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What Is The ACATS?

Views 7132022.08.03

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Key Takeaways

  • The ACATS is a system can be used to transfer stocks, bonds, cash, unit trusts, mutual funds, options, and other investment products.

  • Only NSCC-eligible members and Depository Trust Company member banks can use the ACATS system.

  • Centralizes, standardizes, automates, and accelerates the transfer of customer accounts, more safely, effectively and quickly, speeds up settlement and saves transaction costs.

The Automated Customer Account Transfer Service (ACATS) is a system that automates and standardizes procedures for the transfer of assets in a customer account from one brokerage firm and/or bank to another.

ACATS can be used to transfer stocks, bonds, cash, unit trusts, mutual funds, options, and other investment products.

How ACATS Work

In the late 1970s, American commercial banks gradually introduced and improved automatic transfer service accounts on the basis of traditional telephone transfer services.

After the establishment of the National Securities Clearing Corporation (NSCC) in 1976, it began to provide centralized settlement, risk management, information and settlement services for the financial industry.

Subsequently, the NSCC developed and launched the ACATS system, which replaced the previous manual asset transfer system with this fully automated and standardized system.

As long as the customer signs and submits the corresponding asset transfer document at the new receiving company, the ACATS system will start and quickly send the document to the former asset depositing company.

When the basic customer information of the asset transfer-in party and the asset transfer-out party match, the asset transfer-out party immediately registers that the client assets have been transferred out, and the asset transfer-in party immediately registers that the client assets have been transferred in.

During this period, the client does not need to liquidate the position or perform any operations in the transfer-out and transfer-in accounts, so that the account assets can be seamlessly transferred.

Who can use ACATS

All eligible and qualified NSCC full service Members and DTC bank participants are eligible to use ACATS. Mutual Fund Service Members of NSCC are eligible to use the service on a limited basis, only as the contra-party to a transfer initiated by a broker dealer or a bank for the purpose of re-registering a mutual fund position to or from them directly.

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.

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.

Benefits

The ACATS system greatly simplifies the process of transferring client assets from one brokerage firm/bank to another.

Specifically, compared with traditional transfer procedures, the ACATS system has the following four advantages:

First, ACATS has time efficient. ACATS can effectively and quickly transfer assets in customer accounts through standardized, centralized and automated operations.

Second, the transfer process carried out by the ACATS system fully complies with the requirements of the US Financial Industry Regulatory Authority (FINRA), reducing regulatory costs.

Third, the ACATS service can support multiple processing cycles at the same time, which improves the processing capacity per unit time and reduces transfer costs.

Fourth, ACATS is supported by a safe and reliable Internet communication module, which ensures the security of transfers.

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