Best PracticesACATS-Fund/SERV Account Transfer Capability User

Updated: April 23, 2012

Best Practices Fund/Firm Transfer Capability User Guide Page ii

Effective Date: April 23, 2012 Please see Important Notice #A7355 & #A7356

Updated: August 7, 2009

Best Practices Fund/Firm Transfer Capability User Guide Page iii

Disclaimer

This Guide is not a legal document and the statements contained herein do not set forth any legal obligations of DTCC,

National Securities Clearing Corporation (“NSCC”) or any other DTCC subsidiary, nor do any statements contained herein

set forth any legal rights of any NSCC user. All such legal rights and obligations are set forth in NSCC’s Rules &

Procedures and each user’s Membership Agreement with NSCC (together, the “Legal Documents”). The user is referred

to the Legal Documents for a statement of all legal obligations. In general, unless the context clearly indicates

otherwise, terms used in this Guide have the same meanings as in the Legal Documents.

NEITHER DTCC NOR ANY OF ITS SUBSIDIARIES WARRANTS THE ACCURACY OR COMPLETENESS OF THE INFORMATION

CONTAINED IN THIS GUIDE. FURTHER, NEITHER DTCC NOR ANY OF ITS SUBSIDIARIES WARRANTS THE ACCURACY OR

COMPLETENESS OF ANY OTHER WEB SITE WHICH THE USER MAY ACCESS THROUGH THIS GUIDE. THE INFORMATION

CONTAINED IN THIS GUIDE IS NOT INTENDED TO BE A SUBSTITUTE FOR OBTAINING LEGAL OR TAX ADVICE FROM AN

APPROPRIATE PROFESSIONAL ADVISOR. IN NO EVENT WILL DTCC NOR ANY OF ITS SUBSIDIARIES BE LIABLE FOR

LOSSES OR DAMAGES, INCLUDING LOSS OF PROFITS OR CONSEQUENTIAL DAMAGES, ARISING OUT OF THE USE OF

THIS GUIDE OR OTHER HYPERLINKED WEB SITES CONTAINED HEREIN.

TO ENSURE COMPLIANCE WITH INTERNAL REVENUE SERVICE CIRCULAR 230, YOU ARE HEREBY NOTIFIED THAT: (A)

ANY DISCUSSION OF FEDERAL TAX ISSUES CONTAINED OR REFERRED TO HEREIN IS NOT INTENDED OR WRITTEN TO

BE USED, AND CANNOT BE USED, FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED UNDER THE

INTERNAL REVENUE CODE, AND (B) AS A MATTER OF POLICY, DTCC DOES NOT PROVIDE TAX, LEGAL OR ACCOUNTING

ADVICE AND ACCORDINGLY, YOU SHOULD CONSULT YOUR OWN TAX, LEGAL AND ACCOUNTING ADVISOR BEFORE

ENGAGING IN ANY TRANSACTION.

Trademarks

Content in this Guide, including graphical and other images contained herein, is the property of DTCC or is used with the

permission of the copyright owner. The use of the content or these images by you, or anyone else authorized by you, is

prohibited unless specifically authorized in writing by DTCC. Any unauthorized use of content may violate copyright laws,

trademark laws, the laws of privacy and publicity, and communications regulations and statutes.

All names of DTCC and its affiliates, and their products and services, referenced herein are either registered trademarks

or servicemarks of, or trademarks or servicemarks of, DTCC or its affiliates in the U.S. or elsewhere. Other names of

companies, products or services appearing in this Guide are trademarks or servicemarks of their owners.

The contents of this Guide are protected by copyright law. Except as otherwise expressly indicated in this Guide, no

permission is granted to copy, distribute, modify, post or frame any contents of this Guide.

© DTCC The Depository Trust & Clearing Corporation.

ALL RIGHTS RESERVED

Best Practices Fund/Firm Transfer Capability User Guide Page iv

Executive Summary ............................................................................................ 1

Background and Project Overview ...................................................................................... 1 How It Works .................................................................................................................. 1 Opportunity ..................................................................................................................... 1 Cost/Benefit .................................................................................................................... 2 A Look Ahead .................................................................................................................. 2

Transfer Process between Broker /Dealers and Banks ....................................... 3

ACATS Overview .............................................................................................................. 3 Who Can Use the Service .................................................................................................. 3 Benefits .......................................................................................................................... 3 How the Service Works ..................................................................................................... 3

Transfer Process between Broker/Dealers, Banks, and Mutual Fund Companies5

Overview ........................................................................................................................ 5 What Services are Available: ............................................................................................. 5 Limitations / Impact ......................................................................................................... 5

The Call for Industry Standardization ................................................................ 7

Purpose of Industry Standardization ................................................................................... 7 Benefits of Using the Fund/Firm Transfer Capability ............................................................. 7

The Fund/Firm Transfer Capability benefits brokerage firms, banks and funds in the following ways: .......................................................................................................................... 7 The Fund/Firm Transfer Capability benefits investors in the following ways: .......................... 7

Success Metrics ............................................................................................................... 7 The success of the Fund/Firm Transfer Capability will be measured in the following ways: ...... 7

Changes and Enhancements .............................................................................................. 7 Rollout Strategy ............................................................................................................... 8

Initial Implementation .................................................................................................... 8 Future Implementations: ................................................................................................ 8

How the Capability Works .................................................................................. 9

Firm-Initiated Transfer Reject Codes ............................................................... 18

Fund Company Error Handling ......................................................................................... 18

Corresponding Fund/SERV Reject Codes .......................................................... 19

Frequently Asked Questions (FAQs) ................................................................. 21

1. How can I begin using the standardized transfer process? ............................................ 21 2. How will I know if a fund is participating in the new enhancement? ............................... 21 3. If I am a mutual fund transfer agent, will I need to modify my systems even if we are not

participating in the enhancement? ................................................................................. 21 4. How will DTCC handle a transfer request (PTF) submitted for a fund that isn’t signed up for the enhancement? ............................................................................................................ 21 5. Can Trust Companies participate in this enhancement? ............................................... 21 6. Will agreements need to be amended? ...................................................................... 21 7. How will the transfer of Cost Basis be handled? .......................................................... 21 8. What kind of transfers can be performed through this new capability? ........................... 21 9. Why aren’t liquidations included in Phase I of the New Transfers Enhancement? ............. 22 10. Why aren’t new accounts at a fund included in this first phase of this enhancement? ..... 22

Best Practices Fund/Firm Transfer Capability User Guide Page v

11. Since these changes allow ACATS-Fund/SERV transfers to new accounts, how will Customer

Identification Program (CIP) requirements be met by the fund company and their transfer agent? ................................................................................................................................. 22 12. Are any new record types being established in ACATS? .............................................. 22 13. Will a request be rejected by ACATS if a Fund Registration (FR) record is not submitted by the end of the first day if it is in transfer status “Review?” ..................................................... 22 14. When should the “gift indicator” be populated? ......................................................... 22 15. Can I send a fund more than one CUSIP per request?................................................ 22 16. Can I use this to perform mass firm conversions? ..................................................... 22 17. How should the TIN be populated on the 018 record? ................................................ 22 18. Can this process be used to complete a mass representative / dealer change? ............. 22 19. What reject codes should be used for the 018 record? ............................................... 22 20. How long will the fund-to-firm transfer take to settle? ............................................... 23 21. Are new reject codes being established and will the reject codes be mapped from Fund/SERV to ACATS? .................................................................................................................. 23

Links to Related Important Notices and Record Layouts: ..................................................... 34 ACATS Website Link to Documents ................................................................................ 34 Wealth Management Website links to Mutual Funds fixed and variable record layouts .......... 34 Related Rules .............................................................................................................. 34

NSCC Rule Changes .......................................................................................... 36

Background ................................................................................................................... 36 Rule Change .................................................................................................................. 36

Best Practices Fund/Firm Transfer Capability User Guide Page 1

Executive Summary

BACKGROUND AND PROJECT OVERVIEW Mutual Fund transfer processing is not standardized among broker/dealers, banks, and mutual fund companies. The current state of the fund transfer processing remains fragmented with segments of both automated processing (approximately 20-25%) and other areas of completely manual processing (approximately 75-80%). For example: Retirement asset transfers between mutual fund custodians (funds) are highly automated through

the National Securities Clearing Corporation (“NSCC”) Transfer of Retirement Assets (“ToRA”) system.

Customer account transfers between broker/dealers (firms) are also highly automated through NSCC’s Automated Customer Account Transfer System (“ACATS”).

Currently, there is a limited level of adoption of ACATs between banks and broker/dealers for mutual fund transfers and as such they primarily rely on paper.

