US citizens abroad cannot invest through [Fidelity]

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Houston101
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US citizens abroad cannot invest through [Fidelity]

Post by Houston101 » Wed Jul 02, 2014 9:16 am

I saw this news yesterday about fidelity banning the overseas investors (including US citizens) from buying mutual funds.

http://www.marketwatch.com/story/fideli ... -161035216

The related Wall Street Journal article explains that the ban extends to US citizens also (you need paid subscription to read the article).

http://online.wsj.com/articles/fidelity ... ns_markets
A spokesman for Vanguard Group said its funds are typically only for sale to people who live in the U.S., although there are some exceptions for investors residing abroad, for example, some people with inherited accounts
David Kuenzi, an investment manager in Madison, Wis., who works with Americans abroad, said that selling U.S. mutual funds to those investors had long been prohibited. "But it was matter of 'Don't ask, don't tell.' Now the firms are getting more aggressive about compliance," he said.
I hope this doesn't set a new precedent. I wouldn't mind jumping few extra hurdles to prove that my income is legit,if I was abroad, but an outright ban seems ridiculous.

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Re: US citizens abroad cannot invest through a US brokerage

Post by livesoft » Wed Jul 02, 2014 9:24 am

Is this for mutual funds only? Or does it extend to stocks and ETFs as well?
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Re: US citizens abroad cannot invest through a US brokerage

Post by manwithnoname » Wed Jul 02, 2014 9:28 am

Only affects 60,000 accounts out of 20 million. Too much compliance/tax regulation for number of accounts involved.

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Re: US citizens abroad cannot invest through a US brokerage

Post by Tylenol Jones » Wed Jul 02, 2014 9:37 am

Why would they ban funds and not other things like ETFs, bonds, and so on?

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Fidelity bans overseas US Investors from buying Mutual Funds

Post by MaddMaxx » Wed Jul 02, 2014 9:41 am

Looks like it will be harder for ex-pats to invest overseas.


http://finance.yahoo.com/news/fidelity- ... 00640.html
Fidelity Investments and other asset managers are telling U.S. clients who live outside the country that they can no longer buy or trade mutual funds in their brokerage accounts.

Stephen Austin, a spokesman for the financial-services firm, said the change, effective Aug. 1, was prompted by "today's continually evolving global regulatory environment," but he said it wasn't in response to a specific issue.

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Re: US citizens abroad cannot invest through a US brokerage

Post by jstash » Wed Jul 02, 2014 9:50 am

Ridiculous.

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Re: US citizens abroad cannot invest through a US brokerage

Post by Medviersi » Wed Jul 02, 2014 10:15 am

Looks life rebalancing an IRA is out also.

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Re: US citizens abroad cannot invest through a US brokerage

Post by thursdaysd » Wed Jul 02, 2014 10:16 am

What if I already own the funds and then move abroad? Any difference between an IRA and a taxable account? This is probably more fallout from FATCA. :(
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Re: US citizens abroad cannot invest through a US brokerage

Post by tractorguy » Wed Jul 02, 2014 10:22 am

I lived abroad from 1998-2008. This is not new. At that time, I had to maintain a U.S. mailing address (not a PO box) that was the address of record for all my accounts with Vanguard, Fidelity, & Schwab. I never asked the firms why I needed a U.S. postal address but I'm guessing that they are not registered to sell financial products outside the U.S. or could not sell U.S. financial products outside the U.S. There are almost certainly legal hoops that don't allow these firms to offer the same products to someone outside the U.S. as they do to U.S. residents.

I'm certain that the Patriot act (which really tightens up proof of address requirements for all bank accounts) has made it more difficult to fly under the radar as I did before 2008. It is likely that the penalties for not adhering to the Patriot act are making investment firms more vigilant about ensuring that their customers really are U.S. residents.

From the investment firm's point of view or the Federal government's, an investor who moves overseas for job reasons has many of the same financial characteristics as an overseas crook or terrorists who wants to fund U.S. activities. They both want to put money into accounts that can easily be converted to cash in the U.S. The U.S. federal government is requiring that investment firms provide all sorts of paperwork to prove that they aren't being used by crooks or terrorists as an international bank. Its easiest for the firms to just to say that we don't accept any money from outside the U.S.

The Federal government's concern and willingness to prosecute is real. See for example their recent indictment of the French bank BNP. http://abcnews.go.com/Business/wireStor ... s-24371698
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Re: US citizens abroad cannot invest through a US brokerage

Post by Random Poster » Wed Jul 02, 2014 10:33 am

The difficulties that US citizens have in regard to financial matters due to laws passed by the US government (and the enforcement or fear of enforcement thereof) is the main reason why I have essentially abandoned any thought of applying for permanent residency in another country.

If you have any sort of financial "history" and assets tied into the US, it can be extremely difficult to effectively start over and begin a new life in a foreign country.

