BIRD TALK

Dear Bird Talk,

I’m finding out much to my chagrin, that it is illegal for Value Line, an arm of the RBC and with whom I have my portfolio, to allow me to trade whilst I am in Florida, which is for six months.

Finding this out now after contributing to Value Line, a good but expensive advisory agency, is quite upsetting as the expensive Value Line information is absolutely unusable to me until my return to Canada.

After numerous conversations via telephone with the Royal, the CSA and the Canadian government, I cannot

get a simple answer to my questions.

Is the Royal interpreting the law correctly?
Is the Royal refusing to buy a licence, for some reason, that would allow them to trade in Florida?

As well, of course, I think it would be prudent to let all snowbirds know the outcome of your findings if you elect to follow up on this issue.

Ron Young

Response:
According to the SEC, OSC and related Securities Acts, a firm must maintain valid registration with local self-regulatory organizations in order to accept and place any securities-related trades where the investor is present.

However, exceptions to the rule exist. In June 2000, the Securities and Exchange Commission of the United States passed a law known as the “Snowbird Rule.” The Snowbird Rule, however, is particular and only applies to Canadian Registered Retirement Savings Plan (RRSP) accounts and Registered Income Fund (RIF) accounts, or “Self-Directed Tax-Advantaged Plans.” This rule provides relief for Canadian investment firms by waiving the registration requirement imposed by U.S. securities commissions when conducting transactions in a Canadian RRSP or RIF account while the account-holder is resident or “temporarily present” in the U.S.

How does this affect snowbirds and other Canadian travellers? Well, as a Canadian with an RRSP or RIF account at a Canadian securities brokerage firm, it allows that firm to accept and place trades only within your registered accounts when you are on vacation or residing in the United States. This rule does not apply to regular trading or investment accounts. Canadian firms not registered to trade securities in the U.S. jurisdiction in which the Canadian account-holder is vacationing or residing are prohibited from accepting and placing trades within regular investment accounts. Only in registered accounts can this be done.

So, if you are a snowbird and have a Registered Retirement investment account with a Canadian investment firm, it is fully legal for both the firm and yourself to make transactions while you are in the U.S. Should you have a regular trading account with a Canadian investment firm and wish to make transactions while travelling, you may want to give them a call and inquire if they are registered with the securities commission jurisdiction to which you are headed.

A call to the Securities and Exchange Commission of the U.S. can also verify registrations of Canadian firms.

While we cannot comment specifically on your situation, we believe that the above provides insight into the legality of the trades you place while in the United States.

To address your second question, registration requirements in the financial industry are somewhat stringent, time-con

suming, red-taped and costly, especially in the event that the firm seeking registration is a foreign company. These restrictions and costs may be high enough so as to negate the benefits of registration. These are topics best discussed with your financial institution.