# Canadian-US interlisted stocks



## noviceinvestor (Jan 7, 2013)

Firstly, I wish all CMF members a Merry Christmas!

I bought Brookfield Asset Management (TSX:BAM.A) around late September as a long-term buy and hold in my taxable account. I have read somewhere on this forum that it is best to move holdings that pay USD distributions to the US account to avoid my brokerage (TD Waterhouse) reducing the distribution due to FX cost. Couple questions:

1) To move this security to the US side, do I just call TDW to journal it over? Is there any commission involved?
2) If I decide to sell the security, would I calculate the ACB based on the noon rate at the purchase (trade) date?
3) I understand that, even though the security is on the US account, it would still be eligible for the dividend tax credit. Would the T5 capture this dividend for income tax purposes?
4) I have made a habit in the past year to track my dividend received in Canadian dollar. If I were to continue this tracking, would I convert the dividend to Canadian dollar on the dividend's date of settlement using the noon rate of that day?


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## GoldStone (Mar 6, 2011)

BAM pays dividends in two currencies. By default, Canadian shareholders are paid in CAD. US shareholders are paid in USD. 

Moving your shares to the US side won't change the currency of the dividends. BAM will continue to pay you in CAD. If you move the shares to the US side, TD will convert the dividends from CAD to USD at their own, unfavourable rate. You will lose about 1.75% on each conversion.

As a Canadian shareholder, you can instruct BAM to pay your dividends in USD. To be able to do that, you have to register the shares in your own name (~$55 fee at TD). You can't make this election if you own shares in street name.


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## noviceinvestor (Jan 7, 2013)

Thanks Goldstone. I also have AGU in my portfolio. Pretty sure that pays in USD, which is then converted to CAD by the brokerage. So I'm still wondering the same thing as my original post.


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## GoldStone (Mar 6, 2011)

AGU has the same policy as BAM. Canadian residents get paid in CAD. See this:

http://www.financialwisdomforum.org/forum/viewtopic.php?t=117861

But to answer your questions in general:

1. Yes, you call to journal. It's free.
2. You do tax calculations in CAD. If you sell a stock on the US side, you convert the proceeds back to CAD. Use Bank of Canada rate on the trade date. Some people use the rate on the settlement date. Traders who do hundreds of transactions use average exchange rate for the year. The important part is to be consistent about it. Pick one method and stick to it.
3. Yes.
4. It's your own tracking. You can do whatever makes the most sense to you.


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## atrp2biz (Sep 22, 2010)

Hmmm...I get AGU dividends in USD equal to the declaration.


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## GoldStone (Mar 6, 2011)

My AGU info is second-hand. I don't own it.

But BAM info is definitely correct. I own it. At some point, I journalled it to the US sub-account, hoping to collect USD dividends. I got less than declared. TD dinged me on the conversion. I called and asked for an explanation. Post #2 is what they told me.


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## GoldStone (Mar 6, 2011)

atrp2biz, who is your broker? If your broker does the conversion at the mid-market rate, you would get very close to the declaration, despite the round trip from USD to CAD to USD.


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## atrp2biz (Sep 22, 2010)

I'm with BMOIL. I've received $0.875 for the past three dividends in my USD account.


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## humble_pie (Jun 7, 2009)

GoldStone said:


> My AGU info is second-hand. I don't own it.
> 
> But BAM info is definitely correct. I own it. As some point, I journalled it to the US sub-account, hoping to collect USD dividends. I got less than declared. TD dinged me on the conversion. I called and asked for an explanation. Post #2 is what they told me.



this i believe may be a TD phenomenon only. 

one thing is for sure. Various journos the past few years have written enough about canadian-companies-paying-USD dividends plus brokers' FX fees on the same that enough investors have complained to the IIROC.

the IIROC, in turn, has encouraged both brokers & issuing companies to clean up their act. AFAIK there are no regulations yet, brokers & companies are simply being encouraged to make their best efforts.

but BAM has always been out-of-step with its dividends. Until recently they used to forward these as US dollar hard paper cheques to the TD cashier's wicket at 77 king street west. The big green would regularly plop the cheques into a drawer, since nobody could remember any longer what to do with a paper cheque. 

then from time to time some long-suffering soul would complain in cmf forum that he wasn't getting his BAM USD dividends in TD account on time, he was getting them weeks or even months late ...

