Brexit Planning message from IB to EU customers

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nick_r
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Brexit Planning message from IB to EU customers

Post by nick_r »

Hello,

I got an email from Interactive Brokers regarding moving my account from IBUK to IBIE, IBLUX or IBCE. Not right now, but later this year. It was like a pre-announcement I guess.

Anyway, anybody knows more about what will happen? Downsides? Features we'll lose? Taxation changes?

How abot the stocks I bought on LSE? Will those have to be moved too? If not, will I still be able to sell?

So many issues with this damn brexit...

Thanks!
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galeno
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Re: Brexit Planning message from IB to EU customers

Post by galeno »

Watching.

We in the Americas also were told by IB that they will no longer accept corporate accounts from Panama and many other LATAM countries.

We have to switch our corporate account to the British Virgin Islands or go direct with them.
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atenty
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Re: Brexit Planning message from IB to EU customers

Post by atenty »

Hope this helps:
Interactive Brokers Group (“IB”) and its UK affiliate Interactive Brokers (U.K.) Limited (“IBUK”) have been planning for the end of the Brexit transition period, currently scheduled for 31st December 2020, and have been preparing alternative arrangements for our European customers. Our priority is to ensure a seamless transition and continuation in the provision of brokerage services to our customers with minimal disruption and minimal changes. Clients impacted by this event will receive notifications outlining the changes and timelines. Outlined below is a list of Frequently Asked Questions concerning the proposed migration of accounts from IBUK to one of our other European brokers.

FAQs

Q: What actions is IBKR taking to ensure continuity of brokerage services when the Brexit transition starts January 1, 2021?

A: In 2018 IBKR established Interactive Brokers Luxembourg SARL (“IBLUX”) which received regulatory authorization in November 2019. In addition, we are in the process of creating two additional brokers based in the European Union: Interactive Brokers Ireland Limited (“IBIE”) and Interactive Brokers Central Europe Befektetési ZRt (“IBCE”).

It is our intent to migrate all clients impacted by Brexit to one of these three European Union based brokers (“EU Brokers”) prior to December 31, 2020. Migration to IBIE and IBCE is subject to receiving regulatory authorization from the relevant National Competent Authority.

[Post content snipped for fair-use by Mod Misenplace]

Q: Which IBKR broker will my account be migrated to?

Q: Which clients are affected by this migration plan?

Q: How is consent provided?

Q: What happens if I do nothing?

Q: What happens if I do not consent to the transfer?

Q: Will my login credentials change?

Q: Will I have access to the same trading platform or be subject to any software changes following migration?

Q: Will all account balances be transferred at the same time?

Q: What will happen to my current account following migration?

Q: Will IBKR’s commissions and fees change when my account is migrated?

Q: Will my trading permissions change when my account is migrated?

Q: Will open orders (e.g., Good-til-Canceled) be carried over when my account is migrated?

Q: Will I be subject to the U.S. Pattern Day Trading Rule once my account is migrated?

Q: Will I receive a single, combined annual activity statement at year end?

Q: Will the current cost basis of positions be carried over when my account is migrated?

Q: Will the migrated account retain the same configuration as the current account?

Q: What happens if IBKR does not receive the regulatory approval necessary to migrate accounts by December 31, 2020?

Q: Can I continue to address complaints with the UK Financial Ombudsman Service following migration?

Q: How will the migration impact data protection?

Q: How will my account protection be impacted?
source: https://ibkr.info/node/3515
Laurizas
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Re: Brexit Planning message from IB to EU customers

Post by Laurizas »

Downside
Q: How will my account protection be impacted?

A: The insurance protection available to clients in the event of broker default is generally less favorable in the EU as compared to the UK or US.

Currently, provided they meet eligibility requirements, IBUK clients may be protected in relation to investment services under the UK Financial Services Compensation Scheme (“UK FSCS”) at an amount of up to £50,000. As IBUK clients are carried by our US broker, IBL, the securities segment of their account may be eligible for insurance by the Securities Investor Protection Corporation (“SIPC”) at an amount of up to USD 500,000 (subject to a cash sublimit of USD 250,000).