Although highly regarded within their intended constituencies, both ToRA (developed for fund

companies) and ACATS (developed for broker/dealers) were created in response to specific industry

needs and offer limited appeal to current non-participants. Other methods exist that, to a lesser extent, have also provided some automation where transfers are concerned, but no single transfer method alone has met the complete needs of the industry and its clients. Even with the development of each of these methods, the vast majority of transfers (including both transfers in-kind or re-registrations and those that represent liquidations of fund positions held

directly-at-fund or being moved directly to the fund) are currently processed manually. Transfer processing is not only inefficient and costly to industry participants but also continues to be a significant source of client dissatisfaction. The general lack of industry-wide automation causes numerous delays and market exposure. As studies have shown, the average time it takes to manually move one mutual fund position, in either direction, between a firm (broker/dealer or bank) and a fund company is three weeks. Another consequence of the current environment (and lack of standardization) is the extensive

number of bilateral agreements that exist between funds and firms. These agreements are executed to immobilize paperwork and allow transfer processing to become more automated through “point solutions” on a company-by-company basis. Even with these agreements, a significant portion of transfer processing continues to be done through the movement of paper forms and spreadsheets and

still requires manual intervention on behalf of all parties.

HOW IT WORKS The solution is one that works to alleviate both the operational and legal concerns that combined, slow the transfer process. All broker-initiated in-kind transfers will be submitted through ACATS. In turn, NSCC will process the request and forward it on to the fund company through ACATS- Fund/SERV. New fields are being added to ACATS-Fund/SERV that will provide funds with sufficient transparency in which to

systematically ensure that only like account types (e.g., IRA to IRA for retirement scenarios) are being transferred and assist the funds in validating customer information. Upon verification of the ACATS-Fund/SERV record, the fund can elect to systematically re-register the shares without the need of manual intervention. By utilizing ACATS and ACATS-Fund/SERV, a transfer process that currently takes on average three weeks to complete, is reduced to three business days. In addition, the solution will take advantage of the legal constructs governing NSCC participation, to

remove the requirement for bilateral transfer agreements between parties (funds and firms) while still

providing appropriate indemnifications for all parties.

OPPORTUNITY Based on recent studies, anywhere from 75-80% of the transfer scenarios covered in the Phase I

deliverable are processed manually today. One fund company reported that during one 30-day period, only 26% of their roughly 19,000 fund-to-firm retirement transfer incidents were processed systematically. The availability of an automated standard for all constituencies is expected to reduce costs and drive greater adoption of available automation.


COST/BENEFIT The development effort on funds and firms where Phase I is concerned should be relatively small. The design contemplates leveraging both ACATS and ACATS-Fund/SERV thus allowing funds and firms to

utilize existing functionality with minimal enhancement. Funds will be required to rethink how transfers are managed within their operating environment, with the corresponding change in mindset. However, with significant reduction in transfer processing time and cost and an increase in client satisfaction through expedited transfer processing as motivation to change, the decision to adopt the new functionality becomes much more straightforward.

The bigger effort may be in getting fund companies to participate in this enhancement using standard indemnification language through the form of rule making at NSCC. Today, broker/dealers use ACATS to transfer thousands of customer accounts daily without the need of bilateral agreements between the firms or even a unilateral agreement with NSCC. Similarly, funds process retirement asset transfers amongst each other through the use of ToRA without the need of bilateral agreements between fund participants. However, when introduced over a decade ago, fund participants were, and

currently still are, expected to execute a unilateral ToRA agreement with NSCC in order to utilize the service. It is hoped that both parties (funds and firms) can take advantage of this new transfer functionality while allowing the rules of engagement for ACATS and ACATS-Fund/SERV to govern their participation rather than a specific trading agreement between the parties. To eliminate the need for bilateral or unilateral agreements, DTCC and the working group recommended expanding the NSCC Rules to satisfy the legal requirements and provide the needed

protection. NSCC membership requires a signed application that binds members to,

“… (a) to abide by the Rules of the Corporation and to be bound by all the provisions thereof, and that the Corporation shall have all the rights and remedies contemplated by said Rules; (b) the Rules of the Corporation shall be a part of the terms and conditions of every contract or transaction which the participant may take or have with or through the Corporation…” - This is from NSCC Rule 2A Section E Firms participating in the ACATS service currently rely upon section 17 of NSCC Rule 50 for indemnity provisions regarding transfer requests between firms. NSCC filed a rule change in December of 2008 to Mutual Fund Services Rule 52, which became effective upon filing, which allows the transfer and re-

registration of Fund/SERV eligible fund positions between brokers, banks and fund companies that are NSCC members. The rule change amends section 18 of Rule 52 to include indemnification provisions for the re-registration transfer activity, so that funds and firms will have the ability to rely on NSCC rules in lieu of entering into multiple indemnification agreements to engage in the new transfer capability This language includes provisions for retirement transfers to provide assurances to custodians that assets are being re-registered as permissible by law and that in all cases these transfers are trustee to trustee transfers, and as such are non-taxable and non-reportable for federal

income tax and withholding purposes. Such amendments to the NSCC rules will support the timely

implementation of increased automation of mutual fund transfer processing on behalf of the industry.

A LOOK AHEAD The Investment Company Institute (ICI) Broker/Dealer Advisory Committee (“BDAC”) Mutual Funds

Transfers Working Group has been working with DTCC to expand current functionality of its ACATS and ACATS-Fund/SERV systems to provide an automated transfer facility that will comprehensively meet the needs of the industry: Phase I of this project addresses firm-initiated retirement and non-retirement account re-

registrations that move shares from firm (i.e., Networking Level 3 or omnibus accounts) to existing fund direct accounts as well as fund direct accounts into firms. These types of re-

registrations are referred to as “in-kind transfers” although, in fact, no asset actually transfers between the fund and intermediary, and the shares are simply re-registered on the books of the fund. This functionality went live with DTCC on January 23, 2009.

Subsequent phases include support of fund initiated in-kind transfers to/from firm and “cash to firm” direct-at-fund liquidations for retirement (including the existing ToRA workflows) and non-retirement accounts, which at some point will also include rollovers.


Transfer Process between Broker /Dealers and Banks

As mentioned in the Executive Summary, Brokerage Firms and Banks leverage ACATS to transfer assets in customer accounts.

ACATS OVERVIEW 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 expedites account transfers by permitting them to be accomplished in an automated environment. NSCC developed ACATS in conjunction with the NYSE, its Rule 412 Task Force Committee and the NASD to address the industry's need to reduce delays and inconsistencies associated with manual processing. Instruments handled by the system include equities, corporate and municipal bonds, unit investment trusts, mutual funds, options, cash and other investment products.

WHO CAN USE THE SERVICE All eligible and qualified NSCC settling members and DTC member banks are eligible for this service.

BENEFITS ACATS facilitates the accurate and timely transfer of a customer's account, with the following operational advantages to users: Uniform time frames, standardized reporting and automated control functions.

On broker to broker transfers, the service debits delivering firms the full market value of customers' securities, promoting the timely transfer of assets. For account transfers where a bank is the contra side, the assets are delivered free.

ACATS requires the customer's Social Security/Tax Identification Numbers to enhance the ability of firms to identify individual accounts.

ACATS provides an automated transfer initiation procedure that incorporates the industry's effort to immobilize paper documents such as Transfer Initiation Forms (TIFs).

Automated residual credit processing allows credits that accumulate after a transfer is completed, such as stock or cash dividends, to be transferred electronically from the delivering firm to the receiving firm through ACATS.

Through the ACATS-Fund/SERV link, users can easily re-register customers' fund assets.

Automated reclaims, partial transfers and fail reversals are available on a next-day settlement basis.

HOW THE SERVICE WORKS Customers initiate account transfers by submitting completed TIFs to their new brokerage firm or bank (in the case of residual credits and other non-standard transfers, the delivering firm initiates the transfer). The TIF data is forwarded by the receiving broker to the NSCC, which assigns control numbers and sends control reports to both delivering and receiving brokers/banks. Delivering brokers/banks must submit asset details or reject the transfer. Assets that are submitted

are reported to the delivering and receiving firms. Receiving firms have one business day to reject the

account, or request that the delivering firm make adjustments. During this one-day period, the delivering firm can add, delete or change an item. The receiving firm can also delete a mutual fund asset(s) where they don't have a selling agreement with the fund. Securities eligible for the Continuous Net Settlement (CNS) System are automatically routed into CNS, unless the delivering firm indicates otherwise. Other securities are transferred through ACATS Receive and Deliver instructions, or are sent to DTC, if non-CNS, DTC-eligible.. Eligible mutual fund assets can be transferred through the automated ACATS-Fund/SERV interface. Options are routed to the Options

Clearing Corporation, where transfers in customer options positions take place. On settlement date, for non-CNS eligible securities, NSCC automatically debits the delivering broker with the value of the assets being transferred through ACATS and credits the receiving broker with the


same amount. For assets that are delivered through NSCC's physical delivery systems, NSCC will credit the delivering broker with the value of those assets and debit a corresponding amount to the receiving broker.


