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COST BASIS REGULATIONS:
INDUSTRY SCENARIOS AND BEST PRACTICES
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TABLE OF CONTENTS
EXECUTIVE SUMMARY
4
BACKGROUND AND PROJECT OVERVIEW
4
HOW CURRENT ACCOUNT TRANSFERS WORKS
5
THE AUTOMATED SYSTEM (THE ACATS SYSTEM)
6
TRANSFER STATEMENTS - TRANSFER OF BASIS
6
LEVERAGING THE CURRENT SYSTEM- AUTOMATED TRANSFERS OF COST BASIS THROUGH CBRS
7
MANUAL TRANSFER STATEMENTS
8
BEST PRACTICE:
8
BEST PRACTICES to connect COST BASIS to NON-ACATS POSITION movements
9
ACATS
9
NON ACATS TRANSFERS
9
OTHER TRANSACTIONS ASSOCIATED WITH TRANSFER PROCESSES
10
RECLAIMS
10
RECLAIM OF ASSETS AFTER A TRANSFER
10
RECLAIMS (Full and partial)
11
FAIL REVERSAL – FRV
12
BEST PRACTICE
12
DON’T KNOW – (DK)
13
BEST PRACTICE
13
CONVERSIONS
13
OVERVIEW
13
CLEARING CHANGE
14
ENTIRE BUSINESS CONVERSION
14
PARTIAL BUSINESS CONVERIONS
14
FIRM MERGER
14
SALE OF CLEARING FIRM
14
FIRM FAILURE
14
SCENARIOS
14
3RD PARTY
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OVERVIEW
14
FULL PROCESSING
15
TRUST CUSTODY
15
MUTUAL FUND AGENT
15
OMNIBUS
15
SECURITIES AGENT
16
SCENARIOS
16
COST BASIS SUB COMMITTEE (CBSC) GENERAL BEST PRACTICES
16
PTF PROCESSING WITH MF AGENT PROCESSING INDICATOR – FUTURE CONSIDERATIONS
18
ACATS PROCESSING WITH MF AGENT PROCESSING INDICATOR
18
NON-ACATS WITH 3RD PARTY MUTUAL FUND PROCESSOR/OMNIBUS/SECURITIES AGENT/TRUST
CUSTODY
18
GIFTING OF MUTUAL FUNDS
19
GIFTED AND INHERITED SHARES
19
OVERVIEW
19
GIFTING
19
INHERITED
19
INHERITED AND THEN GIFTED (BOTH)
20
FOREIGN SECURITIES
21
ELIGIBLE SECURITIES
21
GLOSSARY
23
DTCC RESOURCES- Information, Links and Record Layout
29
LINKS TO RULES AND RELATED IMPORTANT NOTICES
30
INDUSTRY LINKS AND BEST PRACTICE
30
FREQUENTLY ASKED QUESTIONS
31
APPENDIX A
32
SAMPLE TRANSFER STATEMENTS
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EXECUTIVE SUMMARY
BACKGROUND AND PROJECT OVERVIEW
The Emergency Economic Stabilization Act of 2008 contains requirements for cost basis
reporting defining the responsible parties, what is required and penalties for non compliance
with Internal Revenue Service (IRS) reporting. Specifically, the legislation, which was enacted to
establish a $700 billion package in response to the financial crisis, require an expansion of the
current reporting on IRS Form 1099-B.
Under the new reporting requirements, brokers, banks, transfer agents, mutual funds and
custodians will be required to report adjusted cost basis, gross proceeds, and designate the
holding period of the disposed security (short-term or long-term) to the IRS. The objective of the
new requirements is to help ensure that investors accurately report gains and losses of securities
in their annual tax filings. These new requirements will apply to holdings that are identified by
the IRS as “covered securities.” They will be phased in over a three year period beginning on
January 1, 2011.
The schedule for the phase in of securities is dependent on the security type. For stock in or of a
corporation the applicable date is January 1, 2011. For stock in a Registered Investment
Company (RIC), such as a mutual fund or REIT, or stock acquired in connection with a Dividend
Reinvestment Plan (DRP), the applicable date is January 1, 2012. For options and any other
specified security determined by Secretary, the applicable date is January 1, 2013. The
requirements are prospective in nature, meaning that reporting is only required for securities
purchased and sold after the effective date for that security type.
Today, many firms provide information on gains and losses as supplemental information to
investors. Some include this information online, on the monthly statement and/or on their yearend tax statements. This is informational only and done on a best efforts basis and is not
reported to the IRS. When assets transfer, cost basis may only be passed between firms when
the Automated Customer Account Transfer Service (ACATS) and the Cost Basis Reporting Service
(CBRS) processes are used. Some firms maintain the cost basis detail at the tax lot level (i.e.
tracking the adjusted cost basis of each purchase separately) and other firms maintain adjusted
cost basis only for the total number of shares in the security.
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Cost basis regulations, however, require that adjusted cost basis must be maintained and
reported at the tax lot level for all covered shares that have been disposed of (selling shares
owned or buying back on a short position). Compounding this are enhanced requirements for
specific tax lot identification, wash sale rules, corporate actions and dividend reinvestment.
There are also requirements to identify transfers for Gifting and Inheritance so that the Fair
Market Value (FMV) can be applied based upon the date of the gift or death. This information
must also be transferred with the security when assets are moved to another account, whether
the transfer is a “full” (complete) account transfer or a “partial” (select securities) transfer.
Beginning in 2011, a cost basis transfer statement must be sent along with transfers of all assets
in any covered security types. This includes ACATS and non-ACATS transactions, certificate
deposits, physical presentations, and certificate issuance. Although the Depository Trust and
Clearing Corporation (DTCC) is enhancing CBRS to handle the additional transfer types, the basis
must be passed regardless of whether or not the Delivering Firm or Receiving firm participates in
the DTCC CBRS process.
The onus is on the Delivering firm to provide the basis, however, the Receiving firm is required
to request the basis if it is not received within 15 days. If the basis is still not received, the
shares will be considered “uncovered”. The proposed regulations further state that if the cost
basis is provided by the Delivering firm at a later date, the Receiving firm must update the cost
basis accordingly.
The goal of this document is to discuss best practices for the maintenance of adjusted cost
basis, the designation of covered and uncovered lots and transferring cost basis with the transfer
of assets, especially in situations where the regulations do not spell out what course of action is
required. For example, one area that will require special review is the role of third party
custodians. Many firms in the Industry have third party vendor relationships with other
custodians who do part of the back office operational processes. The proposed legislation
outlines the requirements of financial intermediaries and does not discriminate between the
custodian and sub-custodian (third party vendor). To this end, the third party vendor section
lays out best practices to ensure that cost basis is transferred correctly and that there is a
minimal amount of confusion for custodians transferring to and from third part vendors.
HOW CURRENT ACCOUNT TRANSFERS WORKS
The transfer of a security or account can be either a manual process or an automated process
through the ACATS system provided by DTCC.
