# Order rejected --> Registered account vs Over-the-counter market



## CB1021 (Mar 28, 2011)

I tried to be OTC:LEXG (52% gain today)....but I got this message on RBC direct investing:

_*We were unable to process this order as the selected security cannot be purchased in a registered account.

Most securities that trade on the Canadian over-the-counter Market or the NASDAQ Bulletin Board are not eligible for purchase in a registered account.
*_
Can somebody explain this to me from a theoretical standpoint and also any practical standpoint, for the purpose of furthering my knowledge on the subject?

If I open up a non-registered cash direct investing account, then I'm good to go??


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## kcowan (Jul 1, 2010)

OTC and PNK are highly speculative stocks. They are not deemed suitable for retirement savings accounts. Because they don't offer dividends, they are also a bad choice for a tax protected account because the losses cannot be claimed. Also any gains are taxed at 100% rather than 50%.


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## hypo (Aug 11, 2010)

> Also any gains are taxed at 100% rather than 50%.


??? 

So if my stock goes from 1$-2$ and I make 200$ in profit off the rise, I will be taxed 200$?

???


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## OptsyEagle (Nov 29, 2009)

You will be taxed on the gain of $200 when you remove it from your RRSP.

Your broker did you a big favour. CRA has rules and if the broker had of filled your order you would have been charged a penalty of 1% per month until that security was removed from the RRSP. You need to be careful with this stuff.

As for why it is not allowed in an RRSP. Only the government can answer that question. They make these rules.


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## humble_pie (Jun 7, 2009)

apart from the minister of finance having done all canadians a favour by pronouncing all OB & PK stocks off-limits for registered plans, i am left wondering about the recent explosion of truly vile flim-flam touts on this message forum. CCME, INT, then OCZ, now LEXG. Hype, zoom, blowout, scandal, crash.

how can anybody fly over lexg's website & keep a straight face. These guys are dyed in the wool promoters. Company owns a bunch of claims in alberta & south america (maybe) where there are said to be mineral rich brines including lithium.

brines, they are claiming ? i'd have greater confidence in carverman's wines.


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## humble_pie (Jun 7, 2009)

didn't take long. LEXG plummeted 54.40% to 4.84 this morning.

just another friday fraud. How come there are so many reaching this forum lately.


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## cardhu (May 26, 2009)

It is not so much a matter that OTC and PNK shares are speculative or unsuitable ... they certainly are speculative, and they may very well be unsuitable, but that’s not the reason RBC blocked your trade ... it is merely that they are not  qualified investments for an RRSP. 

There is no 1% per month penalty for buying non-qualified investments ... if RBC had allowed your transaction to proceed, the value of the transaction would be added to your income for the year ... same effect as if you had withdrawn the money. 

It is a fallacy that losses enjoy better tax treatment in a non-reg account than in an RRSP ... Nobody wants to sustain losses, but if you must have some losing positions among a varied portfolio, it is better to have them in the RRSP portfolio than in non-reg ... the offsetting of losses against gains works more advantageously inside the RRSP, than in the taxable account. 

It is also a fallacy that capital gains are taxed more heavily in an RRSP vs non-reg account ... capital gains are taxed in a non-reg account, but on an apples-to-apples basis can enjoy effective tax rates of 0% or less, in an RRSP. For most people, an RRSP (or TFSA) is the right place to hold [qualified] equities, as long as they have contribution room.


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## OptsyEagle (Nov 29, 2009)

cardhu said:


> There is no 1% per month penalty for buying non-qualified investments ... if RBC had allowed your transaction to proceed, the value of the transaction would be added to your income for the year ... same effect as if you had withdrawn the money.


There is and there isn't a 1% penalty. 

In this case you are correct, the acquired property value would become taxable income in the year acquired. Where my recollection came from was property that was qualified and later became unqualified. That would render a 1% per month penalty. I think Nortel might have went through this but if not, many companies have who once prospered and then after falling on hard times was transferred to the pink sheets.


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