Transfer Process between Broker/Dealers, Banks, and

Mutual Fund Companies

OVERVIEW Currently, multiple methods exist to transfer fund positions between broker/dealers, banks, and mutual fund companies. Each of these existing transfer methods were developed over time in response to specific industry needs. No single transfer method alone has met the complete needs of the industry and its clients. Firms and funds therefore developed their systems around one or more methods which best suited their needs. The entire industry would benefit from consolidating into a single system that automates and standardizes transfers between broker/dealers, banks, and funds.

WHAT SERVICES ARE AVAILABLE: ACATS - The most mature of the automated transfer systems currently supports broker and bank

functionality with the capability to transfer all types of accounts, cash, and various types of assets

for both full and partial transfers. The ACATS- Fund/SERV link automates the re-registration of

mutual fund positions. Participation in ACATS and ACATS-Fund/SERV is required for brokers and voluntary for banks. Firm participation in ACATS-Fund/SERV is authorized on a fund-by-fund basis.

Transfer of Retirement Assets (ToRA) – The second most mature method automates fund-to-fund retirement account cash transfers. ToRA enables funds to jointly initiate, acknowledge, confirm and settle the value of fund shares held in fund-sponsored IRA plans. ToRA is a separate service within Fund/SERV®, the industry standard for processing and settling fund orders. Funds must sign up to participate and execute a unilateral ToRA agreement with DTCC.

Networking – While not originally designed to automate the transfer process, many brokerage firms, working directly with a fund company, have adapted the Networking functionality along with Change of Dealer enhancements to facilitate transfer processing. This method, however, does not

generally cover all types of transfers or all types of accounts and cannot be used to move shares for holding directly by a fund.

Manual (aka non-ACAT) – This labor intensive, paper-based process relies on physical delivery

of paperwork and manual processing without any automated tracking. Fund companies and

broker dealers receive large numbers of manual transfer requests that are processed outside of the automated services mentioned above - this lack of automation is a source of a disproportionate number of client complaints due to the time required to complete the transactions and has historically been a focus of regulators.

LIMITATIONS / IMPACT The current environment has encouraged bi-lateral agreements between funds and intermediary agents to immobilize or minimize paperwork and allow transfer processing to become more automated on a company-by-company basis. This manual environment fosters inefficiencies, is fraught with the potential for errors and delays that impact the shareholder. Consequently, limited standardization

exists throughout the industry. This limited standardization has forced individual funds and firms to develop multiple platforms to process and meet the needs of their clients. Each platform has limitations. For example by allowing only certain products or account types to be processed via the platform. This lack of industry-wide automation results in numerous delays, costs, and other negative impacts to investment companies, firms and their mutual clients. These impacts are outlined below:

Cycle Time – The estimated timeframe for moving a fund position held at one fund to a firm or at a firm to another fund is one to four weeks with the average being three weeks.

Client Confusion – Clients generally view their holdings (stocks, bonds and funds) as a single portfolio, and anticipate the transfer activity to move through the process concurrently. Today,

each fund position is transferred as an individual account and is treated as a separate transaction that may or may not move along an automated channel. Although certain transfers may be accompanied by a statement, that statement may be aged and may not fully represent what is being transferred; therefore, certain positions are often left behind or ‘orphaned’ at the delivering firm. Clients must piece together information from various sources and over a period of time in order to confirm that the transaction was completed and done correctly.


Increased costs – The current environment requires a cost associated with manual intervention. Both the receiver and the deliverer are required to have individuals receive the paperwork, process the transactions, receive the paperwork, and reconcile the books and records. Some firms have automated portions of the manual process by building proprietary systems/processes and

entering into one-off agreements with the fund companies. This further complicates the reconciliation efforts and creates diverse variances in processing requirements.

Firm Confusion – The firms responsible for entering and processing the transactions must maintain up to date knowledge on multiple systems and processing streams relative to the firms and funds that are transferring, the account types, the client wishes, and the internal requirements of their own firm.

Agreements – Today ACATS is limited to firm to firm transfers - funds are not a contra- party. Funds and firms as a result have created one off solutions that are handled through a series of supplemental networking agreements and/or indemnification agreements to immobilize paperwork and facilitate transactions for funds and firms.

Cost Basis – Today there is an existing automated mechanism for passing this type of data tied to ACATS transfers between firms. However, legislation effective in 2012 requires that mutual fund cost basis information be passed to the receiving party (firm or fund) at the time of transfer

(within 15 days), regardless of whether the transfer request is processed in an automated or manual fashion. Ideally, the means for passing data for all transfer scenarios should be automated and standardized allowing funds and firms to efficiently comply with the new legislation’s requirements.


The Call for Industry Standardization

PURPOSE OF INDUSTRY STANDARDIZATION The development of the Fund/Firm Transfer Capability will allow the industry to leverage existing services and adopt a standard transfer system that automates all types of transfers between each type of receiving and delivering entity-brokerage firms, banks, and mutual fund companies. This

enhancement will bring together the existing systems and system users to streamline the transfer process. In addition, modifying existing NSCC Rules to satisfy the legal requirements and providing the needed protection for participants of the new capability streamlines adoption and implementation without the need for additional agreements. The Fund/Firm Transfer Capability was also developed to address the historical problems and delays experienced by the industry when transferring accounts.

BENEFITS OF USING THE FUND/FIRM TRANSFER CAPABILITY

The Fund/Firm Transfer Capability benefits brokerage firms, banks and funds in

the following ways:

Lowers the cost of processing transfer requests by leveraging existing ACATS and ACATS-Fund/SERV functionality

Standardizes industry-wide automation

Provides controls around tracking the transfer process

Eliminates certain agreements governing transfer processing; expanded NSCC rules satisfy legal requirements and provide the needed protection

Future enhancement phases will consider the integration of existing tools for transferring cost basis information (for details on current firm-related cost basis functionality visit http://www.dtcc.com/products/cs/equities_clearance/cbrs.php)

The Fund/Firm Transfer Capability benefits investors in the following ways:

Reduces risk of companies leaving shares unaccounted for during transfers

Reduces transfer cycle time

Improves tracking information

Reduces confusion

Improves overall client experience

Limits market exposure for subsequent activity

SUCCESS METRICS

The success of the Fund/Firm Transfer Capability will be measured in the following

ways:

Increase in straight through automated processing

Decrease in overall cycle time

Improvement on overall quality

Increase in client satisfaction

Fewer manually processed transfers by firms and funds

Reduction in processing costs for both funds and firms

CHANGES AND ENHANCEMENTS The Fund/Firm Transfer Capability will leverage both ACATS and ACATS-Fund/SERV, and enable an ACATS member to transfer a fund position directly from/to the fund company. For this capability, the fund company will have two roles: one in its traditional role (processing re-registration instructions like it does today in a firm to firm transfer) and the other as contra party to the transfer. This new enhancement will facilitate the end goal of adopting a single industry standard transfer system that


automates in-kind mutual fund position transfers and simultaneously achieve the benefits previously mentioned by leveraging automated systems in the following manner: In-kind transfers will be handled using ACATS and ACATS-Fund/SERV

DTCC processing costs will be consistent with existing services.

ROLLOUT STRATEGY

Initial Implementation

The initial rollout of this enhancement will include only firm initiated in-kind transfers. An ACATS enhancement allows broker dealers and banks to communicate better with fund companies to re-register shares. This new capability has been made available through rule changes the NSCC has filed

which were adopted by the SEC. For a fund to participate in the new capability, the fund member must join the Fund/Firm Transfer Capability and be ACATS-Fund/SERV eligible. Additionally the fund company’s security issue (CUSIP) must also be ACATS-Fund/SERV eligible and the asset on the transfer request must always belong to the fund member identified as the contra-party in the transaction. Funds may participate in this capability by completing an activation letter on their company letterhead and returning it to DTCC’s Account Administration Department. Please contact your DTCC relationship manager when completing

the Activation Letter (See Appendix A). Certain fields will be added to the registration instruction. (See NSCC Important Notice A #6667, P&S# 6237 dated July 29, 2008 for more information.) As a result, funds must work with their system service providers to implement the necessary changes in order to participate. Detailed information regarding DTCC links to Important Notices, record layouts and related rule changes may be found in the DTCC resource listing below in this document.

Future Implementations:

Future enhancements may include: Fund-initiated in-kind retirement account transfers between broker/dealers, banks and funds using

a variation of the ToRA process. This will address the scenario where a client owns shares of a fund at a broker/dealer in a self-directed retirement account and wishes to transfer those positions in-kind to an established account held directly with a mutual fund company. This expanded

capability will include ACATS, ACATS- Fund/SERV, and/or ToRA enhancements that will allow the transfer of the retirement assets from broker/dealers and banks to mutual fund companies.