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There are many transfers that do not go through ACATS, including those that pass between
brokers, banks, mutual funds and/or transfer agents. Cost basis reporting requirements will add
another level to the tracking and physical delivery of securities. The transfer of an account in full
or partial can include multiple asset types. Each asset type can have different methods of
transferring the ownership between firms on behalf of customers.
THE AUTOMATED SYSTEM (THE ACATS SYSTEM)
ACATS is a system that automates and standardizes procedures and timeframes for the transfer
of assets in a customer account from one brokerage firm and/or bank to another. If both sides
of the transfer are ACATS Participants, then the ACATS system is used to transfer.
ACATS can expedite account transfers by permitting transfers to be accomplished in an
automated environment. The National Securities Clearing Corporation (NSCC) developed ACATS
to address the industry's need to reduce delays and inconsistencies associated with manual
processing. Securities and items handled by the system include equities, corporate and
municipal bonds, unit investment trusts, mutual funds, options, annuities, and cash. 1
In the current environment (2009), CBRS is used in conjunction with ACATS transfers to pass cost
basis between CBRS Participants. Thus in order to pass cost basis currently, both firms must be
ACATS Participants, must be a CBRS Participant, and must use ACATS and CBRS together. Other
types of transfers occur outside of ACATS. These types of transfers can include physical
presentation, direct presentation, Withdrawal-by Transfer (WT) that is not DTCC eligible. When a
transfer occurs outside the ACATS system, CBRS cannot be used to pass cost basis. Basis on
these items cannot be passed automatically. In the current environment, it is passed via manual
paper statement or not at all.
TRANSFER STATEMENTS - TRANSFER OF BASIS
Regardless of the mechanism used to transfer assets, any entity covered under the cost basis
legislation is required to transfer cost basis on covered securities. Additionally, there are
specific requirements for the data that must be included in these transfer statements and
transfer statements are required for all security types that are covered, even if the tax lot is
uncovered.
1
DTCC products website, http://www.dtcc.com/products/cs/equities_clearance/acats.php
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Transfer Statements, however, are not required for security types that are uncovered at the time
of the transfer. For example, a transfer statement is not required on the transfer of a mutual
fund if the assets transfer in 2011 since mutual funds are not covered until 2012.
For that reason, a best practice will be that if a firm has cost basis on an uncovered security, they
should provide a transfer statement with the cost basis. If they do not have the cost basis they
should not send a transfer statement. Similarly, if a firm receives assets of a security type that is
uncovered, it should not expect cost basis and if it is not received they should not request it
after 15 days.
LEVERAGING THE CURRENT SYSTEM- AUTOMATED TRANSFERS OF
COST BASIS THROUGH CBRS
The preferred solution for transferring cost basis will be offered through DTCC’s CBRS.
Responding to industry demand, DTCC will enhance CBRS to comply with the IRS transfer
statement requirements and de-link the cost basis process from the current ACATS system. The
enhanced service will help firms comply with the January 1, 2011 federal mandate requiring
them to transfer cost basis information as covered securities transfer between financial
intermediaries.
The current version of CBRS allows financial firms to pass customer cost basis information on
assets transferred through NSCC's ACATS. Cost basis can only be transferred when assets
transfer through ACATS and both the delivering and Receiving firms have elected to participate
in CBRS.
The enhanced service will effectively extend its efficiencies and capabilities to transfer agents,
issuers, mutual funds, custodian banks and broker/dealers to move cost basis information —
from one financial firm to another — on all assets or transfers regardless of whether the initial
movement occurred in the ACATS system 2 .
Going forward, firms will be able to join CBRS regardless of whether they are a member of DTCC
or NSCC. Cost basis will be passed in a manner similar to today through a daily data download.
2
DTCC website, http://www.dtcc.com/customer/participant/cbrs/index.php.
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Information on CBRS including file layouts, requirements, best practices and information on how
to participate can be accessed through the DTCC website at
http://www.dtcc.com/products/cs/equities_clearance/cbrs.php
MANUAL TRANSFER STATEMENTS
For those firms who do not elect to participate in CBRS, cost basis transfer statements are still
required for covered securities and paperwork and documentation will be required. This labor
intensive, paper-based process will require the physical delivery of paperwork and manual
processing without any automated tracking. Cost basis reporting requirements will add
additional challenges to the tracking and delivery of securities. Nonetheless, at least some firms
will not participate in CBRS and the following best practices attempt to create some
standardization of the manual transfer of cost basis. Samples are included in Appendix A.
Definitions and comments, relating to each of the required fields, can be found within the links
contained in the DTCC Resources – Information, Links and Record Layout section, or in the Links
to Rules and Related Important Notices section of this best practices document.
BEST PRACTICE:
•
Best practice is to send transfer statements at the account level.
•
It is OK to send transfer statements at the asset level.
•
It is not preferred to send one transfer statement per tax lot.
•
Do not consolidate transfer statements at the firm level. Do not consolidate multiple
accounts/assets/lots for one firm into one transfer statement.
•
When sending requests for cost basis, firms should include the Receiving firm’s contact
information, as well as how they would like to receive the cost basis back (fax, mail, etc).
•
Similar to CBRS, firms should only send requests for missing cost basis. Requests should
not be made for cost basis details that have already been received.
•
Do not send cost basis requests for uncovered securities if the cost basis is unknown.
However, firms may decide to send cost basis for uncovered securities, if they maintain it.
•
Transfer date, relating to ACAT transfers, should equal the settle close date (not open fail
settlement date).
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BEST PRACTICES TO CONNECT COST BASIS TO NON-ACATS
POSITION MOVEMENTS
ACATS
NON ACATS TRANSFERS
There are many transfers that do not go through ACATS, including those that pass between
brokers, banks, mutual funds and/or transfer agents. Cost basis reporting requirements will add
another level to the tracking and physical delivery of securities. This section reviews each type of
manual transfer and discusses best practices in creating transfer statements that comply with
the regulatory requirements.
The best practices for these transfers can be found: here on the SIFMA Website.
(If that link does not work, paste
http://www.sifmacat.org/attachments/contentmanagers/24/WCERT%20Process%20version9%20Aug2010.
doc in your internet browser.)
The DTFPART files will help firms capture the Settlement Participant Activity. A CCF User may
use the DTFPART functions in order to receive DTCC's Participant Account Return Transactions
information. Using this will allow firms to mutually leverage a unique ID to support the cost
basis movement.
Related information and files can be found here on the DTCC Website.
(If you prefer, paste http://www.dtcc.com/products/documentation/asset/ccf/settlement/11DTFPAR.pdf
in your internet browser.)
An example of the file names, timing, and description are below:
AVAILABILITY
FILE
DESCRIPTION
(EASTERN TIME)
from 2:00 a.m. to
DTFPDQ
Transactions that "processed" at the end of the PDQ system (prior day).
4:00 p.m.
from 10:30 a.m. to
Transactions that "processed" by morning in the ATP (Account
DTFMTM
6:15 a.m. (next day) Transaction Processor) system.
from 12:05 p.m. to
DTFMTH
Transactions that "processed" by mid morning in the ATP system.
