(USA topic) Fidelity IRA account issues based on living abroad

[ozyjon]

A cautionary tale that illustrates why we must scrupulously cover our tracks before we come to their attention.

If they get access to your I.D. eg; passport, can they check your movements ?

I wonder if they can ?

[mpyre]

Has this anything to do with FATCA ? As a British citizen with a German bank account living in Thailand and no connection what so ever with America i was surprised to receive a letter (too late to reply until the 30th) containing FATCA forms to fill out. Seems Uncle Sam's reach is global.

Yes, it's all about USSA big brother Fatca, the so-called Patriot Act, "Know Your Customer" regulations at banks, etc...all of it coming to the G-20 soon...Liberty had a nice little 250 year run in West, but is now on death's doorstep...

Edited May 31, 2016 by mpyre

[BKKSnowBird]

So what is the worst case scenario? Fidelity closes my IRA. Would I have to return to the US to get that money and move it somewhere else? Could I still do a custodial transfer to avoid early withdrawal penalties?

Edited May 31, 2016 by BKKSnowBird

[CaptHaddock]

So what is the worst case scenario? Fidelity closes my IRA. Would I have to return to the US to get that money and move it somewhere else?

If you already had another IRA account at another broker, you would just initiate a trust-to-trust transfer at broker B. If you did not have another IRA account at another broker, you would probably have to re-establish US residence possibly exposing yourself to state income tax before you could open a new IRA account.

As far as I have heard, Fidelity has not actually closed accounts, but locked them from trading. It's conceivable that a broker actually could close an IRA, liquidate the the portfolio, and send a check for entire amount, which would be a taxable distribution unless rolled over into a new IRA within 60 days. There were stories of banks forcibly closing out IRAs that way back in the early days of IRAs. I haven't heard such stories in a long time, but I expect that the IRA opening documents give all the custodians the power to take such action without liability. That would be the worst case scenario.

Edited May 31, 2016 by CaptHaddock

[CaptHaddock]

If the brokerage firms become really committed to divesting themselves of expat clients or if they are compelled to do so by Congress, then they will certainly be able to identify us. Currently, they only ever require US address verification when opening an account, but it doesn't have to be that way. If they are allowed access to tax and voting rolls, IRS addresses, driver's license databases, they will be able to lower the cost of verification enough to make it continuous. Just as when video cameras got cheap then video surveillance become ubiquitous, so residence verification can easily become too cheap not to incorporate into routine account maintenance.

Very true. Do they think they ARE allowed access to such databases?

I doubt it. Brokerages, like other businesses, generally do not want to get rid of customers. If, however, the risk/reward analysis or the dictates of the government render it against their interest to retain a small class of not-very-profitable clients, then they will do so in a heartbeat of course.

Imagine the situation after the next 9/11-type event.

[rapom]

issues ?

If they determine you're living abroad, they freeze your buying and selling. Yes. Issues.

Old news. Been like this since the Patriot Act was enacted

You wanna have a Brokerage Account with any of the above mentioned?

Gotta reside in the USA!

Fidelity's policy that the OP's post refers to was initiated on August 1, 2014, not close to 7 years ago. The "Patriot Act" that you keep referring too was not the basis for it. The policy that Fidelity started only affects overseas investors and US citizens living overseas that do not have a legal US address from opening new mutual fund trading accounts or making contributions to existing accounts. It does not invalidate existing accounts or worries of asset forfeiture. This policy does not affect individual stock trading or brokerage accounts, at this time. Other financial investment companies have similar policies.

[CaptHaddock]

issues ?

If they determine you're living abroad, they freeze your buying and selling. Yes. Issues.

Old news. Been like this since the Patriot Act was enacted

You wanna have a Brokerage Account with any of the above mentioned?

Gotta reside in the USA!

Fidelity's policy that the OP's post refers to was initiated on August 1, 2014, not close to 7 years ago. The "Patriot Act" that you keep referring too was not the basis for it. The policy that Fidelity started only affects overseas investors and US citizens living overseas that do not have a legal US address from opening new mutual fund trading accounts or making contributions to existing accounts. It does not invalidate existing accounts or worries of asset forfeiture. This policy does not affect individual stock trading or brokerage accounts, at this time. Other financial investment companies have similar policies.

