Online Cost-Basis Accounting for Broker-Controlled Accounts

PFPC introduced a new cost-basis-accounting service, called PFPC-CBA.

PFPC introduced a new cost-basis-accounting service, called PFPC-CBA, for shareholders of mutual funds which automatically calculates gains and losses at the point of redemption for broker-controlled accounts. Brokers can access the cost-basis data online via AdvisorCentral.com, an industry portal for financial advisers jointly owned by three mutual-fund companies (Fidelity Investments, Franklin Templeton Investments and Putnam Investments) and PFPC.

"Most people today believe that more and more fills are coming through the broker channels," says Mike DeNofrio, executive vice president and senior managing director for PFPC's shareholder services and transfer-agency division.

For the past 10 years, PFPC has provided cost-basis accounting for any shareholder redemptions and exchanges it processes. However, "broker-controlled accounts, known as Level 3 accounts, have not been privy to this information," says DeNofrio.

"The brokerage firm has the responsibility to provide that service to the end customer," explains Ilene Gilfedder, vice president in PFPC's transfer-agency division. But a number of firms don't provide that information or provide it in a minimal amount, she says.

Three mutual-fund companies - Eaton Vance, BlackRock Funds and Strong Funds - have signed up for the service. "The funds have to agree to provide the data," says Gilfedder. Each fund company determines how it does its cost-basis accounting and how far back it will make that data available.

Broker/dealers will have the ability to track cost on transfers, share-class rollovers, stock splits and return of capital and to perform wash sale and holding-period-adjustment calculations.

Emphasizing the flexibility of its systems, DeNofrio says the cost-basis-accounting capability is built as a standalone component, integrated with the core mainframe system. Because of the way the system is built, PFPC can offer it to mutual funds and shareholders who are not current PFPC clients or users.

"If the mutual-fund company has a transfer agent other than PFPC, our systems can take feeds from other (TAs) to make these calculations on their data," says Jim Nolan, who oversees business development for the PFPC transfer-agency group.