BTW companies do *not* pay their dividends in both currencies. Their treasury departments issue dividends in one currency only. If they say they issue in USD, then they issue in USD. 

what happens next is that some companies' treasury departments, in a goodwill gesture, convert certain dividends into CAD at spot or bank of canada rates. These are favourable rates. The treasury depts then forward these amounts to brokers.

the issue is whether BAM & the big green have worked out a special arrangement, ie the broker will divulge street investors' residential addresses & BAM will use these the same way they use the addresses of their registered shareholders, in order to calculate who shall receive converted CAD dividends.

thanks for the update, goldstone. I'm questioning whether it applies to AGU, though.


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## atrp2biz (Sep 22, 2010)

I have BAM as well but have kept it in the CAD side. As an experiment, I'll move it to the USD side and see what happens. 

Problems with dividends...but that's another story.


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## GoldStone (Mar 6, 2011)

The issues might be specific to a particular stock/broker combination. BAM / TDDI is one example.

Here's an old CC post on USD dividends:

http://www.canadiancapitalist.com/canadian-stocks-paying-us-dollar-dividends/

Scroll down and read the comments posted in 2015.

User 'migdu' reported that AGU USD dividends come in fine. Broker is not specified.

User 'BumsOndaBeach' reported that RBC DI forcefully converts POT dividends.

User 'paj' reported that BAM dividends come in fine at BMOIL.


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## humble_pie (Jun 7, 2009)

.

(to noviceinvestor, the OP) here you have 3 knowledgeable investors whose opinions & suggestions to you are divided. Rather than bother with us old phartz, perhaps you could try the following practical experiment)

journal your AGU shares to your TDDI USD account. All journals are free at the big green, they will be happy to do this.

then calculate your next dividend payment to a per share amount. Compare this with the actual USD dividend amount declared by the company. You will see if you are being charged an FX fee or not.

of course, the forum would appreciate so much if you'd then post back your findings. Please dig up this thread from the archives & let us know. In the meantime, Happy New Year.


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## GoldStone (Mar 6, 2011)

I double-checked the TD statement.

500 BAM shares held in the US sub-account.

Declared dividend: $0.12 USD

Expected dividend: $60

Actual dividend received: $57.74


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## humble_pie (Jun 7, 2009)

to add to the story:

it's clear from so many small details everywhere that the IIROC has encouraged brokers & dividend issuers to work on this longtime hidden problem - the FXing of USD dividends from canadian issuers when shares are held in CAD account.

absolutely the *worst* solution, imho, is for brokers to inform companies, prior to record date, that they have X number of shares in street form that belong to residents of canada. 

what happens next is that the companies, believing they are being helpful, forward this bulk allocation of dividends in CAD. All dividend transmissions, BTW, are via the CDS system.

the really harsh aspect of this address segregation, for us shareholders who hold in street form at brokers, is the segregation will be permanent. We will never again be able to journal shares from one currency account to the other. This unfortunate situation would be punitive for option traders, for example.

wondering out loud: does BAM have US options? if so, the handicap for them is significant, if they cannot hold BAM in USD account.


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## humble_pie (Jun 7, 2009)

GoldStone said:


> I double-checked the TD statement.
> 
> 500 BAM shares held in the US sub-account.
> 
> ...



what i think is being created: Total Dividend Madness.

just when we the posters who'd focused so heavily on the dividend FX story in recent years had managed to train up a generation of investors who knew to shelter their USD dividends from canadian companies in USD accounts ... just when we'd succeeded at long last ... then BAM, companies like BAM started messing with their dividends.

at the moment i see the situation as beginning to split up into the tower of Babel. Some companies are going to have some arrangements with some brokers, the way BAM has with TD.

but not all companies are going to have the same arrangements with all brokers. This will lead to a situation in which dividend payments will become higgledy-piggledy. An investor will *never* be able to logically anticipate What is Going to Happen to his Dividends.