To be exact, Fidelity prevented you from buying or exchanging Fidelity funds, except that reinvestment of dividends was allowed. They restricted you because you "reside outside the US," not because you lack a US address.

It had nothing to do with either the Patriot Act or FATCA.

[Boon Mee]

To be completely clear, Fidelity will not transact trades if you have an overseas address nor will they add equities, bonds etc to your brokerage account if you reside overseas regardless whether you have a US address.

And, the locus for this policy is the Patriot Act fellas...

[CaptHaddock]

That's not what the letter of June, 2014 says, the full, redacted text of which appears below. It makes no mention of stocks, bonds, or ETFs, only mutual funds, which on rereading I see includes both Fidelity and non-Fidelity mutual funds. The letter does say that they may impose further restrictions at some point in the future.

On what basis do you attribute the Patriot Act to be the source of Fidelity's policy? Other brokerage firms have so far not adopted similar policies implying that it is not a legal requirement.

[image of text does not appear]

Edited June 2, 2016 by CaptHaddock

[tonray]

http://www.wsj.com/articles/fidelity-bans-overseas-investors-from-buying-mutual-funds-1404246385

[Boon Mee]

That's not what the letter of June, 2014 says, the full, redacted text of which appears below. It makes no mention of stocks, bonds, or ETFs, only mutual funds, which on rereading I see includes both Fidelity and non-Fidelity mutual funds. The letter does say that they may impose further restrictions at some point in the future.

On what basis do you attribute the Patriot Act to be the source of Fidelity's policy? Other brokerage firms have so far not adopted similar policies implying that it is not a legal requirement.

[image of text does not appear]

Upon the basis of my Relationship Manager who told me she'd lose her job if they found out transactions were carried out for non-USA clients.

Confirmed from other sources as well.

Again, the locus was the Patriot Act.

[CaptHaddock]

That's not what the letter of June, 2014 says, the full, redacted text of which appears below. It makes no mention of stocks, bonds, or ETFs, only mutual funds, which on rereading I see includes both Fidelity and non-Fidelity mutual funds. The letter does say that they may impose further restrictions at some point in the future.

On what basis do you attribute the Patriot Act to be the source of Fidelity's policy? Other brokerage firms have so far not adopted similar policies implying that it is not a legal requirement.

[image of text does not appear]

Upon the basis of my Relationship Manager who told me she'd lose her job if they found out transactions were carried out for non-USA clients.

Confirmed from other sources as well.

Again, the locus was the Patriot Act.

Your Fidelity rep is blowing smoke. Fidelity has so far only restricted purchases of mutual funds, not stocks, bonds or ETFs. Here is a quote from an investment advisor explaining why Fido and other brokers are restricting trades in mutual funds (only):

Many expats are surprised to learn that rules barring the sale of most U.S. registered mutual funds to non-residents are decades old. Previously, these long-standing limitations on ownership were seldom enforced. Recently, however, mutual fund companies modified due diligence procedures to compel more rigorous compliance with existing rules. Stepped-up enforcement of existing rules reflects the new environment of enhanced cross-border compliance and regulation among banks and brokerage firms.

Mutual fund distribution agreements typically mandate that mutual fund owners reside domestically in the United States for two main reasons. First, U.S. fund groups are not allowed to solicit overseas business for their SEC-registered funds, even from U.S. expatriates. Offering shares of mutual funds to non-domestic clients could potentially violate the laws of any country in which an investor or prospective investor in a fund is resident or domiciled. Second, mutual funds may make tax treaty claims on their holdings, which require funds to certify all shareholders are resident in the United States.

http://thunfinancial.com/us-brokerage-accounts-american-expats-closed-2015/#sthash.PPXHUFXD.dpuf

As far as other, unamed "other sources," that's you blowing smoke.

Edited June 3, 2016 by CaptHaddock

[Boon Mee]

Well, we guess the entire Dallas Fidelity operations unit are 'blowing smoke' when they tell this customer he cannot trade?

As they say in Thai: "Tham Jai Khun" Capt.