What is a Deposit/Withdrawal at Custodian (DWAC)?
Deposit/withdrawal at custodian (DWAC) is an advanced, electronic method used for transferring new shares or converting paper share certificates. This method is favoured by investors who prefer to maintain their securities in a registered, rather than physical, form. It allows for an expedited transfer directly to a brokerage account, reducing the usual time and risk associated with handling physical certificates.
This system operates under the Fast Automated Securities Transfer Program (FAST), linking broker-dealers with the Depository Trust Corporation (DTC) to facilitate swift movement of securities.
Benefits of DWAC
- Speed: Transfers are almost instantaneous compared to traditional methods.
- Cost-Effectiveness: Reduces expenses on printing and mailing physical certificates.
- Reduced Risk: Eliminates the dangers of physical certificate loss or damage during transport.
How is DWAC Different from Direct Registration System (DRS)?
While both DWAC and DRS allow investors to hold securities electronically, DWAC is specifically used for newly issued shares or when converting paper certificates to electronic form. DRS, in contrast, handles shares that have already been issued and are maintained digitally on the transfer agent’s books.
Requirements for Using DWAC
- Securities must be either free-trading or eligible for restriction removal.
- The broker managing the transaction needs to be a participant in the DTC.
- The issuing company must be approved for DWAC transfers.
Key Takeaways
- DWAC employs the FAST system for swift electronic transfers.
- It ensures securities are managed with minimal physical handling, providing both security and efficiency benefits.
- By integrating technology, DWAC simplifies the trading and handling of securities.
Further Explorations in DWAC
Requesting and Delivering Physical Certificates
Investors still have the option to request physical certificates. These can be deposited into brokerage accounts either through direct delivery of the paper certificate to the broker or electronically via the DWAC system. Essential requirements for this process include the original stock certificates, a completed DWAC deposit form, and any applicable fees.
Related Terms
- Transfer Agent: A financial institution assigned by a corporation to maintain records of investors and account balances.
- Depository Trust Corporation (DTC): A firm that manages the electronic clearing and settlement of publicly traded companies.
- Electronic Certificate: A non-physical certificate that digitally confirms stock ownership.
Suggested Books for Further Reading
- “Securities Operations: A Guide to Trade and Position Management” by Michael Simmons – An excellent resource for understanding the detailed mechanisms of the securities operation, including DWAC.
- “The Essentials of Finance and Accounting for Nonfinancial Managers” by Edward Fields – Offers a broad financial perspective beneficial for understanding concepts like DWAC in corporate settings.
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