# US Stock Dripping



## swoop_ds (Mar 2, 2010)

Does anyone on here drip US stocks in a non-registered account?

I think I understand all of what's involved to get it setup:

1. Open a TD Bank account in the US
2. Get first share
3. Sign up for DRIP program
4. Fill out W8-BEN form for each stock

I have 12 Canadian stocks that I drip and I really like the process, I'm just looking to get some US stocks. I haven't fully decided if I just was to buy the stocks or ETFs in a normal RSP brokerage account or go the route mentionned above.


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## humble_pie (Jun 7, 2009)

swoop_ds said:


> I have 12 Canadian stocks that I drip and I really like the process, I'm just looking to get some US stocks. I haven't fully decided if I just was to buy the stocks or ETFs in a normal RSP brokerage account


please do not even *think* of DRIPPing US stocks in any registered account.

the risk is that, with market drips, the broker will charge an FX fee not once, but twice. Once when the dividend money comes into the account, once again when the cash is taken out to execute the market DRIP.

even in a so-called USD rrsp, this can happen with market DRIP dividends. The reasons for this are obscure.  Part of the problem is likely to arise in legacy electronic systems owned & operated by CDS (ie all the brokers acting in concert.)

parts of this system were written 35-45 years ago, when USD dividends were not all that common. But now the incapacity of the system to deliver USD dividends at fair exchange rates is becoming a major issue, especially in registered accounts where brokers are acting as trustees & are bound by fiduciary duty to conduct themselves in the best interests of their beneficiaries.

it is said that royal bank online broker does not DRIP USD dividends. The reason for this may be prudence on the part of roybank; that is, they realize the external CDS system into which they are locked may trigger an FX fee even when their "all-USD rrsp" is not supposed to have this blemish. Therefore they may have prudently decided to avoid the problem by not offering USD DRIP dividends in registered accounts.

in general, brokers are not yet being transparent in disclosing FX fees on USD dividends to clients. The situation is particularly egregious in registered accounts where brokers are bound by jurisprudence to act transparently & fairly as trustees.

long & short: probably OK to DRIP USD dividends in USD cash & margin accounts. Proceed with ultra caution in registered accounts, though. Monitor closely any USD DRIP you receive in registered by comparing it with the spot rate (bank of canada noon rate will be fine) on the payable date (although some systems use record date.) If you are not receiving the spot rate/bank of canada noon rate for your dividend conversion, then you'll know that the broker is charging a mostly-concealed foreign exchange fee.


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## Sampson (Apr 3, 2009)

humble_pie said:


> it is said that royal bank online broker does not DRIP USD dividends.


not true. had to double check because I don't check so often anymore, but I have several US, NYSE holdings that Drip fine.


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## humble_pie (Jun 7, 2009)

Sampson said:


> not true. had to double check because I don't check so often anymore, but I have several US, NYSE holdings that Drip fine.


but are your DRIPs in rrsp, sampson?

i was writing only about rrsp & other registered accounts, so sorry, i thought i'd made that clear?

the reason i wrote "it is said that roybank" does not DRIP USD etc is because a senior cmf member of long date recently posted here, clearly & distinctly, that roybank does *not* DRIP USD divs in rrsp. As i recall, this annoyed him.

i don't have a roybank account but would have had no reason to doubt what he was saying.

in that same thread, i recall another member mentioning that BMO - another of the big 3 USD rrsp brokers - does do USD dividend DRIPs.

at that time, i was myself looking into what data is controlled by the all-broker electronic storage & delivery CDS system. In the cases of double-dipping on rrsp USD DRIP dividends that have been specifically reported in the blogosphere over the past year, it is possible that part of the toxic process occurs in the CDS system itself, that is, outside the brokerage house.

this would not mean that the individual brokers are to be 100% absolved of any responsibility imho, because after all the CDS is a system that is eollectively owned & operated by the brokerage industry for its own convenience.


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## Sampson (Apr 3, 2009)

it is in an RRSP. INTC. like I said, had to double check. in fact, my ECA holding on the USD side within RRSP also DRIPs, neither suffer from any FX type issues.

My experience wit RBC and DRIPs is that, and confirmed by a rep, that they allow drips for some equities, not others, the reason was not clear to me and they did not divulge. This restriction holds trye for CAD and US equities, within and outside RRSPs.

None of my US market traded ETFs DRIP, inside or out. Could it be possible the other senior poster simply held one of these "un-drippables".