8:05 a.m. (next day)
from 1:30 p.m. to
DTFMTI
Transactions that "processed" by midday in the ATP system.
9:30 a.m. (next day);
from 2:30 p.m. to
DTFMTD
Transactions that "processed" by early afternoon in the ATP system.
10:30 a.m. (next
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day);
from 4:15 p.m. to 12
DTFMTA
Transactions that "processed" by afternoon in the ATP system.
p.m. (next day);
from 7:30 p.m. to
Transactions that "processed" or "dropped" by end of day in the ATP
DTFMTE
3:30 p.m. (next day). system.
OTHER TRANSACTIONS ASSOCIATED WITH TRANSFER PROCESSES
There are many situations where, subsequent to a transfer of assets, the Delivering firm may
request that all or part of the position be returned or where a Receiving firm cannot take the
shares of a delivery sent to them. There are different names for these requests based on the
mechanism used to transfer the assets. “Reclaims” (Transfer Type RCL) is the term used when
assets transferred through ACATS are being requested back due to error, “Don’t Know“ (DK) is
the term used relative to shares transferred through a Deliver Order (DO) on a DTC transfer, and
“Fail Reversal” (Transfer Type FRV) is the reversal of an open fail because a firm was unable to
make delivery. An Industry Sub Group was established to review the many scenarios and ensure
that industry standardization or best practices could be established.
RECLAIMS
RECLAIM OF ASSETS AFTER A TRANSFER
Firms may face certain challenges or obstacles regarding cost basis as it relates to processing
reclaims. The following best practices should be considered when developing processes and
procedures for transferring basis when returning assets.
In the event of the reclamation of assets, the original Delivering firm requesting assets may have
already provided cost basis (electronically or via a transfer statement) to the Receiving firm for
those assets. In this case, the firm sending the assets back must also return cost basis. It is a
highly recommended best practice that firms send back the cost basis associated with the
originally delivered shares. This is important since the account may have held shares of the
transferred security prior to the recent transfer and it is important to maintain the integrity of
the lots at the respective firms.
Additionally, the shares may be subsequently be moving internally to an account with a different
registration which makes the original transfer of the correct basis essential since firms should
not transfer cost basis from an account for a different account holder (e.g. a gift) or an account
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for the same client but with a different registration type (e.g. individual account to a qualified
account).
For example 200 shares of ABC Co. are already in an account and another 100 shares are
received. If the Delivering firm requests that some or all of the position be returned, the
Receiving firm needs to return cost basis associated with the 100 shares on the original transfer.
The original Receiving firm might have a different method (FIFO vs. HICO) and would use their
method in returning from the associated original shares. If there is a difference received by the
original Delivering firm, they need to contact the contra firm to resolve the exception.
If cost basis was not sent on the original asset transfer, the Receiving firm returning the assets
will not need to return the cost basis back to the Delivering firm. In this scenario, it is strongly
suggested that the original Receiving firm send back cost basis with zero basis indicated as
unknown and as "uncovered". If this practice is adopted, it will eliminate the Delivering firm
submitting a cost basis request.
RECLAIMS (Full and partial)
When a Delivering firm submits a system reclaim, an ACATS Ctrl# is associated with this request.
This control number should be referenced when cost basis is returned.
When the Delivering firm is processing a manual claim, the firm should update their claim letters
to reference the unique ID (original ACATS Ctrl# from the asset transfer, IMS TID, etc.). It is
important to determine which unique ID is needed in order to add to the claim letter. A firm also
has the option to specify lots, but is not a requirement. No unique ID would be required if cost
basis was not sent on the original asset transfer by the Delivering firm.
The Receiving firm should evaluate the manual claim letter and send back a transfer statement
including the cost basis of the assets being returned. If the reclaim letter does not request that
basis associated with specific lots be returned, basis could be sent using any depletion method,
provided that the basis was associated with the shares received and not with shares held in the
account prior or subsequent to the transfer.
Where possible, the firm sending the basis back should use all of the attributes of the original
transfer statement provided by the original Delivering firm. If basis was not provided, the firm
sending the basis back will not send a transfer statement when the assets are returned. The
original Delivering firm should not send a request for basis for reclaims where the basis had not
been provided originally.
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Certain scenarios can arise where a reclaim (RCL) cannot be honored and must be rejected. Or,
certain asset types cannot be requested in a system claim such as Mutual Funds. In these
events, a Partial Transfer Delivery (PTD) is often used to return assets such as mutual funds. The
Delivering firm of the claim should keep all assets together when processing the PTD. Note that
a new transfer statement by the Receiving firm with a new Unique ID (the new ACAT Control# for
the PTD) will need to be used to tie in the basis to the new PTD transaction.
The best practice is that the PTD will have its own ACAT Ctrl# to now use for the CBRS record or
transfer statement. The basis attached to the asset movement (of the PTD) is the original basis
that would have been sent. The best practice is to make sure the original receiving firm still
makes every attempt to deliver the associated basis from the original delivery. It is possible that
specific lots need to be sent back.
Same logic should apply to firms submitting manual claims.
FAIL REVERSAL – FRV
A Fail Reversal is the reversal of a cash settlement where a position has not physically moved
from the delivering firm to the receiving firm. Fails can occur from a settled Full ACATS, Partial
ACATS or Residual. The Fail Reversal is processed after the Full ACATS, Partial ACATS or Residual
has settled. In most cases it is processed days later. A FRV is initiated by the Delivering firm.
Fail reversals are for the entire asset quantity. Partial fail reversals do not occur if Delivering firm
is trying to reverse part of the asset share quantity.
BEST PRACTICE
•
A firm will usually pass cost basis on the original transfer for an asset when an open fail
to deliver has been established for that same CUSIP.
•
If cost basis is sent on the original transfer, the receiving firm should return cost basis
when a FRV is processed.
•
If firm received basis on the original transfer, need to figure out how to return it on the
FRV.
•
If no basis is received on the original transfer, receiving firm will not have cost basis to
return on the FRV.
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•
If no basis is sent on the original transfer, delivering firm should not send a transfer
request on the FRV for cost basis.
•
Same logic should apply to manual fail reversals. Paperwork is passed between firms and
FRV is processed through fail settlement system.
DON’T KNOW – (DK)
A DK can result when a Deliver Order (DO) is processed. If the delivering firm processes a Free
Deliver Order and the receiving firm does not agree with the delivery, a DK will be processed.
This can occur same day or day(s) after the original DO. The standard practice is to process a DK
the same day the DO occurs.
BEST PRACTICE
•
If the DK is processed same day, no cost basis will move to the Receiving firm. The shares
remain at the delivering firm.
•
If the DK is processed the day(s) after the Deliver Order, the cost basis would most likely
be passed by the delivering firm.