Complete asset liquidation upon the transfer between broker/dealers, banks and mutual fund

companies. This will address scenarios where a client owns shares directly with the mutual fund company or in a brokerage account and wishes to liquidate those positions and transfer the cash proceeds to a retirement or non-retirement account. ACATS, ACATS-Fund/SERV and/or ToRA enhancements will enable full liquidation of transfers between broker/dealers, banks, and mutual fund companies.

It is anticipated that mutual fund companies may consider utilizing the CBRS service to transfer tax lot (cost basis information) as it relates to positions transferred through the Fund/Firm Transfer Capability.

http://www.dtcc.com/downloads/legal/imp_notices/2008/nscc/a6667.pdf


How the Capability Works

The following section highlights the workflows and best practices firms and funds should use when transferring positions.

Detailed information regarding DTCC links to Important Notices, record layouts and related rule changes may be found in the DTCC resource listing below in this document.



Day 1 Day 2

Day 3Day 4

How the Capability Works: Day One

Process Detail: Firm Initiated In-Kind Transfer (“Firm Pull”)

Dealer Firm

(Receiver)

Initiator

NSCC

ACATS

NSCC

Fund/SERV

Fund

Company

(Deliverer)

Submits ACATS

PTF and Fund

Registration

STEP

Processes Fund

Registration Instruction

Transmits 018 Record

to Fund Company

Processes the 018

Record

Firm obtains Transfer Initiation Form (TIF) and fund account statement from the shareholder and enters a Position Transfer Fund (PTF) transfer request into the ACATS Transfer System. PTF includes Transfer Initiation (TI), Asset Transfer (AT).

Broker ACATS System transmits the PTF request to NSCC on next available transmission cycle.

NSCC validates the participant and CUSIP eligibility, assigns an ACATS control number, sets the transfer status to “Review” and returns the ACATS control number to the initiating Firm.

Broker system receives ACATS control number and status, creates an FR record and submits to NSCC with ACATS control number.

DETAIL

After the Firm returns the FR, NSCC takes data

from the FR, TI & AT records and creates an

ACATS Transfer Record (018).

NSCC submits the 018 record to the Fund company.

Fund company receives record and validates the

018 record data as identified (See file record layout

for all available fields for edit consideration).

Fund company validates the 018 record, processes

the request and sends the acknowledgement

record 019 back to the Firm.

Time Considerations

• Transfer Initiation (TI) & Asset Transfer (TA) must be

submitted by 12:00pm ET.

• Fund Registration (FR) must be submitted by 4:00pm ET.


How the Capability Works: Day Two – Day Four

Process Detail: Firm Initiated In-Kind Transfer (“Firm Pull”) Day 1 Day 2

Day 3Day 4

Dealer Firm

(Receiver)

NSCC

Fund/SERV

NSCC

ACATS

Fund

Company

(Deliverer)

STEP

Fund Company responds to 018 record by

submitting acknowledgement or rejection on the 019

record by 11:00 am ET.

Shares are transferred into receiving

fund/account as requested in the 018 record.

DETAIL

The acknowledgement 019 is sent from Fund/SERV

to ACATS.

If no response from Fund company see “Alternate

Processing” below.

NSCC sends ACATS Fund/SERV Stat file

to Firm and if acknowledged, ages PTF transfer to “Settle

Close” at end of day.

If no response from Fund Company see “Alternate


Day 2: Firm Settlement System receives fund shares into

customer’s firm account and networks position to fund

account.

Day 3: ACATS Settlement Date – PTF transaction

settles. Transfer is complete.

Submits the 019 Record

to Fund/SERV

Sends 019 Record to

ACATS

Receives 019 Record,

Creates ACATS

Fund/SERV Stat File

ACATS Transfer is

Updated

Time Considerations

• Fund Company must

respond to 018 by

11:00 am ET.

NOTE: Transfer details are passed

through an edit process at the Fund

Company. If failure occurs,

determination will be made if transfer

can be corrected and accepted, or if

transfer must be rejected

Day 2: All items not responded to will be given a status of PEND for one day, and remain in ‘Review’ status. If Fund

Registration (FR) is acknowledged, transfer status is aged to ‘Settle Close’ at end of day. If FRis rejected, transfer

status is aged to ‘Reject’ (Status 600) at the end of the day.

Day 3: All pending items not responded to will be given a status of ‘System Purge’ and transfer status will be updated

to ‘Reject’ (Status 600). If FR is acknowledged, age transfer status to ‘Settle Close’ at end of day. If FR is rejected,

transfer status will be updated to ‘Reject’ (Status 600) at end of day.

ACATS Settlement Date: PTF transaction settles if account was aged to ‘Settle Close’ the previous day.

(No money settlement.)

Day 4:

ACATS Settlement Date: PTF Transaction settles if account was aged to ‘Settle Close’ the previous day. (No money

settlement.)

Alternative Processing



How the Capability Works: Day Two – Day Four

Process Detail: Firm Initiated In-Kind Transfer (“Firm Push”) Day 1 Day 2

Day 3Day 4

Dealer Firm

Deliverer

(Initiator)

NSCC

Fund/SERV

NSCC

ACATS

Fund

Company

(Receiver)

STEP

Fund Company responds to 018 record by

submitting acknowledgement or reject on the 019

record by 11:00 a.m. ET.

Shares are transferred into receiving

fund/account as requested in the 018 record.

DETAIL

The acknowledgement 019 record is sent from

Fund/SERV to ACATS.



NSCC sends ACATS Fund/SERV Stat File to Firm and

ages PTF to “Settle Close” status at end of day.



Day 2: Firm settlement system delivers the fund shares out of

the customer’s firm account. The fund shares are now held level 0 at the fund. The “broker of record” will be retained or removed

at the discretion of the Fund company.

Day 3: ACATS Settlement Date – PTF transaction settles.

Transfer is complete.

Submits the 019 Record

to Fund/SERV

Sends 019 Record to

ACATS

Receives 019 Record,

Creates ACATS

Fund/SERV Stat File

ACATS Transfer is

Updated

Time Considerations

• Fund Company must

respond to 018 by

11:00am ET.

NOTE: Transfer details are passed

through an edit process at the Fund

Company. If failure occurs,

determination will be made if transfer

can be corrected and accepted, or if

transfer must be rejected.

Day 2: All items not responded to will be given a status of “PEND” for one day, and remain in ‘Review’ status. If Fund

Registration (FR) is acknowledged, transfer status is aged to ‘Settle Close’ at end of day. If FR is rejected, transfer

status is aged to ‘Reject’ (Status 600) upon receipt of reject.

Day 3: All pending items not responded to will be given a status of ‘System Purge’ and transfer status will be updated

to ‘Reject’ (Status 600) If Fund Registration is acknowledged, age transfer status to ‘Settle Close’ at end of day. If

Fund Registration is Rejected, transfer status will be updated to ‘Reject’ (Status 600) upon receipt of the reject.

ACATS Settlement Date: PTF transaction settles if account was aged to ‘Settle Close’ the previous day.

(No money settlement.)

Day 4:

ACATS Settlement Date: PTF Transaction settles if account was aged to ‘Settle Close’ the previous day. (No money

settlement.)

Alternative Processing


Best Practices:

Firm Initiated In-Kind Transfer (‘Pull’) and

Firm to Fund Company In-Kind Transfer (“Push”)

Firm Rejects – SSN#/TIN#

Firm to Fund Company In-Kind Transfer (Push):

• For accounts with no SSN/TIN (e.g., a non-US citizen with a non-US address): Firms should submit

“000000000” in the SSN/TIN field and then a Transfer Agent can match against the remaining data fields.

Firm Initiated In-Kind Transfer (Pull):

• Firms that use Omnibus Account processing should continue to populate the ACATS Fund Registration

record using their TIN. ACATS will take both the customer’s SSN/TIN and the ACATS Account type input

on the ACATS TI record and populate them both in new fields on the ACATS – Fund/SERV 018 Transfer

Record to assist the Fund company with identifying the underlying customer.

NSCC Rejects – Service Eligibility

Firms should verify that the Fund CUSIP is ACATS-Fund/SERV eligible using the ACATS Transaction

History Inquiry Application.

NSCC Rejects – Participant #

Firms should utilize the ACATS Master file to ensure the Fund Participant # is eligible for a PTF Transfer

Type.

NSCC Rejects – CUSIP

• Firms should establish controls to ensure a CUSIP submitted for the fund is held at the same fund

company. This can be done by utilizing internal tables to ensure fund company X’s CUSIP is not submitted

for fund company “Y’s’” participant #.

• Only 1 CUSIP per PTF transfer record can be submitted. Firms that utilize front end processes need to

ensure that multiple AT records cannot be submitted per TI record.

Note: Unless otherwise designated, each section applies to both transfer types (“Pull” and “Push”).


