DTCC talks up cost-basis service in wake of new regulation

Source: Depository Trust & Clearing Corporation

The Depository Trust & Clearing Corporation (DTCC) today announced that it is working with broker/dealers, transfer agents, issuers and mutual funds to help them comply with new cost-basis legislation in the Emergency Economic Stabilization Act of 2008.

The legislation requires that they report accurate, adjusted cost-basis information on equities, mutual funds and other financial instruments to their clients and to the Internal Revenue Service.

The legislation specifies that financial intermediaries must begin reporting cost-basis data on January 1, 2011 for stocks, January 1, 2012 for mutual funds and Dividend Reinvestment Plans and January 1, 2013 for all other securities. Firms, however, may need to start tracking cost-basis data sooner.

More than 35 companies have already signed on to use AccuBasis, DTCC's cost-basis solution, including Disney, Aflac, H&R Block, First American Stock Transfer, Johnson Controls and others. DTCC continues to meet with additional firms to help them comply with the new federal law.

"We're encouraging our customers to prepare sooner rather than later," said Lori-Ann Trezza, DTCC vice president, Product Development, "since the industry is still unsure as to when it will need to start tracking purchase and sales activity for millions of investors, as well as pricing and corporate actions that affect their customers' positions. We're advising the industry not to wait so it will be ready to meet the new reporting requirements."

DTCC's AccuBasis has been the industry's leading cost-basis solution since it was introduced in 2007, providing adjusted cost-basis information quickly, accurately and efficiently for a broad variety of financial service providers and their customers. In its 2008 Investment Guide, Forbes Magazine called the cost-basis information provided by AccuBasis as "definitive." And when the Internal Revenue Service National Research Program conducted its 2005 Tax Gap Report, it used the AccuBasis database to prepare its findings.

"AccuBasis has proven to be a cost-effective alternative to building an in-house solution, which could require massive upgrades to recordkeeping and accounting systems," said Trezza. "And we continue to iintroduce enhancements to AccuBasis so that it remains the most accurate, efficient, and most user-friendly cost-basis solution on the market today."

The latest enhancements include additional information on cash mergers. In a cash merger, shareholders in the company being acquired are offered cash for their shares instead of shares in the new company, but there is little transparency in the transaction and the investor may not even know who is buying the shares. AccuBasis will now display additional information about the acquiring company, providing greater transparency of the corporate action.

Another enhancement is the introduction of a new Portfolio Manager. The Portfolio Manager allows investors to track multiple positions, both currently and historically, and automatically adjusts the market value and the cost-basis of each position. "Tracking a single position manually can be difficult and time consuming. Tracking multiple positions can be positively daunting," Trezza added.

Even before the new legislation was passed, many DTCC clients such as Disney and Aflac have used AccuBasis to boost customer satisfaction, offering the service through a link on their Web page. Banks and brokerage firms have found back office applications for AccuBasis for 1099 reporting and account transfers.

AccuBasis requires minimal input - the security name, CUSIP or ticker symbol, number of shares acquired and the acquisition date (as little as the year will do if the exact date is unknown). With this information, AccuBasis automatically tracks the changes caused by stock splits, mergers, dividend reinvestments and other possible corporate actions, to calculate accurate, adjusted cost basis - all in a matter of seconds.

AccuBasis is a service offering of DTCC Solutions LLC and NetWorth Services, Inc. DTCC Solutions LLC is a wholly-owned subsidiary of DTCC.

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