Under the EU Brokers IBLUX, IBIE and IBCE eligible claimants may be entitled to claim compensation up to a maximum of EUR 20,000. More information on the applicable scheme, coverage and claim eligibility will be provided together with our request to transfer.
[quoted from https://ibkr.info/node/3515- Mod Misenplace]
occambogle
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Re: Brexit Planning message from IB to EU customers

Post by occambogle »

I totally understand why IB is moving out of the UK... but it sucks to lose the FSCS protection. I speak as someone who long ago had an account with Kaupthing Icelandic bank's branch in Isle of Man when the bank went bust, which wasn't covered by UK FSCS, and had to claim on the severely-underfunded Isle of Man compensation scheme. I got the money back in full after a year, as the amount was small, but many others lost out...

"As IBUK clients are carried by our US broker, IBL, the securities segment of their account may be eligible for insurance by the Securities Investor Protection Corporation (“SIPC”) at an amount of up to USD 500,000 (subject to a cash sublimit of USD 250,000)."

I find this part confusing though.... they talk about IBUK clients but don't explicitly say that clients of the new EU IBKR entities would be covered by SIPC.
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galeno
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Re: Brexit Planning message from IB to EU customers

Post by galeno »

I'm confused.

I thought IB was a USA domiciled discount broker with international branches. Like the old Merrill Lynch of my father's era. Like Schwab International but with access to UCITS ETFs on non-USA bourses. Big drop in L1 and L2 dividend withholding taxes for us.

Now I'm seeing all these different letters: IBKR. IBUK. etc. What's going on? Which IB do we belong to?

We have a Panamanian corporate account with IB. For six years. Transfered from Schwab. Where we were for 25 years. To ME this means the Americas. Now IB wants us to use a British Virgin Island corporate account. BVI is a UK territory.

Does this mean we go from IBKR (Americas) to IBUK (Great Britian)?

Help.
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glorat
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Re: Brexit Planning message from IB to EU customers

Post by glorat »

IB as a broker has multiple legal entities across the globe in order to be a broker in different countries, typically to comply with local broker regulations. Where the country has no specific regulations, typically its US entity will operate there.

Changes in legal entities has happened before. For example, I believe the US legal entity originally operated in Hong Kong but eventually, presumably due to regulations, IB formed a Hong Kong legal entity to operate its brokerage operations and requested/required all Hong Kong accounts to migrate from the US entity to the new Hong Kong entity in what seems to be similar to the above.

I wasn't part of the migration but I am using the Hong Kong entity. As far as I can tell, it is simply a legal thing. The accounts and software etc are unchanged. The only possible difference that was discussed was who was providing the broker regulation and "insurance" in the event of broker fraud. Given the size and reputation of IB, I consider this a minimal and acceptable issues.

In short, I can understand many people having concerns here but objectively and on historic precedence I expect this all to end up being a non-issue
occambogle
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Re: Brexit Planning message from IB to EU customers

Post by occambogle »

glorat wrote: Thu Sep 17, 2020 8:28 am The only possible difference that was discussed was who was providing the broker regulation and "insurance" in the event of broker fraud. Given the size and reputation of IB, I consider this a minimal and acceptable issues.
For U.S. citizens the physical location of your account has a bearing on whether you would need to file an FBAR each year. I was careful to check my account was with IB USA for this reason.
I think it makes sense for IB to move to Europe, but there is a big difference between 20k, 100k, and 500k governmental protection in the event of problems.... so customers should be clear on what is what.
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galeno
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Re: Brexit Planning message from IB to EU customers

Post by galeno »

For us the BVI (British Virgin Islands) is the UK version of the US Virgin Islands. Both are territories of large countries with important stock exchanges.

For whatever reasons IB in the USA no longer likes our "Panamanian clothes" it wants us to use "BVI clothes" or go "nude" (no corporate account).

If we use "BVI clothes" will we be pushed to IB in the UK? If we are pushed to IB in the UK will we be limited to only the LSE because of Bretexit?