Best Practices :

Firm-Initiated In-Kind Transfer (Pull) and

Firm to Fund Company In-Kind Transfer (Push)

Firm Rejects – Full Shares

When requesting a transfer of all shares, use the full share indicator; do not include a share

amount

Firm Rejects – Account Number

Firms should submit entering “Account Number” and refrain from using “Investor #”, “Customer

#”, “Client #”, “Group #”.

•“Fund Number” should not be used in conjunction with “Account Number”

•No dashes or spaces should be used in entering “Account Number”.

Firm Rejects – Account Set-Up

Firm to Fund Company In-Kind Transfer (Push Only):Firms should ensure an account has been set up at the receiving mutual fund company prior to

submitting the request. This is a required element for initiating a PTF. Establishing a default

new account number is not permissible for this transaction type.

Fund Rejects – SS#/TIN#

Firm Initiated In-Kind Transfer (Pull):•For Accounts where a Social Security or Tax ID # has not been established or populated

systematically, firm should not submit PTF request until # is established. Fund will reject for

mismatch.

•Fund companies should use both the additional SSN/Tax ID number and ACATS Account Type

fields on the ACATS-Fund/SERV 018 Transfer record to assist them with identifying the

underlying customer whenever the firm processes a Fund Registration for an Omnibus Account

using their Tax ID number

Firm to Fund Company In-Kind Transfer (Push):•If Social Security Number / TIN on “From” and “To” accounts do not match edit against

secondary SS/TIN Field, and the firm sends a gift indicator, Fund Company should honor the

transaction.



Firm-Initiated Transfer Reject Codes

This information is summarized in Important Notice A6736, dated November 7, 2008. http://www.dtcc.com/downloads/legal/imp_notices/2008/nscc/a6736.pdf

The Fund/SERV reject code assigned by the fund (see below) will be reported to the ACATS member firms on the ACATS-Fund/SERV Statistics (STAT) file.

The corresponding PTF transfer request is moved to a Status of 600 (Reject).

The ACATS Position File will report one of two reject codes added as a result of the enhancement signifying that the in-kind transfer was not successful:

— 015 – Position Transfer Fund (Deliverer) – Used for any rejected in-kind transfers from Fund control to Firm control.

— 028 – Position Transfer Fund (Receiver) – Used for any rejected in-kind transfers from Firm control to Fund control.

Firms are encouraged to use the ACATS-Fund/SERV Stat file, in the event of a PTF transfer request reject, to understand the reason why the transfer was rejected and adjust their subsequent PTF transfer request submission accordingly.

FUND COMPANY ERROR HANDLING Every effort should be made to soft-reject Fund/SERV transfers that may not fully pass system edits, which may permit minor corrections to be made and permit successful processing of the order. However, it is inevitable that a fund may need to reject a transfer back to the firm for legitimate business and / or data purposes.

The following best practices are defined in the event that a fund must reject an ACATS-Fund/SERV transfer initiated from the transfer capability. As noted previously, these codes are provided to firms on the ACATS-Fund/SERV Statistics File, and consistent usage can help firms in automating error handling, while providing a common language for the Industry to use when communicating trade rejects. The reject codes provided in the list are a subset of all available Fund/SERV rejects codes, which funds and firms already know in the context of ACATS-Fund/SERV firm to firm transfers. The list below does

not include these general reject codes, examples of which pertain to stop codes, social codes, and file configuration concerns. However, it should be understood that these more general reject codes,

pertaining to all aspects of ACATS-Fund/SERV, could also be used in the context of the new transfer capability . The list provides the corresponding Fund/SERV reject code, its description, and the business context (as applicable) in which that reject code should be used.

http://www.dtcc.com/downloads/legal/imp_notices/2008/nscc/a6736.pdf


Corresponding Fund/SERV Reject Codes

CODE DESCRIPTION BUSINESS REASON & SUGGESTED BEST PRACTICE

047 Network Control Indicator

Missing/Invalid

Business Reason: Delivering account matrix level not valid for fund to

firm transfers; receiving account matrix level not valid for firm to fund

transfers.

Suggested Best Practice: Hard reject back to submitter.

Notes: Used in Pull / Push scenarios

060 Transaction Amount Exceeds Book

Share Balance

Business Reason: If the shares/dollar amount specified is greater than the

account balance at the time the request is received by the fund.

Suggested Best Practice: The fund should verify if all shares should be

transferred and process or reject the ACATS-Fund/SERV transaction

accordingly.

Notes: Used in Pull / Push scenarios. The code of 060 currently reads “Liquidation Amount Exceeds Book Share Balance”.

Recommending “Liquidation” be changed to “Transaction” so the error can be applied to transfers as well.

073 Customer account number at fund

("from” a/c) missing/invalid

Business Reason: If the shares are being transferred from an existing fund

account, the number provided in the Customer Account number at fund

(DEL Firm) field should match the account number on the fund's books.

Suggested Best Practice: The fund should verify the account number and

process or reject the ACATS-Fund/SERV transaction accordingly.

Notes: Primarily used in Pull scenario when the delivering account is not networked (matrix level 0). If the delivering account is

matrix level 4, the firm will provide a BIN on the 018 record.

074 Customer account number at fund ("to" a/c)

missing/invalid

Business Reason: If the shares are being transferred to an existing fund

account, the number provided in the Customer Account number at fund

field should match the account number on the fund's books.

Suggested Best Practice: The fund should verify the account number and


Notes: Used in Push scenario for the receiving account. The firm will provide a BIN on the 018 record for the delivering account.

103 SSN/EIN number missing Business Reason: The shareholder SSN/EIN provided on the incoming

record does not match the SSN/EIN on the account held at the fund.

Suggested Best Practice: The fund should verify the SSN/EIN and



139 Account Type missing/Invalid Business Reason: Fund prototype retirement plan types on delivering and

receiving accounts not equal for ACATS transfer in kind. The

account/plan types must match or be compatible per the Plan Type Matrix

(See DTCC resource listing below).


CODE DESCRIPTION BUSINESS REASON & SUGGESTED BEST PRACTICE

Suggested Best Practice: The fund should verify the account type and


Notes: Used in Pull / Push scenarios. For retirement accounts, this will be the retirement plan type.

176 Transaction Not Allowed Against

this Firm

Business Reason: Fund to firm transfers not allowed for this firm; firm to

fund transfers not allowed for this firm.

Suggested Best Practice: Hard reject back to submitter.


178 Transaction Not Allowed Against this

Security Issue

Business Reason: The fund family participates in the ACATS service but

this specific CUSIP is not an ACATS participant/does not allow firm to

fund transfers.

Suggested Best Practice: This Hard Reject should be used when a

specific CUSIP does not participate in the transfer enhancement , but other

CUSIPs within the Fund Company DO participate in the transfer

enhancement



Frequently Asked Questions (FAQs)

1. How can I begin using the standardized transfer process?

If you are an existing ACATS member firm, you need to be ACATS-Fund/SERV eligible and set-up for Settlement Location 10 (Fund/SERV) on the ACATS Participant Master File. Firms who are not ACATS-Fund/SERV eligible need to contact their Relationship Manager. If you are a Fund Company, you must first be both Fund/SERV and ACATS-Fund/SERV eligible. To participate in this enhancement, you are also required to complete an activation letter on your corporate letterhead and return it to DTCC’s Account Administration Department. This activation letter can be found in Appendix A and also can be obtained from your Relationship Manager who will assist you with the membership process.

2. How will I know if a fund is participating in the new enhancement?

Funds that have signed up for this capability will be listed on the WMS website and the ACATS website. Please reference the fund participant list prior to submitting a transfer request through this enhancement. Firms can also determine who is utilizing the enhancement by receiving the ACATS Participant Master File AutoRoute # 02090068 which is distributed weekly on Friday. There is a field

on the file that identifies whether the ACATS member is a broker, bank or mutual fund company (See

NSCC Important Notice A#6695/P&S# 6265 dated September 16, 2008).

3. If I am a mutual fund transfer agent, will I need to modify my systems even if

we are not participating in the enhancement?

Programming is not required for NSCC participants that have not signed up for the Fund/Firm Transfer Capability for non-participating funds for this enhancement, DTCC will populate the additional data

fields in the 018 record with spaces.

4. How will DTCC handle a transfer request (PTF) submitted for a fund that isn’t

signed up for the enhancement?

The PTF request will be rejected upon submission to ACATS so the 018 record will not be created.

5. Can Trust Companies participate in this enhancement?

Yes, it is available to all ACATS member firms. ACATS currently allows a number for the Tax ID of the Trust Company. There is also a field for the Tax ID of the shareholder or owner of the account. This field is available to be passed as an individual SSN on the Fund/SERV 018 Record Type.

