What is an SEC Code?

What is an SEC Code?

Standard Entry Class codes, or SEC codes, are a classification system used in the U.S. for electronic payments. These three-letter codes determine the transaction type and provide processing instructions for funds transfers.

By categorizing each transfer with a specific SEC code, financial institutions can easily identify the purpose of the transaction and handle it accordingly.

How do SEC codes work?

Standard Entry Class codes serve as a way of simplifying the processing of different types of Automated Clearing House (ACH) payments.

ACH transactions are facilitated by the Automated Clearing House Network, regulated by the National Automated Clearing House Association (NACHA). Within the ACH network lies a key player whose use of SEC codes ensures seamless and efficient transactions.

Originating Depository Financial Institutions (ODFIs) are crucial in ensuring the correct code is used when initiating an ACH transaction. The ODFI assigns the proper ACH SEC code to each transaction to ensure it’s processed correctly.

ODFIs must understand the purpose of the transaction and select the ACH SEC code corresponding to that purpose, as failure to use the correct code may result in a rejected or delayed transaction. By assigning the appropriate SEC code, the ODFI facilitates efficient ACH transactions, minimizing errors and ensuring compliance with regulatory standards.

Although the ODFI assigns the SEC code to each transaction, familiarizing yourself with these codes allows you to expand your financial literacy to make informed decisions.

What are the different types of SEC Codes?

Since there are many different SEC transaction codes, tracking them all can be difficult.

Here are some SEC codes to keep in mind when managing financial transactions:

  • ACK (ACH Payment Acknowledge): This code signifies the transaction acknowledges a previously received ACH payment or transaction.
  • ADV (Automated Accounting Advice): This code signifies that the transaction involves the automated delivery of an account-related notification. ADV codes are commonly used to inform account holders about account activity (deposits, withdrawals, etc.).
  • ARC (Accounts Receivable Entry): This code identifies ACH transactions that involve the conversion of a paper check received by mail into an electronic ACH payment. Businesses commonly use ARC transactions for goods or services where the payment information is obtained from the check processed electronically.
  • ATX (Financial EDI Acknowledgement): This code identifies the transaction type and acknowledges the receipt of financial EDI transactions, confirming the information has been received and processed. ATX coders are typically associated with financial Electronic Data Interchange (EDI) acknowledgments rather than ACH transactions.
  • BOC (Back Office Conversion Entry): This code identifies ACH transactions that involve the conversion of a check received at a location other than a financial institution. These transactions are common in converting checks into electronic payments at point-of-sale sites or other non-financial institution locations to streamline payments and reduce paper checks.
  • CCD (Corporate Credit or Debit Entry): This code identifies ACH transactions involving funds moving between corporate accounts. These transactions are common in corporate businesses for salary payments, vendor payments, and other business-to-business (B2B) payments.
  • CIE (Customer Initiated Entry): This code identifies ACH transactions initiated by the consumer or customer rather than a business or corporate entity. These transactions are common for consumer-initiated payments, such as online bill payments or other EFTs.
  • COR (Notification of Change or Refused Notification of Change): This code indicates a financial institution is notifying another institution about a change in the account holder’s information. These codes are often related to changes in account numbers or other details affecting electronic transactions.
  • CTX (Corporate Trade Exchange): This code facilitates the exchange of extensive remittance information and payment, producing more detailed data for corporate transactions. CTX codes are specifically for corporate payments that require additional details for a transaction.
  • DNE (Death Notification Entry): This code informs financial institutions about the death of an account holder and helps manage posthumous transactions to ensure appropriate handling of the deceased individual’s accounts.
  • ENR (Automated Enrollment Entry): This code signifies an automated enrollment of accounts in electronic transactions. ENR codes streamline the new account enrollment process for ACH transactions, making it more efficient for financial institutions.
  • IAT (International ACH Transaction): This code classifies and processes cross-border ACH payments to identify the nature of the transaction — consumer or corporate payment — and ensure compliance with international regulations.
  • MTE (Machine Transfer Entry): This code categorizes automated, non-consumer transfers. MTE codes are often common for transactions initiated by machines or automated processes rather than individuals.
  • POP (Point of Purchase Entry): This code designates electronic check transactions at the point of purchase. Typically used in a face-to-face environment, POP entries enable the conversion of paper checks into electronic transactions at the point of sale.
  • POS (Point of Sale Entry): This code classifies transactions at the point of sale. It’s common when converting paper checks into electronic transactions during a purchase.
  • PPD (Prearranged Payment and Deposit): This code identifies transactions involving prearranged payments or deposits. PPD codes are common for various consumer transactions, such as bill payments or direct deposits.
  • RCK (Re-presented Check Entry): This code enables the electronic representation of a previously bounced check, allowing for more efficient and automated processing of such transactions.
  • SHR (Shared Network Transaction): This code identifies transactions that involve sharing costs among multiple parties.
  • TEL (Telephone-Initiated Entry): This code classifies transactions initiated over the phone. TEL codes are common for consumer payments authorized by phone.
  • TRC (Truncated Entry): This code indicates that a transaction has been processed with truncated or shortened account information, meaning only a portion of the account number is used for the transaction for security and privacy reasons.
  • TRX (Truncated Entry Exchange): This code indicates a check has been truncated, meaning it has been processed electronically, and the physical check has been securely destroyed. TRX codes are common for electronic check presentations where the check is scanned, and its image is used for processing instead of the physical check.
  • WEB (Internet Initiated/ Mobile Entry): This code indicates a transaction is being initiated through the Internet or a mobile device. WEB codes are common for online purchases, bill payments, and other web or mobile transactions.
  • XCK (Destroyed Check Entry): This code indicates a check was destroyed by the bank and replaced by an electronic payment.

Understanding ACH SEC codes is crucial for individuals and organizations alike. With many SEC codes to keep track of, categorizing these codes by use case can be helpful.

How are these SEC codes categorized?

SEC transaction codes, such as ACK and PPD SEC codes, are categorized by transaction type and account type.

 

SEC Code Code Title Transaction Type Account Type Agreement or Authorization
ACK ACH Payment Acknowledge Non-Monetary N/A N/A
ADV Automated Accounting Advice Non-Monetary N/A Agreement: ODFI/RDFI and ACH Operator
ARC