We've had access to non-USA bourses for only 6 years. For the previous 34 we've only "shopped" on USA exchanges.

Can we buy inexpensive additional portfolio insurance if the IBUK insurance is inadequate?
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galeno
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Re: Brexit Planning message from IB to EU customers

Post by galeno »

This is driving me crazy. USA IB is IBL? Then what is IBKR?

Where did all these letters come from?

I wish they'd make an IBCR.
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occambogle
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Re: Brexit Planning message from IB to EU customers

Post by occambogle »

galeno wrote: Thu Sep 17, 2020 9:42 am This is driving me crazy. USA IB is IBL? Then what is IBKR?
Where did all these letters come from?
IBKR is just the ticker name for Interactive Brokers own stock, and so a quicker way to write Interactive Brokers. Some just write IB..... Your issue (and as someone also residing outside of the developed world... I do feel for you) from your other thread, is more about who IB are willing to take on as customers generally, with regard to residency etc... which is a bit of a different issue than the topic of this thread.
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galeno
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Re: Brexit Planning message from IB to EU customers

Post by galeno »

Thank you! That makes TOTAL sense. Why didn't I think of that?

I've been posting about IB on Bogleheads for 6 years. Recently I started seeing "IBKR". So...OK. Very sexy. But for me it was just IB.

I believe I'm STARTING to understand the basic situation. Nationalism is waxing and globalism is waning. These are just the legal and regulatory rules we must play by.

As long as we can continue to hold VWRD and AGUG in our portfolio we're happy.

We do NOT want return to the days when we held VT and a ladder of brokered USA FDIC CDs in US banks.

occambogle wrote: Thu Sep 17, 2020 9:45 am
galeno wrote: Thu Sep 17, 2020 9:42 am This is driving me crazy. USA IB is IBL? Then what is IBKR?
Where did all these letters come from?
IBKR is just the ticker name for Interactive Brokers own stock, and so a quicker way to write Interactive Brokers.....
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galeno
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Re: Brexit Planning message from IB to EU customers

Post by galeno »

It seems like IB will resolve all these issues automatically for its European customers.

I imagine that the USA is pressuring IB with new regs. When I called USA IB about their decision regarding LATAM corp accounts no longer being accepted. The guy simply told me that the compliance that needs to be done is just not worth the hassles.

Our costs will be significant. We probably have to sell our UCITS ETFs and then rebuy them.
occambogle wrote: Thu Sep 17, 2020 8:47 am
glorat wrote: Thu Sep 17, 2020 8:28 am The only possible difference that was discussed was who was providing the broker regulation and "insurance" in the event of broker fraud. Given the size and reputation of IB, I consider this a minimal and acceptable issues.
For U.S. citizens the physical location of your account has a bearing on whether you would need to file an FBAR each year. I was careful to check my account was with IB USA for this reason.
I think it makes sense for IB to move to Europe, but there is a big difference between 20k, 100k, and 500k governmental protection in the event of problems.... so customers should be clear on what is what.
KISS & STC.
krasnall
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Re: Brexit Planning message from IB to EU customers

Post by krasnall »

occambogle wrote: Thu Sep 17, 2020 6:38 am "As IBUK clients are carried by our US broker, IBL, the securities segment of their account may be eligible for insurance by the Securities Investor Protection Corporation (“SIPC”) at an amount of up to USD 500,000 (subject to a cash sublimit of USD 250,000)."

I find this part confusing though.... they talk about IBUK clients but don't explicitly say that clients of the new EU IBKR entities would be covered by SIPC.
The answer might be in their FAQ:
As accounts migrated to IBLUX, IBIE or IBCE will not be introduced to IBL, they will not be subject to the PDT rule.
I think European clients won't be covered by SIPC anymore, as the European branches won't be acting as introducing brokers for IB US. There is also a question of who will be the custodian if not IB US. This is quite a big issue, especially if one gets transferred to IB in Hungary (no offense, I live in Poland myself and wouldn't like to have all my assets domiciled here).
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galeno
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Re: Brexit Planning message from IB to EU customers

Post by galeno »

Our custodian is either Chase NA or Bank of America NA. I forgot which one. Definately NOT IB.

