ACATS: What is it and how does it help corporate cash management?

What is an ACAT?

The Automated Customer Account Transfer Service (ACATS) is an electronic system developed by the National Securities Clearing Corporation (NSCC) that standardizes and automates asset transfer between financial institutions. 

Originally designed to simplify account migrations between brokerages, ACATS is now the industry standard for transferring securities and cash holdings in financial services.

Why does this matter for your startup? ACATS provides a seamless way for companies with investment accounts to move their entire brokerage account (including cash and investments) from their current provider to a new platform. 

This is a common scenario when startups want to move their funds from a previous banking platform to Rho and use our Rho Treasury service to invest their cash. 

ACATS is available to firms that are NSCC members, including Rho’s custody partners, Apex Clearing and Interactive Brokers.

Business and institutional accounts can also leverage this transfer mechanism, including a startup's treasury or investment account. 

For example, suppose your seed-funded startup currently manages its funds in a brokerage account at Bank A. In that case, ACATS allows you to transfer those assets to Rho and start using Rho Treasury without selling off investments or disrupting your liquidity position.

How an ACAT Works

So, what does the actual transfer process look like? Understanding the ACATS process can help your finance team prepare for a smooth transition. Here's how it works:

Step 1: Initiation by the New Firm

The process begins when your startup opens an account with a new provider (like Rho) and decides to move existing assets. 

But here's an important callout: The receiving member uses the details typically found on your account statement at the sending firm - such as account number, account title, and taxpayer ID - to submit an electronic transfer request via the ACATS system.

Step 2: Validation by the Current Firm

What happens next? The ACATS system forwards the transfer request to your current institution. Your current provider must either validate or reject the request within a short review period (as mandated by FINRA rules). 

Validation occurs when account information matches, and assets are transferable; rejection happens if mismatches or non-transferable assets exist. 

Following validation, your current firm provides an itemized list of your account's assets to ACATS and the receiving firm as part of the transfer information.

Step 3: Transfer of Assets

Once validated, ACATS coordinates the electronic transfer of assets in kind. Both firms have a defined review period to confirm the asset list, and then your securities (stocks, bonds, funds, etc.) are moved to your new account on a scheduled settlement date. 

The transfer is highly automated. Positions are reregistered under the new custodian, and cash balances are transferred. You'll be pleased to know that your holdings remain invested throughout this process; there's no need to liquidate anything during the transfer.

Step 4: Completion and Verification

A standard ACATS transfer typically takes only 3-8 business days from initiation to completion, barring any complications. 

Once complete, your startup should receive a statement from your new account that you can compare with the final statement from your old account to ensure all assets are transferred correctly. Any residual dividends or interest accrued at the old firm will usually sweep over afterward.

Want to know another option? You can choose either a full account transfer (moving all assets and closing the old account) or a partial transfer (moving only selected assets). Most startups opt for full transfers when consolidating their treasury operations onto a new platform.

Info & Documents Needed to Start an ACAT

To ensure a smooth ACATS transfer for your business account, gather these essential items:

• Account Details: Provide exact details of your existing account. This includes your company name exactly as it appears on the current account, the account number, and the account type (e.g., Corporate Brokerage, LLC account). For a business, you'll typically use your company's Tax Identification Number (EIN) instead of a Social Security number.
• Transfer Documentation: Requirements vary by custodian. While some brokerages require a transfer form (TIF), others, like Apex, don't for most transfers. Apex specifically only requires a special form for mutual fund transfers.
• Corporate Authorization Documents: Ensure that the persons initiating the transfer are authorized to act on the account. The new institution may require proof of your business's identity and the signer's authority. For example, they might request a copy of corporate formation documents or a corporate resolution indicating who can transact on behalf of the company.
• Recent Account Statement: You'll typically need to provide a recent statement from your current brokerage account. This helps verify your account's holdings and details, ensuring nothing is overlooked during the transfer.
• Other Relevant Information: If requested, be prepared to supply additional details, such as contact information or your current institution's DTC number.

Accuracy is crucial here. Any errors or omissions (like a misspelled company name or wrong account number) will delay the process until corrected.

Eligible & Ineligible Securities

One advantage of ACATS is that it supports various asset types, allowing your business to transfer most common investments in-kind. However, some assets cannot be moved via ACATS. Here's what startups should know:

Eligible for ACATS:

But what types of assets can you transfer? Nearly all publicly traded securities and cash in a brokerage account are transferable, including:

• Stocks and ETFs
• Corporate and municipal bonds
• U.S. Treasuries and other government securities
• Most mutual funds
• Cash balances
• Money market funds

ACATS works for various account types, from standard taxable brokerage accounts to IRAs and trusts, as long as the receiving member institution offers that type of account.

Ineligible for ACATS:

Some assets cannot transfer via ACATS, including:

• Proprietary or non-transferable mutual funds offered exclusively by your old broker
• Alternative investments and private securities
• Private placement shares and limited partnership interests
• Illiquid securities not traded on mainstream exchanges
• Unlisted stocks or OTC/penny stocks (if the new broker doesn't support them)
• Employer-sponsored retirement plan assets (like 401(k)s)
• Assets amid a transaction or not in "street name."

For a startup evaluating its current treasury account, it's wise to inventory its holdings and determine whether anything falls into the "ineligible" category.