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Re: US citizens abroad cannot invest through a US brokerage

Post by FoolishJumper » Wed Jul 02, 2014 10:55 am

As a US citizen abroad for 9 years, I'm far from concerned about this. I've opened multiple accounts (both bank and brokerage) with companies that claim only US residents can open accounts. The main point is that they do not know I live abroad. I never provided them a foreign address. And they can't simply look if people login from outside the US, as far too many people travel internationally for work. The IRS fully views myself and my non-US wife as US residents (the tax code is quite clear on that), so I'm fully in the clear when I check that I'm a resident for tax purposes. The issue revolves around the fact that the US does poorly at differentiating between domicile and residence. It's fairly well accepted that college students can have different residence and domicile, but working adults are required to be domiciling and residing in the same place. This is really a specific issue to countries which have geographically variable income tax rates (I know US and Switzerland do...not sure if there are any others). So I'm positive I'm legally in the right, as I've never gotten an account application with the question 'what address do you lay your head at night for 183 or more days of the year'; they ask my tax residency. Certainly I violate no parts of Patriot Act (I actually read it on a transatlantic flight at one point to ensure I'm not committing fraud); I certaintly don't violate the ideals behind it and I don't violate the act itself either. I'm sure I won't receive this letter for 'overseas clients', and I'm positive I'll never be asked to confirm my physical residency when I login. I would likely comply with the letter and/or not lie about my residency and move my Fidelity assets elsewhere, but I'm almost positive it will never happen.

The reason why it applies specifically to mutual funds is that different countries have special rules about different investments are taxed (just like the US). The UK, for instance, treats offshore mutual fund capital gains as income, which can lead to extremely high tax rates. Individual stocks and bonds do not have this sort of restriction (it is related to the passive status of funds). The UK is therefore dependent on its residents to report such funds they hold, which I'm positive many do not. The concern is that if the UK decides it doesn't like the US applying massive fines on its financial institutions, then it turns around and fines Vanguard, Fidelity, etc. for allowing US citizens living in the UK to violate UK law. The easiest way is for Fidelity to say 'you aren't allowed', but I'm not sure that will cover the firm's rears if the authorities come calling. That said, ETFs are equally faux pas in the UK, so I'm not sure why they pick and choose. I suppose brokerages aren't set up to allow trading of individuals stocks but not individual ETFs.

This has always been a concern for expats (whether they all realized it or not). Every country treats the situation differently, so US citizens need to worry about how they are treated by the country they are living in and make sure their foreign holdings are up to scratch. It is less an issue for most non-US expats, as they only have to worry about the laws of the country they work/live in. US citizens (and Filipinos for that matter) need to worry about their country of citizenship as well, and it is common for conflicting requirements to come from the two sides.

I definitely don't take the restriction as far as Random Poster that I therefore shouldn't live abroad due to the complication. I'm happy to put up with the headache for the opportunity that I have. That's precisely what it is....an additional complication I need to deal with.

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Re: Fidelity bans overseas US Investors from buying Mutual F

Post by Beliavsky » Wed Jul 02, 2014 10:57 am

What is an ex-pat supposed to do? Having money in foreign bank accounts subjects them to reporting requirements with draconian penalties for violations, and now it's getting harder for them to invest with American financial institutions.

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Re: Fidelity bans overseas US Investors from buying Mutual F

Post by FoolishJumper » Wed Jul 02, 2014 11:06 am

Already being discussed at [here]

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Re: Fidelity bans overseas US Investors from buying Mutual F

Post by Alex Frakt » Wed Jul 02, 2014 12:28 pm

Threads merged.

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Re: US citizens abroad cannot invest through a US brokerage

Post by TedSwippet » Wed Jul 02, 2014 6:15 pm

FoolishJumper wrote:The UK, for instance, treats offshore mutual fund capital gains as income, which can lead to extremely high tax rates.
Although nothing like as high as the US tax rates on offshore funds. The worst case in the UK would be 45%. US PFIC rules can take the federal tax liability on offshore funds to 100% of the gain.
FoolishJumper wrote:US citizens (and Filipinos for that matter) need to worry about their country of citizenship as well, and it is common for conflicting requirements to come from the two sides.
Not a worry for Filipinos. Only US citizens and Eritreans have the problem of citizenship-based taxation.

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Re: US citizens abroad cannot invest through a US brokerage

Post by bpp » Wed Jul 02, 2014 7:00 pm

FoolishJumper wrote:As a US citizen abroad for 9 years, I'm far from concerned about this. I've opened multiple accounts (both bank and brokerage) with companies that claim only US residents can open accounts. The main point is that they do not know I live abroad. I never provided them a foreign address. And they can't simply look if people login from outside the US, as far too many people travel internationally for work.
So you lied to them. Which may work if they never figure out where you really live, but it wouldn't seem to give you much of a footing to stand on if they do figure it out.

