Skip to main content

by Craig Donner

It’s all systems go for the launch of DTCC’s enhanced Cost Basis Reporting Service (CBRS) on December 10, 2010.

DTCC will go live with the service that day even though final regulations issued by the Internal Revenue Service (IRS) provide temporary relief from penalties for noncompliance with certain parts of the law. The final regulations, released in October, require broker/dealers, transfer agents, issuers, mutual funds and custodian banks to begin reporting cost basis information to investors and the federal government beginning on January 1, 2011, but provide a one-year reprieve on penalties for the transfer of cost basis information among financial intermediaries, according to the IRS.

The leeway granted by the IRS came in response to the industry’s request to delay implementation of the law for one year to allow firms additional time to resolve the complexities and operational challenges of having to transfer an investor’s cost basis on each transaction when securities are sold.

“While there appears to be some uncertainty among financial intermediaries over their interpretation of the final regulations, we want to assure our customers that DTCC is on target to meet the New Year’s deadline and that the enhanced CBRS will be operational before the new law takes effect,” said Susan Cosgrove, DTCC managing director, Clearance and Settlement/Equities.

Promoting standardization

DTCC leveraged the existing CBRS technology to help customers meet a provision of The Emergency Economic Stabilization Act of 2008 requiring cost basis information to move between financial intermediaries during an account transfer. The enhanced CBRS will serve as a central communications hub for market participants to transfer this information in a seamless and secure electronic environment. The service will not calculate or store cost basis information.

“Since customers began approaching us nearly two years ago, our goal has been to work collaboratively with a broad coalition of market participants to help them solve this reporting challenge,” said Cosgrove. “The enhanced CBRS introduces a standardized and centralized service that will effectively mitigate operational risk for the industry while promoting enhanced efficiency and lower cost for our customers. We’ve already begun development of additional enhancements that will help firms comply with other parts of the law that will take effect in the coming years.”

For instance, firms will need to begin calculating and reporting cost basis information on mutual funds by January 1, 2012, and on debt, options and other securities on January 1, 2013. User testing continues

User testing, which began in September, remains ongoing. Firms that expect to be using the enhanced CBRS system on January 1, 2011, must submit their account forms by the first week of December. DTCC will continue to support testing through 2011 as new firms need to be onboarded to the service. Testing allows firms to bring their systems into compatibility with the enhanced service and ensure they can receive and send data and accommodate new fields in the record layout. @ [To learn more about user testing for the enhanced CBRS, contact your relationship manager or the Customer Support Hotline at 888.382.2721, option 6, option 7, then option 2.]