I thought I'd just drop a note and introduce myself. I'm an investment advisor in Canada of some 19 years experience and was dual licensed as a CDN and US Investment advisor for 9 years. A member brought my attention to this board.
I know that many cross border ex-pats on both sides of the border can find themselves in a quagmire, challenged to find out what their options are on the investment side (including RSP's and IRA's) when moving countries. I do not profess to be an expert on ALL the issues (candidly Nelsona seems to be a fountain of knowledge) but perhaps I can provide insight on the challenges one has and where to go to get them fixed - as much as one can. I have been actively involved in this problem since this Pandora's box was opened in late 1993.
Oftentimes I find that people perceive that it is the tax agencies that are the obstacle when it is in fact the securities regulators that represent the challenge.
Anyway, I’m just here to be a resource. For the moment I have kept my email address hidden as I'm not here to "solicit" clients.
Cross border investment challenges?!
Moderator: Mark T Serbinski CA CPA
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Rickerbucks
- Posts: 40
- Joined: Tue Oct 25, 2005 3:43 pm
Nelsona, feel free to edit, delete or refute. It's just what I understand of the issues and the solutions available.
To All:
So let’s clearly identify what the problem is. Both U.S. and Canadian securities regulators have the following fundamental rule.
When a client deals with the supplier of an investment product, the firm, the advisor and the product have to be “registered” in the given state or province that the client lives.
Effectively this means if you live in Texas, then the firm, the advisor and the products being recommended / purchased must in some way have registered in the state of Texas. The primary reason for this universal rule is so that the regulators in YOUR state wish to have power of censure over advisors dealing in their state and that investment products have in some way provided paperwork to the regulator. Fair enough really.
Although this rule has always been in place, it was not until 1993 when a major CDN brokerage firm applied to open an institutional trading desk in Boston in 1993 that they inadvertently opened up the can of worms. The MA state securities people became aware that a “CDN” firm was dealing with their residents and they involved the SEC and things started to get complicated. Until then, both CDN and US firms opened accounts without a pause for thought.
Initially ALL investment account were under the spotlight, both RSP and cash accounts. Starting in the mid ‘90’s most respectable bank and investment firms adopted a policy of 1. trading accounts closed. "Please move your money." Period. 2. RSP accounts. You can HOLD your existing holdings and you may SELL but you cannot reinvest.
From about 1995 to 2000 the CDN financial services industry (FI) lobbied the US authorities specifically with respect to RSP’s. It seemed unreasonable to force CDN ex-pats to liquidate and deregister RSP but at the same time it was not reasonable to take away their rights to invest. By late 2000 the SEC removed its objections and said ‘….you can trade RSP accounts as normal BUT you have to get the STATE regulators onside as the authority is also with them”. From 2000 to 2004, all but three states set up a process that allowed some type of process to allow CDN FI’s to deal with US residents on RSP accounts. (Virgina is one I know. Cannot remember the other two)
Having said that, not all firms WILL allow trading. Even today, I think you will find that most CDN chartered banks still have a lock down on RSP’s. However, most (but not all) investment firms (including the ones owned by the charter banks) have arranged to be able to work with clients. In addition, not all investment advisors - even at said firms -are able to open RSP’s but it is certainly a lot easier to find someone. As I say, most large full service firms have ‘legitimized’ this part of their business. I wish to re-state that not all firms, large or small, have invested in the compliance department to work with RSP accounts but it should be easier to find a US approved RSP advisor. In addition TD Waterhouse Discount Canada will open accounts. You CAN buy mutual funds. The SEC exemption applied to funds as well in RSP accoutns ONLY.
Trading accounts: Well the results are not as easy. It’s a lot more difficult to be able to maintain a trading account. There are a small number of firms that have a structure in place. BMO Nesbitt Burns can open accounts but they have a very narrow range of investment options. You can only buy “interlisted” stocks i.e. stocks that are listed on both NYSE and TSE. The good news is that they maintain accounts in $CDN. Canaccord is also up and running but I gather the accounts are maintained in $USD which somewhat defeats the purpose (although not entirely). I have heard that Raymond James in Canada is close but.... RBC has taken an interesting approach. IF the advisor has a discretionary portfolio license (not many do) then they open the account in Canada and everything is fine. The technicality is that the investment decision is being made by the advisor and NOT the client thus the “mind, body and soul” of the decision is being made in Canada. Yoo'll have to decide if that is an exceptable option.
