What it means
Most shares today are held in electronic form in the name of a central depository, with brokers keeping records of who owns what. Sometimes a shareholder, or the company, wants the shares to be held directly in the investor's own name on the company's register.
DWAC is the route for moving shares in either direction. The process works through the transfer agent, the organisation that keeps the company's list of shareholders.
When an investor asks to withdraw shares, the broker sends an instruction through DTC, and the transfer agent confirms and updates the register. Similarly, a deposit moves shares from the register back into the broker's account at DTC so that they can be sold on the market.
DWAC is common in several situations. Newly issued shares may be held on the register until the company arranges for them to be made available for trading, and employees receiving shares from a share plan may need them deposited into a brokerage account.
It also appears when securities are moved from one broker to another through a transfer agent. For finance and operations staff, the key points are timing and accuracy.
DWAC transactions need the right account details, share quantities and approval from both the broker and the transfer agent, and delays or mismatches can hold up a sale. Fees may apply, so companies and investors should check what their broker or agent charges.
The same four letters can also appear as a stock ticker symbol for a company, so the context is important when you see them. In operational and settlement discussions, DWAC almost always refers to the custodian service described here.
Details of the process change from time to time, so check the current requirements with your broker or transfer agent. From a controls perspective, companies keep a log of every DWAC request, noting who approved it and when the register was updated.
This helps the finance team reconcile the number of shares on the register with the number shown in the accounts. A mismatch can affect earnings per share and the records used for shareholder voting, so it needs prompt investigation.
In practice
Real-world examples.
Example
An employee receives 5,000 shares from a company share plan, and the shares are recorded with the transfer agent. She asks her broker to arrange a DWAC deposit so that the shares can be sold on the open market.
Example
A start-up that has just listed wants to move 200,000 shares held on its register into the brokerage account of an investor who has bought them privately. The transfer agent and the investor's broker complete the move through a DWAC request, which takes a few working days. The company's finance team updates its share register once the transfer agent confirms the movement.
Example
An investor decides to hold her shares directly in her own name rather than through a broker. She asks the broker to initiate a DWAC withdrawal, and the shares are re-registered on the company's records. She will later receive company documents directly rather than through her broker.
Case study
Seen in the real world.
Harbourview Biotech is a fictional company that had just completed an offering of 2,000,000 shares to private investors. The shares were issued on its register, and the investors wanted to sell as soon as the lock-up allowed. The finance director, Ms Tanaka, needed to make sure the shares could move quickly.
She found that many of the delays came from incorrect account details on the investors' DWAC instructions, and one broker had submitted the wrong share count. By preparing a checklist for investors, covering the account number, share quantity and name on the register, she reduced the number of rejected requests from 12 to 2 in a month.
This illustrative story shows how a small operational process can have a large effect on investor confidence. When shares reach the market on time, investors are happier and the company avoids avoidable complaints.
Watch out
Common mistakes.
- Entering the wrong account number or share quantity on the DWAC instruction, which leads to rejection and delay.
- Forgetting that restricted shares may need legal clearance before they can be deposited and sold. A transfer agent will usually ask for a legal opinion or similar document before releasing them.
- Assuming the transfer happens instantly, when the transfer agent and broker both need to approve it.
Questions
People also ask.
What does DWAC stand for?
It stands for Deposit/Withdrawal at Custodian.
Who runs DWAC?
It is a service of the Depository Trust Company, and transfer agents and brokers use it to move shares in and out of the system.
How long does a DWAC transfer take?
It can range from a few hours to several working days, depending on the accuracy of the request and the speed of the broker and agent. Asking your broker about its cut-off times helps you plan.
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