Cost basis on mutual fund assets updated in DTCC system

The Depository Trust & Clearing Corporation announced Tuesday that it rolled out enhancements to its Cost Basis Reporting…

The Depository Trust & Clearing Corporation announced Tuesday that it rolled out enhancements to its Cost Basis Reporting Service, which will now provide cost basis information on mutual fund assets.
Federal cost basis reporting regulations for mutual fund assets come into effect in January 2012.
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 and transactions involving fund investments as of Jan. 1, 2011; fund companies have until 2012 to comply.
In a nutshell the CBRS platform acts as the hub, a secure hub, for moving account information from one custodian or other intermediary to another.
That means all the typical asset transfers among broker-dealers, custodian banks, issuers, mutual funds and transfer agents.

While many financial advisers will already know this I was curious whether most registered investment advisers or reps affiliated with an independent broker-dealer might interact with the system.

The answer is that they will not necessarily interact with it directly.

In most cases it will be a transfer agent or other intermediary, acting on behalf of the end client/investor, that moves accounts from one custodian or other institution to another.

These moves might be initiated by the adviser at the investor’s behest for accounts being managed by the adviser.

And it can be extremely helpful to have that cost basis data move with the account, especially around tax time (as that data has often been lost in the past when such account movement took place).

Lydia Midwood was kind enough to shed some light on the subject for me; she is a director within DTCC’s Equities Clearing section, specifically the Clearance and Settlement area.

“Yes, CBRS supports the passage of cost basis from any financial intermediary to another, so as long as the asset is moving from one firm’s books to another, the firms can use CBRS,” she wrote in an e-mail.
To be clear, this is going to be of most value for more recently acquired assets, those that cost basis is actually being tracked for.
Advisers will need to rely on other systems for calculating lost cost basis (see the top link in the “related stories” below).
She also responded to my inquiry regarding pricing.
“We charge fees based on asset records submitted and received,” wrote Ms. Midwood.
“On a basic level, we charge $0.01 per original asset record submitted, and $0.09 per original asset record received. Original records are the most common records,” she added.
Ms. Midwood said there is a far more comprehensive fee schedule available on the DTCC’s website (see the link to the CBRS portion of the website below).
Lots of different asset types can be transferred through CBRS including those that go through National Securities Clearing Corp.’s (a subsidiary of DTCC) Automated Customer Account Transfer Service, Fund/SERV, and others.
The CBRS is available both through automated, long-standing, dedicated computer-to-computer connections as well as over the Internet.
DTCC updated its cost basis reporting features for CBRS related to equity positions in 2010.
Fixed income and options are the next pieces of the cost basis regulatory puzzle that CBRS will be updated for; presently estimated by DTCC for some time in 2013.

For more information visit the CBRS online.