Keeping your US address on your investment account after you leave?… My own horror story

19 December 23
Uncategorized

Keeping your U.S. address on your investment account after you leave? My own horror story

I have never shared this story publicly because quite frankly it is embarrassing to me given what I do for a living, but it’s my hope that others don’t make the same mistake.

In the summer of 2009, after nearly 10 years in New York, I got the opportunity of a lifetime to run the TMT (Technology, Media, Telecom) business in London. Throughout my career on Wall Street, I, like many of my colleagues, had an investment advisor that handled all my personal investing for me. Ironically enough, it was an advisor I interned with during university in my hometown of Chicago. Anyway, before I left for London I called to inform her about my upcoming move. She told me over the phone that I shouldn’t bother using my London address and to just keep my NYC address “to keep it easy for me”. This, as it would turn out, would end up costing me a small fortune.

Fast-forward less than a year and European markets were in turmoil as bank stocks around the world were cratering. The company I was working for at the time had some convertible bonds that were trading incredibly cheap to the underlying stock price. The reason why is not important, but basically you could buy these bonds and then tender (give back) them to the company and receive the stock at a ~30 per cent discount. Myself and a bunch of the other traders all made these trades in our personal accounts. I called my advisor from the trading desk in London (where every conversation is recorded and kept for regulators, this will become important later on) and explained the situation to her. I instructed her to purchase the bonds and then tender them back to the company on a specific date. She was unaware of the opportunity and was eager to share it with her other clients “right away”. The next few months at work were stressful as the entire European credit market kept going lower. My personal investments were not a big concern to me as I rarely made any changes. I logged onto my account one day to see that the bonds I instructed the advisor to purchase and submit to tender back to the company were still in my account. The tender date had now past, yet for some reason the bonds were still in my account. It was at that moment that I had a sinking feeling that the advisor just forgot to submit them and now the bonds had dropped in value because they could no longer be converted to common stock. I immediately called the advisor and asked why the bonds were not tendered for the stock, she clammed up and said she would get back to me. An email was then sent from her office saying that they never received any instructions to tender the bonds from me. That email set in action a chain of events that ended up requiring me to hire a securities lawyer in New York and file a claim against the advisor and the broker dealer.

Given there was a recording of the conversation, my expectations were that this would be an open and shut case. Strangely enough, the broker dealer kept refusing my lawyer’s offer to settle. When two parties cannot come to an agreement in such a case, arbitration is the only resolution, per FINRA guidelines. When their lawyer spoke during the arbitration, it became clear to me why they would not settle. One of their positions was that I intentionally misled them as to my residence, and that as a U.K. resident I was outside of their jurisdiction basically. My jaw almost hit the floor and the ensuing settlement was a slap in the face.

While my situation is unique, and trade errors are rare, the fact that I even put myself in that position is embarrassing in hindsight. I constantly hear from other people moving to Canada that they, too, were told to just use their old address, or the address of a family member to “keep it simple”. What I did not fully appreciate is the risk it exposed me to. You are basically in compliance no-man’s land when you have investment accounts with an old address. If the advisor is not licensed to work with residents outside of the U.S., you are taking a risk that might end up costing you a small fortune.

One of the ironies of this story is that this experience along with the numerous other difficulties Dixie and I had moving our assets here when we moved back to Canada was the impetus to start Beacon Hill. There can be a silver lining in every story I guess.

Feel free to reach out to me if you have any questions. We specialize and are licensed to work with both U.S. and Canadian residents.

Phil Hogan, CPA, CA, CPA (Colorado)

Phil Hogan is a Canadian and US CPA working with clients throughout Canada and the US. Phil advises on cross border tax and financial planning matters. Phil can be reached at phil@beaconhillwm.ca or via telephone at 250-661-9417. You can also read more about Phil at www.Beaconhillwm.ca/team/about-phil/

This commentary reflects the personal opinions, viewpoints and analyses of the Beacon Hill Wealth Management Ltd. partner providing such comments, and should not be regarded as a description of advisory services provided by Beacon Hill Wealth Management Ltd. or performance returns of any Beacon Hill Wealth Management Ltd. client. The views reflected in the commentary are subject to change at any time without notice. Nothing in this commentary constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Beacon Hill Wealth Management Ltd. manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results. Any discussion about taxation is for educational purposes only and should not be viewed as professional advice. Consult your tax professional for tax advice on your particular situation.

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