As for checking logins from abroad, Vanguard has been known to do just that. I remember reading complaints from Americans in Thailand a few years ago that Vanguard had abruptly blocked access to the entire country, for example.
The IRS fully views myself and my non-US wife as US residents (the tax code is quite clear on that), so I'm fully in the clear when I check that I'm a resident for tax purposes.
Well, no, they do not view you as a US resident. Their taxing authority over you comes from your US citizenship, not your residence. In fact, if you declare foreign residence on Form 2555, they will recognize your non-US residence for the purpose of the Foreign Earned Income Exclusion. There is no concept of "US resident for tax purposes" in your case. (The situation is different for Canadian snowbirds, for example, who may become US residents for tax purposes if they spend enough days per year in the US.)

It occurs to me that your wife, on the other hand, could be "US resident for tax purposes" if you choose to treat her as such in order to file Married Filing Jointly -- and if she then takes the FEIE, they would be treating her as a "non-resident resident"... (Hmm, think I'll stop now before my head explodes.)

But US tax issues aside, the reason most companies don't want to deal with non-resident customers is to avoid running afoul of the banking and securities regulations in other countries. Lying to them about one's actual residence seems to me to be asking for trouble in the event they do find out. Not something I'd be willing to do, anyway. YMMV.
Last edited by bpp on Wed Jul 02, 2014 7:07 pm, edited 1 time in total.

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Re: US citizens abroad cannot invest through [Fidelity]

Post by LadyGeek » Wed Jul 02, 2014 7:06 pm

This thread is now in the Investing - Theory, News & General forum (investing news).

This story was mentioned on tonight's (Wednesday) Nightly Business Report.
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Re: US citizens abroad cannot invest through [Fidelity]

Post by normaldude » Wed Jul 02, 2014 7:15 pm

If you use a US mailing address (not a PO box) and US phone number, will they really care?

If US investment firms strictly enforce this, it could be devastating for US expats. If you invest in mutual funds / ETFs domiciled overseas, you have to deal with the brutal PFIC form, and horrendous PFIC tax treatment (which can wipe out your entire investment), as well as the annoying FBAR & FATCA forms. So basically, if US investment firms strictly ban overseas US customers, then US expats are basically shut out of the boglehead method of investing, and have to turn to bank accounts, gold, real estate, etc.
Last edited by normaldude on Wed Jul 02, 2014 7:24 pm, edited 3 times in total.

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Re: US citizens abroad cannot invest through a US brokerage

Post by kayanco » Wed Jul 02, 2014 7:15 pm

FoolishJumper wrote:As a US citizen abroad for 9 years, I'm far from concerned about this. I've opened multiple accounts (both bank and brokerage) with companies that claim only US residents can open accounts. The main point is that they do not know I live abroad. I never provided them a foreign address. And they can't simply look if people login from outside the US, as far too many people travel internationally for work. The IRS fully views myself and my non-US wife as US residents (the tax code is quite clear on that), so I'm fully in the clear when I check that I'm a resident for tax purposes. The issue revolves around the fact that the US does poorly at differentiating between domicile and residence. It's fairly well accepted that college students can have different residence and domicile, but working adults are required to be domiciling and residing in the same place. This is really a specific issue to countries which have geographically variable income tax rates (I know US and Switzerland do...not sure if there are any others). So I'm positive I'm legally in the right, as I've never gotten an account application with the question 'what address do you lay your head at night for 183 or more days of the year'; they ask my tax residency. Certainly I violate no parts of Patriot Act (I actually read it on a transatlantic flight at one point to ensure I'm not committing fraud); I certaintly don't violate the ideals behind it and I don't violate the act itself either. I'm sure I won't receive this letter for 'overseas clients', and I'm positive I'll never be asked to confirm my physical residency when I login. I would likely comply with the letter and/or not lie about my residency and move my Fidelity assets elsewhere, but I'm almost positive it will never happen.

The reason why it applies specifically to mutual funds is that different countries have special rules about different investments are taxed (just like the US). The UK, for instance, treats offshore mutual fund capital gains as income, which can lead to extremely high tax rates. Individual stocks and bonds do not have this sort of restriction (it is related to the passive status of funds). The UK is therefore dependent on its residents to report such funds they hold, which I'm positive many do not. The concern is that if the UK decides it doesn't like the US applying massive fines on its financial institutions, then it turns around and fines Vanguard, Fidelity, etc. for allowing US citizens living in the UK to violate UK law. The easiest way is for Fidelity to say 'you aren't allowed', but I'm not sure that will cover the firm's rears if the authorities come calling. That said, ETFs are equally faux pas in the UK, so I'm not sure why they pick and choose. I suppose brokerages aren't set up to allow trading of individuals stocks but not individual ETFs.

This has always been a concern for expats (whether they all realized it or not). Every country treats the situation differently, so US citizens need to worry about how they are treated by the country they are living in and make sure their foreign holdings are up to scratch. It is less an issue for most non-US expats, as they only have to worry about the laws of the country they work/live in. US citizens (and Filipinos for that matter) need to worry about their country of citizenship as well, and it is common for conflicting requirements to come from the two sides.

I definitely don't take the restriction as far as Random Poster that I therefore shouldn't live abroad due to the complication. I'm happy to put up with the headache for the opportunity that I have. That's precisely what it is....an additional complication I need to deal with.
Then what do you do when asked for US address on the forms?