I only checked the last month's statement, will have to look into which of my US holdings can and which cannot.


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## humble_pie (Jun 7, 2009)

Sampson said:


> it is in an RRSP. INTC. like I said, had to double check. in fact, my ECA holding on the USD side within RRSP also DRIPs, neither suffer from any FX type issues.
> 
> My experience wit RBC and DRIPs is that, and confirmed by a rep, that they allow drips for some equities, not others, the reason was not clear to me and they did not divulge. This restriction holds trye for CAD and US equities, within and outside RRSPs.



thankx for the verification!

your phrase "the reason was not clear to me and they did not divulge" resonates with anyone trying to shine a light on broker reform with respect to the charging of FX fees upon certain USD dividends.

the front line representatives are not trained to handle these questions or give out information on these issues. This is why so many front line "answers" clash. Different representatives will tell different clients different stories, even at the same brokerage house. None of this is their fault, they are all trying their best. The problem stems from failure-to-train policies that are being officially maintained at the brokerage houses. At every brokerage house, there seems to be a big information lacuna that is being quietly maintained.

it turns out that there are no regulations that govern the foreign exchange fees that a broker may charge or even the fees that a broker is required to report. _Translation: this is pig's heaven for brokers_. Meanwhile all canadian brokers have pretty near doubled their FX fees over the course of the past few years, so it is in their interest to keep the clients as much in the dark as possible.

i've asked some questions of my principal broker & they have, in turn, responded to say - from a high level - that it will take them 5 months before they can officially answer! meanwhile a regional vice-president joined me to say that she, too, has exactly the same questions & she also is waiting to hear what head office will eventually reply on the issues.

a handicap to full answer is that not many clients are yet asking these kinds of questions. 

since they are not required to, brokers deliberately do not place FX information about dividends on their statements. Clients glance at the net results - which is the final appearance of dividend transactions in accounts - & so far the majority of clients have been assuming that such figures are kosher & that no broker is charging any kind of FX fee on dividends.

Sampson, as you undoubtedly know, roybank was hit with a class action over FX fees on rrsp stock transactions a decade ago & i believe that roybank settled. At the present time, another similar class action is making its way slowly through the system. This one names BMO. Slowly, as in the case was filed in 2006 & there has not yet been even one hearing!

but i see innumerable tiny signs that the brokers know the issue of hidden FX fees on dividends is another issue that could potentially bring on more class actions, especially in RRSP accounts. I see signs that the brokers are trying, in good faith, to find solutions to the problem of the hidden FX fees. Alas, what i don't yet see is any hint that they will give up the smoke-&-mirrors approach to FX on dividends any time soon.


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## james4beach (Nov 15, 2012)

Again I wish to commend humble_pie for bringing this attention to brokers' (hidden) FX fees



> Translation: this is pig's heaven for brokers. Meanwhile all canadian brokers have pretty near doubled their FX fees over the course of the past few years


And I can imagine why. Dividends have been hot in the last few years. Just look at the stats (PDF file)... "The percentage of stocks paying dividends in the S&P 500 is at the highest level recorded in the past 15 years"

Look at page 6 for an amazing chart. Total dividends paid out from US stocks... just HUGE amounts, historically speaking. Imagine you're a broker, and you have the opportunity (via more FX fees) to take a piece of that cashflow.


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## humble_pie (Jun 7, 2009)

*so amazing !!*

so amazing i can hardly write this !!

but - pursuant to my efforts, inquiries & complaints dating back more than a year about several USD/dividend issues - TDDI has just admitted to me - in writing, from a high level - that it has indeed been charging double FX fees on USD DRIP dividends in registered accounts !! (they don't admit this, but the procedure has likely been going on for umpty doodle years !!) (same procedure is probably going on today on at all canadian brokers that do not offer true USD rrsps !!)

the big green now writes that it is in the process of reforming this toxic procedure. TDDI has just put in place a process revision that will allow it to auto-wash those USD DRIP dividends in registered accounts. Although not fully operational yet - a dedicated program developer has been engaged to build this feature - this final auto-wash modality will enable TDDI clients to avoid all FX fees in all registered accounts.

this is a leadership action from TDDI. It's difficult for any large corporation to admit its mistakes, so i for one am not going to look back at double FX fees that were charged in the past. What's done is done. Instead i am going to salute the big green for being among the first of the non-USD brokers to take this breakthrough step. (there is evidence that scotia ITrade also saw writing on the wall this past spring/summer & began converting USD dividends from the 20 interlisted canadian companies at bank of canada rates, ie without additional FX fees) (however i don't know what scotia is doing about USD DRIP dividends on US stocks.)

a new era is dawning, yay !! All the other canadian brokers whose ancient ISM mainframes are preventing them from building USD rrsp platforms are going to have to follow, sooner or later, the reformed pro-client initiatives of TDDI & scotia ITrade.

