New regulations laid out in the Emergency Economic Stabilization Act of 2008 that are due to take effect in January 2011 may present independent RIAs and broker/dealers with significant business challenges. Fidelity Investments has rolled out a series of resources, including a white paper titled “Cost Basis Regulations and Your Firm,” to help its clients prepare for the changes. Fidelity is also presenting regional client events, Webinars, fact sheets, abd one-on-one consultations to educate clients about the requirements.
According to a Fidelity statement, the regulations, which will be phased in over three years, require broker/dealers to report adjusted cost basis for “specific securities” on the annual IRS Form 1099-B. They will be required to indicate whether the holding periods of the disposed securities were short term or long term. Other provisions in the regulations that are relevant to RIAs, broker/dealers and their end clients include how to handle cost basis for transfer of assets, short sales, wash sales and corporate actions.