•
If the asset(s) from the Deliver Order are placed in a suspense account (this occurs when a
client account is not identified) at the receiving firm, cost basis may not be returned if a
DK is processed. The receiving firm may even reject the cost basis from the original DO
being sent from the delivering firm. If this occurs, the delivering firm may have to
reinstate cost basis when DK is processed by receiving firm.
CONVERSIONS
OVERVIEW
Of recent history, our industry has seen numerous conversions of varying sizes that have
become more frequent in nature. Discussions between parties involved in a conversion include
determining effective dates of transfer, methods to transfer assets, clients opting out, residual
sweeps, ineligible assets, etc. Moving forward, these discussions need to include thoughts on
cost basis requirements and how firms involved will accept/decide upon responsibilities to
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ensure that continuity in passing client's cost basis travels as an account transfers or is
converted.
This Sub Group has gathered to discuss some of these operational and systematic challenges so
that best practices and solutions can be developed. One specific challenge to be reviewed
occurs when a DTCC Participant Number is retired and no longer valid. Additional discussions
related to firm failure will hope to capture some level of understanding as it relates to the
requirement to pass cost basis.
CLEARING CHANGE
MORE CONTENT TO BE ADDED PENDING FINAL DISCUSSIONS
ENTIRE BUSINESS CONVERSION
MORE CONTENT TO BE ADDED PENDING FINAL DISCUSSIONS
PARTIAL BUSINESS CONVERIONS
MORE CONTENT TO BE ADDED PENDING FINAL DISCUSSIONS
FIRM MERGER
MORE CONTENT TO BE ADDED PENDING FINAL DISCUSSIONS
SALE OF CLEARING FIRM
MORE CONTENT TO BE ADDED PENDING FINAL DISCUSSIONS
FIRM FAILURE
MORE CONTENT TO BE ADDED PENDING FINAL DISCUSSIONS
SCENARIOS
Link to Scenario Document for Conversion to be provided at a later date.
3RD PARTY
OVERVIEW
3rd party processing occurs in a number of different ways throughout the Industry today. Because
of the relationship with 3rd parties and the transfer process, understanding the workflow behind
several transfer scenarios is complicated and creates the need for best practices. In some
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transfers, the original receiving and Delivering firm may not be aware that a 3rd party relationship
exists at the contra firm. These practices help ensure that the flow of cost basis information
passes from one firm to another in an accurate and timely fashion.
FULL PROCESSING
This is where the holder of the client account has decided to have a 3rd party process all activity
(including transfers). There are instances in the industry where some 3rd party processors allow
customers to choose if cost basis is part of the solution. The best practice is for the firm who
holds the assets and is facilitating the transfer to always hold and transfer the cost. The end
client statement and 1099-Bs is usually created directly from the 3rd party system.
TRUST CUSTODY
This is where a firm leverages a 3rd party to clear/custody their mutual fund assets and stocks.
Usually the firm with the end client account (custodian) is a bank who is not ACATS, DTCC or
NSCC eligible and all client assets are held in an omnibus account that is custodied by the third
party. The end client statement and 1099-Bs are usually created by the firm folding the end
client accounts and the 3rd party processor usually does not have access to the tax lot accounting
system.
MUTUAL FUND AGENT
This is where a firm leverages a 3rd party to clear/custody their mutual fund assets only.
Usually the firm with the end client account is a DTCC participant and may or may not be
ACATS eligible. Assets for the mutual funds are combined in an omnibus account at the 3rd
party. The end client statement and 1099-Bs are usually created directly by the firm
holding the end client account and the 3rd party custodian usually does not have access to
the tax lot accounting system. Within ACATS, the 3rd party agent or custodian is identified
by using the “MF Agent Indicator” field on the XXXX.xxxxx file which DTCC then maps to
the 3rd party agent before sending the FR (018 record) to the fund.
OMNIBUS
This is where a firm leverages a 3rd party to clear/custody their mutual fund assets and stocks.
Usually the firm with the end client account is a bank who is not ACATS, DTCC or NSCC eligible.
Assets for the end clients are combined in an account at the 3rd party custodian and the end
client statement and 1099-Bs are usually created by the firm holding the end client account. The
3rd party processor usually does not have access to the tax lot accounting system. The end client
accounts are typically corporate accounts
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SECURITIES AGENT
This is where a firm leverages a 3rd party to clear/custody their stocks/bonds. Usually the firm
with the end client account is a bank who is not ACATS, DTCC or NSCC eligible. The end client
statement and 1099-Bs are usually created directly from the custodian system. The 3rd party
processor usually does not have access to the tax lot accounting system.
SCENARIOS
Link to Scenario Document
COST BASIS SUB COMMITTEE (CBSC) GENERAL BEST PRACTICES
Starting January 1, 2011, the delivering firm of the asset should always send the cost except:
1. ACATS where the original receiving firm or original delivering firm is using a 3rd party
agent for MFs and using MF Agent Processing in ACATS (see section on 3rd Party Best
Practices).
2. Non-ACATS where the original delivering firm or original receiving firm is using a 3rd
party agent for MFs. Contra firms will typically not know that other firm is using a 3rd party
agent except to look at the fund account movement (see section on 3rd Party Best
Practices).
3. PTF or Non ACAT Mutual Fund Transfers – Mutual Funds are not covered asset types for
2011 and Mutual Fund Companies have commented that they do not want firms to send
cost basis until required to do so.
Other items to note:
•
ACATS (with PTDs) should be used as much as possible in transferring assets to another
ACAT participant.
•
Specific lot selection by the client should always be initiated at the delivering firm to
transfer the assets to the receiving firm. It should not be initiated by the receiving firm to
request specific lots in a transfer.
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•
If both firms are CBRS Participants, CBRS should be used to pass cost basis between both
parties. As a CBRS Participant, you should be expected to receive and send cost basis
records through CBRS and not via paper.
•
"Send it if you've got it" – The Delivering firm should send cost basis regardless of if the
asset is covered. It is a service to the client who is transferring.
•
Receiving firms should only create expected cost flags (and requests for costs basis) on
covered assets/accounts. If they receive basis on uncovered asset types or into uncovered
account types, that basis should be accepted.
•
In order for a cost basis record (CBRS or statement) to be sent with the correct share
amount ACATS participants must review their current process for mutual fund deliveries.
Currently, some firms have the MF Full/Partial Indicator field value set to “1” (Full
Transfer). When this occurs over a pay date the mutual fund will typically move the entire
position (including the income). Since that income is moved immediately, it is typically
not booked by the Delivering firm. Since the movement at the firm does not match the
movement at the fund then the cost basis that is relayed will not match either. Example
below:
8/31/2010 – Delivering firm adds 100 shares of Mutual Fund A to AT record on delivery
9/1/2010 – Mutual Fund A credits fund account for one share (from income)
9/2/2010 – 018 record sent to fund family from NSCC to move “All” shares from
delivering firm to receiving firm.
9/3/2010 – 101 shares sent from delivering firm to receiving firm.
