Moving some or all of your Mutual Fund Investments to Another Company
Moving investments is not hard but it may take a few weeks
- OK, so you are either moving all of your mutual fund investments to another company or moving some of your investments to another company for diversification. (See my video here).
- You have the legal right to move your money. It is your money.
- There are well over 100 other companies that would love for you to give them a try. (Here is the list of the top 100 mutual fund companies by AUM)
Who is ACATS and why are they important to you?
The regulation agency that formally controls this important process is The Automated Customer Account Transfer Service (ACATS).
ACATS defines themselves as: “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.”
What is the biggest IRA transfer consideration?
Unless a CPA, CFA or other professional that knows your specific situation tells you otherwise, make sure if you are moving money from a pre-tax dollars product or account that it will be going to another pre-tax account. Or if you are moving post-tax monies that it also goes into a like account.
Avoid this Tax and IRS Audit Scare with the 1099-R form
My doctor says I will most likely die of a heart attack. He also says, statistically he and everyone will as well. I recommend that you make sure look for your 1099-R sent to you in the US mail in late January and include these numbers correctly on your tax form or program. If this is not done correctly, you will get an audit notice and bill from the IRS for the full taxable amount the next June treating the “from” sale as ordinary income. After the initial panic and two days of phone calls, certified letters and forms this can be fixed. The 1099-R shows the IRS that these funds were moved “to” a “like” pre-tax investment product or account. Consult your tax professional for details.
What are the Steps to Moving Investment Funds to Another Investment Firm?
- You will work with your “RECEIVING” investment firm (the one the monies are going to) in filling out a TIF or (Transfer Initiation Form). The receiving company will send that form to ACATS. This is really the only action item in the process until your taxes are processed. However, here are the other steps in a multi-week process if something goes wrong and you need to intervene. It is still YOUR money and YOU need to make sure the process gets completed correctly each time.
- ACATS will assign a control number to the transfer, and distribute output to both the receiving Member and the delivering Member identified in the TIF, putting the requested transfer into “Request” status in the ACATS system. If there is an error, ACATS will contact the “receiving/initiating” company.
- The delivering Member (the current investment company) must respond to the output within one business day, by either adding the assets that are subject to the transfer or by rejecting the transfer. If the deliverer does not respond, ACATS will add information relating to the transfer to reporting distributed to FINRA. FINRA oversees investment companies and has the power to levy dire sanctions on these companies.
- After the delivering Member adds the assets that are subject to the transfer, both the receiver and deliverer Members have an opportunity to review the list of assets in the account. The ACATS transfer will remain in this “Review” status which can last the remainder of the day that the deliverer added assets and through the next business day. During this review period, the delivering Member can add, delete, or modify an asset or assets listed in the transfer. If the deliverer takes any of these actions, ACATS updates the transfer to “Review Adjust-Deliverer” status and adds an additional business day for the parties to review the transfer.
- Once the review period is complete, and the receiving Member has added any applicable re-registration instructions, ACATS will stage the transfer for settlement, and sets the account to “Settle Prep” status. During this period, which lasts for one business day, the receiver and deliverer can no longer update the transfer.
- When the transfer settles, it is set to “Settle Close” status in the ACATS system. If a broker-to-broker transfer includes non-CNS eligible securities, the delivering Member will be debited the market value of the asset and the receiving Member will be credited the market value of the asset through NSCC’s money settlement.
- When cash assets are transferred in a broker-to-broker transfer, that amount will be debited and credited through NSCC money settlement, and netted with any applicable incentive charges described above. When cash assets are transferred in an ACATS transfer where one of the counterparties is a bank, that asset settles through a Security Payment Order (SPO) charge at DTC.
In Summary – The Good News is You Have Just Three Main Tasks In Moving Investment Monies / IRA rollover
Your tasks move your money to another investment company are:
- To fill out the Transfer Information Form
- Send it to your new company
- File your 1099-R form correctly on your next year’s taxes.
Always consult a professional before making any investment moves.