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Re: US citizens abroad cannot invest through [Fidelity]

Post by Karamatsu » Wed Jul 02, 2014 7:30 pm

Except for expatriate Fidelity customers, this doesn't seem to surprising. As others have mentioned, restrictions on the purchase of mutual fund shares by US citizens abroad has been around for a long time. The surprise is more that Fidelity allowed it before... I wish I'd known! Restrictions have been in place at Schwab since before 9/11 and at Vanguard whenever it was that I checked with them (I forget).

That said, it IS becoming more and more difficult for foreign and expatriate to invest. Right now it seems we can invest in ETFs, stocks, bonds, REITs and just about anything else, but the hurdles just keep getting bigger and bigger, more and more intrusive. Of course, foreign investors will always have their local markets, but it would not surprise me if, in the end, it becomes impossible for expatriates to invest at all, and long-term expats will be left making hard choices about either their country of residence or their citizenship.

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Re: US citizens abroad cannot invest through a US brokerage

Post by kayanco » Wed Jul 02, 2014 7:34 pm

bpp wrote:
FoolishJumper wrote:As a US citizen abroad for 9 years, I'm far from concerned about this. I've opened multiple accounts (both bank and brokerage) with companies that claim only US residents can open accounts. The main point is that they do not know I live abroad. I never provided them a foreign address. And they can't simply look if people login from outside the US, as far too many people travel internationally for work.
So you lied to them. Which may work if they never figure out where you really live, but it wouldn't seem to give you much of a footing to stand on if they do figure it out.

As for checking logins from abroad, Vanguard has been known to do just that. I remember reading complaints from Americans in Thailand a few years ago that Vanguard had abruptly blocked access to the entire country, for example.
The IRS fully views myself and my non-US wife as US residents (the tax code is quite clear on that), so I'm fully in the clear when I check that I'm a resident for tax purposes.
Well, no, they do not view you as a US resident. Their taxing authority over you comes from your US citizenship, not your residence. In fact, if you declare foreign residence on Form 2555, they will recognize your non-US residence for the purpose of the Foreign Earned Income Exclusion. There is no concept of "US resident for tax purposes" in your case. (The situation is different for Canadian snowbirds, for example, who may become US residents for tax purposes if they spend enough days per year in the US.)

It occurs to me that your wife, on the other hand, could be "US resident for tax purposes" if you choose to treat her as such in order to file Married Filing Jointly -- and if she then takes the FEIE, they would be treating her as a "non-resident resident"... (Hmm, think I'll stop now before my head explodes.)

But US tax issues aside, the reason most companies don't want to deal with non-resident customers is to avoid running afoul of the banking and securities regulations in other countries. Lying to them about one's actual residence seems to me to be asking for trouble in the event they do find out. Not something I'd be willing to do, anyway. YMMV.
A US Citizen must have the same rights no matter where in the world he/she lives. It even sounds bogus that one can't buy a mutual fund just because they are living abroad.

It's not his problem, the companies should figure out how to handle these cases.

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Re: US citizens abroad cannot invest through [Fidelity]

Post by Karamatsu » Wed Jul 02, 2014 7:39 pm

Just to emphasize, there is no ban on US expatriate investing. Fidelity's policy only applies to shares of mutual funds, and is bringing them into line with the policies of brokers like Vanguard. Expatriates can still trade other instruments just fine (stocks, bonds, REITs, ETFs...). Ironically this means we are still free to access a subset of Vanguard funds as long as we do it through the ETF share class.

For now.

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Re: US citizens abroad cannot invest through a US brokerage

Post by normaldude » Wed Jul 02, 2014 7:41 pm

kayanco wrote:A US Citizen must have the same rights no matter where in the world he/she lives. It even sounds bogus that one can't buy a mutual fund just because they are living abroad. It's not his problem, the companies should figure out how to handle these cases.
So a restaurant is not allowed to refuse food delivery if you live 1000 miles away? You have a "right" to a businesses services?

Businesses should be free to choose who they do business with.

That said, I absolutely hate the idea of US investment firms banning US expats. This is likely a government created problem, because of bloated & complex FATCA regulations.
Last edited by normaldude on Wed Jul 02, 2014 7:42 pm, edited 1 time in total.

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Re: US citizens abroad cannot invest through [Fidelity]

Post by Karamatsu » Wed Jul 02, 2014 7:41 pm

A US Citizen must have the same rights no matter where in the world he/she lives.
That is how it should be, but unfortunately it's not how things are.

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Re: US citizens abroad cannot invest through [Fidelity]

Post by LadyGeek » Wed Jul 02, 2014 7:49 pm

Here's the wiki page on taxation: Taxation as a US person living abroad

Please stay on topic and factual. Opinions on the sanity (or not) of government regulations, taxes, etc. are off-topic.
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Re: US citizens abroad cannot invest through a US brokerage

Post by manwithnoname » Wed Jul 02, 2014 7:49 pm

kayanco wrote:
bpp wrote:
FoolishJumper wrote:As a US citizen abroad for 9 years, I'm far from concerned about this. I've opened multiple accounts (both bank and brokerage) with companies that claim only US residents can open accounts. The main point is that they do not know I live abroad. I never provided them a foreign address. And they can't simply look if people login from outside the US, as far too many people travel internationally for work.
So you lied to them. Which may work if they never figure out where you really live, but it wouldn't seem to give you much of a footing to stand on if they do figure it out.