9/6/2010 – Cost basis record sent to receiving firm for 100 shares
The receiving firm will not be able to apply the cost basis to position since the share
movement was for 101 shares but the cost basis was for 100 shares. The receiving firm
will potentially reject the cost and request new cost basis from the delivering firm (who
won’t have the cost on the 101 since the 1 share income was never booked into the
clients account on the delivering firm side).
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The best practice is for firms to set MF Full/Partial Indicator field value to "2" (Partial
Transfer). Then the delivering firm will book the one share and sweep the one share later
(and then follow up with the cost basis). The cost basis record will then match the share
movements. Having the value as "1" (Full Transfer) will cause problems for the Receiving
firm when dividends post in timing with an ACAT transfer. By having a value of "2", it will
create a process where the delivering firm will long the client shares and then pass the
shares on a residual credit sweep (RCR). By creating the RCR, the firm will enable the
trigger to send a corresponding CBRS record to the Receiving firm.
PTF PROCESSING WITH MF AGENT PROCESSING INDICATOR – FUTURE
CONSIDERATIONS
•
Mutual Fund Companies will have to recognize the original broker and not 3rd party
clearing agent so that the original receiving/Delivering firm will understand where cost
will come from/to.
•
Mutual Fund Companies should look to store the original delivering/receiving custodian in
order to send requests and corrections in the future.
ACATS PROCESSING WITH MF AGENT PROCESSING INDICATOR
•
Use CBRS to send/receive cost basis. No changes to what exists today.
•
Original delivering firm/receiving firm should exchange cost basis. No changes to what
exists today.
NON-ACATS WITH 3RD PARTY MUTUAL FUND PROCESSOR/OMNIBUS/SECURITIES
AGENT/TRUST CUSTODY
•
If the receiving firm is an ACAT participant, use PTDs where possible
•
Use receiving firm account number plus +delivering firm account number as transfer
control for CBRS if there is no control number (otherwise use DTC/NSCC or Fed control
number).
•
Use recommended processes and unique ID# as referenced in the Non ACAT Best
Practices
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GIFTING OF MUTUAL FUNDS
When a custodian finds out there is going to be a gift of a mutual fund (including those which
will go through their 3rd party MF vendor) there should be a communication to the 3rd party agent
that includes the delivering firm client account number (as that will be used on the CBRS control
number).
GIFTED AND INHERITED SHARES
OVERVIEW
The regulations require that transfer statements indicate whether tax lots being transferred are
due to a gift, inheritance, or the transfer of a previously gifted and/or inherited security.
Additionally, the regulations require the maintenance and transfer of additional data elements
for transfers in these types of tax lots. For gifted shares, this includes maintaining and
transferring both carryover basis and the fair market value (FMV) as of the date of the gift. For
inherited securities this includes the step up of basis as of the date of death (DOD). CBRS has all
of the required fields and values to ensure that proper indication of Gift or Inherited (or both)
can be performed. It is important that Manual Transfer Statements allow for this as well
GIFTING
Best Practice suggestion is that gifting should be initiated by the Delivering firm rather than the
Receiving firm. For ACATS, PTDs should be used rather than PTRs or FUL transfer types. For
ACAT transfers, note that the Gift Indicator field value does not necessarily equate to a gift
indicator on CBRS. Firms would need to ensure that if the transaction qualifies as a gift, that the
ensuing indicator on CBRS is used and the additional required information is included on the
transfer statement.
INHERITED
This section may require updates based on final regs.
The cost basis for bequeathed assets must be “stepped up” to the value of those assets on the
date of death (or a different date under certain circumstances). For example: Client buys shares
on 1/5/2011 for $1000. Client dies on 4/5/2012 and shares are worth $5000 on that date.
Stepping up the basis requires that the cost basis be changed to $5000 with an acquisition date
of 4/5/2012 and a holding period of long-term. For certain scenarios (e.g. when only one party
in a joint account is deceased and based on state law), only a portion of the basis may qualify for
a step up in basis. Firms may be challenged in determining when to step up the basis
considering when and if assets move directly from the decedent’s account to the beneficiary’s
account or whether the assets first move to an estate account.
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In the current transfer environment, firms frequently allow joint accounts to transfer to single
accounts as well as other mismatched account registration types. In order to satisfy required
authorization, firms utilize MEMO notes on ACATs or pass documentation (for example, a death
certificate and affidavit of domicile). Many of these transfers can and do involve a deceased
individual and are frequently initiated by the Receiving firm. The Receiving firm should have all
of the required documentation, and an understanding of the transfer scenario. In general when
the transfer does not involve a deceased individual, it isn't considered to be a change of
beneficial owner. These transfers initiated by the Receiving firm are normally between like
registered accounts.
For transfers involving a deceased individual (Single account now deceased and Delivering firm
did not previously know the individual was deceased) to an Estate account that has been initiated
by the Receiving firm, the Delivering firm sends assets and cost basis. The Receiving firm knows
the assets are inherited and should contact the Estate or Account Executive to validate or step up
the cost basis. The Delivering firm would send normal cost basis without stepping up since they
did not know the client was deceased.
If the Delivering firm knows the assets are for a decedent account they may require that the
assets are first transferred to an estate or BDA account with the appropriate steps to capture
Date of Death and other required coding. Best Practice suggestion is to have the Delivering firm
initiate the transfer and "push" the shares in the transfer to the Receiving firm (such as via PTD).
The Delivering firm should have the appropriate faculties to determine the step up of the basis
when these steps are taken.
When the Delivering firm account is an Estate Account and the Receiving firm account is an
identical Estate Account, there should be no changes from current transfer process. When the
Delivering firm account is an Estate Account and the Receiving firm account is a beneficiary, the
best practice is to initiate these movements as a "push" and the cost basis on the transfer
statement should be stepped up as required and indicate that the shares were inherited. Best
Practice is to initiate this transfer at the Delivering firm.
INHERITED AND THEN GIFTED (BOTH)
This occurs when an inherited tax lot is subsequently gifted. Because inherited shares
automatically receive long-term status, and that status is then transferred to the donee it is
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critical to maintain its inherited and gifted status. To accommodate this, the CBRS Tax Lot Input
Record has a field called, "Gifted or Inherited Indicator" where "Both" should be used.
FOREIGN SECURITIES
Foreign securities that are eligible to be considered as covered in 2011 will require a manual
process and recommended creation of a unique ID to ensure that the following cost basis
transmissions match up with the asset movement if ACATS is not used to transfer them (ACAT
transfers will leverage the ACAT ctrl# as the unique ID). Difficulties can occur since some firms
who participate in the transfer of foreign securities might not be easily recognized, will not be
CBRS participants, or do not exist on a universally distributed master file that will hold their
name, address, and phone # as needed to create Manual Transfer Statements. Firms that
leverage a 3rd party or custodial entity to transfer foreign assets realize that systematic or
electronic transmissions for the movement do not exist or are not consistent. A unique
transaction ID that would be needed by both parties does not exist and those 3rd party or
custodial entities are not part of the exchange or relay of cost basis information. Changes to
firm procedures are needed so that the proper information can be captured to create the
recommended unique ID. This information is gathered "manually" or via phone/email interaction
during the settlement process of the foreign transfer.