PS cmf forum had reports a year or so ago, from haroldCrump & altaRed, that their Potash dividends in non-registered accounts at scotiaItrade were suddenly being paid in CAD that had been converted at the favourable spot rate.

harold, as best i can recall, was surprised. He said he'd asked Scotia how is this happening? but they had no explanation.

i think now we're beginning to see. It's tower of Babel dividend madness.

the situation would be infinitely better if the IIROC would pass new regulations requiring that all canadian companies paying USD dividends *must* convert dividends for all canadian residents to CAD at favourable spot rates, by their treasury departments, prior to forwarding the bulk dividend amount to each broker & financial institution.

that way, there'd be a dependable general rule that investors could live with.


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## humble_pie (Jun 7, 2009)

GoldStone said:


> I double-checked the TD statement.
> 
> 500 BAM shares held in the US sub-account.
> 
> ...




something's up. $57.74 as final USD dividend has not been reduced by any FX fee as of recently. At the $.72 very recent rate, the received amount would have been USD 43.20. Huge difference.

would you know for what, exactly, did TD make that $2.26 USD charge? there might even be a code entry on your statement.

in any event, we can establish one thing. Contrary to "arby" over on financial wisdom, in this instance you were not charged any FX fee. Certainly you were not charged twice.

i wonder if this broker is now charging clients because it had to go to the trouble of forwarding clients' address info to the dividend issuing company?


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## AltaRed (Jun 8, 2009)

+1 investors should not be left to navigate the minefield. I wonder whether even the professional money managers know what is going on.


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## humble_pie (Jun 7, 2009)

altaRed you're totally right. I think we investors will have to complain strongly to the IIROC, if Dividend Babel continues.

i've been picking up on this story for a long time. A couple years ago - roughly - i heard from IR at one of the fatal 21s that the IIROC wanted the companies to shoulder the cost of converting their dividends - including for shareholders holding in street form, who are the vast majority.

when i mentioned this to one of the best & the brightest among the TD team managers at the time, he was, of course, heartily in favour of the company-pays solution. After all, he pointed out, the companies are the ones making the dividend currency decision & they are the ones who have the shareholders.

we brokers can't help what the CDS system does when it delivers our dividends, he said.

also at that time - a couple years ago - i checked with 3 major USD paying companies. I found their IRs to be 100% in the dark. One assured me that his USD-dividend canadian company didn't care a fig about shareholders holding in street form at brokers.

"We have enough trouble looking after our registered shareholders," said this amiable rogue. "Investors who are concerned have to deal with their brokers," he added.

another tiny clue over the years: a cmf member who is close to Brookfield went to see their IR lady a couple years ago. She told him that Brookfield was concerned about its street shareholders at brokers & - as of that date 2 years ago - she assured him that Brookfield was indeed working on a solution.

altaRed as you know, it takes years & years & years to move a bureaucracy forward. Picometre by picometre. Sometimes never.

but i think a huge mess may be looming, if enough companies set up dividend address arrangements with whatever brokers might be willing to cooperate.

there will be no master list of who's doing what. The broker call centre representatives will be the last to know anything correctly, so the amount of mis-information & dis-information will be enormous. Even keeping in mind the reality, which is that everybody is trying to do the best job they can, nobody is trying to be deceptive.

me i believe that the best thing would be for the IIROC to enforce a new regulation that all companies which opt to pay a USD dividend *must* convert all appropriate dividends, for both registered & street shareholders alike, to CAD at favourable spot/bank of canada rates. Administrative costs to determine the address of street shareholders at brokers should be borne by the companies themselves. Treasury department costs to conduct the mass conversion for each dividend should also be borne by the companies.

we the investors could live with that. There would be stability, reliability, predictability. However, the IIROC has to create the regulation first.


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## AltaRed (Jun 8, 2009)

I agree companies themselves need to take on the burden. After all, they chose to report in USD.