Along the same logic, there are portfolio management companies – I know of Guardian Capital – that will open discretionary accounts but the minimums are larger – usually $250,000. If anyone knows of others feel free to add them to the list.
TD Waterhouse Discount USA has $CDN accounts and a team of traders that are focused exclusively on US residents that want to trade CDN stocks and hold the account in $CDN. If you are comfortable doing your own thing this is a great solution. They are poised to merge with Ameritrade and I have no idea if this will change anything. Of course TD stills owns 35% or so. *shrug*. As far as I know, they are the only “US” firm that also maintains $CDN accounts for US residents. Again, if anyone knows different, chime in.
Using a ‘fake’ address: DO NOT TRY to get around these challenges by using a ‘fake’ address. Although it may appear to solve the obstacles re: securities law (and a FI should not knowingly allow you to do it. If they DO, then run away as they don’t know what they are doing) you now start having the very real risk of the tax authorities questioning the situation. Once you become non-resident, there are withholding taxes that apply to ALL accounts. It makes no matter that it is an RSP. The CCRA will want its withholding on non-resident accounts. If you use a “CDN” address then they will come after you for the withholding tax that SHOULD have been withheld at source and was not.
The US perspective: IRA’s; So what about going in reverse? In recent months / years I have heard that when a US resident moves to Canada they have started getting calls from their US financial institution saying they can no longer trade. I guess the US side is now worried in the way the CDN side was 10 years ago. I do not know if the CDN regulators are making this an issue (I very much doubt it) but I can see why large US firms are just going to adopt a “…we don’t know and don’t care. It’s such a small part of our business lets just say NO”.
I do know TD Waterhouse DB USA has a policy that IF the IRA is with them when you move to Canada then everything is good and business as normal, but they will not open an IRA AFTER you have moved to Canada. So plan ahead. If you want to stay with your FI they set the portfolio up so that you can be Rip Van Winkel. Buy, Hold and Ignore.
Trading accounts: Moving your $USD stocks and bonds (NOT tax free muni’s) is no problem. In Canada it’s easy to open a $USD investment account and maintain your holdings. Mutual funds cannot be moved. It’s simply not possible to move mutual funds across the border. You have to just hold them, or sell them. This is also true going from Canada to the US. This is never going to change so don’t hold your breath.
So in summary, it certainly IS possible to have your RSP set up as normal. Trading accounts are more difficult. I think the best solutions probably boil down to two extremes, TD Discount or a fully managed portfolio.
Although possible to move IRA’s into RSP’s in Canada, it’s a pain. Can be done, but requires a good understanding of how. 99 /100 it’s probably best just to leave them in the US.
Hopefully this provides some insight on the issues. As I say, it’s a securities regulations issue, not a tax issue that represents the headache. I have tried to provide as much info as I can about what the CDN FI's are able / willing to do but if people personal experience can broaden the info above, I'd love to know about it.
To All:
So let’s clearly identify what the problem is. Both U.S. and Canadian securities regulators have the following fundamental rule.
When a client deals with the supplier of an investment product, the firm, the advisor and the product have to be “registered” in the given state or province that the client lives.
Effectively this means if you live in Texas, then the firm, the advisor and the products being recommended / purchased must in some way have registered in the state of Texas. The primary reason for this universal rule is so that the regulators in YOUR state wish to have power of censure over advisors dealing in their state and that investment products have in some way provided paperwork to the regulator. Fair enough really.
Although this rule has always been in place, it was not until 1993 when a major CDN brokerage firm applied to open an institutional trading desk in Boston in 1993 that they inadvertently opened up the can of worms. The MA state securities people became aware that a “CDN” firm was dealing with their residents and they involved the SEC and things started to get complicated. Until then, both CDN and US firms opened accounts without a pause for thought.
