Securities Rules Change to Benefit Snowbirds

Fall 2000 CSANews Issue 36  |  Posted date : Mar 06, 2007.Back to list

Under existing U.S. Securities and Exchange Commission rules, it has been technically illegal for Canadian snowbirds in the U.S. to issue trading and investment instructions to their financial advisor or stockbroker back in Canada. This includes transactions affecting their RRSP/RRIF accounts and Canadian mutual funds, which a U.S. broker is clearly not capable of handling.

These regulations severely impacted on snowbirds, as many had to issue orders regarding their accounts prior to departure in the late fall, and had to leave their investments largely untouched, despite market changes. They could issue a sell order, but no purchase or active trades were permitted while in the United States.

This also adversely affected hundreds of thousands of retired Canadians who are now permanent U.S. residents. They could not access their RRSP/RRIF investments, and had to return to Canada to affect transactions. A prior S.E.C. and Ontario Securities Commission agreement has made it illegal for Canadian-based mutual fund companies to accept purchase orders from a U.S. operation, imposing severe fines and penalties if this agreement is violated.

The purpose of the restricted legislation was to protect U.S. brokers and ensure that they received the business, even though they could do nothing with RRSP/RRIF transactions.

Reason and common sense have now prevailed, especially in light of the opportunity for direct trading on the Internet. The S.E.C. has come full circle. However, there are still state regulations in place to impede these transactions. Florida and Nevada have followed the S.E.C. and made this practice legal for Canadian snowbirds, but Arizona, Texas, California and Hawaii have not, and the situation is still pending. Winter residents of these states may have to provide full discretionary consent to their brokers to be allowed to trade, something we would not recommend.

In addition, even in Florida and Nevada, your Canadian broker must have no office in the state and must be a member of a Canadian self-regulatory body such as the IDA (Investment Dealer's Association). A exclusively mutual fund dealer is currently not acceptable.

Anyone in Florida and Nevada dealing with Dundee Securities, the official financial planning agency of the CSA, will have no problems this winter with U.S. orders which they direct to their Canadian advisor, as Dundee is an IDA member.

We expect rule changes in Texas, Arizona and California within the next three to six months, to finally resolve this issue.