When we moved from Schwab International to IB our financial advisor made a big deal about the custodian. He wanted it to be a large US bank.

To this day I don't understand why other than the basic retail store rule of separate responsabilities. It seemed like a reasonable idea.

Also I don't know what the "NA" means.

"The European branches won't be acting as introducing brokers for IB US. There is also a question of who will be the custodian if not IB US. This is quite a big issue, especially if one gets transferred to IB in Hungary (no offense, I live in Poland myself and wouldn't like to have all my assets domiciled here)."
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glorat
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Re: Brexit Planning message from IB to EU customers

Post by glorat »

krasnall wrote: Thu Sep 17, 2020 11:53 am There is also a question of who will be the custodian if not IB US. This is quite a big issue, especially if one gets transferred to IB in Hungary (no offense, I live in Poland myself and wouldn't like to have all my assets domiciled here).
As far as i can tell, all IB subsidiaries use the same set of custodians as each other, which as already pointed out is not IB itself anyway. Many of those custodians will be in the US.

In any case, none of this affects the domicile of your assets which is determined by the fund you bought, not the broker nor the custodian.
TedSwippet
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Re: Brexit Planning message from IB to EU customers

Post by TedSwippet »

galeno wrote: Thu Sep 17, 2020 12:53 pm Also I don't know what the "NA" means.
Me neither, so I did a bit of digging.

https://en.wikipedia.org/wiki/National_ ... ted_States
In the modern United States, the term national bank has a precise meaning: a banking institution chartered and supervised by the Office of the Comptroller of the Currency ("OCC"), an agency in the U.S. Treasury Department, pursuant to the National Bank Act. Inclusion in the bank's name of the word National, the designation National Association, or its abbreviation N.A. is a required part of the distinguishing legal title of a national bank, as in "Citibank, N.A." or "CIT Bank, N.A." Many state banks, by contrast, are chartered by the applicable state government agencies (usually the state's department of banking). The Federal Deposit Insurance Corporation (FDIC) insures deposits at both national and state banks.

The advantage of holding a National Bank Act charter is that a national bank is not subject to state usury laws intended to prevent predatory lending. (However, see also Cuomo v. Clearing House Association, L. L. C., stating that federal banking regulations do not preempt the ability of states to enforce their own fair-lending laws.) There is currently no federal cap on rates. The federal government only requires that whatever rates, fees, or terms are set by issuers be disclosed to the consumer in accordance with the Truth in Lending Act.
occambogle
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Re: Brexit Planning message from IB to EU customers

Post by occambogle »

Does anyone know if there are any estate tax / inheritance issues with any of the european IB subsidiaries?

As a parallel example.... for IB US and other US brokerages they are subject to US estate tax on US situs assets over $60k. Non-US Situs assets (e.g. UCITS ETFs) are not affected but my reading of posts on this forum indicates (a) it can cause a lengthy delay in receiving the assets after death for a non-US person, and (b) also cash over $60k would be subject to the tax.

So I am just wondering are there any similar laws in Ireland, Luxembourg or Hungary(?) that would prove to be pitfalls and to be aware of?
glorat
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Re: Brexit Planning message from IB to EU customers

Post by glorat »

occambogle wrote: Mon Nov 09, 2020 5:36 am Does anyone know if there are any estate tax / inheritance issues with any of the european IB subsidiaries?

As a parallel example.... for IB US and other US brokerages they are subject to US estate tax on US situs assets over $60k. Non-US Situs assets (e.g. UCITS ETFs) are not affected but my reading of posts on this forum indicates (a) it can cause a lengthy delay in receiving the assets after death for a non-US person, and (b) also cash over $60k would be subject to the tax.

So I am just wondering are there any similar laws in Ireland, Luxembourg or Hungary(?) that would prove to be pitfalls and to be aware of?
The state/inheritance tax relates to where the assets are domiciled - so nothing to do with the broker or the exchange, at least in relation to ETFs. So to correct your statement...

