Automated Customer Account Transfer Service (ACATS) Definition

What Is the Automated Customer Account Transfer Service (ACATS)?

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

The National Securities Clearing Corporation (NSCC) developed the ACATS system, replacing the previous manual asset transfer system with this fully automated and standardized one. This greatly reduced the cost and time of moving assets between brokerage accounts as well as cut down on human error.

Key Takeaways

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

How the Automated Customer Account Transfer Service (ACATS) Works

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

The ACATS simplifies the process of moving from one brokerage firm to another. The delivering firm transfers the exact holdings to the receiving firm. For example, if the client had 100 shares of Stock XYZ at the delivering firm, then the receiving firm 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 repurchase them with the new firm. Another benefit is that clients do not need to let their previous brokerage firm or advisor know beforehand. If they are unhappy with their current broker, they can simply go to a new one and start the transfer process.

Securities Eligible for ACATS

Clients can transfer all publicly traded stocks, exchange-traded funds (ETFs), 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)s.

Transfers involving qualified retirement accounts like IRAs may take longer as both the sending and receiving firm must validate the tax status of the account to avoid errors that could cause a taxable event.

Securities Ineligible for ACATS

There are several types of securities that cannot go through the ACATS system. Annuities cannot transfer through the system, as those funds are held with an insurance company. To transfer the agent of record on an annuity, the client must fill out the correct form to make the change and initiate the process via what is known as a 1035 exchange.

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

How Does an ACATS Transfer Work?

An ACATS transfer is initiated by a brokerage customer at the receiving institution by submitting a Transfer Information (TI) record. The TI contains all of the information needed to identify the customer’s existing brokerage account and where it will be delivered. The delivering firm must respond to the output within one business day, by either adding the assets that are subject to the transfer, or by rejecting the transfer. Before delivery is made, a review period is opened where the sending and receiving firm 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 primarily one of automating the process such that it cuts the delivery time down to 3-6 business days for ACATS vs. up to one month or more for a non-ACATS transfer. The other difference is that the automated system is far less prone to mistakes, typos, and other forms of human error.

What Is an ACAT Out Fee?

Some brokers charge existing customers a fee to ACAT assets out of their account to a new brokerage. This fee can be as high as $100 or more per transfer. Brokerage firms charge this fee to make it more costly to close the account and move assets elsewhere. Not all brokerages charge these fees, so check with yours before initiating a transfer.

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