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## humble_pie (Jun 7, 2009)

^^

"but this will increase our costs," the companies are going to wail.

just upthread (messages 13, 16) we can see what *might* be a fee charged by the TD to recover its costs in data mining & data transmission to BAM, for the company to use in preparing dividend distribution by currency using address selection as a criterion.

what a horror. Dividend FX fees were 1.50-2%. That new fee seen above clocks in at 3.77%.

perhaps saint francis had the right idea. Renounce all wealth, take vow of poverty, enjoy the flowers, inhale what's left of the fresh air (have to go to the high mountains or north of 60 for that), try to serve the less fortunate each:


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## humble_pie (Jun 7, 2009)

atrp2biz said:


> I have BAM as well but have kept it in the CAD side. As an experiment, I'll move it to the USD side and see what happens.



doc re your BAM shares, since you say these are at BMO. After you will have moved them to the US side, could you let the forum know what happens?

if you receive USD dividends whole, pure & uncut, then we would know that the special arrangement for TDDI is kind of a big green thing.

also, what has been happening so far with your BAM dividends in CAD account at BMO? if BMO does have the special address arrangement, you should have been receiving CAD dividends at spot rate, although you might be charged a fee such as the one goldstone was charged by TD recently ...


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## GoldStone (Mar 6, 2011)

humble_pie said:


> something's up. $57.74 as final USD dividend has not been reduced by any FX fee as of recently. At the $.72 very recent rate, the received amount would have been USD 43.20. Huge difference.
> 
> would you know for what, exactly, did TD make that $2.26 USD charge? there might even be a code entry on your statement.
> 
> ...


Sorry, I don't follow your logic. I don't understand how you came up with USD 43.20.

In any case, here's how I explain it.

From the horse's mouth:

Stock & Dividend Info | Common Shares | Brookfield Asset Management



> Please note that the quarterly dividend payable on Brookfield's Class A Limited Voting Shares is declared in US dollars. Registered shareholders who are U.S. residents receive their dividends in U.S. dollars, unless they request the Cdn. dollar equivalent. Registered shareholders who are Canadian residents receive their dividends in the Cdn. dollar equivalent, unless they request to receive dividends in U.S. dollars. *The Canadian dollar equivalent of the quarterly dividend is based on the Bank of Canada noon exchange rate on the record date* or, if this falls on a weekend or holiday, on the following business day.


The record date for the dividend I mentioned was Aug 31, 2015. Payment date was Sep 30, 2015.

Declared dividend: $0.12 USD or $0.158676 CAD. BAM did the conversion on the record date.

Canadian dollar dropped between the record date and the payment date. I'm guessing that TD converted the dividend back to USD on the payment date.

I received $57.74 USD / 500 shares = $0.11548 USD per share

TD conversion rate: 0.158676 CAD / 0.11548 USD = 1.3741

Bank of Canada noon rate on Sep 30: 1.3394

TD exchange fee: (1.3741 - 1.3394) / 1.3394 = 2.59%

TD DI statement doesn't show the conversion rate or any code entries. It simply shows the amount paid in USD.


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## GoldStone (Mar 6, 2011)

humble_pie said:


> what a horror. Dividend FX fees were 1.50-2%. That new fee seen above clocks in at 3.77%.


My calculation comes to 2.59%. The difference between 3.77% and 2.59% is the CAD decline between the record date and the payment date.


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## humble_pie (Jun 7, 2009)

GoldStone said:


> Sorry, I don't follow your logic. I don't understand how you came up with USD 43.20.
> 
> In any case, here's how I explain it.
> 
> ...





