With new modifications to the systems at the Depository Trust and Clearing Corp., reporting of cost basis information appears as if it could become less of an issue with advisers — assuaging some concerns from advisers that new requirements could make reporting more costly and cumbersome.
The DTCC today announced that it will make some changes to its Cost-Basis Reporting Service as part of efforts to prepare the industry for the impending January 2011 mandate requiring the reporting of adjusted cost basis information to investors and the federal government. That service was launched by the National Securities Clearing Corp., a subsidiary of the DTCC, in 2003.
Right now, CBRS provides financial firms with the ability to transfer customer cost basis information, but only on those assets passing through NSCC’s Automated Customer Account Transfer Service. While it won’t calculate or store cost basis information for firms, the planned updates to CBRS will allow data to be passed to transfer agents, issuers, mutual funds, custodian banks and broker-dealers on both ACATS and non-ACATS transactions. The Securities and Exchange Commission must approve the changes.
In a prepared statement, Kevin McCosker, director of asset services for Pershing LLC, said that the new requirements will affect many systems within the financial services industry. “DTCC’s expanded Cost Basis Reporting System will allow entities to electronically pass along cost basis and eliminate future processing costs and paper flow, and is critical to helping the industry comply with the legislation.”
The Emergency Economic Stabilization Act of 2008 states that financial intermediaries must report cost basis to the Internal Revenue Service and to taxpayers for trades as of Jan. 1, 2011; fund companies have until 2012 to comply. Wirehouses already track this data, and custodians are not required to comply with the legislation.
That has left broker-dealers, mutual fund companies and fund custodians to wrestle over the last year with how best to update their systems to comply with these requirements.
The DTCC has been working with a broad coalition of market participants to design the changes, which are to be finalized before the end of 2009. According to the DTCC, the updated version of the CBRS should be ready for participant testing by the third quarter of 2010.
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