Initially ALL investment account were under the spotlight, both RSP and cash accounts. Starting in the mid ‘90’s most respectable bank and investment firms adopted a policy of 1. trading accounts closed. "Please move your money." Period. 2. RSP accounts. You can HOLD your existing holdings and you may SELL but you cannot reinvest.
From about 1995 to 2000 the CDN financial services industry (FI) lobbied the US authorities specifically with respect to RSP’s. It seemed unreasonable to force CDN ex-pats to liquidate and deregister RSP but at the same time it was not reasonable to take away their rights to invest. By late 2000 the SEC removed its objections and said ‘….you can trade RSP accounts as normal BUT you have to get the STATE regulators onside as the authority is also with them”. From 2000 to 2004, all but three states set up a process that allowed some type of process to allow CDN FI’s to deal with US residents on RSP accounts. (Virgina is one I know. Cannot remember the other two)
Having said that, not all firms WILL allow trading. Even today, I think you will find that most CDN chartered banks still have a lock down on RSP’s. However, most (but not all) investment firms (including the ones owned by the charter banks) have arranged to be able to work with clients. In addition, not all investment advisors - even at said firms -are able to open RSP’s but it is certainly a lot easier to find someone. As I say, most large full service firms have ‘legitimized’ this part of their business. I wish to re-state that not all firms, large or small, have invested in the compliance department to work with RSP accounts but it should be easier to find a US approved RSP advisor. In addition TD Waterhouse Discount Canada will open accounts. You CAN buy mutual funds. The SEC exemption applied to funds as well in RSP accoutns ONLY.
Trading accounts: Well the results are not as easy. It’s a lot more difficult to be able to maintain a trading account. There are a small number of firms that have a structure in place. BMO Nesbitt Burns can open accounts but they have a very narrow range of investment options. You can only buy “interlisted” stocks i.e. stocks that are listed on both NYSE and TSE. The good news is that they maintain accounts in $CDN. Canaccord is also up and running but I gather the accounts are maintained in $USD which somewhat defeats the purpose (although not entirely). I have heard that Raymond James in Canada is close but.... RBC has taken an interesting approach. IF the advisor has a discretionary portfolio license (not many do) then they open the account in Canada and everything is fine. The technicality is that the investment decision is being made by the advisor and NOT the client thus the “mind, body and soul” of the decision is being made in Canada. Yoo'll have to decide if that is an exceptable option.
Along the same logic, there are portfolio management companies – I know of Guardian Capital – that will open discretionary accounts but the minimums are larger – usually $250,000. If anyone knows of others feel free to add them to the list.
TD Waterhouse Discount USA has $CDN accounts and a team of traders that are focused exclusively on US residents that want to trade CDN stocks and hold the account in $CDN. If you are comfortable doing your own thing this is a great solution. They are poised to merge with Ameritrade and I have no idea if this will change anything. Of course TD stills owns 35% or so. *shrug*. As far as I know, they are the only “US” firm that also maintains $CDN accounts for US residents. Again, if anyone knows different, chime in.
Using a ‘fake’ address: DO NOT TRY to get around these challenges by using a ‘fake’ address. Although it may appear to solve the obstacles re: securities law (and a FI should not knowingly allow you to do it. If they DO, then run away as they don’t know what they are doing) you now start having the very real risk of the tax authorities questioning the situation. Once you become non-resident, there are withholding taxes that apply to ALL accounts. It makes no matter that it is an RSP. The CCRA will want its withholding on non-resident accounts. If you use a “CDN” address then they will come after you for the withholding tax that SHOULD have been withheld at source and was not.
The US perspective: IRA’s; So what about going in reverse? In recent months / years I have heard that when a US resident moves to Canada they have started getting calls from their US financial institution saying they can no longer trade. I guess the US side is now worried in the way the CDN side was 10 years ago. I do not know if the CDN regulators are making this an issue (I very much doubt it) but I can see why large US firms are just going to adopt a “…we don’t know and don’t care. It’s such a small part of our business lets just say NO”.