"IB US domiciled ETFs are subject to US estate tax on US situs assets over $60k. Non-US situs assets (e.g. UCITS ETFs) are not affected."

The only asset that the broker might actually hold on behalf of you is a cash balance. To avoid that pitfall, don't keep cash with your broker. Put it in a fund, or withdraw it to your bank.
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Re: Brexit Planning message from IB to EU customers

Post by occambogle »

glorat wrote: Mon Nov 09, 2020 9:34 pm The state/inheritance tax relates to where the assets are domiciled - so nothing to do with the broker or the exchange, at least in relation to ETFs. So to correct your statement...

"IB US domiciled ETFs are subject to US estate tax on US situs assets over $60k. Non-US situs assets (e.g. UCITS ETFs) are not affected."

The only asset that the broker might actually hold on behalf of you is a cash balance. To avoid that pitfall, don't keep cash with your broker. Put it in a fund, or withdraw it to your bank.
Thanks. I'm aware that this is how it works for US inheritance rules... but are we sure the same rules are applicable if the broker is based in the new IB european countries? Is it not possible they may be different including for an EU citizen? It may well be fine, I just want to be sure. Also I wonder what the rules are in those countries for cash in broker account.
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Re: Brexit Planning message from IB to EU customers

Post by glorat »

occambogle wrote: Tue Nov 10, 2020 1:31 am Thanks. I'm aware that this is how it works for US inheritance rules... but are we sure the same rules are applicable if the broker is based in the new IB european countries? Is it not possible they may be different including for an EU citizen? It may well be fine, I just want to be sure. Also I wonder what the rules are in those countries for cash in broker account.
My confidence (albeit not certainty) is based on the fact that the broker doesn't hold any of your assets. A totally separate legal entity called the custodian is what holds your assets. But even they may hold the underlying assets... the ETF fund probably has custody of the underlying assets.

So the question to me is when probate happens, which of those matters? In fairness, clearly the broker does have a role in probate, which allows the possibility for me to be wrong. However, general internet reading (which can also be wrong), says it is the domicile of the ETF fund that matters.

Also every country (include each in Europe) can have their own rules on inheritance tax, which may include taxing securities... but I understand that to be determined by the tax residency and domiciles of the recipients and deceased, not the broker.
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Re: Brexit Planning message from IB to EU customers

Post by occambogle »

glorat wrote: Tue Nov 10, 2020 1:38 am My confidence (albeit not certainty) is based on the fact that the broker doesn't hold any of your assets. A totally separate legal entity called the custodian is what holds your assets. But even they may hold the underlying assets... the ETF fund probably has custody of the underlying assets.

So the question to me is when probate happens, which of those matters? In fairness, clearly the broker does have a role in probate, which allows the possibility for me to be wrong. However, general internet reading (which can also be wrong), says it is the domicile of the ETF fund that matters.

Also every country (include each in Europe) can have their own rules on inheritance tax, which may include taxing securities... but I understand that to be determined by the tax residency and domiciles of the recipients and deceased, not the broker.
Thanks again. It sounds complicated, but on balance maybe not something to majorly worry about. Reason I'm interested is I'm opening an IBKR account for my wife who is an EU citizen but non-EU non-US resident and am not sure yet in which country (US or the EU entities) that IB will place her account, so am researching if there are significant differences in terms of potential tax implications assuming she holds primarily UCITS ETFs.
Update: IB opened the account with their US LLC entity, so the European entity laws aren't important. She'll be buying UCITS ETFs only, so seems the only pitfall to keep in mind is never to have more than $60k cash there (which won't happen anyway).
pitagora
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Re: Brexit Planning message from IB to EU customers

Post by pitagora »

Does anyone know how the EU branches handle estates/inheritances? If you have US assets in a US broker, as a EU citizen you will have to pay 40% estate tax. But what happens it's IB Hungary for instance? If I die, is the US involved in any way in the transfer of my assets? Are there estate tax risks?
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Re: Brexit Planning message from IB to EU customers

Post by bogle_man »

So what is the consensus? IB UK splitting into different entities and not being covered by SIPC anymore is synonymous with not a good broker. How can one trust their lifetime investments and pension funds with just 20k protection?

