Cost-Basis Reporting Will Cost Plenty

October 5, 2009
Chris Kentouris

The deadline for complying with the Internal Revenue Service’s new rules for reporting the original cost basis for securities won’t take effect until early 2011. But broker-dealers, mutual funds, transfer agents, custodian banks and other asset managers should get prepared.

Making changes to internal applications, selecting any needed technology from an outside supplier, training staff in their use and educating investors about what’s going on are no easy tasks.

Waiting until 2010 to get started is not an option, experts say. The last minute has already arrived.

That’s because vendors may be too busy or unresponsive. Your own operations staff may even be challenged to handle the changes required in your company’s coding and then having time to conduct needed tests.

Get ready now and you may be ready – by the end of next year.

“We strongly advise that brokerages aggressively seek a solution to be tested and live by the end of 2010 before trading begins in January 2011,” wrote David Easthope, an analyst with Celent.

Last week, the research firm and Wolters Kluwer Financial Services, a provider of tax lot accounting software, issued a pretty grim analysis of just how far along the securities industry is in meeting the potential new regulations.