(signed)
a dumb crumb who got something done to help canadian investors


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## CanadianCapitalist (Mar 31, 2009)

Congratulations! It is indeed good news for small investors who are DRiPping their shares and are being penalized now.



humble_pie said:


> a new era is dawning, yay !! All the other canadian brokers whose ancient ISM mainframes are preventing them from building USD rrsp platforms are going to have to follow, sooner or later, the reformed pro-client initiatives of TDDI & scotia ITrade.
> 
> (signed)
> a dumb crumb who got something done to help canadian investors


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## humble_pie (Jun 7, 2009)

CC it benefits any size investor in any registered account whatsoever at TDDI who wants to DRIP his USD dividends.

these dividends can arise from US public companies, USD etfs or the 20 canadian companies that pay their dividends in US dollars. That's a lot of investors, of all stripes & sizes, who stand to benefit.


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## humble_pie (Jun 7, 2009)

what the new process will mean for TD clients with US holdings in registered accounts is that they can 1) choose DRIP dividends whenever these are available; or 2) continue to pay the broker FX fees ranging from 1.25-1.50% on cash dividends.

i'm wondering if there is going to be a tsunami of TD registered account holders into DRIP dividends? what about pressure on the broker & on broker delivery systems like CDS to inaugurate DRIP dividends on certain etfs & other securities that do not presently offer them?

debut date for the new TD system is 31 december/13. News is going to be lively, i imagine each:


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## Toronto.gal (Jan 8, 2010)

^ You deserve a Champion of Education award!


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## Sampson (Apr 3, 2009)

Terrific news for TDDI account holders and way to stick it to the man.

I'm honestly surprised they acknowledged this (indirectly of course) at all and didn't simply continue the 'shady' practice. Seeing as how oligopolies (telecom/cable sector, I'm looking at you, and the banking industry) tend to only move changes when the government gets involved, this is a big win for the little guy.


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## mrPPincer (Nov 21, 2011)

That is great news for sure, thanks for the update Pie!
I for one have been asking their reps about this after every conversation when for any reason I have to talk to them on the phone.
The answer was always 'no specific time-line, possibly next year'.
Can't wait to switch drips on, btw what is the time-line on this?


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## mrPPincer (Nov 21, 2011)

humble_pie said:


> debut date for the new TD system is 31 december/13. News is going to be lively, i imagine each:


doh
missed that, scanned the thread too quickly, sorry
Thanks again Pie


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## humble_pie (Jun 7, 2009)

Sampson said:


> Terrific news for TDDI account holders and way to stick it to the man.
> 
> I'm honestly surprised they acknowledged this (indirectly of course) at all and didn't simply continue the 'shady' practice. Seeing as how oligopolies (telecom/cable sector, I'm looking at you, and the banking industry) tend to only move changes when the government gets involved, this is a big win for the little guy.



the big green acknowledged this to myself alone, for the time being, because a) i've been inquiring diplomatically but relentlessly for more than a year; & b) probably because they know i write somewhere in the internet.

i must confess i did have to work bloody hard to get my FX issues anywhere up near the big nobs at TDDI. The campaign took more than a year. Just talking to the front line representatives is not enough, of course. Baby step by baby step, ever since 2012, i've been inching my plaints re FX fees on USD dividends higher & higher.

occasionally i've hinted at this campaign here in cmf forum. I did email the nittygritty documents to a couple of friends on here. I never posted openly about my efforts but they were ongoing, all the time.

frankly i was never expecting to win a victory! i was always thinking that just getting our complaints to the attention of the big nobs at the top & showing them how so many innocent TDDI clients were being hurt while not understanding the FX fees that they were, in fact, being charged ... i was always thinking that that would be all i could ever hope to accomplish.

the issue TDDI has just corrected is the double FX fee on USD DRIPs in RRSP. There is a 2nd USD/dividend issue that i raised with the big green nobs, which they are sidestepping & refusing to answer for the time being. It will be much harder to win on this 2nd issue, so i shall have to rethink mes plans de bataille.

