DTCC Connection

Jun 01, 2011 • DTCC Connection

DTCC Helps Fund Companies Comply With Cost Basis Mandate

by Rich Marulanda


DTCC continues to enhance its Cost Basis Reporting Service (CBRS) to help the industry meet new regulatory requirements.


The latest focus is the fund industry, which faces a January 2012 Internal Revenue Service (IRS) mandate requiring financial intermediaries to record the transfer of mutual fund cost basis information when moving assets among fund companies.


“The CBRS platform is a centralized communications hub that promotes standardization and helps customers meet their regulatory requirements in an efficient and cost-effective manner,” said Josephine Torelli, DTCC vice president, Wealth Management Services. “CBRS has played a critical role in helping the equities side of our business meet its regulatory requirements, and we are confident it will do the same for the mutual funds marketplace in 2012.”


Next-generation system

DTCC initially launched CBRS in 2003 to enable broker/dealer and bank participant firms to communicate cost basis information on assets transferred via the Automated Customer Account Transfer Service (ACATS).


“Think of it as a central post office for CBRS information, which provides a common link and common language for all CBRS users to communicate about cost basis transfers,” said Lydia Midwood, DTCC director, Product Management. “The biggest benefit of CBRS is that it provides a secure, automated standard for communicating this information.”


DTCC upgraded CBRS in response to IRS regulations in the economic recovery package passed by Congress in October 2008. It rolled out the enhancements in 2010 and continues to upgrade the service to meet the needs of the industry.


“The new CBRS is basically the next generation of the previous system, and now it is applicable to many more transaction types and counterparties,” explained Midwood. “Financial intermediaries need to record cost basis information for the accounts on their books, and they also need to transfer this information when assets move from one firm to another. This is where DTCC comes in – to help the industry transfer cost basis information when assets move from firm to firm.”


Industry collaboration

To respond to the increased regulatory needs of its customers, DTCC helped establish a cross-functional industry committee with participation from different segments of the industry: broker/dealers, banks, equity transfer agents and issuers, mutual fund companies and service bureaus.


“This group has played a key role in defining the system’s functionality and record layouts,” said Midwood. “Since many different parties are affected by the legislation, DTCC sought their input to make sure the system would meet their various cost basis passage needs.”


Fund focus

In terms of mutual funds, extra attention to detail has been critical. Midwood noted that because mutual funds have unique attributes that must be considered when transferring cost basis information, a separate industry task force was created and it has developed a mutual fund user’s guide. The guide contains recommended practices, frequently asked questions and resources that may be useful to firms implementing cost basis transfer reporting for mutual funds. (It is available on www.dtcc.com under the Mutual Fund Services and CBRS product pages.)


“DTCC worked closely with the Investment Company Institute’s Broker/Dealer Advisory Committee and its Cost Basis Reporting task force to develop the best-practice guide and address many of the new reporting requirements,” added Midwood.


CBRS at your fingertips

In May, DTCC produced a CBRS webinar with a special focus on mutual funds. The webinar, which is also available on www.dtcc.com, gives an overview of CBRS and explains how customers can register for the service and prepare for testing so they can better manage the technical and reporting challenges associated with meeting the January 2012 regulatory requirement. @


[For more information, contact your relationship manager.]


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