OK we are agreed on most details, although i did say i was using the most recent BOC exchange figs, which are .7223 USD/CAD & 1.3845 CAD/USD for 24 dec/15, because i didn't know which BAM dividend you were working with.

your figs for the BAM divvie paid 30 sep/15 look fine. You can see, i hope, that BAM converted USD/CAD at spot or BOC rates, so it appears that the only FX fee you paid was TD's gouge on the payable date, when it reversed currencies from CAD back to the original USD?

still, imho that is bad enough. If we stumble forward into a situation in which some companies are collecting & using investor address data from some brokers to determine dividend currency delection, while other companies and/or other brokers are not using these criteria, then we shall be in a messy situation.

one of the surprising things i learned while researching this issue is that there are no regulations that govern how much FX fee a broker may charge. A broker would be allowed to charge the moon if it thought it could get away with the practice. 

authority vests with the individual provincial exchange regulators & in canada these don't amount to much. We have no national securities regulator. Brokers' conduct is not federally regulated by the Bank Act, in the way that the conduct of credit card companies does fall under the Bank Act for example.

but, other than the OSC plus a few feeble efforts by other provincial securities regulators, brokers go scot-free, save & except for the presence & efforts of the IIROC, which in effect is the brokers themselves, since the securities industry is a self-regulating business.

my view is that we live in an era of ever-faster global networks, ever more efficient exchange algebras being practiced by bank treasury floors all over the world. FX rates for big wholesale customers are coming down. Yet, for small retail customers, exchange rates are going up, simply because small retail customers are the least able to resist & therefore they are the most vulnerable market group among a bank's customers.


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## My Own Advisor (Sep 24, 2012)

Agreed HP re: "me i believe that the best thing would be for the IIROC to enforce a new regulation that all companies which opt to pay a USD dividend *must* convert all appropriate dividends, for both registered & street shareholders alike, to CAD at favourable spot/bank of canada rates. Administrative costs to determine the address of street shareholders at brokers should be borne by the companies themselves."

Until that happens, the only thing the lil' investor can do is to keep the stock that pays dividends in CDN $, in a CDN-side account, *and* the CDN stock that pays dividends in USD $, in a USD-side account.


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## atrp2biz (Sep 22, 2010)

humble_pie said:


> doc re your BAM shares, since you say these are at BMO. After you will have moved them to the US side, could you let the forum know what happens?
> 
> if you receive USD dividends whole, pure & uncut, then we would know that the special arrangement for TDDI is kind of a big green thing.
> 
> also, what has been happening so far with your BAM dividends in CAD account at BMO? if BMO does have the special address arrangement, you should have been receiving CAD dividends at spot rate, although you might be charged a fee such as the one goldstone was charged by TD recently ...


BAM.A dividends were paid into my BMOIL USD account on March 31. I received the declared US$0.13 with no adjustments.

On December 31, I received $0.16572/share in my CAD account (vs. US$0.12 declared)--an implied FX rate of USD/CAD=1.3810. Noon rate was USD/CAD=1.3840


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## humble_pie (Jun 7, 2009)

atrp2biz i'm glad you brought this up. As you know i kind of monitor the constantly-evolving story of broker FX fees ...

i put my BAM shares in USD account at the TD, in time for the recent end-of-march dividend payment, just to observe what would happen.

BAM is an interlisted that pays USD dividends but its treasury department does convert the bulk dividend amount to CAD at spot rate whenever the company knows or has reason to believe that clients wish to receive their dividends in CAD.

long story short, i actually received *more* than the dividend amount in US dollars in my USD account at the big green. The dividend was USD .13, i received USD .1327 per share.


how did this happen? 

my surmise is that BAM converted to CAD at spot rate. Then, a few hours later on the payable date, TD converted back again from CAD to USD at the spot rate of that minute, which happened to be on an upswing (exchange rates fluctuate every minute) so my dividends flowed with an extra USD currency perk.

next time, it could go the other way. Or - next time - i could put the BAM shares back in CAD account, in which case there would be a one-time conversion done at spot rate by BAM in its own treasury department.


how does BAM know which broker clients - whose shares are held anonymously in street form - wish to receive dividends in CAD?

because - the IIROC must be urging this, after receiving numerous complaints about FX fees on dividends from investors - the CDS network, which transports securities & payments among brokers & financial institutions - is furnishing companies who request with a list of what it, the CDS system, believes are our wishes re dividend currency.


how is the CDS system assembling this data about our wishes, without consulting us?

it's taking a guess. Basically the CDS system is using the country in which each individual investor resides as the currency determinant. Brokers furnish this data on a voluntary basis to CDS for each dividend. There is evidence that some brokers are using the "settlement currency" criterion instead. There is also evidence that some brokers are not cooperating.


