One of the main reasons why investors want to transfer shares is because they want to change brokers. Just like the functioning of a bank, where loans and credit can be transferred, people can transfer shares from one account to another. Depending on their requirements, investors might change their mind on who they want to do business with. This can be due to rising costs, redundant technology, bad customer care or the firm simply going out of business. However, many might be intimidated by the procedure to do so, given the volatility of markets but this is into the case anymore. Here’s how to transfer stock between brokers.
- Using ACATS software to transfer stocks
Before technology became such a non-negotiable part of our life, a manual transferring of shares was carried out which resulted in a lot of human errors. Now, with a software-based programme called Automated Customer Account Transfer (ACATS) shares can be transferred between brokers without much hassle. Customers need to have online broking accounts to be eligible for this. If they are not in possession of one they need to open a broking account online with their DP.
The ACATS software was developed by the National Securities Clearing Corporation (NSCC) to transfer stocks, cash, bonds mutual funds, unit trusts and other investment options being offered. Only those companies who are NSCC-eligible can use ACATS.
- Steps taken to transfer the stocks
To transfer the necessary stocks via ACATS both the firms participating will have individual responsibilities. The brokerage account receiving the stocks will have to contact the firm in possession of the stocks and request for a transfer with instructions. Post this the former firm will have to accept the instructions received or reject or amend them within three business days. Here, validation will include corroborating the customers’ details. After this process, the current firm must cancel any open orders and cannot accept fresh requests from the client. They must also transfer the instructions to the new firm with particulars on the account balance and list of securities positions. Post the transfer, the new stock brokerage firm will be responsible and answerable to the customer regarding stock reporters.
It is also suggested that investors thoroughly check their account information and assets are properly transferred. Once all the due processes are carried out, the delivering firm can take three days to move the assets to the new security brokers.
Customers can also opt for a manual method which still exists but it can take longer and the process can be tiresome compared to the ACATS software. However, the software also has limitations. This includes annuities that are bought through insurance companies cannot be transferred through this system. A separate form will have to be filled out by the client to initiate the process. Overall, the ACATS system has very few limitations and is an easy and convenient method to transfer stocks between brokerage accounts.