As for checking logins from abroad, Vanguard has been known to do just that. I remember reading complaints from Americans in Thailand a few years ago that Vanguard had abruptly blocked access to the entire country, for example.
The IRS fully views myself and my non-US wife as US residents (the tax code is quite clear on that), so I'm fully in the clear when I check that I'm a resident for tax purposes.
Well, no, they do not view you as a US resident. Their taxing authority over you comes from your US citizenship, not your residence. In fact, if you declare foreign residence on Form 2555, they will recognize your non-US residence for the purpose of the Foreign Earned Income Exclusion. There is no concept of "US resident for tax purposes" in your case. (The situation is different for Canadian snowbirds, for example, who may become US residents for tax purposes if they spend enough days per year in the US.)

It occurs to me that your wife, on the other hand, could be "US resident for tax purposes" if you choose to treat her as such in order to file Married Filing Jointly -- and if she then takes the FEIE, they would be treating her as a "non-resident resident"... (Hmm, think I'll stop now before my head explodes.)

But US tax issues aside, the reason most companies don't want to deal with non-resident customers is to avoid running afoul of the banking and securities regulations in other countries. Lying to them about one's actual residence seems to me to be asking for trouble in the event they do find out. Not something I'd be willing to do, anyway. YMMV.
A US Citizen must have the same rights no matter where in the world he/she lives. It even sounds bogus that one can't buy a mutual fund just because they are living abroad.

It's not his problem, the companies should figure out how to handle these cases.
Large financial firms do not want to be bothered with complexities/cost of tax compliance for Expats where a violation can result in tax penalties or criminal prosecution. Look at federal prosecution of BNP, a french bank that violated US laws for trading with Cuba, Sudan and Iran. $9B fine and restriction on currency trades and criminal conviction. Its not worth it to financial firms to not comply with US laws on tax evasion. No brainer.

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Re: US citizens abroad cannot invest through [Fidelity]

Post by jstash » Wed Jul 02, 2014 8:07 pm

Why mutual funds, specifically? Why would they block mutual funds and not ETFs?

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Re: US citizens abroad cannot invest through a US brokerage

Post by cbeck » Wed Jul 02, 2014 8:12 pm

thursdaysd wrote:What if I already own the funds and then move abroad? Any difference between an IRA and a taxable account? This is probably more fallout from FATCA. :(
It wouldn't matter if you moved after opening the accounts. In fact, if you already live abroad you would probably not be able to open an account without a verifiable, physical US address. For Fidelity, no difference between an IRA and a taxable account. However, Keoghs are not affected. It is important to open a lot of accounts of all kinds before leaving the US.


I got the letter from Fidelity and have since moved my IRAs to another institution.

Expats need to have a US mailing address, a vpn service to provide a US ip address when connecting to US financial institutions, and a US phone number. A physical US address, for instance with a family member, would be ideal, but not in a state with an income tax since the financial institution would file a 1099 with the state tax bureau eventually provoking a tax domicile audit.

This issue is unrelated to FATCA, which is about tax collection.

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Re: US citizens abroad cannot invest through a US brokerage

Post by normaldude » Wed Jul 02, 2014 8:15 pm

cbeck wrote:This issue is unrelated to FATCA, which is about tax collection.
The original WSJ article seems to disagree..

"..Observers said fund managers are becoming more conservative in the wake of global developments such as the U.S. Foreign Account Tax Compliance Act and other U.S. efforts.."

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Re: US citizens abroad cannot invest through [Fidelity]

Post by normaldude » Wed Jul 02, 2014 8:30 pm

So I'm taking a closer look at recent articles on this issue, and they don't actually say anything about US citizens.

There was this vague comment in a Bloomberg article..
"..Most overseas clients opened accounts while living in the U.S. before moving abroad.."

http://www.bloomberg.com/news/2014-07-0 ... funds.html
So it's possible that Fidelity is merely targeting non-US citizens. Like someone who came to USA on a student visa or work visa, opened a Fidelity account, and then a few years later moved back to their home country.

This would actually make more sense, because 2-way FATCA agreements would mean that Fidelity would have to pay extra money to gather up that foreign citizen's information, and send that information to that foreign person's government. Fidelity probably doesn't want to deal with that FATCA compliance hassle, so they're probably ejecting overseas foreign citizen customers, just like how many foreign banks & brokerages are ejecting US citizen customers.
Last edited by normaldude on Wed Jul 02, 2014 8:34 pm, edited 1 time in total.

