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

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

Let me explain what the Automated Customer Account Transfer Service, or ACATS, really is. It's a system that handles the transfer of securities from one trading account to another at a different brokerage firm or bank.

The National Securities Clearing Corporation (NSCC) created ACATS to replace the old manual way of transferring assets. This automated and standardized approach cuts down on costs, time, and human errors when moving assets between accounts.

If you're in the United Kingdom or Ireland, know that their equivalent is handled by the Certificateless Registry for Electronic Share Transfer (CREST).

Key Takeaways on ACATS

You can use ACATS to transfer a range of investments, including stocks, bonds, cash, unit trusts, mutual funds, options, and more. It's often necessary when you decide to switch your account from one brokerage to another.

Remember, only members eligible with the NSCC and Depository Trust Company (DTC) banks can participate in ACATS. Once the customer account details are verified, the actual delivery of assets takes about three to six business days.

Be aware that some brokerages will charge you an ACAT fee for each transfer.

How the Automated Customer Account Transfer Service (ACATS) Works

Here's how ACATS operates in practice. You start the process by signing transfer documents with the new receiving firm. They then submit a request using your account number to the delivering firm.

If everything matches up between the two firms, the ACATS process kicks off, and delivery typically completes in three to six business days. The system transfers your exact holdings, like if you have 100 shares of a stock, the receiving firm gets exactly that with the same purchase price.

This setup is convenient because you don't have to sell off your positions and buy them back at the new firm. Plus, you don't even need to notify your old brokerage or advisor ahead of time—if you're not satisfied, just head to a new one and initiate the transfer.

Important Note on Retirement Accounts

Keep in mind that transfers for qualified retirement accounts, such as IRAs, might take longer. Both firms have to verify the tax status to prevent any mistakes that could trigger a taxable event.

Securities Eligible for the Automated Customer Account Transfer Service (ACATS)

You can transfer publicly traded stocks, bonds, exchange-traded funds (ETFs), cash, and most mutual funds via ACATS. It also covers options, annuities, and even certificates of deposit (CDs) from NSCC-member banks.

The system applies to various account types, including taxable accounts, individual retirement accounts (IRAs), trusts, and brokerage 401(k)s. Your broker or financial advisor can confirm if your specific account qualifies for an ACATS transfer.

Securities Ineligible for ACATS

Not everything can go through ACATS—it depends on the receiving firm's rules. Proprietary investments like certain mutual funds or alternative assets might need to be liquidated and could not be available at the new broker.

Additionally, unlisted shares or over-the-counter (OTC) products might not transfer with some firms.

How Does an ACATS Transfer Work?

To initiate an ACATS transfer, you submit a transfer information record at the receiving institution. This record has all the details to identify your existing account and where the assets will go.

The delivering firm has one business day to respond, either by listing the assets for transfer or rejecting it. There's a review period before delivery where both firms confirm the assets.

What Is the Difference Between an ACATS and Non-ACATS Transfer?

The key difference is automation: ACATS cuts delivery time to three to six business days, while non-ACATS manual transfers can take a month or more. ACATS also minimizes errors from typos or human mistakes.

What Is an ACAT Out Fee?

An ACAT out fee is what some brokers charge when you transfer assets out using ACATS to a new brokerage. It's a way to discourage account closures, but not all firms do this—check with yours first.

The Bottom Line

In summary, ACATS lets you transfer eligible accounts between brokerages efficiently, as long as both are NSCC members or DTC banks. If you're thinking of switching, ask your current firm about any fees they might charge for the transfer.