Many early-stage companies stick to mainstream instruments (e.g., stocks, ETFs, treasury bills, money market funds), which means most or all of their assets will transfer easily.

If you have a specialized asset (perhaps a fund unique to your old provider), you may need to decide whether to liquidate it or leave it at the current firm.

Benefits to the Client

What's in it for your startup? Using ACATS to transfer a business brokerage account offers several key advantages:

Fully electronic & efficient

Are you tired of paperwork? ACATS transfers are handled through an automated electronic system, making the process fast, standardized, and reliable. 

There's no need to mail paperwork or manually re-enter each asset; everything is processed through a central clearing mechanism. This speeds up the transfer (settling in days instead of weeks) and reduces errors.

For your startup, this means minimal downtime and a smooth transition; your assets remain invested and simply appear in your new account after the transfer window, with virtually no administrative hassle.

No taxable event (in-kind transfer)

Here's a crucial benefit you should know about. Transferring via ACATS is a non-taxable event, as assets move in-kind rather than being sold.

You're not forced to liquidate investments into cash. The shares or bonds themselves transfer over, carrying their cost basis and holding period with them.

This allows your startup to avoid any tax consequences from selling positions just to switch providers.

What you owned before is exactly what you own after, just at a new institution. No gains are realized, and no taxable event is triggered by the transfer itself, a crucial consideration for startups managing investor capital.

The existing broker cannot block the transfer

Are you worried about pushback from your current provider? ACATS provides peace of mind that your current broker cannot unjustly impede your transfer. U.S. regulations (FINRA Rule 11870) require the carrying firm to cooperate and expedite legitimate transfer requests with proper disclosures.

They cannot refuse or delay the transfer simply because they don't want to lose your business. Investors can move their accounts freely, and firms must process those requests promptly. 

This means your startup can confidently initiate a transfer to Rho without fear that your old brokerage will put up roadblocks.

The result: Minimal friction

Another benefit is not having to personally orchestrate the move with your old institution. The new firm handles the initiation and communication through ACATS, so you typically do not need to inform your previous broker in advance or get their permission.

This spares you from potentially lengthy calls or sales pitches urging you to stay. If you're a busy founder or CFO, it's a relief to avoid unnecessary negotiations. You can focus on setting up the new platform, and ACATS will automatically pull the assets from the old account.

Best Practices for a Smooth ACAT Transfer

To ensure your treasury transition goes smoothly, follow these best practices:

Confirm All Holdings are Transferable

Before initiating, review the assets in your account and confirm with Rho that they can accept everything you plan to transfer. While most standard securities will transfer without issue, if you hold any unusual or proprietary products, discuss this ahead of time.

It's better to know in advance if a certain mutual fund or bond can't be transferred via ACATS. If it is not eligible, decide whether to liquidate it or leave it at the old broker.

Provide Accurate Information

Whether your new provider requires forms or handles the process electronically, accuracy is essential. Make sure the information you provide matches your existing account details perfectly. 

Your business name on the new account should match the old account exactly, account numbers should be correct, and the tax ID must be accurate.

Typically, your new provider can start the process for you electronically if they have all the needed information. 

Other providers may require a formal TIF form to be completed. Either way, having a copy of your latest statement is helpful so the receiving firm can verify all account details.

Typos or mismatches are a leading cause of transfer delays. If your current account has any special designations (for example, "XYZ Corp. DBA ABC Investments"), ensure you've communicated that to your new provider.

Plan for Any Transfer-Out Fees

It's common for the delivering broker to charge an "ACAT transfer-out fee" when you move your account. This fee can range roughly from $50 to $100 (varies by institution) and is often automatically deducted from your account's cash during the transfer.

Check your current broker's policy on transfer fees ahead of time. Keeping a sufficient cash balance ensures the fee can be paid without selling any securities. Some new providers may even reimburse this fee as a perk for new clients.

Ensure You Won't Need Access to Funds Mid-Transfer

Once an ACATS transfer is in motion, you will be unable to trade or withdraw funds from the account until the process is completed. 

As a result, you typically cannot use the old account, and the new account will only reflect the assets after completion.

Plan your cash flow accordingly. If your startup has a large expense coming up, schedule that payment either before initiating the transfer or after everything lands in your new account. 

It's also best to avoid trading during the transfer window, as changes in the account can complicate reconciliation.

Communicate and Monitor

Even though ACATS is automated, stay in contact with both Rho and your old firm during the transfer. If something seems delayed, don't hesitate to ask your new provider for a status update.

By staying responsive, you can quickly address any issues that arise. In most cases, the transfer will be completed without intervention, but a proactive stance helps catch any snags early. 

Once the ACAT is complete, review your new account to ensure all assets arrived correctly, and follow up promptly on any discrepancies.

Wrapping Up

So what's the bottom line? For startups looking to optimize their treasury operations, the ACATS process removes many historical barriers to switching financial providers. 

Whether you've raised a seed round and are seeking higher yields, or you're scaling and need more sophisticated treasury services, ACATS enables you to transition smoothly without disrupting your investments. 

By understanding how ACATS works, what to prepare, and what to expect, your finance team can execute a painless transition to a platform like Rho Treasury, keeping your focus where it belongs: on growing your business. 

Ready to transform how you manage your startup's finances? Contact our team today to learn how Rho Treasury can help you earn on your company cash while maintaining the liquidity your business needs and make the switch seamlessly through the ACATS process.