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Re: US citizens abroad cannot invest through a US brokerage

Post by LadyGeek » Wed Jul 02, 2014 8:34 pm

normaldude wrote:
cbeck wrote:This issue is unrelated to FATCA, which is about tax collection.
The original WSJ article seems to disagree..

"..Observers said fund managers are becoming more conservative in the wake of global developments such as the U.S. Foreign Account Tax Compliance Act and other U.S. efforts.."
FATCA came into full force on July 1, 2014. From the IRS: Summary of FATCA Timelines and FATCA Information for Foreign Financial Institutions and Entities
Under FATCA, to avoid being withheld upon, foreign financial institutions (FFIs) may register with the IRS and agree to report to the IRS certain information about their U.S. accounts, including accounts of certain foreign entities with substantial U.S. owners

FFIs that enter into an agreement with the IRS to report on their account holders may be required to withhold 30% on certain payments to foreign payees if such payees do not comply with FATCA.
Google "FATCA July 1" for more info.
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Re: US citizens abroad cannot invest through [Fidelity]

Post by jidina80 » Wed Jul 02, 2014 8:57 pm

Vanguard for a long time has refused to provide its Flagship financial planning services to me when I'm physically outside of the U.S., even though the only address I ever use - for Vanguard and all U.S. financial and legal correspondence - is a U.S. address.

This could be a blow to U.S. armed forces deployed overseas and living in many cases off-base. I expect the law related to this will be revised eventually.

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Re: US citizens abroad cannot invest through [Fidelity]

Post by normaldude » Wed Jul 02, 2014 9:00 pm

jidina80 wrote:Vanguard for a long time has refused to provide its Flagship financial planning services to me when I'm physically outside of the U.S., even though the only address I ever use - for Vanguard and all U.S. financial and legal correspondence - is a U.S. address.
Do you also use a US-based phone number?

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Re: US citizens abroad cannot invest through [Fidelity]

Post by Karamatsu » Wed Jul 02, 2014 9:11 pm

So it's possible that Fidelity is merely targeting non-US citizens.
That's possible but unlikely given that other major brokers also refuse to allow US citizens abroad to trade mutual fund shares, and have for many years. I tried to verify by looking at Fidelity's site but the server that I got connected to (https://www.fidelity.com aka [23.66.108.238]) appears to have an invalid certificate, so may be fraudulent. That's a first (for me) for a major financial site.

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Re: US citizens abroad cannot invest through [Fidelity]

Post by normaldude » Wed Jul 02, 2014 9:19 pm

Karamatsu wrote:
So it's possible that Fidelity is merely targeting non-US citizens.
That's possible but unlikely given that other major brokers also refuse to allow US citizens abroad to trade mutual fund shares, and have for many years. I tried to verify by looking at Fidelity's site but the server that I got connected to (https://www.fidelity.com aka [23.66.108.238]) appears to have an invalid certificate, so may be fraudulent. That's a first (for me) for a major financial site.
Have you tried using a US VPN?

To be on the safe side, US citizen expats might need to use a US address (not PO box), US phone number, and US VPN.

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Re: US citizens abroad cannot invest through [Fidelity]

Post by LadyGeek » Wed Jul 02, 2014 9:22 pm

Karamatsu wrote:I tried to verify by looking at Fidelity's site but the server that I got connected to (https://www.fidelity.com aka [23.66.108.238]) appears to have an invalid certificate, so may be fraudulent. That's a first (for me) for a major financial site.
The IP address gets to Japan, but it does not belong to Fidelity.

This might not help your US access problem, but Fidelity has a non-US affiliate site. From: Fidelity International Investors, http://www.fidelity.co.jp/ (not a secure connection).
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Re: US citizens abroad cannot invest through [Fidelity]

Post by bpp » Wed Jul 02, 2014 9:32 pm

normaldude wrote:To be on the safe side, US citizen expats might need to use a US address (not PO box), US phone number, and US VPN.
...in order to attempt to conceal a false declaration?
That seems like an unusual definition of "safe."
Last edited by bpp on Wed Jul 02, 2014 9:38 pm, edited 1 time in total.

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Re: US citizens abroad cannot invest through [Fidelity]

Post by ResearchMed » Wed Jul 02, 2014 9:33 pm

LadyGeek wrote:
Karamatsu wrote:I tried to verify by looking at Fidelity's site but the server that I got connected to (https://www.fidelity.com aka [23.66.108.238]) appears to have an invalid certificate, so may be fraudulent. That's a first (for me) for a major financial site.
The IP address gets to Japan, but it does not belong to Fidelity.

This might not help your US access problem, but Fidelity has a non-US affiliate site. From: Fidelity International Investors, http://www.fidelity.co.jp/ (not a secure connection).
That's odd.

I typed in that address [https://www.fidelity.com] and got to Fidelity. I'm pretty sure that it was the "right" Fidelity, because it auto-filled-in the account name (a bunch of asterisks, then the last few characters, correctly].

And I have NOT previously used this way/this e-address to enter our accounts.
We have been using a "netbenefits" link, previously provided, for several years now.

