are your interlisted dividends at risk for FX fees? here are more fax ma'am
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just upthread i've posted about the New Reality with cross-currency dividends & about their Recent History, but here we go again.
keep in mind that brokers receive one bulk dividend payment from the CDS system, in one currency or the other currency. Brokers do *not* receive dividend bulks in 2 currencies & broker clients may *not* elect to receive in the currency of their choice.
what has been happening these past few years - oh, maybe 5 or 6 years, ever since investors kicked up a fuss over broker FX fees on canadian dividends in this forum - is a low-key, ongoing conversation among brokers, the issuing companies who are canadian interlisted stocks & the IIROC, which has been attempting to deal with investor complaints.
Brokers Blame the Companies
the brokers took the position that it was their right to charge FX fees on incoming dividends where applicable. Brokers pointed fingers at the dividend-issuing interlisted canadian companies & said the Problem was the Companies' Fault. The companies - said the brokers - were the parties who had decided to issue dividends in USD instead of traditional CAD in the first place. Therefore the companies - said the brokers - should be the ones to clean up their own mess.
keep in mind that the IIROC is actually the brokers acting in concert. Finance is a self-regulated industry. So in this case, the IIROC favoured its own members, who are the brokers.
now starts the New Reality. The IIROC keeps encouraging companies that pay USD dividends to Be Nice to Street Shareholders.
New Dividend Reality
gradually, in very recent years, some of the companies have indeed tried to do better for retail clients like ourselves, whose shares are held in street form at brokers. These companies thought that they should convert their USD dividends to CAD themselves, in their own treasury departments, at spot rates, at their own expense, before sending the bulk dividend amounts out to brokers.
the question was, how would these companies decide which broker customers wanted which currency?
Chaos Begins
at this point, severe misinformation entered the picture. The companies themselves claim that CDS system representatives and/or certain transfer agents have informed them that certain brokers wish to receive CAD dividends because (the misinformation says) these brokers have surveyed their clients & their clients prefer CAD.
the same CDS system representives and/or transfer agents are said to have informed the companies that certain other brokers have surveyed their clients & those other brokers desire USD divvies.
thus we investors end up with situations like brookfield (BAM.A) divvies are paid to TDDI in CAD but paid to other brokers such as BMO in USD. Similar story with Potash.
bref, all is chaos. Nobody knows what's happening.
As of Today
i find myself wondering how on earth so many people could be hallucinating that discount brokers lovingly & solicitously maintain expensive data bases indicating their clients' currency desires for each & every precious little dividend they are supposed to receive?
the fact is the brokers don't give an essaitcheyetee about the currency of their clients' dividends. The reality is that brokers grab each bulk dividend payment sent to them from a company's treasury department via the CDS system & process it immediately. Brokers ruthlessly apply FX fees to clients whose destination accounts are not in the same currency as the bulk dividend payment. Brokers promptly distribute a pro-rated post-applicable-fee dividend amount into each client's account. The entire operation takes only a few hours.
only a few years ago, scribes like myself who worked to expose the above procedure, could safely suggest that investors who wished to avoid FX fees on dividends should keep those shares in the currency account of the dividend itself.
but no longer. Nowadays that rule is bye-bye. Gradually, as the IIROC exhorts its members to Act Nice to Shareholders, more & more companies will be deciding to do what brookfield & potash have done, which is convert their dividends themselves at head office.
a huge problem arises today because A) brokers don't know what is going on & B) investors themselves don't know what is going on either.
do the companies announce changes to their dividend policy via public news releases? no they do not.
do their websites state the new facts? no they do not.
are broker call centres trained to handle this level of tricky, detailed information? no they are not.
how can investors find out what is happening with their dividends at any of the 25-30 canadian companies that pay USD dividends? chaotic as it may sound, a good place for decent information is a forum like this one. Pick your sources carefully, though.
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