I do know TD Waterhouse DB USA has a policy that IF the IRA is with them when you move to Canada then everything is good and business as normal, but they will not open an IRA AFTER you have moved to Canada. So plan ahead. If you want to stay with your FI they set the portfolio up so that you can be Rip Van Winkel. Buy, Hold and Ignore.
Trading accounts: Moving your $USD stocks and bonds (NOT tax free muni’s) is no problem. In Canada it’s easy to open a $USD investment account and maintain your holdings. Mutual funds cannot be moved. It’s simply not possible to move mutual funds across the border. You have to just hold them, or sell them. This is also true going from Canada to the US. This is never going to change so don’t hold your breath.
So in summary, it certainly IS possible to have your RSP set up as normal. Trading accounts are more difficult. I think the best solutions probably boil down to two extremes, TD Discount or a fully managed portfolio.
Although possible to move IRA’s into RSP’s in Canada, it’s a pain. Can be done, but requires a good understanding of how. 99 /100 it’s probably best just to leave them in the US.
Hopefully this provides some insight on the issues. As I say, it’s a securities regulations issue, not a tax issue that represents the headache. I have tried to provide as much info as I can about what the CDN FI's are able / willing to do but if people personal experience can broaden the info above, I'd love to know about it.
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Rickerbucks
- Posts: 40
- Joined: Tue Oct 25, 2005 3:43 pm
Valid point. One of the bottlenecks that remains is the concept of "securities issued by prospectus". The SEC was prepared to exempt mutual funds - of course they are "issued by prospectus only" - but that exemption was NOT extended to securities. Again, this is unlikely to ever change.
Thus, as you mentioned, IPO's are not available (although they are of course the first day they start trading on the TSX) but mutual funds are OK. New issue bonds are also a problem except for "exempt issuers" which basically means government bonds only.
Thus, as you mentioned, IPO's are not available (although they are of course the first day they start trading on the TSX) but mutual funds are OK. New issue bonds are also a problem except for "exempt issuers" which basically means government bonds only.
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Rickerbucks
- Posts: 40
- Joined: Tue Oct 25, 2005 3:43 pm
I'm residing in Georgia, which certainly was a "No" state as recently as last year, I believe. However above thread caused me to check the IDA website which now lists Georgia as a "model 1" type state (info updated Jan 2005).
So I'm thinking that perhaps husband and I should attempt to move our RRSPs to self-directed plans. While Georgia was a "No" state there wasn't anything I could do about this anyway.
Now that I could actually do something, I need a refresher/update on the deal. Am I correct in thinking we can't manage our existing non self-directed plans? Is TDW our only option for opening self-directed plans?
So I'm thinking that perhaps husband and I should attempt to move our RRSPs to self-directed plans. While Georgia was a "No" state there wasn't anything I could do about this anyway.
Now that I could actually do something, I need a refresher/update on the deal. Am I correct in thinking we can't manage our existing non self-directed plans? Is TDW our only option for opening self-directed plans?
The first thing to do is to check with your current RRSP manager.
Even if GA is a 'go' state now, there is no requirement that your manager become compliant with that state. NationalBank for example, when they bought altamira (I had a active self-directed account -- different than just having an RRSP account -- with them which was opened when MO became a yes state) flatly said: "Game Over. If you don't live in Florida, your account has to be closed." They could have remained active tin the other 45 yes states at that time, but made a corporate decision not to. RBC has made a similar decision, but allowing for a few more states.
Once you have found that your current firm is not going to allow trades, then, since GA is on the list, you are free to find ANY broker that will deal with.
Trouble is, most will not begin a new relationship with a current US resident -- no discount brokerage except TDW will do this presently.
When/if you do contact TDW, it is very important that you contact the division that deals with US clients, otherwise, buy going thru the main switchboard, you will be met with silence/choking/denials etc. They literally freak out when you tell them you are in the US.
<i>nelsona non grata... and non pro</i>
Even if GA is a 'go' state now, there is no requirement that your manager become compliant with that state. NationalBank for example, when they bought altamira (I had a active self-directed account -- different than just having an RRSP account -- with them which was opened when MO became a yes state) flatly said: "Game Over. If you don't live in Florida, your account has to be closed." They could have remained active tin the other 45 yes states at that time, but made a corporate decision not to. RBC has made a similar decision, but allowing for a few more states.
