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GainsKeeper in the News

Jennifer Marso
Director, Corporate Communications
Wolters Kluwer Financial Services
On Twitter: @JenniferMarso
Angela Peterson
Senior Public Relations Specialist
Wolters Kluwer Financial Services
On Twitter: @AngiePeterson
Wolters Kluwer Financial Services Enhances Capital Changes Product for Cost Basis Reporting

WALTHAM, Mass. – Dec. 06, 2010 – Wolters Kluwer Financial Services is enhancing its Capital Changes offerings to help financial institutions comply with the cost basis reporting law, which takes effect Jan. 1, 2011.

The cost basis reporting law requires brokers to provide cost basis information to their customers and the IRS when reporting the sale of a security. Specifically, brokers and transferors of securities must adjust the cost basis of covered securities for corporate actions in computing cost basis information reported to the IRS and customers. The IRS has outlined steep penalties for reporting incorrect cost basis information.

The cost basis law also requires issuers of securities to provide the IRS and securities holders with a statement setting forth the quantitative effect of a corporate action on cost basis. These issuer statements must be provided to holders by Jan. 15 of the year following the corporate action.

While these new issuer statements are intended to help brokers comply with the cost basis reporting rules, brokers may encounter difficulties in relying on issuer statements for several reasons. Brokers typically process corporate action adjustments no later than the date the corporate action occurs so that customer accounts reflect current holdings. Tax lot relief methods and transfer reporting also rely on quick updating for corporate actions. Issuer statements will likely not be timely to meet brokers’ needs for basis adjustments as corporate actions occur and will not be available for every corporate action event (such as events for foreign securities). They could also be unclear in application if the tax treatment of a particular corporate action is uncertain. Brokers must also classify securities as stock based on their knowledge even if the issuer has not explicitly identified the security as stock. Brokers could face practical difficulties readily classifying certain derivatives and structured products for cost basis purposes.

Capital Changes provides information relating to corporate actions, including those related to foreign securities. To help ensure financial institutions have access to the information they need when the new cost basis reporting law takes effect Jan. 1, 2011, Capital Changes will include:

  • Updated Issuer Reports – Capital Changes will research and report publicly available issuer statements, including any updates or changes issuers make to the statements after they are released.
  • Expanded Tax Guidance – Capital Changes will provide tax commentary to help clarify confusing or inconsistent information within issuer statements, including adding new information relating to the tax classification of securities, and assist brokers in understanding the tax implications of issuer statements that may be difficult to decipher.
  • Issuer Statement via Direct Data Feed – Capital Changes’ Direct Data Feed product will include applicable issuer statement information, including a separately fielded security tax classification associated with the corresponding Committee on Uniform Securities Identification Procedures (CUSIP) number or other security identifier.

“In light of the new regulatory requirement that brokers adjust cost basis for corporate actions in a tax accurate manner consistent with issuer statements, it is more important than ever for brokers to have ready access to complete and accurate corporate action tax information,” said Richard Ryndak, senior product manager for Capital Changes at Wolters Kluwer Financial Services. “Our team is focused on helping them obtain ready access to important tax information provided on issuer statements and understand the cost basis implications of both routine and complex corporate actions when the issuer statement falls short.”

Capital Changes is a product within Wolters Kluwer Financial Services’ Securities Tax Solutions business that provides daily coverage of corporate actions events and 100 years of historical archive data to financial services, accounting and law firms.

About Wolters Kluwer Financial Services

Wolters Kluwer Financial Services is a comprehensive regulatory compliance and risk management business that helps financial organizations manage operational, compliance and financial risk and reporting, and improve efficiency and effectiveness across their enterprise. The organization’s prominent brands include: FRSGlobal, ARC Logics for Financial Services, PCi, Compliance Resource Network, Bankers Systems, VMP® Mortgage Solutions, AppOne®, GainsKeeper®, Capital Changes, NILS, AuthenticWeb™ and Uniform Forms™. Wolters Kluwer Financial Services supports its global customers with offices in more than 20 countries and is the leading worldwide provider of compliance and risk management solutions for the financial services industry, serving more than 15,000 banking, insurance and securities customers across the globe. Wolters Kluwer Financial Services is part of Wolters Kluwer, a leading global information services and publishing company with annual revenues of (2009) €3.4 billion ($4.8 billion) and approximately 19,300 employees worldwide. Please visit our web site for more information.