I am really puzzled here what is the right move for all EU investors.
krasnall
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Re: Brexit Planning message from IB to EU customers

Post by krasnall »

There is only one way to have SPIC coverage - use a US broker. Unfortunately, not many offer access to EU exchanges, and even if they do, usually the commissions are not reasonable. There is also a way to use US IB by signing up with Zacks Trade, which acts as IB's white label broker. It's a bit different than European IB partner brokers, as you are not "introduced" to IB UK/IE/LUX/HU, but instead you keep some relationship with Zacks Trade and IB US is used for the back office stuff. The only issue is the commission for European exchanges - 0.3% with 12 EUR minimum. However, I contacted them and they are open for negotiation.

I'm still waiting to see if IB seriously wants to move clients to the Hungarian entity. I see it as a much higher risk than the lack of SPIC coverage.
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Re: Brexit Planning message from IB to EU customers

Post by bogle_man »

krasnall wrote: Tue Nov 24, 2020 6:20 am I'm still waiting to see if IB seriously wants to move clients to the Hungarian entity. I see it as a much higher risk than the lack of SPIC coverage.
What's the issue with Hungary? If we buy Irish-domiciled funds, we are still taxed at Irish rates (leveraging Irish treaties). The custodian of our brokerage account could be Hungary but so what. To me, the more important aspect is the protection.
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Re: Brexit Planning message from IB to EU customers

Post by Laurizas »

Last edited by Laurizas on Tue Nov 24, 2020 7:44 am, edited 1 time in total.
krasnall
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Re: Brexit Planning message from IB to EU customers

Post by krasnall »

bogle_man wrote: Tue Nov 24, 2020 6:54 am What's the issue with Hungary? If we buy Irish-domiciled funds, we are still taxed at Irish rates (leveraging Irish treaties). The custodian of our brokerage account could be Hungary but so what. To me, the more important aspect is the protection.
Right, both aspects are important. However, unless you use a US broker, you are stuck with the default 20k protection in the EU, no matter which broker you choose. Unless some country decides to increase the protection limit for their brokerages, which I believe will not happen anytime soon.

My issue with Hungary? I don't feel safe keeping my money there. Same goes for Cyprus, Bulgaria or Poland. I already have some assets in Poland (to maintain my client status with a local bank here) but I would prefer to keep the majority in a jurisdiction which has a strong and independent judiciary, is stable politically and has high credit rating. Unfortunately most of the countries from the former eastern block don't offer that anymore. Some might say the risk is very low. Perhaps it is low, but I like to sleep well at night.
bogle_man
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Re: Brexit Planning message from IB to EU customers

Post by bogle_man »

Laurizas wrote: Tue Nov 24, 2020 7:32 am
bogle_man wrote: Tue Nov 24, 2020 6:54 am What's the issue with Hungary?
https://www.dw.com/en/hungary-is-no-lon ... a-53442394
https://theorangefiles.hu/nationalizati ... ion-funds/
Hmm, quite alarming indeed!
imperia
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Re: Brexit Planning message from IB to EU customers

Post by imperia »

Laurizas wrote: Tue Nov 24, 2020 7:32 am
bogle_man wrote: Tue Nov 24, 2020 6:54 am What's the issue with Hungary?
https://www.dw.com/en/hungary-is-no-lon ... a-53442394
https://theorangefiles.hu/nationalizati ... ion-funds/
This is false propaganda!
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Re: Brexit Planning message from IB to EU customers

Post by bogle_man »

What about Saxo? Does the custody fee and Citi as a custodian provide a better protection?
alwaysonit
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Re: Brexit Planning message from IB to EU customers

Post by alwaysonit »

Please correct me if I am wrong in my summary;

