How ACATS Streamlines Your Investment Transfers: A Guide to the Automated Customer Account Transfer Service

What is ACATS?

ACATS, or the Automated Customer Account Transfer Service, is a system designed to facilitate the transfer of securities between brokerage firms in a seamless and efficient manner. Developed by the National Securities Clearing Corporation (NSCC), ACATS was introduced to replace the cumbersome manual asset transfer system that was prone to errors and delays.

Before ACATS, transferring investments was a labor-intensive process that involved extensive paperwork and manual verification. This not only increased the risk of human error but also prolonged the transfer period. With ACATS, this entire process is automated, reducing costs and significantly shortening the time required for transfers. The key benefits include lower operational costs for brokerage firms, faster transfer times for clients, and a drastic reduction in errors.

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How ACATS Works

The initiation of an ACATS transfer begins with the client signing transfer documents with the receiving firm. Here’s a step-by-step overview of how it works:

• Initiation: The client initiates the transfer by signing a Transfer Instruction (TI) form with the receiving brokerage firm. This form contains all necessary details about the securities to be transferred.

• Submission: The receiving firm submits the Transfer Information (TI) record to ACATS.

• Verification: The delivering firm (the firm from which assets are being transferred) verifies the information provided in the TI record.

• Review Period: After verification, there is a review period during which any discrepancies or issues are addressed.

• Completion: The entire process typically takes three to six business days to complete.

This streamlined process ensures that transfers are handled efficiently without the need for extensive manual intervention.

Eligible and Ineligible Securities

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Not all types of securities are eligible for transfer through ACATS. Here’s what you need to know:

• Eligible Securities: Stocks, bonds, ETFs, mutual funds, cash, and certain alternative investments are all eligible for ACATS transfers. This covers a wide range of common investment vehicles.

• Ineligible Securities: Securities such as annuities, non-transferrable mutual funds, and over-the-counter (OTC) securities are not eligible for transfer through ACATS. These types of investments often have unique requirements that cannot be accommodated by the automated system.

Understanding which securities are eligible can help you plan your transfers more effectively.

Types of Accounts Supported

ACATS supports a variety of account types, making it versatile for different investment needs:

• Taxable Accounts: Regular brokerage accounts that are subject to taxes.

• Individual Retirement Accounts (IRAs): Traditional and Roth IRAs can be transferred using ACATS.

• 401(k) Rollovers: Transferring funds from a 401(k) plan to an IRA or another qualified retirement account is also supported.

• Other Qualified Retirement Accounts: Other types of retirement accounts can also be transferred through ACATS.

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This broad support ensures that most investors can use ACATS for their account transfers.

Fees and Tax Implications

When using ACATS, it’s important to understand the associated fees and tax implications:

• Fees: The fees associated with ACATS transfers are generally minimal. Some brokers may even cover these costs as part of their service.

• Tax Implications: ACATS transfers are typically not taxable events. This means that the cost basis and holding period of your investments remain unchanged during the transfer process.

Understanding these aspects can help you make informed decisions about your investment transfers.

Common Issues and Delays

While ACATS is designed to be efficient, there are common issues that can cause delays:

• Incorrect or Incomplete Forms: One of the most common reasons for delays is incorrect or incomplete transfer forms. Ensuring all information is accurate and complete is crucial.

• Liquidation Instructions: Issues related to liquidation instructions can also cause delays.

• Account Type Mismatches: Mismatches between the old and new account types can also slow down the process.

Monitoring the transfer process closely and communicating with both the old and new brokers can help resolve any issues promptly.

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