Brexit Planning message from IB to EU customers

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nick_r
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Joined: Thu Feb 12, 2015 8:05 am

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.....
KISS & STC.
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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.
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