From what I understand, the only difference is if Interactive Brokers defaults, we are only covered up to €20k now.
However, this would only apply to cash positions as a separate legal entity would hold my assets once they are invested in, say an ETF.
So there is no downside to this migration to anybody who will never hold over €20k cash with them.
Laurizas
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Re: Brexit Planning message from IB to EU customers

Post by Laurizas »

alwaysonit wrote: Thu Nov 26, 2020 1:41 pm if Interactive Brokers defaults, we are only covered up to €20k now.
22000, not 20000
alwaysonit wrote: Thu Nov 26, 2020 1:41 pm However, this would only apply to cash positions as a separate legal entity would hold my assets once they are invested in, say an ETF.
Stock positions also. Let's say IB engages in fraudulent activities and numbers in your account are fake, your assets are somehow gone.
Matej Vela
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Re: Brexit Planning message from IB to EU customers

Post by Matej Vela »

krasnall wrote: Thu Sep 17, 2020 11:53 am
occambogle wrote: Thu Sep 17, 2020 6:38 am "As IBUK clients are carried by our US broker, IBL, the securities segment of their account may be eligible for insurance by the Securities Investor Protection Corporation (“SIPC”) at an amount of up to USD 500,000 (subject to a cash sublimit of USD 250,000)."
[...]
I think European clients won't be covered by SIPC anymore, as the European branches won't be acting as introducing brokers for IB US.
As far as I can tell, Interactive Brokers is putting a heavy workload on "may be eligible" in that sentence. SIPC only covers those securities that are registered with the SEC (viewtopic.php?p=3322921, viewtopic.php?p=4644635), which excludes nearly all UCITS funds (viewtopic.php?p=5612874). The majority of EU/EEA clients who invest in UCITS were only benefiting from SIPC protection on uninvested USD cash, so this boils down to downgrading from the UK FSCS coverage of £85K to whichever limit applies in Ireland, Luxembourg, or Hungary respectively. On second thought, the r/wallstreetbets crowd who hold individual stocks do lose a meaningful layer of protection, but I'm assuming they're unlikely to be reading this.
krasnall wrote: Thu Sep 17, 2020 11:53 am There is also a question of who will be the custodian if not IB US. This is quite a big issue, especially if one gets transferred to IB in Hungary (no offense, I live in Poland myself and wouldn't like to have all my assets domiciled here).
Unfortunately, this is a bit like "pick your poison".

Ireland? Just look at Customs House Capital. It was reported to regulators by a whistleblower in 2009, and collapsed in 2011 after going as far as violating the segregation of client funds. The people responsible are only being prosecuted now, in 2020: https://www.irishtimes.com/business/fin ... -1.4339408, https://www.askaboutmoney.com/threads/t ... al.172083/

Germany? Just look at Wirecard. After FT wrote about it in Jan 2019, BaFin reacted by investigating FT and banning short sales: https://www.ft.com/content/284fb1ad-ddc ... 09b36868db

