What is Automated Customer Account Transfer Service?

The Automated Customer Transfer Service (ACATS) refers to an electronic system that ensures a smoother transfer of various financial securities of the customers from one institution’s Trading Account to another’s. These institutions are mainly banks or brokerage firms. ACATS help in transferring numerous types of assets and investment products.

For the mutual fund transfers and transactions, ACATS connects to the SERV system or NDCC’s funds. The system then ensures a faster re-registration of funds in case of the account transfers. Also, while transferring the insurance assets, ACATS links with the Insurance Processing Service (IPS) for Offering the necessary details and information for re-registering between the two companies.

Transfers via ACATS require around six business days to get processed. However, ACATS transactions do not have any guarantee, and thus they can also be reversed if any side of the involved parties appears to be in transfer defaults. The National Securities Clearing Corporation (NSCC) developed this system, and it then became the subsidiary of Depository Trust and Clearing Corporation (DTCC).

The newer system replaced the existing, manual system of asset transfers. To use ACATS, the company must be a member of NSCC, and the banks must be the member of DTCC.

Eligible Securities

Clients can trade the ETFs, cash, publicly-traded stocks, Mutual Funds, and Bonds using the ACATS system. It is also used widely for transferring the Certificates of Deposits (CDs) from the banking and financial institutions as long as they remain members of NSCC. ACATS also works on numerous accounts like the Individual retirement Accounts (IRAs), trusts, taxable accounts, and brokerage accounts.

Ineligible Securities

There are various types of securities that cannot be transferred using the ACATS system. For example, ACATS cannot be used for transferring annuities as the Insurance companies hold these funds.

For transferring the agent of record on an annuity, the client must correctly fill the form for making changes and initiating the process. Furthermore, several other ineligible securities rely on the regulations of the receiving firms or the banks.

Many institutions have some proprietary investments like mutual funds that require liquidation and might not be available for repurchase by any new broker. Furthermore, some firms also do not prefer and avoid transferring the unlisted shares or financial products trading Over the Counter (OTC).

Benefits of ACATS

Here are the key benefits of using ACATS:

• It helps centralise, standardise, accelerate, and automate the customer accounts’ transfer between the NSCC members and the DTCC Bank member or between the two NSCC members.
• It also allows the broker-dealer to comply with the Financial Industry Regulatory Authority (FINRA) requirements for transferring the customer accounts.
• ACATS supports several processing cycles, including accelerated settlements.
• It offers various cost-saving opportunities.
• ACATS accommodate several processing capabilities, which include secure internet communications and automated CPU-to-CPU transfers.