RM

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Re: US citizens abroad cannot invest through [Fidelity]

Post by jidina80 » Wed Jul 02, 2014 10:10 pm

normaldude wrote:
jidina80 wrote:Vanguard for a long time has refused to provide its Flagship financial planning services to me when I'm physically outside of the U.S., even though the only address I ever use - for Vanguard and all U.S. financial and legal correspondence - is a U.S. address.
Do you also use a US-based phone number?
When I phone Vanguard, which is rare, I use their U.S. Flagship phone number. I've phoned them both from the U.S. and overseas.

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Re: US citizens abroad cannot invest through [Fidelity]

Post by normaldude » Wed Jul 02, 2014 10:27 pm

jidina80 wrote:
normaldude wrote:
jidina80 wrote:Vanguard for a long time has refused to provide its Flagship financial planning services to me when I'm physically outside of the U.S., even though the only address I ever use - for Vanguard and all U.S. financial and legal correspondence - is a U.S. address.
Do you also use a US-based phone number?
When I phone Vanguard, which is rare, I use their U.S. Flagship phone number. I've phoned them both from the U.S. and overseas.
I recommend always using a US address and US phone number.

In other words, your Vanguard account should only have a US address and US phone number, Vanguard should only know you by a US address and US phone number, when you call Vanguard, the Vanguard representative should see a US phone number on their caller ID, and if they need to call you back, they should be able to call your +1 US phone number. There should be zero indication that you are overseas.

You can get a +1 US phone number from Skype.com, for $5/month.
Last edited by normaldude on Wed Jul 02, 2014 10:29 pm, edited 1 time in total.

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Re: US citizens abroad cannot invest through [Fidelity]

Post by cbeck » Wed Jul 02, 2014 10:28 pm

normaldude wrote: So it's possible that Fidelity is merely targeting non-US citizens. Like someone who came to USA on a student visa or work visa, opened a Fidelity account, and then a few years later moved back to their home country.
Nope. I am a US citizen and they notified me.

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Re: US citizens abroad cannot invest through [Fidelity]

Post by normaldude » Wed Jul 02, 2014 10:31 pm

cbeck wrote:
normaldude wrote: So it's possible that Fidelity is merely targeting non-US citizens. Like someone who came to USA on a student visa or work visa, opened a Fidelity account, and then a few years later moved back to their home country.
Nope. I am a US citizen and they notified me.
Would you be able to scan & post the Fidelity letter? (obviously black out any personal info).

I hate reading these WSJ and Bloomberg articles that merely summarize what the Fidelity letter says. I'd like to see the actual source, and exact wording.

Thanks in advance, if you're able to do that.

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Re: US citizens abroad cannot invest through [Fidelity]

Post by cbeck » Wed Jul 02, 2014 10:32 pm

bpp wrote:
normaldude wrote:To be on the safe side, US citizen expats might need to use a US address (not PO box), US phone number, and US VPN.
...in order to attempt to conceal a false declaration?
That seems like an unusual definition of "safe."
What is false, illegal, or unethical about a mailing address?

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Re: US citizens abroad cannot invest through [Fidelity]

Post by normaldude » Wed Jul 02, 2014 10:34 pm

bpp wrote:
normaldude wrote:To be on the safe side, US citizen expats might need to use a US address (not PO box), US phone number, and US VPN.
...in order to attempt to conceal a false declaration?
That seems like an unusual definition of "safe."
I never said anything about a false declaration. You are giving them an accurate mailing address & phone number.

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Re: US citizens abroad cannot invest through [Fidelity]

Post by lululu » Wed Jul 02, 2014 10:40 pm

ResearchMed wrote: I typed in that address [https://www.fidelity.com] and got to Fidelity. I'm pretty sure that it was the "right" Fidelity, because it auto-filled-in the account name (a bunch of asterisks, then the last few characters, correctly].
I have never taken the time to figure out how browsers autofill, but I have seen them autofill on sites that I have not gone to before. I assumed the fields had common names, like FirstName or something, at multiple sites, and that's what the browser recognized.

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Re: US citizens abroad cannot invest through [Fidelity]

Post by jidina80 » Wed Jul 02, 2014 10:42 pm

normaldude wrote:
jidina80 wrote:
normaldude wrote:
jidina80 wrote:Vanguard for a long time has refused to provide its Flagship financial planning services to me when I'm physically outside of the U.S., even though the only address I ever use - for Vanguard and all U.S. financial and legal correspondence - is a U.S. address.
Do you also use a US-based phone number?
When I phone Vanguard, which is rare, I use their U.S. Flagship phone number. I've phoned them both from the U.S. and overseas.
I recommend always using a US address and US phone number.

In other words, your Vanguard account should only have a US address and US phone number, Vanguard should only know you by a US address and US phone number, when you call Vanguard, the Vanguard representative should see a US phone number on their caller ID, and if they need to call you back, they should be able to call your +1 US phone number. There should be zero indication that you are overseas.