6. Will agreements need to be amended?

We hope that the availability of the automation and the NSCC rule change are sufficient to obviate the need for separate agreements. However, each fund and firm will make their own determination as to whether existing bi-lateral agreements also need to be amended or additional agreements need to executed prior to participating in the new capability. Please note that separate bilateral agreements detract from one of the main benefits of the enhancement, which was to use DTCC rules in lieu of negotiating / amending agreements to guide and govern participation. Such rule changes were made in consultation with fund and firm representatives to ensure appropriate protection for delivering and

receiving firms in the transfer transaction.

7. How will the transfer of Cost Basis be handled?

The enactment of Cost Basis Legislation, which is effective for mutual funds January 1, 2012, will

require the industry to create a solution to facilitate the transfer of share lot history as part of the transfers’ process. Currently, DTCC’s Cost Basis Reporting Service (CBRS) is used by firms to transfer tax lot information after an ACATS transfer is processed and settled. This capability will eventually be

made available to fund companies who also utilize this service. Other NSCC solutions may also be developed for funds to transfer basis information to firms prior to the 2012 implementation date.

8. What kind of transfers can be performed through this new capability?

Retail and retirement account positions held directly at the fund and fund positions held at a participating firm can be transferred to an account that was pre-established at the fund and/or firm prior to the transfer.


9. Why aren’t liquidations included in Phase I of the New Transfers Enhancement?

The later phases of this project will address liquidations. At this time it was not possible to make the changes required without regulatory approval to expand the ACATS service to accommodate

liquidation scenarios.

10. Why aren’t new accounts at a fund included in this first phase of this

enhancement?

Subsequent phases include support of fund initiated in-kind transfers to/from firm and “cash to firm” direct-at-fund liquidations for retirement (including the existing ToRA workflows) and non-retirement

accounts, which at some point will also include rollovers.

11. Since these changes allow ACATS-Fund/SERV transfers to new accounts, how

will Customer Identification Program (CIP) requirements be met by the fund

company and their transfer agent?

ACATS currently allows transfers to new accounts for brokers, and the processes to support CIP exist. The initial implementation of the capability for “firm to fund” transfers is limited to transfers into accounts at the funds that are already established. Examples include gifting of shares to someone or transfers of shares in kind to an account already established at the fund company or with the

brokerage firm.

12. Are any new record types being established in ACATS?

Yes, a Position Transfer (PTF) record will be established when a firm submits an ACATS TI and AT record. This new PTF transfer type requires a Mutual Fund company to be identified as a contra-party to the transfer. Please see the DTCC resource listing below for links to the record layouts.

13. Will a request be rejected by ACATS if a Fund Registration (FR) record is not

submitted by the end of the first day if it is in transfer status “Review?”

No, ACATS will generate a fund registration on behalf of the receiver (either firm or fund) using pre-identified default values.

14. When should the “gift indicator” be populated?

The gift indicator should be populated when the firm receives the proper paperwork, obtains the TIF from the fund TA or an LOA from the shareholder.

15. Can I send a fund more than one CUSIP per request?

No, only one CUSIP can be submitted per PTF transfer record.

16. Can I use this to perform mass firm conversions?

The Networking Service should typically be used to facilitate these types of transfers. This enhancement is not intended for mass firm-to-firm conversions or for firm resignations. Please contact the fund company prior to sending any mass firm to firm or firm resignation activity so that

the process can be managed effectively for all parties.

17. How should the TIN be populated on the 018 record?

The TIN is a required field on the 018 record. When a firm is acting as a receiver, there is a required field on the ACATS Fund Registration (FR) record which is for the Social Security/Tax ID Indicator. Additionally, there is a new field on the 018 record that will always be populated with the same Social

Security/Tax ID# that was used on the PTF transfer request. For a fund acting as a receiver, ACATS

will always default the Social Security Tax ID# indicator to Tax ID#. The number populated in that field and in the additional Social Security/Tax ID# field will always be the same number used on the PTF transfer request.

18. Can this process be used to complete a mass representative / dealer change?

No, the ACATS Fund/SERV service is not intended to facilitate a mass representative / dealer change

function or firm resignation activity. This is supported through Networking.

19. What reject codes should be used for the 018 record?

Please see the reject code listing that follows.


20. How long will the fund-to-firm transfer take to settle?

Settlement will occur within the same time frame as ACATS today – from 3 to 4 business days, depending on when the reply (Fund/SERV record type 019) is received. The fund can either

acknowledge or reject the request. If there is no reply to the request in the allotted time, the transfer will move to a “reject status” in the ACATS system.

21. Are new reject codes being established and will the reject codes be mapped

from Fund/SERV to ACATS?

ACATS has added two new reject codes on the ACATS Position File. These reject codes are applicable

to both firm initiated transfer scenarios. The reject codes are: Reject Code 15 – Position Transfer Fund (Deliverer) – To be used when the fund company is

acting as a deliverer on the transfer

Reject Code 28 – Position Transfer Fund (Receiver) – To be used when the fund company is acting as a receiver on the transfer.

The same existing Fund/SERV reject codes will apply. In order to identify why the fund rejected the fund re-registration, firms will need to review the ACATS-Fund/SERV STAT file.


Appendix A

TO BE EXECUTED ON COMPANY’S LETTERHEAD

[DATE]

Attention: (Your Relationship Manager)

National Securities Clearing Corporation

55 Water Street - 25th

Floor

New York, NY 10041

Re Fund/Firm Transfer Capability

Effective opening of business ______________, please activate (Name, Account Number and Tax ID#) for the Fund/Firm Transfer Capability. This will enable us as a Fund Company to act as a contra-party (either in the role of receiver or deliverer) on a Position Transfer Fund (PTF) transfer type only with an ACATS member firm.

The contact person is (name to be posted on web-site) He /she may be reached at (please provide phone #)

Sincerely,

By: _______________________

Signature of Authorized Person

Name : ____________________

Title: _____________________


Appendix B

FIRM AS RECEIVER

Field Name ACATS Values

Record Length 0755

Physical Sequence Number 01

Logical Sequence Number 01

Originator Type ‘B’= Firm

Firm Number Original Receiver Number (Firm)

Record Type ‘018’

Test Indicator ‘0’=Production

Fund Number Populated from Fund/SERV

Security Issue Country Code ‘00’

Security Issue ID ISIN # populated from ACATS Asset Transfer (AT) Record

Security Issue Check Digit ‘0’

Fund/SERV Control Number Populated from Fund/SERV

Correction Indicator Spaces

Processing Date ACATS Process Date

*(R) Book/Physical Share Indicator ‘1’ – Transfer in and out: book shares

*(C) PI Delivery Indicator Spaces

*(O) TPA/Investment Agent Number Spaces

*(O) Customer Name

Original Receiver Customer Account Name populated from

ACATS TI record

*(R) Fund Account Indicator ‘0’ = New Account - domestic

*(R) Customer Account Number at Fund Spaces

Agent for Firm Number Original Receiver Number (Firm)

*(R) Network Control Indicator

The firm’s receiving participant default value populated from

ACATS Participant Instruction Database, if provided

Otherwise - ‘0’ = Non-networked

*(R) SSN/EIN Indicator ‘0’= Tax ID#

*(R) SSN/EIN Number

The firm’s receiving participant’s Tax ID # populated from the

ACATS Participant Instruction Database

*(R) Dividend Code


the ACATS Participant Instruction Database, if greater than

spaces

Otherwise - ‘1’ – Reinvest, Reinvest, Reinvest

*(R) Withhold Indicator ‘0’ = Certified (W-9 on file)


FIRM AS RECEIVER


*(R) Payable Information Indicator ‘0’ = Address of Record

*(R) Customer Name End Line Indicator ‘4’ = Line number where name ends

*(O) Customer Zip Code

5 digit:


the ACATS Participant Instruction Database, if provided

Otherwise - Spaces

4 digit:

Spaces

*(R) Social Code

‘15’ - When receiver is a bank

‘18’ – When receiving Participant Network Control Indicator

on ACATS Participant Instruction Database Default value =

‘3’

‘06’ – Otherwise

*(R) NAV Account Indicator ‘0’ = No

*(R) Margin Account Indicator ‘0’ = No

*(R) Check Writing Privileges Indicator ‘0’ = No

*(O) State of Sale (State Code) Spaces

*(C) Country of Origin (Country Code) Spaces

*(R) Account Representative Name ‘ACATS DEFAULT’

*(R) Account Representative Number '999999999'

*(R) Branch Identification Number '999999999'

*(C) Number of Payables 0

*(C) W8 Certification Date Spaces

*(C) W8 Expiration Date Spaces

*(O) W8 Override NRA Special Rate Spaces

*(C) W8 Qualified Intermediary Indicator Spaces

*(C) W8 Override Country Code Spaces

*(R) Customer Name/Address Line 1 Receiving Participant’s Name (Firm Name)