Once you have found that your current firm is not going to allow trades, then, since GA is on the list, you are free to find ANY broker that will deal with.
Trouble is, most will not begin a new relationship with a current US resident -- no discount brokerage except TDW will do this presently.
When/if you do contact TDW, it is very important that you contact the division that deals with US clients, otherwise, buy going thru the main switchboard, you will be met with silence/choking/denials etc. They literally freak out when you tell them you are in the US.
<i>nelsona non grata... and non pro</i>
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Rickerbucks
- Posts: 40
- Joined: Tue Oct 25, 2005 3:43 pm
As nelsona suggests, the first thing is to establish what type of investment actively you want to do. Self-directed at a discount brokerage, mutual fund portfolios with an advisor, or direct ownership of stocks, bonds, funds etc with the help of an advisor.
Once you have that in mind, contact your existing RSP supplier and ask them if they can help. If the answer is 'no', then you need to find another supplier. However, even then it can be a grey area to a certain degree. What do I mean?
Well, some of the state regulators have a phrase in the approvals that says something like "....a CDN financial institution is able to continue business with an existing RSP client...". Problem is that phrase is interpreted by some CDN FI's that they can only deal with EXISTING RSP clients of the firm. In other words, perhaps a Bank of Montreal bank client with an RSP can be referred to a Nesbitt Burns Investment Advisor (assuming the IA themselves has obtained their license - not all will be) to trade their RSP, but Nesbitt Burns may have a policy that they will not except an account from outside the BMO system. You may be dealing at some credit union that says, 'soory we have no option for you' but then you go to Mega bank that DOES deal with US RSP clients but only EXISTING clients. They will not open NEW accounts.
Different firms will have different policies. I know TD will specifically look up the state by state rules to try and discern if the account has to be "...an existing account of the firm..." or if there is enough wiggle room to open an account and transfer from another firm. Another phrase in these rules is, "...so long as the firm did not solicit the RSP account..." they can open an account. Clearly the Discount firm only has clients that come to them, but as you can see the whole issue remains a dogs breakfast.
I believe that the INTENT of the state rules is to allow any and all CDN FI's to open and transfer RSP accounts, but the intrepretation of the sentance structure of these rules have the CDN FI's err on the side of caution.
If you remain frustrated in finding a solution to specifically what you want to do, come back here and let us know and perhaps Nelsona and I can point you in some directions.
*****************************
It's not that I can't SPELL, it's that I can't TYPE
Once you have that in mind, contact your existing RSP supplier and ask them if they can help. If the answer is 'no', then you need to find another supplier. However, even then it can be a grey area to a certain degree. What do I mean?
Well, some of the state regulators have a phrase in the approvals that says something like "....a CDN financial institution is able to continue business with an existing RSP client...". Problem is that phrase is interpreted by some CDN FI's that they can only deal with EXISTING RSP clients of the firm. In other words, perhaps a Bank of Montreal bank client with an RSP can be referred to a Nesbitt Burns Investment Advisor (assuming the IA themselves has obtained their license - not all will be) to trade their RSP, but Nesbitt Burns may have a policy that they will not except an account from outside the BMO system. You may be dealing at some credit union that says, 'soory we have no option for you' but then you go to Mega bank that DOES deal with US RSP clients but only EXISTING clients. They will not open NEW accounts.
Different firms will have different policies. I know TD will specifically look up the state by state rules to try and discern if the account has to be "...an existing account of the firm..." or if there is enough wiggle room to open an account and transfer from another firm. Another phrase in these rules is, "...so long as the firm did not solicit the RSP account..." they can open an account. Clearly the Discount firm only has clients that come to them, but as you can see the whole issue remains a dogs breakfast.
I believe that the INTENT of the state rules is to allow any and all CDN FI's to open and transfer RSP accounts, but the intrepretation of the sentance structure of these rules have the CDN FI's err on the side of caution.
If you remain frustrated in finding a solution to specifically what you want to do, come back here and let us know and perhaps Nelsona and I can point you in some directions.
