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GainsKeeper in the News

Jennifer Marso
Director of Corporate Communications
Wolters Kluwer Financial Services
612-852-7912
jennifer.marso@wolterskluwer.com
Angela Peterson
Senior Public Relations Specialist
Wolters Kluwer Financial Services
612-656-7745
angela.peterson@wolterskluwer.com
Wolters Kluwer Financial Services’ GainsKeeper Offers Readiness Checklist for Proposed Cost Basis Reporting Legislation
List Helps Brokerages and Clearing Firms Examine Tax-Lot Accounting Capabilities

WALTHAM, Mass. – May 13, 2008 – To help the financial services community prepare for proposed cost basis reporting legislation, GainsKeeper®, a part of Wolters Kluwer Financial Services, is offering a Readiness Checklist to encourage brokerages and clearing firms to evaluate whether or not their current cost basis systems can meet the proposed tax-lot accounting requirements.

Congress is actively considering legislation that would require financial institutions to report adjusted basis information for securities to the Internal Revenue Service (IRS) and taxpayers. While some organizations already have cost basis systems in place, the requirements under the pending legislation, if enacted, will exceed the capacity of many existing systems securities firms currently use.

“At a glance, firms might assume their systems can accommodate the changes that are likely on the way, but when you consider the detailed data needed to address the various types of securities and different accounting methods that will be necessary, it’s really more than most systems can currently handle,” said Chuck Ross, general manager, GainsKeeper. “Given industry-wide cost-cutting measures, resource constraints, and the lead time required to complete large information technology projects, it is critical that firms are proactive and assess their cost basis readiness now.”

The Cost Basis Reporting Readiness Checklist poses 12 questions that will help firms determine if their current system meets proposed cost basis requirements or if they need to make adjustments. The questions address various issues, including:

  • Is the cost basis system overwhelmed by the radical increase in data volume triggered by the IRS’ wash sale rule?
    Most systems do not support tax sub-lots triggered by wash sale adjustments. Yet the wash sale rule can easily result in a 300 percent increase in data volume. For a firm with two million accounts, the volume can easily grow to more than 400 million tax lots when wash sales are taken into account. This volume creates a problem that is hard to resolve with traditional database architecture.
  • Can the system transfer cost basis properly when processing the high volume of recurring corporate events, both simple and complex?
    With thousands of corporate actions affecting the basis of stocks each year, managing them is a difficult, full-time job. Firms need a system that can automatically process a full range of corporate action adjustments.
  • Does the system correctly apply the differing tax methods for determining the basis of securities sold?
    Tax law will require systems to be capable of the different tax accounting methods chosen by a firm’s customers. Additionally, systems must be able to employ methods that apply to different security types, such as the special rules pertaining to mutual fund shares.

“Failure to fully assess your current system’s capacity could eventually mean your firm won’t be able to meet basis reporting requirements or your clients’ needs, resulting in catastrophic customer service or tax penalty consequences,” said Stevie Conlon, GainsKeeper’s tax director. “If you really examine your system and ask the tough questions now, you can prevent that from happening.”

For a complete Cost Basis Readiness Checklist, contact Angela Peterson, Wolters Kluwer Financial Services’ Corporate Communications, at angela.peterson@wolterskluwer.com.

About GainsKeeper

GainsKeeper® , a part of Wolters Kluwer Financial Services, provides automated tax-based financial tools and services to the investment community. GainsKeeper’s solutions enable financial institutions to offer sophisticated tax lot accounting services to their customers, ranging from back-office outsourcing to fully integrated, web-based tools and services utilized by the brokerage, mutual fund, and fund administration industries. In addition, GainsKeeper offers products designed specifically for individual investors and accountants to meet their complex tax reporting and portfolio analysis needs. For more information, visit www.gainskeeper.com.

About Wolters Kluwer Financial Services

Wolters Kluwer Financial Services provides best-in-class compliance, content, and technology solutions and services that help financial organizations manage risk and improve efficiency and effectiveness across their enterprise. The organization’s prominent brands include Bankers Systems, VMP® Mortgage Solutions, PCi, GulfPak, Desert Document Services®, AppOne®, GainsKeeper®, CCH® Capital Changes, NILS INsource®, AuthenticWeb™, Uniform Forms™, and CCH® Wall Street.

Wolters Kluwer Financial Services’ solutions include integrated and stand-alone compliance and work flow tools, documentation, analytics, authoritative information, and professional services. Customers include banks, credit unions, mortgage lenders, and securities and insurance organizations of all sizes throughout the United States. For more information on Wolters Kluwer Financial Services, visit www.WoltersKluwerFS.com.

Wolters Kluwer is a leading global information services and publishing company. The company provides products and services globally for professionals in the health, tax, accounting, corporate, financial services, legal, and regulatory sectors. Wolters Kluwer has annual revenues (2007) of €3.4 billion ($4.8 billion), maintains operations in over 33 countries across Europe, North America, and Asia Pacific and employs approximately 19,500 people worldwide. Wolters Kluwer is headquartered in Amsterdam, the Netherlands. Visit www.wolterskluwer.com for information about our market positions, customers, brands, and organization.