*(C) Customer Name/Address Line 2 'FOR BENEFIT OF: Original Receiver Customer Account

Name

*(C) Customer Name/Address Line 3 Original Receiver Customer Account Name

*(C) Customer Name/Address Line 4 Spaces


FIRM AS RECEIVER


*(C) Customer Name/Address Line 5

The firm’s Receiving Participant Default Customer

Name/Address (Line 5) populated from ACATS Participant

Instruction Database, when exists

Otherwise - Spaces

*(C) Customer Name/Address Line 6

The firm’s Receiving Participant Default Customer

Name/Address Line 6 populated from ACATS Participant

Instruction Database, when exists

Otherwise - Spaces

*(R) Transaction Type ‘1’=Transfer to new account

Account Type Indicator ‘1’ = ‘Customer Name’

Customer Account Number at Firm

The firm’s Receiving Participant Default Account Prefix (if

exists on ACATS Database) + Original Receiver Customer

Account Number + Receiving Participant Default Account Suffix (if exists)

Delivering Firm Number Original Deliverer Number (Fund)

Customer Account Number at Fund

(Delivering Firm) Delivering Account Number of Fund populated from the

ACATS TI record


(Delivering Firm) ‘Spaces’

Network Control Indicator (Delivering Firm) ‘0’ – Not Networked

Agent for Delivering Firm Number Original Deliverer Number (Fund)

*(R) Fraction Indicator ‘1’ = Transfer Fraction

Full/Partial Indicator

This field will be populated from whatever the firm submits on

the ACATS TI record

Values

‘0’ – (Full) - move all shares in the account at the Fund when

AT MF Full/Partial Indicator = ‘1’

‘1’ - (Partial) - move the exact share quantity specified when

AT MF Full/Partial Indicator = ‘2’

Transfer Share Quantity Populated from ACATS Asset Transfer (AT) record

However, if the firm populates 0 in the field above, this should

be SPACES

CDSC Transfer Indicator Spaces

Delivering Firm Share Aging Indicator

‘1’ - The delivering firm or fund company will provide the

share aging information in an automated fashion through the

Networking Share Aging file.

Membership Identifier

This is the firm’s Receiving Participant Default Membership

Identifier populated from the ACATS Participant Instruction

Database when populated

Otherwise – spaces


FIRM AS RECEIVER


Membership Identifier (Delivering Firm)

‘Spaces’

Transfer Money Amount ‘Spaces’

Currency Indicator This field is populated from the ACATS Asset Transfer (AT)

record

Default Registration ‘1’ = Default Registration

ACATS Control Number ACATS Control Number + Asset Sequence#

*(R) Transfer Disbursement Option –

Accruals ‘4’= Reinvest - Receiving firm (bucket to bucket)

*(R) Transfer Disbursement Option -

Fractional Cash-in-lieu ‘4’= Reinvest - Receiving firm

*(R) Transfer Disbursement Option –

Residuals ‘4’= Reinvest - Receiving firm

*(O) NRA Tax 0

Settlement Date ACATS Settlement Date (Will always be 2 business days after

processing date)

Accrual Money Amount 0

Accrual Money Amount Indicator Spaces

SS#/EIN #2 SSN/EIN Number taken from ACATS Transfer Input (TI)

Record

ACATS Account Type Account Type taken from ACATS Transfer Input (TI) Record

Gift/Donation Indicator Taken from ACATS Transfer Input (TI) Record


FUND AS RECEIVER


Record Length 0755

Physical Sequence # 01

Logical Sequence # 01

Originator Type ‘B’ = Firm

Firm Number Original Receiver # (Fund)

Record Type ‘018’

Test Indicator ‘0’ = Production

Fund Number Populated from Fund/SERV

Security Issue Country Code ‘00’

Security Issue ID ISIN # from ACATS Asset Transfer (AT) Record

Security Issue Check Digit ‘0’

Fund/SERV Control # Populated from Fund/SERV

Correction Indicator Spaces

Processing Date ACATS Process Date

Book/Physical Share Indicator ‘1’ – Transfer in and out: book shares

PI Delivery Indicator Spaces

TPA/Investment Agent Number Spaces

Customer Name Original Receiver Customer Account Name

Fund Account Indicator ‘2’ – Existing account – domestic

Customer Account Number at Fund Receiver Customer Account # at Fund (This field will be

populated from the ACATS TI record – Original Receiver

Customer Account Field)

Agent for Firm Number Original Receiver Number (Fund)

Network Control Indicator ‘0’ – Not Networked

SSN/EIN Indicator ‘0’ = Tax ID number

SSN/EIN Number SSN/EIN Number taken from ACATS (Transfer) Input Record

Dividend Code ‘1’ – Reinvest, Reinvest, Reinvest

Withhold Indicator ‘0’ – Certified (W-9 on file)

Payable Information Indicator ‘0’= Address of Record

Customer Name End Line Indicator ‘4’ lines where name ends

Customer Zip Code Spaces

Social Code ‘ 99’ - ‘Other

NAV Account Indicator ‘0’ = No

Margin Account Indicator ‘0’ = No

Check Writing Privileges Indicator ‘0’ = No


FUND AS RECEIVER


State of Sale (State Code) Spaces

Country of Origin (Country Code) Spaces

Account Representative Name ‘ACATS DEFAULT’

Account Representative Number '999999999'

Branch Identification Number '999999999'

Number of Payables 0

W8 Certification Date Spaces

W8 Expiration Date Spaces

W8 Override NRA Special Rate Spaces

W8 Qualified Intermediary Indicator Spaces

W8 Override Country Code Spaces

Customer Name/Address Line 1 Receiving Participant’s Name

Customer Name/Address Line 2 'FOR BENEFIT OF: Original Receiver Customer Account

Name

Customer Name/Address Line 3 Original Receiver Customer Account Name

Customer Name/Address Line 4 Spaces



Transaction Type ‘2’ = Transfer to existing account’

Account Type Indicator Populated from Firm input as Deliverer on ACATS AT Record –

Either ‘1’ Customer Name or ‘2’ Street Name

Customer Account Number at Firm Receiver Customer Account # at Fund (Taken from the ACATS

TI record)

Delivering Firm Number Original Deliverer Number

Customer Account Number at Fund

(Delivering Firm) Populated from Firm Input as Deliverer on ACATS AT Record

(Taken from Fund/SERV Customer Account Number Deliverer

field) when AT (delivering side) Book/Physical Ind = 1 or 2

Otherwise – spaces and Customer Account Number at Firm

(Delivering firm) field below will be populated


(Delivering Firm) Populated from Firm Input as Deliverer on ACATS AT Record

(Taken from Fund/SERV Customer Account Number Deliverer

field) when AT (delivering side)Book/Physical Ind = 0

Otherwise – spaces and Customer Account Number at Fund

(Delivering firm) field above will be populated


FUND AS RECEIVER


Network Control Indicator (Delivering

Firm) Populated from Firm Input as Deliverer on ACATS AT Record

(Taken from Network Control Indicator Field)

Values

0 = Non-networked

3 = Matrix level 3

4 = Matrix level 4

(Note: as-of April 23, 2012, Matrix levels 1 & 2 are not allowed

on ACAT transactions – NSCC Important Notice A7356)

Agent for Delivering Firm Number Populated from Firm Input as Deliverer on ACATS AT Record

(Taken from Executing Broker, when populated)

Otherwise Original Deliverer Number

Fraction Indicator ‘1’ = Transfer Fraction

Full/Partial Indicator Populated from Firm Input as Deliverer on ACATS AT Record

‘0’ – Full – move all shares in the account at Fund when AT MF

Full/Partial Indicator = ‘1’

‘1’ – Partial – move the exact share quantity specified when AT

MF Full/Partial Indicator = ‘2’

Transfer Share Quantity Populated from ACATS AT Record (Quantity Field)

A - However, if the firm populates 0 in the field above, this

should be SPACES

CDSC Transfer Indicator Spaces

Delivering Firm Share Aging Indicator

Populated from Firm Input as Deliverer on ACATS AT Record

(Taken from the Share Aging Indicator field)

Values

1 = The delivering firm or fund company will provide the share

aging information in an automated fashion through the

Networking Share Aging file.

