Tasking For Fatca
Maybe this will jinx it, but Fatca (the Foreign Account Tax Compliance Act) is shaping up to be one of the few pieces of major US financial industry regulatory legislation that won't end up being gutted or significantly eroded before it actually gets a chance to take effect.
Fatca is part of the Hire Act of 2010 (Hiring Incentives to Restore Employment), also known as the Tax Cut Act of 2010, sponsored by US Senators Schumer (D-NY), Hatch (R-Utah) and Lincoln (D-Ark.). The regulation concerns means to prevent tax evasion by US citizens with foreign accounts and foreign firms operating in the US. The US Internal Revenue Service, which will be registering non-US financial firms for compliance with Fatca, did not publish draft regulations before December 31, as was expected. Fatca is set to take effect on January 1, 2013, and apply to transactions on and after that date. Also, firms must register by June 30, 2013 to avoid penalties when withholding starts in 2014.
Even with a slight delay (so far) in IRS code for the regulation, the law is unlikely to be derailed by political and election season considerations – as it might have if it had taken effect this month or at any point before November 6. Then, there may have been pressure to postpone it or change it through how Fatca was or was not implemented, but because the effective date is just after the election, that has been avoided, it appears.
So what does all this mean for the reference data space? In short, there will be a lot of work to do to prepare for Fatca compliance, including development or purchase of new systems. Corporate actions processing, in particular, is a function that will require systems changes due to Fatca compliance. The extension of the cost-basis accounting method to corporate actions now required by the IRS is going hand in hand with Fatca to increase the complexity of corporate actions processing, particularly in handling information, assessments, analysis and controls, as Deborah Culhane, chief operating officer of Fidelity ActionsXchange, relates.
There are still few service providers out there with offerings to address this growing concern, as Culhane and colleagues from other firms are saying. Tax information services reporting company GlobeTax has been making clients and the industry aware of what the implications of Fatca are for corporate actions processing. Such educational efforts are happening, according to Ian Davidson, EMEA product head, electronic markets, Citi, but solutions are not yet apparent, he says.
Even though Fatca taking effect may still seem like a long way off, there will be a lot to watch for in the meantime, to see how the industry and its providers will develop ways to handle the processing complexities created by the regulation.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@waterstechnology.com or view our subscription options here: http://subscriptions.waterstechnology.com/subscribe
You are currently unable to print this content. Please contact info@waterstechnology.com to find out more.
You are currently unable to copy this content. Please contact info@waterstechnology.com to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@waterstechnology.com
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@waterstechnology.com
More on Regulation
DSB says industry is ready to meet UPI mandate ahead of deadline
The Unique Product Identifier will be required for certain OTC derivatives in the EU at the end of April, following US adoption in January.
‘Very careful thought’: T+1 will introduce costs, complexities for ETF traders
When the US moves to T+1 at the end of May 2024, firms trading ETFs will need to automate their workflows as much as possible to avoid "settlement misalignment" and additional costs.
Court case probes open-source licenses as movement stands at crossroads
The Software Freedom Conservancy’s lawsuit against TV-maker Vizio begins trial in California, raising questions about open-source licenses and the risks posed by adhering to them.
Waters Wavelength Podcast: Countdown to T+1
DTCC’s Val Wotton joins the podcast this week to discuss the impending move to T+1 in the US.
Consolidated tape hopefuls gear up for uncertain tender process
The bond tapes in the UK and EU are on track to be authorized in 2025. Prospective bidders for the role of provider must choose where to focus their efforts in anticipation of more regulatory clarity on the tender process.
Fighting FAIRR: Inside the bill aiming to keep AI and algos honest
The Financial Artificial Intelligence Risk Reduction Act seeks to fix a market abuse loophole by declaring that AI algorithms do not have brains.
Waters Wrap: The rise of AI washing… and regulation washing?
The SEC recently levied fines against two investment advisors over “AI washing”. Anthony takes issue with the announcement.
Prepare now for the inevitable: T+1 isn’t just a US challenge
The DTCC’s Val Wotton believes that firms around the globe should view North America’s move to T+1 as an opportunity—because it’s inevitable.
Most read
- Sell-Side Technology Awards 2024: All the winners
- Systematic tools gain favor in fixed income
- Sell-Side Technology Awards 2024: Best sell-side front-office platform—Bloomberg