atrpdocbiz, you can see the difference between brokers BMO & TDDI. Other brokers are doing god knows what. There is no consistent polcy anywhere. Potash for example - another USD dividend payor - is a markedly different story, even at the TD.

it's my belief that the IIROC is "encouraging" brokers to behave more fairly & transparently with respect to hidden FX fees on USD dividends, but it is not regulating or forcing this issue. The result is chaos.

for my part, i've taken to eyeing my USD dividends from canadian payors - i only have a few - to see if an FX fee is being charged or not.


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## GoldStone (Mar 6, 2011)

humble_pie said:


> long story short, i actually received *more* than the dividend amount in US dollars in my USD account at the big green. The dividend was USD .13, i received USD .1327 per share.
> 
> how did this happen?
> 
> my surmise is that BAM converted to CAD at spot rate. Then, a few hours later on the payable date, TD converted back again from CAD to USD at the spot rate of that minute, which happened to be on an upswing (exchange rates fluctuate every minute) so my dividends flowed with an extra USD currency perk.


Not quite.

1. BAM converts from USD to CAD exactly two weeks prior to the payment date.
https://www.brookfield.com/content/stock_and_dividend_info/common_shares-26718.html

_"The Canadian dollar equivalent of the quarterly dividend is based on the Bank of Canada noon exchange rate exactly two weeks (or 14 days) prior to the payment date for the dividend."_

2. TD doesn't convert the dividends at the spot rate, as we discussed many times before. They take a haircut.

3. CAD appreciated quite a bit in the last two weeks before the payment date. Enough to give you a boost despite the haircut taken by TD.




humble_pie said:


> next time, it could go the other way.


Correct, if CAD drops in the last two weeks before the payment date.


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## humble_pie (Jun 7, 2009)

GoldStone said:


> Not quite.
> 
> 1. BAM converts from USD to CAD exactly two weeks prior to the payment date.
> https://www.brookfield.com/content/stock_and_dividend_info/common_shares-26718.html
> ...





goldstone you are right. The TD did charge an FX fee. It did not convert at spot rates.

the BAM dividend arrived 31 march/16 at the big green, which applies FX rates & fees to dividends on their payable dates. The rate the TD used was .7550. The BOC noon rate on that day was .7710.

CAD appreciated during the 2-week interval between brookfield conversion & TD conversion, as you point out. Hence my little windfall on the USD-paid dividends. But if CAD had fallen duriing the same period, i would have received less than the US 13-penny dividend per share.

solution for BAM shareholders at the TD: hold BAM in CAD account. The first conversion - from USD to CAD - is being done by BAM in-house at spot rates (they say), before they send the bulk dividend amounts to brokers for distribution to street shareholders. Although getting their BAM dividends in CAD may not be what individual investors would choose, at the very least it is a non-toxic procedure when done at spot rates. Note that the TD solution may or may not apply to other brokers. Evidently the procedure is not the same at BOMIL, as atrp2biz advises upthread.

what is crazy unfair about the overall situation - that is, taking into consideration all of the roughly 24 canadian companies that pay USD dividends - is the fact that nobody is informing investors about which company & which broker is doing what. The broker representatives have no clue. The corporate IRs mostly have no clue either, the BAM shareholder IR is exceptional.

given this absence of information, there is no reliable way that investors can shelter their interlisted USD dividends from predatory FX fees by brokers.

there are no regulations that govern the FX fees a broker can charge. Brokers are regulated by their provincial securities authorities. We have no national securities commission in canada. This means far looser regulation than banks themselves, which are more strictly regulated by the federal Bank Act.

i'm including the above dry & dessicated paragraph because it means that the only place investors can complain about their hidden FX fees is the IIROC. Technically speaking, the brokers are not breaking any regulations. What they're conducting when they charge hidden or impossibly complex FX fees is, patently, unfair business practice; but it will likely take a mountain of complaints & a Methuselah's lifetime to reform the broker industry.


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