ATTENTION CANADIAN TRADERS:
Cdn RRSP/RRIF accounts & OTCBB Securities
This from a post on RB:
Just an FYI..I recall seeing some discussion in the past about holding OTCBB securities in registered accounts. At the time I posted some information. Here is something that I received that talks about the issue in more detail. I hope this helps out everyone in Canada who had some questions on the issue. My apologies to the US folks on the board as obviously this does not apply to you.
Non-qualified Investments: Over-the-counter Bulletin Board Securities
It has recently come to the attention of the Canada Custom & Revenue Agency (CCRA) that a number of registered client accounts (i.e. RRSP, LRSP, LIRA, PRSP, RRIF, LRIF, LIF, or RESP) are currently holding non-qualified investments under the federal Income Tax Regulations. This is an industry problem and appears to be the case at every IDA member firm. The actions on the part of investors, as well as the investment industry, were not intended to circumvent the qualified investment rules, but rather occurred through inadvertence.
The particular non-qualified securities in questions are from the:
· Nasdaq Stock Market "OTC Bulletin Board"
· Quotation service operated by Pink Sheets LLC (i.e. "Pink Sheets", "Yellow Sheets")
In response to discussions with the Investment Dealers Association of Canada, the Federal Department of Finance has agreed to temporarily suspend the normally adverse treatment of such investments provided that clients take the following actions:
Ø Prior to January 1, 2002, clients are responsible for removing all US OTC Securities held in their registered account (holdings as of August 31, 2000). There are two ways in which your client can remove the US OTC Securities from their registered account:
· Sell the holding; or
· Swap the US OTC Security from a client’s registered account to a personal account in exchange for cash or qualified investment(s).
Please note: there is a possibility that some of these US OTC Securities may become qualified prior to January 1st 2002 by obtaining a listing on a prescribed exchange.
Ø On or after September 1, 2000, new or additional US OTC Securities may not be purchased for holding in your client’s registered accounts.
IMPACT:
Failure to remove the US OTC Securities held in a registered account by January 1, 2002, will subject your clients to an income tax inclusion for tax purposes equal to the original cost of the US OTC Security. In addition, all non-qualified holdings are subject to a 1% per month penalty on the cost amount of the shares.
FOR MORE INFORMATION:
The following Internet link will provide you with the CCRA Release entitled "Eligibility of Over-The-Counter Shares for RRSPs and RRIFs": ccra-adrc.gc.ca |
