# Self-Directed RRSP Rules



## 50invester (Feb 10, 2010)

Hello: I am a newbie invester at 50 (better late than never). I have just opened a new Self-Directed RRSP account through Questrade. I am going to start off buying some ETF's ... have not decided which ones yet. I was visiting the CRA site to try and find out what investments are eligible for RRSP accounts. It states on the CRA site that 'securities cannot be held in your own name' (see attached link). I do not know what the heck this means. Can anyone please provide an answer.

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/cntrbtng/slfdrctd-eng.html

Also, I understand that many foreign investments are now allowed, but how can you be sure which ones can be held in your RRSP.

Any help would be greatly appreciated.


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## Four Pillars (Apr 5, 2009)

I don't think you can buy anything through a discount broker that wouldn't be allowed in the RRSP (although there might be exceptions).

I believe that rule applies to physical goods - ie you can't include antique cars, art etc.

If you are planning to buy etfs, stocks or mutual funds then you should be fine.


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## Robillard (Apr 11, 2009)

'securities cannot be held in your own name'

As it refers to "self-directed RRSPs", this phrase sets out the difference between this type of account and an "individual RRSP". An individual RRSP account is an account that one holds with a fund company, bank or other financial institution. The only things that can be held in an individual RRSP are the investments offered by the bank/fund company. In industry parlance, an individual RRSP account is known as a "client name" RRSP account. As I understand it, this is because the owner of the account is the legal owner of the securities held in the account. 

By comparison, a "self-directed RRSP" is an RRSP account held at any broker (it doesn't need to be a discount broker). The broker lets you buy and hold a myriad of securities that may or may not be provided by or managed by them or their related companies, subject to certain restrictions. A self-directed RRSP gives the investor a lot more flexibility to hold investments since they are not restricted to those that are offered by the broker's company. In industry parlance, a self-directed RRSP is referred to as a "nominee" RRSP account. I believe that this is because the registration on any securities held in the account is that of the broker, and not the beneficial owner. Essentially the account holder nominates the broker to purchase and hold securities in trust for them.

Let me try to clear this up with an example. Suppose I have a self-directed RRSP. I direct my broker to purchase mutual funds. Assuming that this is the first time that I have purchased funds with this company through my self-directed RRSP, to administer this, the fund company opens a new account on their system in the broker's name. My name and brokerage account number are referenced on their end, but according to their records, the legal owner of those fund units is the brokerage, not me. 

I know that this does not clarify what securities can be held in a self-directed RRSP, but I think it explains what the CRA's meaning.


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## 50invester (Feb 10, 2010)

*Self Directed RRSP*

First off, thanks to all who responded to my questions .... greatly appreciated. I am still however, a bit confused (not suprisingly). I somewhat understand the statement 'Essentially the account holder nominates the broker to purchase and hold securities in trust for them'. I don't fully understand the 'why', but I know that this legal mumbo jumbo. Why should you not have a stock in your name ... what is this stock being held in trust for? Also, where you state 'the legal owner of those fund units is the brokerage, not me', well this is really confusing. If this is true, then how does this affect me when I want to redeem any stock, fund, bond, etc. from the account. How can the broker own the security when I made the purchase with my money? I would like to start trading but would like to fuuly understand this and make sure that this legal stuff does not have any negative consequences after I begin making purchases. 

Thanks again.


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## Robillard (Apr 11, 2009)

50invester,

I'm sorry if my response was confusing.

In general, a self-directed RRSP account can hold many types of securities, including GICs, corporate shares, income trust units, bonds, mutual fund units, and labour-sponsored fund shares. I'm not sure if options and warrants can be held in an RRSP, but it is my understanding that futures contracts and partnership interests are ineligible. Also, a self-directed RRSP account can also hold mortgages and the shares of closely-held private companies, subject to certain restrictions. 

The implication of the CRA's statement relates to the administration of self-directed RRSPs, not the types of securities that can be held in them. It also has little bearing on you as the account holder. "Being held in trust for you" by the brokerage is, for all intents and purposes, the same as being owned by you. All brokerage accounts function like this, regardless of whether they are self-directed RRSP accounts or not. Having your nominee (the broker) as the registered holder of the securities generally simplifies things for you as the investor. Consider this example:

Suppose you as an investor own units of five different mutual funds with five different fund companies (and have five different Individual RRSP accounts). Each fund company will issue regular statements to you, and issue separate contribution receipts for any contributions to those accounts during the year. If instead you open one self-directed RRSP account, and direct your broker to purchase units of each of the five mutual funds, you will only receive one set of statements (from your broker), and only receive one contribution receipt for any funds contributed to the self-directed RRSP account. When you have mutual fund units in a self-directed RRSP, your relationship is with your broker, and not with the fund companies.


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## 50invester (Feb 10, 2010)

Yes, this makes more sense now. I also spoke with someone at Questrade and theygenerally said the same thing. Thanks again. Great Fourm with great info!


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## rookie (Mar 19, 2010)

*invest in private companies?*

i am a total rookie and my question is related to this post. so i am posting here rather than creating a new thread. all help is appreciated.

My friend is starting a private business in a foreign country and i would like to invest in it. can this investment be considered for my rrsp? rather can i invest in this company with my rrsp money?


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