For more in depth guidance on recommendations and the unique ID format and section
addressing foreign security transfers. click the here or paste the following address into your
browser:
http://www.sifmacat.org/attachments/contentmanagers/24/WCERT%20Process%20version9%20
Aug2010.doc
ELIGIBLE SECURITIES
As discussed previously, securities become covered under the legislation in a phased approach:
•
For stock in or of a corporation the applicable date is January 1, 2011.
•
For stock in a RIC, such as a mutual fund or REIT, or stock acquired in connection with
a DRP, the applicable date is January 1, 2012.
•
For options and any other specified security determined by Secretary, the applicable
date is January 1, 2013
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However, it is often difficult to easily classify a particular security type into one of these buckets
and firms are limited by the data available on their security master in determining where a
particular security falls. For example, most securities classified on firms’ security master as
equities would be considered to be “shares of stock in or of a corporation.” However, closed end
funds, which are mutual funds and are eligible for average cost, and therefore not covered until
2012 are generally classified as equities.
Most firms have the ability to segregate closed end funds and not consider them to be covered in
2011. However there are other security types that are proving to be more challenging. An
example is preferred stock where those that are “perpetual preferred stock” that pay dividends
would be covered in 2011 and others that pay interest and have a maturity date are debt
securities and technically shouldn’t be covered until the IRS deems debt securities to be covered.
Additionally, in their individual evaluations, firms making differing determinations on when
various security types are covered. For example, some firms feel that REITS should be covered in
2011, some feel they are not covered until the IRS deems them to be covered in a future phase
and others feel that publicly traded REITs should be covered in 2011 while privately held REITS
are not covered until the IRS deems them to be covered.
The link below provides a spreadsheet of various security types and the phase in which they are
likely covered. It also attempts to describe instances where firms have either disagreed on when
they would be considered to be covered and when they felt they may or may not be able to
determine in what phase they should be covered. In these instances, it has been observed that it
might be wise to take a more conservative stance and consider them to be covered as of the
earlier effective date.
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GLOSSARY
ACATS - The Automated Customer Account Transfer Service (ACATS) is a system that automates
and standardizes procedures for the transfer of assets in a customer account from one
brokerage firm and/or bank to another, from the DTCC website
http://dtcc.com/products/documentation/cs/acats.php
ACAT Control Number - 14 digit number assigned by the ACATS system when a new transfer
request is submitted. The control number is assigned in Request 1, Day 1. The number is
made up of the following: The Century (CC), Year (YY), and Julian Date (DDD) when the
record was submitted and the system assigned sequence number (NNNNNNN), starting
with 0000001 for each date. When viewing the number you will see
(CCYYDDDNNNNNNN).
Automated Customer Account Transfer Service (ACATS) - A system that automates and
standardizes procedures for the transfer of assets in a customer account from one
brokerage firm and/or bank to another, from the DTCC website
http://dtcc.com/products/documentation/cs/acats.php
Autoroute – SIAC’s internal system for routing all output (reports and files) to participants.
Bifurcation - To divide into two separate parts, especially parts that go in different directions.
This is applied to positions when the basis is the average cost method. It allows you to
segregate, or bifurcate, and calculate the basis for the uncovered versus covered
positions.
CBRS - The Cost Basis Reporting Service (CBRS) is an automated system that provides CBRS
member firms (brokers and banks) with the ability to transfer customer cost basis
information to each other on any asset transferred through the Automated Customer
Account Transfer Service (ACATS).
Control Number – 14 digit number assigned by the ACATS system when a new transfer request is
submitted. The number is made up of the following: The Century (CC), Year (YY), and
Julian Date (DDD) when the record was submitted and the system assigned sequence
number (NNNNNNN), starting with 0000001 for each date. When viewing the number you
will see (CCYYDDDNNNNNNN).
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Conversion - When one of the parties to a transfer undergoes a “one-time” conversion event
whereby bundles of assets transfer from one broker to another such as in a clearing firm
conversion or merger.
Corporate Action - Any event that brings material change to a company and affects its
stakeholders. Splits, dividends, mergers, acquisitions and spinoffs are all examples of
corporate actions that can impact both shareholders and bondholders.
Cost basis –”The original value of an asset for tax purposes (usually the purchase price), adjusted
for stock splits, dividends and return of capital distributions. This value is used to
determine the capital gain, which is equal to the difference between the asset's cost basis
and the current market value. Also known as "tax basis", quoted from Investopedia.
Covered Security – A security included in the IRS reporting requirements of the Emergency
Economic Stabilization Act of 2008. A security is considered covered if the basis in the
position was captured from a transaction that occurs after the applicable date based on
security type. The schedule for the phase in of securities is dependent on the security
type. For stock in or of a corporation the applicable date is January 1, 2011. For stock in a
RIC, such as a mutual fund or REIT, or stock acquired in connection with a DRP, the
applicable date is January 1, 2012. For options and any other specified security the
applicable date is January 1, 2013.
Custodian - A financial institution that has the responsibility for a customer's securities. This
firm is usually the firm for creating the client statements and reporting to the IRS (and
other applicable government bodies).
Cycle – In output files- the number of the cycle in which the transaction was received and
reported to participants.
Depository Trust and Clearing Corporation - Through its subsidiaries, provides clearing,
settlement and information services for equities, corporate and municipal bonds,
government and mortgage-backed securities, money market instruments and over-thecounter derivatives.
Dividend Reinvestment Plan (DRP) – A plan offered by a corporation that allows shareholders to
buy stock directly from the company (usually through a transfer agent). These plans
reinvest the cash dividends to purchase more stock.
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DTC Control Number - 16 digit number assigned by DTC once a Deliver Order is entered into the
DTC system. NDOs have their control numbers confirmed through the night time
confirmation process (typically a confirm file back to receiving firm and delivering firm).
DTCC – (Depository Trust and Clearing Corporation) through its subsidiaries, provides clearing,
settlement and information services for equities, corporate and municipal bonds,
government and mortgage-backed securities, money market instruments and over-thecounter derivatives.
Deliver Order – An instruction generated by ACATS for DTC to deliver a non—CNS, DTC-eligible
security from one participant to another participant at DTC. Deliver Orders are commonly
referred to as D.O.s (pronounced D-Os). When a Deliver Order is entered for night
settlement (versus real time) it is referred to as a night deliver order or “NDO”.
DK (Don't know the trade) - An expression used whenever a trade cannot be settled because one
party lacks knowledge of the trade or receives conflicting instructions from the other
party.
DO – See Deliver Order
DTC – See Depository Trust Company
DWAC (Delivery Withdrawal at Custodian) - Denotes a transfer of shares between a broker /
dealer and the transfer agent for the security. The transfer is completed electronically and
is facilitated by the Depository Trust Company (DTC).
Eligible Security – List of security types identified that meet certain criteria and determines when
the security is covered for purposes of the IRS regulations.
