As the new cost basis legislation becomes effective in 2011, it is critically important to understand the final requirements and meet all deadlines to ensure compliance. The cost basis reporting law enacted in 2008 contains provisions designed to ensure more accurate reporting of gains and losses on investor tax returns.
Beginning January 1, 2011, any custodian recordkeeping assets producing 1099-B’s will need to complete accurate tax lot accounting. Certain tax forms issued beginning in 2012 needs to report accurate gain loss data, not just gross proceeds. These new rules have staggered effective dates and will apply to:
o Equities acquired on or after January 1, 2011;
o Mutual fund and dividend reinvestment plan (DRIP) shares acquired on or after January 1, 2012; and
o All other financial instruments, including fixed income securities and derivatives, acquired on or after January 1, 2013.
All major broker/dealer (BD) applications are being enhanced to handle tax lot accounting. Trust accounting applications have had tax lot accounting in place for decades, however, this means that BD’s must also gather accurate tax lot information when bringing on new accounts.
Oakbrook Solutions has designed and developed an Automated Customer Account Transfer Service (ACATS) and Cost Basis Reporting Service (CBRS) industry solution for its clients to assist with requirements of the new cost basis reporting legislation. Oakbrook worked with clients to define business requirements, build functional design, and now offers a DB2 based ACATS-CBRS solution that can integrate with a client’s security movement and control application. The ACATS component allows participating institutions to exchange new account data related to asset holdings in a cost effective manner. The CBRS element utilizes the ACATS infrastructure to deliver tax cost data on new accounts.
“We have been monitoring the impact of this legislation for some time and are excited to provide needed business functionality to our clients,” stated Craig Cook, President of Oakbrook Solutions. “This technology should enable clients to efficiently handle and control the additional workload brought on by the legislation."
The solution will be integrated with the bank’s security movement and custody application. Data feeds and formats (both inbound and outbound) are handled by new online screens and batch functions that assist with controlling and monitoring the status of ACATS and CBRS work in progress. Feeds can be accepted as many times a day as needed. Once the appropriate status is reached, new security transactions are generated to handle the security movement and corresponding accounting events. The online screens are supported by DB2 databases, which allow for ease of integration with workflow applications as needed to facilitate better process management.
Once installed, the product will allow companies to quickly integrate and communicate effectively with the participants via ACATS. This will save institutions time related to new account processing and account closing.
Oakbrook’s solution provides an effective and efficient process for handling the holdings and cost data and integrating it into new accounts. Both services are now available for installation and will assist with company efforts to establish compliance with the new cost basis legislation.
About Oakbrook Solutions Inc.: Established in 1999, Oakbrook Solutions solves problems faced by firms in the Wealth Management Industry. Oakbrook possesses a unique blend of technology, business and management expertise that helps their clients implement change, integrate applications and improve operational efficiency. This is accomplished by understanding our customer’s business and delivering solutions that solve their problems from both a technology and business perspective. For more information, please visit http://www.oakbrooksolutions.com.