2 = The delivering firm or fund company will provide the share

aging information outside of the system

Membership Identifier ‘SPACES’

Membership Identifier (Delivering

Firm) Populated from Firm Input as Deliverer on ACATS AT Record

(Taken from the Firm Membership Indicator – Deliverer)

Transfer Money Amount Populated from Firm Input as Deliverer on ACATS AT Record

Currency Indicator Populated from Firm Input as Deliverer on ACATS AT Record

(ISO Currency Code)

Default Registration ‘1’ = Default Registration

ACATS Control Number ACATS Control Number + Asset Sequence#

Transfer Disbursement Option -

Accruals ‘4’ = Reinvest - Receiving firm (bucket to bucket)


FUND AS RECEIVER


Transfer Disbursement Option -

Fractional Cash-in-lieu ‘4’ = Reinvest - Receiving firm

Transfer Disbursement Option –

Residuals ‘4’ = Reinvest - Receiving firm

NRA Tax 0

Settlement Date ACATS Settlement Date (This will always be 2 business days

after processing date)

Accrual Money Amount 0

Accrual Money Amount Indicator Spaces

SS#/EIN #2 SSN/EIN Number taken from ACATS Transfer Input (TI)

Record

ACATS Account Type Account Type taken from ACATS Transfer Input (TI) Record

Gift/Donation Indicator Taken from ACATS Transfer Input (TI) Record


Definitions

ACATS - 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-Fund/SERV - An interface system that links NSCC's Automated Customer Account Transfer Service (ACATS) with the Fund/SERV system. The interface allows mutual fund companies to electronically update their account registrations when a customer account is transferred between brokers or re-registered directly with the fund company. ACATS TI Record - An automated transfer initiation procedure that immobilizes the paper document Transfer Initiation Form (TIF) when a customer transfers their securities account from one brokerage

firm and or bank to another. ACATS AT Record - An automated input records that allows for the submission of security assets (associated to a particular TIF) that are to be included in a customer account transfer. ACATS FR Record - An automated input record used to re-register an ACATS transferred mutual fund asset at the Mutual Fund Company. CBRS - The Cost Basis Reporting Service (CBRS) is an automated system that provides ACATS

member firms (brokers and banks) with the ability to transfer customer cost basis information to each

other on any asset transferred through the Automated Customer Account Transfer Service (ACATS). Contra-Party – The broker/dealer or customer to whom shares have been sold or transferred: or from whom shares have been purchased/transferred. In-Kind Transfer – A transfer type that is the re-registration of mutual fund assets on the books of a fund or a firm. LOA – Letter of Acceptance

Position Transfer Fund (PTF) - An ACATS transfer type that allows a member firm, acting as either receiver or deliverer, to initiate a transfer to have a mutual fund asset re-registered to or from its account at the fund, whereby the fund is also acting as the contra-side to the transfer. SARSEP – A term used when referring to a plan that was created in 1998 as the result of the Salary Reduction Simplified Employee Pension Act. ToRA – Transfer of Retirement Assets (ToRA) is a function of the Fund/SERV system. It is an automated, centralized system that enables fund to jointly initiate, acknowledge, confirm and settle

the transfer of the value of fund shares held in Retirement Accounts. Transfer Initiation Form (TIF) - A paper document form completed by a brokerage customer when they transfer their account from one financial institution to another. The form includes customer detail information such as the account name, account type, account number, the firm where the account is

currently held, and the customer's social security or tax identification number.


DTCC Resources- Links, Record Layouts and

Related Rules

LINKS TO RELATED IMPORTANT NOTICES AND RECORD LAYOUTS:

ACATS Website Link to Documents

http://www.dtcc.com/products/documentation/cs/acats.php#fixed

Further information regarding modifications to ACATS Transfer (018) Record Layout can be found in Important Notices: Important Notice A#6620 dated May 20, 2008

Important Notice A#6653 dated July 7, 2008

Important Notice A#6667 dated July 29, 2008

Important Notice A#6736 dated November 7, 2008

Important Notice A#6744 dated November 21, 2008

Important Notice A#6764 dated December 24, 2008

Important Notice A#6773 dated January 13, 2009

Wealth Management Website links to Mutual Funds fixed and variable record

layouts

http://www.dtcc.com/products/wealthmgmt/members/fl_layouts.php http://www.dtcc.com/products/wealthmgmt/members/vl_layouts.php

Related Rules

DTCC and the ICI Transfers Working Group are assisting DTCC with rule modifications that are required for ACATS and the new Mutual Fund Transfers Enhancement. The goal of this working group is to modify NSCC rules, to eliminate the need for specific agreements between brokers, banks and

mutual fund companies. http://www.dtcc.com/downloads/legal/rule_filings/2008/nscc/2008-12.pdf

http://www.dtcc.com/products/documentation/cs/acats.php#fixed

http://www.dtcc.com/products/wealthmgmt/members/fl_layouts.php

http://www.dtcc.com/downloads/legal/rule_filings/2008/nscc/2008-12.pdf


ToRA Plan Matrix (June 2009)

Please note the latest ToRA Plan Type Matrix can be found at: http://www.dtcc.com/products/wealthmgmt/members/manuals.php

http://www.dtcc.com/products/wealthmgmt/members/manuals.php


NSCC Rule Changes

BACKGROUND Mutual fund transfers are not standardized among broker/dealers, banks, and mutual fund companies. The current state of mutual fund transfer processing remains fragmented with segments of both automated processing (approximately 20-25%) and manual processing (approximately 75-80%). No single transfer method alone has met the complete needs of the industry and its clients. The lack of industry-wide automation causes numerous delays and market exposure, among other things, given

the average time it takes to manually move one mutual fund position between a broker/dealer and a fund is three weeks. A consequence of the lack of standardization is the execution of numerous indemnification agreements between funds and broker/dealers. The Investment Company Institute’s Broker/Dealer Advisory Committee (BDAC) formed a Mutual Funds Transfers Working Group that includes members of the BDAC and the Securities Industry and Financial Markets Association (“SIFMA”) Customer Account Transfer Division. The Transfers Working Group has been working with DTCC to expand current functionality of its Automated Customer

Account Transfer Services (ACATS) and ACATS Fund/SERV systems in order to provide a single

automated transfer facility that will meet the needs of the industry. Phase I of this project addresses broker-initiated retirement and non-retirement account re-registrations that move shares from brokerage to existing fund direct accounts as well as fund direct accounts into brokerage. These types of re-registrations are referred to as “in-kind transfers” although, in fact, no asset actually transfers between the fund and intermediary, and the shares are simply re-registered on the books of the fund.

The specific change for this phase adds three new fields to the ACAT transfer record that will allow funds to ensure transfers to like account types, and to validate customer information for omnibus transfers. Today, these transfers are processed manually, as broker/dealers provide spreadsheets to funds for processing. Blanket letters of indemnity exist between the two parties.

RULE CHANGE The rule change amends Rule 52 of NSCC’s Rules to accommodate the following types of account re-registrations:

Transfer of customer mutual fund shares registration, held by a customer directly at a mutual fund company, to be re-registered in the name of a financial intermediary (e.g., broker-dealer,

bank or other custodian) Transfer of customer mutual fund shares registration, held by a financial intermediary, to be

re-registered as a direct customer position at the mutual fund company The transfer of registration can be requested by a Member in the capacity of the party receiving the re-registration, or in its capacity of the party from which the registration is to be transferred. Completion of the registration transfer request requires that the contra-side NSCC Fund Member accepts the re-registration request, in order for it to be processed through NSCC. In connection with such transfer request, the rule also provides that, unless the parties agree otherwise, the Member and Fund Member agree with one another to comply with certain legal

responsibilities that are associated with the re-registration. The Member agrees that, in initiating such request, it has obtained the requisite authorization from the account holder and that it will provide a copy of it to the Fund Member upon request. It also indemnifies the Fund Member from any liabilities associated with the request, other than those relating to the negligence or misconduct of the Member. In connection with re-registrations of IRA and other tax-deferred accounts, a Member that makes the transfer request in its capacity as a successor custodian agrees that it is so-qualified under the

provisions of the Internal Revenue Code. The Rule further states that the participants agree that any

dispute between them relating to these provisions will be resolved directly between them, and that NSCC is not a party to such dispute and has no responsibility with respect to the enforcement or satisfaction of such provisions. In addition, the submission or processing of a transfer transaction through NSCC will not extinguish or affect any legal rights of the participants arising out of the transaction. This is similar to the provisions that are currently contained in NSCC rules as they relate to other mutual fund services of NSCC (see for example Rule 52, Section 46 relating to Fund/SERV

and ToRA services, and Rule 50, Section 17 relating to ACATS.) Automating and standardizing the re-registrations involved in account transfer processing that must otherwise be done on a manual basis reduces processing errors, lower costs and reduces the time needed to complete the transfer process, to the benefit of investors and the firms that process transfers on their behalf.


Thus, the NSCC Rules have been expanded to satisfy the legal requirements and provide the needed protection for participants. Funds and firms engaging in the new Fund/Firm Transfer Capability may rely on the new and amended NSCC Rules in lieu of entering into multiple indemnification agreements. The rules support the timely implementation of increased automation of mutual fund transfer

processing. Further information on the NSCC Rule filing may be found at: http://www.dtcc.com/downloads/legal/rule_filings/2008/nscc/2008-12.pdf

http://www.dtcc.com/downloads/legal/rule_filings/2008/nscc/2008-12.pdf