Fail Reversal - A Fail Reversal is the reversal of a cash settlement where a position has not
physically moved from the delivering firm to the receiving firm. Fails can occur from a
settled Full ACATS, Partial ACATS or Residual.
FED Control Number - 18 digit number assigned by Fed once a delivery order is completed
FIFO (First In First Out)/HICO (High Cost) – Two methods of valuing the cost of goods sold. FIFO
uses the cost of the oldest items in inventory first while HICO uses the highest cost in
order to minimize tax consequence.
Foreign Security –Any security denominated or expressed in foreign currency.
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Full Transfer – Request by the original receiving firm to transfer all the assets in a customer’s
account held at the original delivering firm.
FRV – A nonstandard transfer that allows the original delivering firm to reverse the monies with
the original receiving firm on an open fail transaction. See Fail Reversal.
Gifting - A transfer of property from one person or entity to another without consideration or
compensation. For income tax purposes, the words "gift" and "contribution" usually have
separate meanings, the latter word being used in connection with contributions to
charitable, religious, etc., organizations, whereas the word "gift" refers to transfers of
money or property to individuals.
Lot - Every activity that increases the total quantity of shares owned by a client and has its own
cost associated with it is considered a lot. Example: Dividend reinvestment shares create
a distinct and separate lot.
Multicycle – The reporting of output from NCSS to participants at multiple times throughout the
processing day.
Mutual Fund Cleanup – See MFC
MFC – A nonstandard transfer that allows a delivering firm to clean up mutual fund assets that
were included in earlier ACATS transfers but were subsequently reregistered outside
ACATS. The cleanup reverses the settlement incentive money charged to the delivering
firm (and credited to the receiving firm) when the original transfer was prepared for
settlement.
National Securities Clearing Corporation - A subsidiary of DTCC, provides clearing, settlement,
risk management, central counterparty services and a guarantee of completion for certain
transactions for virtually all broker-to-broker trades involving equities, corporate and
municipal debt, American depositary receipts, exchange-traded funds, and unit
investment trusts.
Nonstandard Transfer – ACATS Transfers initiated by the original delivering firm that have
shortened settlement schedules (for example, Residual Credits (RCR), Partial Transfers
(PTD, PTR), Reclaims (RCL), Fail Reversals (FRV), Mutual Fund Fail Clean-Up (MFC)).
NSCC – National Securities Clearing Corporation, a subsidiary of DTCC, provides clearing,
settlement, risk management, central counterparty services and a guarantee of completion
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for certain transactions for virtually all broker-to-broker trades involving equities,
corporate and municipal debt, American depositary receipts, exchange-traded funds, and
unit investment trusts.
NSCC Control Number – 11 digit number assigned by NSCC once a transfer order is entered into
Networking.
PTD – A nonstandard transfer for part of an account or partial shares in an account that is
initiated by the Delivering firm.
PTR – A nonstandard transfer for part of an account or partial shares in an account that is
initiated by the Receiving firm.
Reclaim – A process of requesting assets initiated by the original Delivering firm to the original
Receiving firm due to error or over-delivery. Also known as a claim.
Registered Investment Company (RIC) – An investment company that is registered with the SEC
and meets the requirements of the Investment Company Act of 1940 with respect to
income distribution, fee structure, and diversification of assets.
RCL - A nonstandard transfer that allows the original delivering firm to initiate the return of an
asset that has already been transferred to the original receiving firm. Mutual Funds
cannot be submitted for on an RCL. See Reclaim.
RCR – A nonstandard transfer that allows the original delivering firm to initiate a transfer of
residual balances or shares to the Receiving firm. FINRA 11870 requires that residual
credit balances be swept within 10 days and for a minimum of 6 months after the original
completed transfer.
Residual Credit Sweep – See RCR
Step Up in Basis - The readjustment of the value of an appreciated asset for tax purposes upon
inheritance. With a step-up in basis, the value of the asset is determined to be the higher
market value of the asset at the time of inheritance, not the value at which the original
party purchased the asset.
Sub-Custodian – A vendor chosen by a custodian to do part of all of the investment processing
activities (middle and back office).
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Suspense Account - An account used to store short-term funds or securities until a permanent
decision is made about their allocation.
3rd Party Vendor – Similar to a sub-custodian but this term is used when the sub-custodian only
handle part of the processing (mutual fund processing only for example).
Transfer Agent - A company, generally a bank or trust company, appointed by a firm to transfer
that firm's securities. A transfer agent is also responsible for issuing stock certificates,
dealing with lost or stolen certificates, and generally maintaining accurate records for the
client company.
Transfer Control Number – Cost basis system generated number assigned by DTCC (17 length,
alpha numeric). Format is CCYYDDDCBNNNNNNNN, example is 2001255CB000000001
Transfer Statement – Statement of information required when a security or account is
transferred. The transfer statement must include information that identifies account,
security, tax lot, cost basis, etc….
Uncovered Security – A security that does not meet the criteria included in the IRS reporting
requirements of the Emergency Economic Stabilization Act of 2008. A security may be
considered uncovered if the basis in the position originated prior to the phase in dates. An
account may be considered uncovered if the cost basis information is not received during
the transfer process.
Wash Sale Rule - The wash sale rule prevents claiming a loss on a sale of stock when a
replacement stock is bought within the 30 days before or after the sale.
WT (Withdrawal-by-Transfer) – An electronic movement of shares from the issuer or its
designated transfer agent to the participant through the DRS Profile system.
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DTCC RESOURCES- INFORMATION, LINKS AND RECORD LAYOUT
Overview of changes to CBRS
DTCC will be making changes to the Cost Basis Reporting System (CBRS) to comply with new
IRS regulations that will take effect for equities on January 1, 2011. There will be further
changes to the system as the regulations begin to cover mutual funds on January 1, 2012;
and debt and other securities on January 1, 2013. DTCC will be involved with only the
passing—not the calculation—of cost basis.
We expect to begin industry testing of the anticipated changes to CBRS starting on September
13, 2010. We expect to deploy the new system in production on December 10, 2010. Once
DTCC implements these changes, the current record layouts will be replaced with new record
layouts. After the switch, DTCC will no longer support the current CBRS record layouts.
The Customer Support Hotline is available for questions about CBRS. In contrast to the CBRS
Working Group call that occurs once a week, the Customer Support Hotline is available for
questions every day. Call 888-382-2721, option 6, then option 7, then option 2. The phone
tree options do not yet mention CBRS: please follow the options for ACATS.
Documents on the CBRS web pages. There are two CBRS web pages: the original CBRS web
page, and an additional enhanced CBRS webpage. The original web page has the majority of
the CBRS documentation, including the User Guide and record layouts. The enhanced web
page has a link to the Frequently Asked Questions (FAQs).