(signed)
general wolfe
lévis, québec
le 10 septembre 1759

ps sampson i didn't "stick it to the man," i was the sweetest little partridge berry pie in the world ...


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## Spudd (Oct 11, 2011)

I for one am very impressed! I look forward to enjoying the fruits of your labor (would that be the pie filling?).


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## humble_pie (Jun 7, 2009)

please join me in the campaign, Spudd, we still have a lot of work to accomplish ...


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## james4beach (Nov 15, 2012)

Great work, humble_pie!


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## My Own Advisor (Sep 24, 2012)

GREAT WORK Humble_Pie!

So, this takes effect on December 31, 2013 for real???? This isn't some lower-level manager vowing "they will" do this?

I've already been promised the USD $$$ RRSP from TDDI. Nothing...


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## humble_pie (Jun 7, 2009)

My Own Advisor said:


> I've already been promised the USD $$$ RRSP from TDDI. Nothing...



but how could they have "promised" a USD rrsp? afaik they "promised" no one a USD rrsp, although they did issue strong hints in late 2012. But since then, nothing has been said.

the dividend auto-wash is not the long-awaited USD rrsp, it's just a patch that will remove the remaining big offence in the present TD rrsp setup.

this is the FX fee on USD dividends, especially the double FXing of DRIP dividends.

what i have is a letter on paper - hard copy - that TD will auto-wash USD dividends in rrsp by 31 december/13. That's just over 2 months away.

the letter does not make clear whether the laundry add-on is being built for DRIP dividends only, or whether it will be deployed for all USD dividends in all registered accounts.

this weekend i'll write to my source & ask that they make auto-washing of USD dividends a standardized feature for all USD dividends in all registered accounts. There are sensible arguments that can be made as to why they should include all USD dividends in rrsps, not just DRIPs.

the source is hi-level enough. At least 2 vice-presidents were involved; this past summer the head of litigation for TD wealth management also became involved in my inquiry. The concern would have been the broker's responsibility as trustee for the registered accounts, i believe i mentioned this upthread. 

so far, all seems to be going reasonably well.


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## mrPPincer (Nov 21, 2011)

Actually humble, I too have been told, by two separate front line reps, that USD registered accounts were on the way, but they had no knowledge of when it would be happening.

My account is fairly insignificant dollarwise & I don't hobnob with the brass so my info could be a little off, but I do try to pressure them to the extent I can, and have given serious thought to switching brokers on this issue until I heard your happy news today.


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## humble_pie (Jun 7, 2009)

mrPPincer said:


> Actually humble, I too have been told, by two separate front line reps, that USD registered accounts were on the way, but they had no knowledge of when it would be happening.


yes, i've been told that as well. I imagine nearly every tddi client has been told that USD rrsps are "on the way." 

this is not the same thing as "promise." I never heard of a bald "promise." If any td rep used the word "promise," he would have been making a tiny mistake. A listener could have known to be skeptical.

also, one has to be able to distinguish among front line representatives. Also among team managers. Even among the PA team managers, who at td are usually the best managers. It's the same in every huge business or bureaucracy these days. It's such a delicate challenge to deal with em.


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## mrPPincer (Nov 21, 2011)

Just a thought here, this latest news, TDDI promising you a US divy autowash fix, reminds me of a windows OS patch.
It's still not a complete fix but it is nice to see they seem to be listening and ever-so-slowly responding to our concerns.


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## Cal (Jun 17, 2009)

CanadianCapitalist said:


> Congratulations! It is indeed good news for small investors who are DRiPping their shares and are being penalized now.


I see a future article coming from you out of this info. :biggrin:


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## gibor365 (Apr 1, 2011)

humble_pie said:


> debut date for the new TD system is 31 december/13. News is going to be lively, i imagine each:


I have automatic US$ "wash" setup in TDW. 
Should I call them on Dec31 or new DRIP rules will take affect automatically?
also wondering how it's gonna work? For example if for specific US stock I DRIP 1 share, rest of the dividend money will go to US MM fund or still will be converted to Canadian cash?


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## My Own Advisor (Sep 24, 2012)

I have automatic US$ "wash" setup in TDW but wondering also, should I call in December to ensure new rules take effect?

Humble?


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