(Source: Business Wire)
A new survey, Why C-Level Executives Should be Concerned About the
New Cost Basis Reporting Law, conducted by Celent
in conjunction with Wolters
Kluwer Financial Services, shows that while financial firms have
done a lot of research around the Cost Basis Reporting Law, the industry
is lagging in implementing solutions to comply with it.
The Cost Basis Reporting Law requires the reporting of adjusted cost
basis information for covered securities to the Internal Revenue Service
(IRS) and to taxpayers. With an initial effective date of January 1,
2011, there is an urgent need for firms to prepare, considering the
technology, operational, tax, legal and other business requirements that
will need to be in place in order to comply with the law.
However, the summer 2009 survey of 175 financial professionals ranging
from broker-dealers, investment advisors, mutual funds, banks, asset
management firms, hedge funds and custodians showed that 52% of the
survey respondents who will ultimately need to implement a solution or
else rely on a partner are unaware whether time has actually been
allocated for this process. In addition, only 16% of applicable firms
have allocated any budget at all to building or purchasing a solution.
"These statistics are troubling when you also consider that 75 percent
of the survey respondents who have allocated
time for implementing a compliance solution estimate that it will take
at least 13 months in total elapsed time to complete the process,"
says David Easthope, senior analyst with Celent's Securities &
Investments Group and author of the report. "With the law's first
effective date only 15 months away, firms must move beyond the research
phase and aggressively pursue planning and development."
And with the clock ticking, many firms are starting to show concern of
their own. The survey shows that concern over compliance is centered on
having proper systems in place and meeting regulatory timeframes.
Broker-dealers and mutual fund companies show high concern levels over
nearly every component of the new law, including basis method elections,
special rules/mechanical issues, and transfer reporting.
Although many firms are still unsure of plans, some themes are starting
to emerge. About 25 percent of asset manager/hedge funds surveyed plan
to build their own system, while nearly a quarter of broker dealers and
banks will combine one of their own systems with capabilities of a
third-party vendor.
"While there is progress being made, industry preparedness at this point
is still rather weak," says Chuck Ross, general manager for GainsKeeper,
part of Wolters Kluwer Financial Services.