To learn more about DTCC and how it is helping firms meet the new rules.
http://www.dtcc.com/customer/participant/cbrs/index.php
The CBRS record layouts:
http://www.dtcc.com/products/documentation/cs/cbrs.php
CBRS User Guide
http://www.dtcc.com/products/documentation/cs/cbrs.php
FAQs about CRBS, the input/output files.
http://www.dtcc.com/products/documentation/cs/cbrs/Enhanced_CBRS_FAQs.pdf
CBRS Important Notices
http://www.dtcc.com/products/documentation/cs/cbrs_notices.php
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LINKS TO RULES AND RELATED IMPORTANT NOTICES
The proposed IRS regulations with regard to broker reporting responsibilities:
http://www.irs.gov/irb/2010-05_IRB/ar09.html
The regulations published on the
http://www.gpo.gov/fdsys/pkg/FR-2009-12-17/pdf/E9-29855.pdf
The draft/redesigned 1099B form can be found here:
http://www.irs.gov/pub/irs-dft/f1099b--dft.pdf
INDUSTRY LINKS AND BEST PRACTICE
The regulations define what is required; they do not provide the methodology to comply
with these new rules. There are many challenges the industry must consider to comply
and many of these are being addressed by the SIFMA Customer Account Transfer
Committee. (Securities Industry and Financial Markets Association). www.sifmacat.org
Various Sub-Committees were convened to review scenarios and possibilities. Their
findings and documented Best Practices can be found here.
(if the link does not work, paste
http://www.sifmacat.org/attachments/contentmanagers/24/working%20BP%20rev%201%206.pdf in your
internet browser.)
For Non-ACATS transfers, the Best Practices can be found here.
(if the link does not work, paste
http://www.sifmacat.org/attachments/contentmanagers/24/WCERT%20Process%20version9%20Aug2010.
doc in your interest browser.)
Sample transfer statements for Manual Transfers can be found here.
(if the link does not work, paste http://www.sifmacat.org/en/cms/?24 in your internet browser.)
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FREQUENTLY ASKED QUESTIONS
Where can I find contact information for firms that do not participate in CBRS?
There is not a repository for these firms at this time. Best Practice suggests that the
Delvering Firm includes this information on the Transfer Statement (see Appendix A for
template).
It will be up to each individual firm to maintain a list of contacts if they choose to.
What am I required to do when I don’t receive basis?
If basis is not received within 15 days, a request must be sent to the Delivering firm. After the
request has been made, if within a period of time basis is still not received, the shares will be
considered uncovered.
Does it cost to join CBRS? Are there other fees?
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APPENDIX A
SAMPLE TRANSFER STATEMENTS
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Sample Broker Statement
Record Content: Outbound – Original
Delivering Firm A/C: xxxxxxxx
TOA Settlement Date: 06/15/2010
Transfer Control Number: 123456789012345678901234567890
Alternate Control Number: 123456789012345678901234567890
Transaction Type: ACATS
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Receiving Firm Number: 00000222
Receiving Firm Type: CBRS User
Agent for Firm Number:
A/C at Receiving Firm: oooooooooo
ISIN Country Code: US
ISO Currency Code: USD
ISIN Security Check Digit:
33
Record Content: Outbound – Original
Delivering Firm A/C: xxxxxxxx
TOA Settlement Date: 06/15/2010
Transfer Control Number: 123456789012345678901234567890
Alternate Control Number: 123456789012345678901234567890
Transaction Type: ACATS
Receiving Firm Number: 00000222
Receiving Firm Type: CBRS User
Agent for Firm Number:
A/C at Receiving Firm: oooooooooo
ISIN Country Code: US
ISO Currency Code: USD
ISIN Security Check Digit:
*** This format may apply to all Outbound TOA including Original, Corrected, Reject, and Request. Update <Header> and
<Record Content> to reflect the correct report.
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Sample Transfer Agent Statement
Street address 1
Street address 2
City, ST ZIP
From: Cost Basis Team
Tel: (xxx) xxx-xxxx
ABC Transfer Agent, LLC
TO: [Receiving Cost Basis Firm]
Attn: [Name – Cost Basis Dept]
Street Address 1
Street Address 2
City, ST ZIP
Country (non-US)
[Receiving Cost Basis Firm] Phone #: (xxx) xxx-xxxx
IRS Code Section 6045A Basis Transfer Statement
Statement Date: [MM/DD/YYYY]
Correction Please fax to (xxx) xxx-xxxx or Email to xxxxxxxx@aol.com
Request
Please fax to (xxx) xxx-xxxx or Email to xxxxxxxx@aol.com
Reject () Can’t apply basis () Not agent for CUSIP () Tax-lot greater than quantity received
Account Information
Cost Basis Delivering Firm DTC #
123456
Cost Basis Receiving Firm DTC #: 123456
Account # at Receiving Firm :
1234567890123456789
Unique ID/Transfer Control#: 123456789012345687901234568790
Date Transfer Initiated:
MM/DD/YYYY
Date Transfer Settled: MM/DD/YYYY
Date of Previous Statement : (for corrected or requested) : MM/DD/YYYY
Security #1: Asset Record
CUSIP/ ISIN:
123456789
Total shares:
123456789012.1234
Security
Description:
Security
Classification:
1234567890123456789012345678901
Ticker Symbol:
123456
12345678
Lot #1: Tax Lot Record
Quantity
123456789012.1234
Covered/
Uncovered/
Pending
Blank/C/N/P
Certificate
Number
AB123456789
Gift/
Inherited
Blank/G/I/Both
Acquisition Date
MM/DD/YYYY or
VARIOUS
Gift
Date
MM/DD/YYY
Y
Original Acquisition
Date for Wash Sale
Adjustment
Original Cost
Basis
Adjusted Cost
Basis
MM/DD/YYYY
$1234567890.67
$123456789.67
Total FMV on Gift
Date
$12345678901234.67
Last
Corporate
Action under
6045B
YYYYNNN
Taxes
paid by
Agent
Y/N
ISO/ESPP
Blank/I/E
Zero
Basis
Indicator
True/
Unknown
Shareholder
provided
Y/N/Unknown
35
Sample Request for Cost basis via paper
<Month DD, YYYY>
<Receiving Firm Name>
Attn: Cost Basis Transfer Stmt Dept
<Street Address>
<Additional Address line>
<Additional Address line>
<City, State Zip Code>
Cost Basis Request for Account # <Account #>
Control # <Control #>
In accordance with TARP regulations, please forward cost basis for the following securities that were transferred
to us on <Transfer Date> for the indicated client's account.
<Client Name>
<Street Address>
<City, State Zip Code>
<Additional Address Line>
<Additional Address Line>
CUSIP or CINS
SECURITY DESCRIPTION
QUANTITY
123456789
Cracker Barrel
1,500.00000
234567890
Disney
345678901
Paramount
123456789
1234567890123456789012345678901234567890
650.00000
24.68452
234567890123.12345
Please send the requested cost basis information to the below address or via fax to <###-###-####>. Should you have any questions,
our Cost Basis Department can be reached at <###-###-####>.
<Sending Firm Name>
Attn: Cost Basis Transfer Stmt Dept
<Street Address>
<City, State Zip Code>
Thank you,
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