The SEC, for all its underfunding and hollowing out, still compares favorably to EU regulators as things stand: https://www.sec.gov/news/press-release/2020-266

~~~
Edited on Fri Nov 27, 2020 9:46 pm EST: replaced https://www.investor.gov/introduction-i ... ation-sipc with viewtopic.php?p=3322921 and viewtopic.php?p=4644635; added a sentence on individual stocks.
Last edited by Matej Vela on Fri Nov 27, 2020 9:46 pm, edited 1 time in total.
Laurizas
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Re: Brexit Planning message from IB to EU customers

Post by Laurizas »

Matej Vela wrote: Thu Nov 26, 2020 3:43 pm SIPC only covers those securities that are registered with the SEC,
From the link you provided:
And it does not provide protection for investment contracts not registered with the SEC.
European Etfs are not investment contracts.
Matej Vela
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Re: Brexit Planning message from IB to EU customers

Post by Matej Vela »

Laurizas wrote: Thu Nov 26, 2020 4:02 pm
Matej Vela wrote: Thu Nov 26, 2020 3:43 pm SIPC only covers those securities that are registered with the SEC,
From the link you provided:
And it does not provide protection for investment contracts not registered with the SEC.
European Etfs are not investment contracts.
See viewtopic.php?t=216237, where a poster claimed that SIPC itself responded with the SEC registration requirement, and there was no clear conclusion that unregistered funds are in fact covered by SIPC. Possibly that was garbled somewhere, in which case I apologize for passing along incorrect information.
Laurizas
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Re: Brexit Planning message from IB to EU customers

Post by Laurizas »

Matej Vela wrote: Thu Nov 26, 2020 4:25 pm See viewtopic.php?t=216237, where a poster claimed that SIPC itself responded with the SEC registration requirement,
Yes, I know this particular thread, but topic author hasn't claimed that he had received an answer from SEC. Bottom line, I also spent decent amount of time regarding this topic and I came to conclusion that it is not clear, but logically SIPC should cover European ETFs, but it is just my intuition.
alwaysonit
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Re: Brexit Planning message from IB to EU customers

Post by alwaysonit »

What are our options?

I assume no European can avail of FSCS protection now post Brexit, regardless of broker?

Is it a good idea to diversify our investments over multiple reputable discount brokers?
Laurizas
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Re: Brexit Planning message from IB to EU customers

Post by Laurizas »

alwaysonit wrote: Fri Nov 27, 2020 4:18 am I assume no European can avail of FSCS protection now post Brexit, regardless of broker?
Etfmatic?
cafe72
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Re: Brexit Planning message from IB to EU customers

Post by cafe72 »

I took a look at the customer agreement for IB LUX since I will have to migrate and these points concern me since there is only a 20K protection:
3.1.2.4 You authorise us to arrange for your assets to be held with a sub-custodian in one or more jurisdictions outside Luxembourg or the EEA. In some cases, assets which are held overseas will be subject to different settlement, legal and regulatory requirements than those that apply in Luxembourg or the EEA. In some jurisdictions, local law might not allow your assets to be separately identifiable from our assets or those of the sub-custodian. You might be at greater risk of loss if the sub-custodian fails.

3.1.2.5 You expressly consent and authorise us to deposit your assets with a specific third party that does not meet IBLUX's internal risk assessment.

3.1.2.6 You expressly consent and authorise us to arrange for your assets to be held with a sub-custodian in one or more jurisdictions outside of Luxembourg or the EEA where the nature of the assets requires them to be deposited with a sub-custodian in a jurisdiction which does not regulate the holding and safekeeping of financial instruments for the account of another person.

3.1.4.2 Where your assets are held by a sub-custodian, save as provided under the Client Assets Rules, we cannot guarantee that you would not lose your assets if the sub-custodian fails. Where there is a default by a sub-custodian resulting in a shortfall, you may be required to share in that shortfall in proportion to the value of the assets which our sub-custodian hold for you with other clients.
So apparently they are authorized to hold your securities in jurisdictions that don't have the same regulations/safekeeping, where your assets might not be separately identifiable from IB's assets or those of the sub-custodian. This is concerning. How many of these sub-custodians in those sort of jurisdictions do they use?

And in what circumstances would I be required to share in the shortfall of a sub-custodian? Would my securities be available to creditors or to the sub-custodian to be liquidated? :?
Matej Vela
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Re: Brexit Planning message from IB to EU customers

Post by Matej Vela »

Laurizas wrote: Fri Nov 27, 2020 1:22 am Yes, I know this particular thread, but topic author hasn't claimed that he had received an answer from SEC. Bottom line, I also spent decent amount of time regarding this topic and I came to conclusion that it is not clear, but logically SIPC should cover European ETFs, but it is just my intuition.
The part about virtually all UCITS not being registered with the SEC I'm sure about, both from prospectus language used by all major UCITS providers, and from searching the SEC's filings database EDGAR. I do appreciate your feedback, and have updated the original post to link to previous threads here instead of investor.gov.
Laurizas
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Re: Brexit Planning message from IB to EU customers

Post by Laurizas »

If one really needs the clarity, I recommend writing a paper letter with request for information regarding particular situation both to Sec and Sipc.
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