWAC allows for the immediate transfer of securities to a brokerage account without the need for physical delivery, making the process more efficient and significantly quicker. This method saves costs associated with printing and mailing physical certificates and eliminates the risks of loss or damage during transit. The electronic nature of DWAC transfers ensures the shares are securely and conveniently moved between parties.
Here are the primary benefits of using DWAC:
- Efficiency: Transfers are immediate, and settlements are accelerated.
- Cost Savings: No need for printing and mailing physical certificates, reducing associated costs.
- Reduced Risk: Eliminates risks of loss or damage as the process is fully electronic.
DWAC Eligibility Requirements
To utilize DWAC, certain conditions must be fulfilled:
- Shares must be free trading or eligible for restriction removal.
- The broker must be a DTC participant.
- The issuer must be DWAC eligible.
Comparing DWAC and DRS
DWAC isn’t the only method for transferring shares electronically. Another method is the Direct Registration System (DRS). The key difference is that DRS involves shares that are already electronically registered on the books of the transfer agent. Both ensure the convenience of electronic registration but serve slightly different purposes and methodologies.
Discover FAST: The Backbone of Electronic Transfers
The Fast Automated Securities Transfer (FAST) program is an agreement between the DTC and transfer agents. Under this program, FAST agents act as custodians for DTC, facilitating the dematerialization of securities and significantly reducing shipping and processing costs associated with physical certificates. The FAST program does not apply to money market securities.
Requesting and Delivering Physical Certificates
Even in this digital age, shareholders can still request physical stock certificates if needed. This can be done by having the broker initiate the request through DTC or by sending shares directly to the transfer agent through DWAC.
Fees may apply for this service, and a Medallion Signature Guarantee – a certification stamp authenticating the signature on a share certificate – is often required.
To deposit shares into a brokerage account via DWAC, shareholders need to provide the following:
- Original stock certificate(s).
- DWAC deposit form.
- Applicable fees.
Summary
DWAC simplifies the process of transferring securities by offering a swift, cost-effective, and secure electronic method. By eliminating the necessity for physical stock certificates, DWAC dramatically enhances the efficiency of brokerage operations and protects against the risks associated with paper certificates. understanding and leveraging DWAC can significantly empower investors and brokerage firms to operate more effectively and securely.
Related Terms: Broker, Physical Delivery, Stock Certificate, Medallion Signature Guarantee, Depository Trust Company.