You can get a +1 US phone number from Skype.com, for $5/month.
My vanguard account DOES have only a U.S. address and U.S. phone number on my profile. Vanguard's restrictions are not much of a problem for me because I do have a U.S. address and phone, and rarely need to phone them, but many U.S. servicemen and women overseas may not be so fortunate.

I'm certainly not going to go out of my way to deceive Vanguard. I found their secure email to be the best way for me to deal with Vanguard when overseas. They don't seem to care which corner of the world the email is coming from.

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Re: US citizens abroad cannot invest through [Fidelity]

Post by bpp » Thu Jul 03, 2014 5:03 am

normaldude wrote:
bpp wrote:
normaldude wrote:To be on the safe side, US citizen expats might need to use a US address (not PO box), US phone number, and US VPN.
...in order to attempt to conceal a false declaration?
That seems like an unusual definition of "safe."
I never said anything about a false declaration. You are giving them an accurate mailing address & phone number.
What is the VPN for, if not to hide where you are connecting from?

The risk I see is this kind of thing will likely get more and more restrictive over time, as automatic information exchanges increase. Fidelity US is not licensed to sell securities in non-US jurisdictions, and it seems like they have finally started to take the risk of exposure to other countries' regulations (I don't get the impression that US regulations are the proximate cause here, though of course I don't know since they aren't being very explicit about the reasons) more seriously than they did before, in line with what other brokerages were already doing. So one may be able to finagle a way in now, but at risk of being forced to liquidate and take an unexpected cap gains hit (or early withdrawal penalty if an IRA) at some point in the future when the other shoe drops. Doesn't seem like an optimal strategy to me.

But as I said, YMMV.

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Re: US citizens abroad cannot invest through a US brokerage

Post by in_reality » Thu Jul 03, 2014 5:36 am

cbeck wrote: Expats need to have a US mailing address, a vpn service to provide a US ip address when connecting to US financial institutions, and a US phone number. A physical US address, for instance with a family member, would be ideal, but not in a state with an income tax since the financial institution would file a 1099 with the state tax bureau eventually provoking a tax domicile audit.
I don't think this is true. Vanguard may do a public records search and if that fails, require you to submit a utility bill and/or a pay stub to prove your residence (been there, had all my accounts frozen). I don't wonder if Fidelity won't adopt a similar policy.

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Re: US citizens abroad cannot invest through a US brokerage

Post by FoolishJumper » Thu Jul 03, 2014 5:48 am

bpp wrote:
FoolishJumper wrote:As a US citizen abroad for 9 years, I'm far from concerned about this. I've opened multiple accounts (both bank and brokerage) with companies that claim only US residents can open accounts. The main point is that they do not know I live abroad. I never provided them a foreign address. And they can't simply look if people login from outside the US, as far too many people travel internationally for work.
So you lied to them. Which may work if they never figure out where you really live, but it wouldn't seem to give you much of a footing to stand on if they do figure it out.
I never lied to anyone. They all ask for tax residency, and I'm a 100% U.S. tax resident. The U.S. is my domicile, and I fully intent to return to the U.S. The U.K. certainly doesn't have a problem understanding this, and neither do any of the 9 previous countries I've lived in. My U.S. tax return makes clear that I'm a U.S. resident (via my filing address, etc) and I've never claimed to be a foreign resident, and it is absolutely true that I am not. I've never claimed foreign Bona-Fide residency, either to the US or any other foreign country. The Foreign Earned Income Exclusion is a horrible construct, and I've never used it and hope to never be in a position to use it. I consciously transferred my state residency to a non-tax state before I departed. I've since changed my driver's license to a taxable state, but that in and of itself does not change my state residency. My current driver's license state could potentially take me to court and back-claim me as a resident of their state, but their case would be extrmely weak given it has a driver's license as sole basis (in fact, I choose to not absentee vote in state elections given the risk on state tax liability, in addition to I could care less about politics in that state). I've definitely never committed fraud either with financial institutions or with government entities.

You can claim I've violating the ideal behind their restriction, but that is far from my concern. They need to better construct their legal terminology if they want to prevent people in my position from investing through them. I've done nothing illegal. As you say, the reason behind the restriction is foreign laws and less-so about FACTA. I ensure I'm 100% complaint with the laws of the country I'm living in, in addition to U.S. laws, so don't see why Vanguard/Fidelity need to treat me like a child.
Last edited by FoolishJumper on Thu Jul 03, 2014 6:05 am, edited 1 time in total.

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Re: US citizens abroad cannot invest through a US brokerage

Post by FoolishJumper » Thu Jul 03, 2014 6:04 am

cbeck wrote:A physical US address, for instance with a family member, would be ideal, but not in a state with an income tax since the financial institution would file a 1099 with the state tax bureau eventually provoking a tax domicile audit.
There are only 12 states which require filing of 1099's (aside from 1099-R's) with them, so all you need to do is pick one of the other 38 states, which is much less restrictive than the 7 states that don't have any income tax. That is of course separate from state residency. The critical point is controlling state residency to prevent taxation. Mailing address caused audits are just a time-wasting exercise, which one should do their best to prevent.

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