*****************************
It's not that I can't SPELL, it's that I can't TYPE
IFIC came up with guidelines years ago, as it became clear that even when a state became 'eligible' for active trading, many firms decided not to allow trading for theiur existing customers.
http://www.ific.ca/pdf/Series4_Topic2_v ... st2002.PDF
Basically, it suggested that their mwemebrs could take on NEW clients if their current broker/manager would not allow trading.
As Shaun points out however, most still will not open an account with out a bona fide pre-existing relationship. The intent was to prevent brokers from soliciting US clients, but this has erroneously been interpreted by most houses (with the notable and laudible exception of TDW)a s a restriction on accepting new clients.
Nesbitt-Burns, for example would not accept me as a client even though I had a BMO bank account AND a "BMO Funds" RRSP account.
<i>nelsona non grata... and non pro</i>
http://www.ific.ca/pdf/Series4_Topic2_v ... st2002.PDF
Basically, it suggested that their mwemebrs could take on NEW clients if their current broker/manager would not allow trading.
As Shaun points out however, most still will not open an account with out a bona fide pre-existing relationship. The intent was to prevent brokers from soliciting US clients, but this has erroneously been interpreted by most houses (with the notable and laudible exception of TDW)a s a restriction on accepting new clients.
Nesbitt-Burns, for example would not accept me as a client even though I had a BMO bank account AND a "BMO Funds" RRSP account.
<i>nelsona non grata... and non pro</i>
"TD Waterhouse Discount USA has $CDN accounts and a team of traders that are focused exclusively on US residents that want to trade CDN stocks and hold the account in $CDN. If you are comfortable doing your own thing this is a great solution. They are poised to merge with Ameritrade and I have no idea if this will change anything. Of course TD stills owns 35% or so. *shrug*. As far as I know, they are the only “US” firm that also maintains $CDN accounts for US residents. Again, if anyone knows different, chime in."
Can anyone confirm this (that TDW allows $C accounts)? Thanks.
Can anyone confirm this (that TDW allows $C accounts)? Thanks.
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Rickerbucks
- Posts: 40
- Joined: Tue Oct 25, 2005 3:43 pm
TD Waterhouse Discount USA
Call 800-934-4448
Option 8
extension 60000
Monday - Friday 9 - 5 EST
Ask for the "Canadian Trading Desk" and take it from there.
Thats the problem about providing a small unique service within a giant machine. Nobody knows they are there.
If you have any problems or things have changed, come back and let us know. I have not spoken to them for about two months and with the Ameritrade merger, who knows.
*****************************
It's not that I can't SPELL, it's that I can't TYPE
Call 800-934-4448
Option 8
extension 60000
Monday - Friday 9 - 5 EST
Ask for the "Canadian Trading Desk" and take it from there.
Thats the problem about providing a small unique service within a giant machine. Nobody knows they are there.
If you have any problems or things have changed, come back and let us know. I have not spoken to them for about two months and with the Ameritrade merger, who knows.
*****************************
It's not that I can't SPELL, it's that I can't TYPE
Thanks Ricker. After my posts yesterday I called TD Canada to see if they could help. Rep knew his stuff, and put me through to someone in the US who then put me through to someone at the Canadian trading desk. They still allow the accounts. I have started the process and should be set up in a few days.
I had a TD Waterhouse RRSP before I moved to the US in 2000. I've been able to trade freely in Cdn and US stocks and Cdn mutual funds. The only restriction is they won't permit online trades for US residents, though they'll give you the online commission for phone trades.
I asked a rep once about this and he said it was because 3 states required a US-licensed broker. I'm in IL (not one of the three) so asked why I couldn't trade online. Apparently WebBroker just has a blanket restriction for US residents. It never seemed to occur to their programmers to restrict by <i>state </i> instead of country.
I asked a rep once about this and he said it was because 3 states required a US-licensed broker. I'm in IL (not one of the three) so asked why I couldn't trade online. Apparently WebBroker just has a blanket restriction for US residents. It never seemed to occur to their programmers to restrict by <i>state </i> instead of country.