pink sheet stocks in rrsp or tfsa which will list on nasdaq?

[scorpioncapital]

Is it allowed to put stocks in RRSP or TFSA that are on pink sheet and that before the end of the tax year will uplist to the nasdaq market? I'm thinking a particular arbitrage strategy here. Just wondering if anyone has thought of this or if it is even allowed. If it doesn't get listed by dec 31, dump the stock.

 

 

[rb]

You're not allowed to. If you do and they catch you the penalty i think is 1% per month of the principle. But I think most likely your broker won't let you do it.

[Cigarbutt]

I've had an experience once when a security got delisted from a designated Canadian exchange and it's still not clear what that really means but I would be surprised that you are allowed somehow to buy an unlisted security in these registered accounts even if that security eventually becomes listed on a designated exchange.

Here's a reference, go listed securities:

https://www.canada.ca/en/revenue-agency/services/tax/technical-information/income-tax/income-tax-folios-index/series-3-property-investments-savings-plans/series-3-property-investments-savings-plan-folio-10-registered-plans-individuals/income-tax-folio-s3-f10-c1-qualified-investments-rrsps-resps-rrifs-rdsps-tfsas.html

 

I hear that Big Brother can become really harsh if they spot such an issue. They also seem to be on the lookout for swap-type transactions. Look page 7 for a glimpse:

https://ca.rbcwealthmanagement.com/documents/10192/1061602/Tax-Free+Savings+Account+-+Eng.pdf/f6510878-4d15-4145-9720-757501ade5c5

[wabuffo]

https://www.canada.ca/en/revenue-agency/services/tax/technical-information/income-tax/income-tax-folios-index/series-3-property-investments-savings-plans/series-3-property-investments-savings-plan-folio-10-registered-plans-individuals/income-tax-folio-s3-f10-c1-qualified-investments-rrsps-resps-rrifs-rdsps-tfsas.html

 

Take a squint at this -- according to the CRA's bulletin corresponding to qualified investments, it looks like an OTC/Pink Sheet could qualify as an RRSP holding if the equity is also listed on an approved designated stock exchange.  But you might want to call your broker first and double-check.  I do think you want to make sure that they are simultaneously listed (OTC and an approved exchange)

 

1.18 Over-the-counter (OTC) quotation systems, such as the OTC Bulletin Board and OTC Link ATS (formerly Pink Sheets) in the United States, are not designated stock exchanges. As a result, securities that trade on OTC markets are generally not qualified investments. However, OTC securities can still qualify if they are cross-listed on a designated stock exchange or if the securities meet other qualification conditions such as those that apply to certain Canadian small businesses.

 

Here's the listed of approved designated stock exchanges:

https://www.fin.gc.ca/act/fim-imf/dse-bvd-eng.asp

 

wabuffo

[gokou3]

https://www.canada.ca/en/revenue-agency/services/tax/technical-information/income-tax/income-tax-folios-index/series-3-property-investments-savings-plans/series-3-property-investments-savings-plan-folio-10-registered-plans-individuals/income-tax-folio-s3-f10-c1-qualified-investments-rrsps-resps-rrifs-rdsps-tfsas.html

 

Take a squint at this -- according to the CRA's bulleting corresponding to qualified investments, it looks like an OTC/Pink Sheet could qualify as an RRSP holding if the equity is also listed on an approved designated stock exchange.  But you might want to call your broker first and double-check.  I do think you want to make sure that they are simultaneously listed (OTC and an approved exchange)

 

1.18 Over-the-counter (OTC) quotation systems, such as the OTC Bulletin Board and OTC Link ATS (formerly Pink Sheets) in the United States, are not designated stock exchanges. As a result, securities that trade on OTC markets are generally not qualified investments. However, OTC securities can still qualify if they are cross-listed on a designated stock exchange or if the securities meet other qualification conditions such as those that apply to certain Canadian small businesses.

 

Here's the listed of approved designated stock exchanges:

https://www.fin.gc.ca/act/fim-imf/dse-bvd-eng.asp

 

wabuffo

 

My experience with this was, I was able to buy FIATY (listed in US OTC; predecessor to FCAU) in a RRSP account because it was cross-listed in the Milan stock exchange.  However, I was NOT able to buy FNMAS because it's solely listed in OTC.

 

 

[nodnub]

IIRC, it has to be listed on a designated exchange when you buy it.  If it is subsequently delisted from the CRA designated exchange (while remaining on non-designated exchanges) then you can keep it in there.  Again, IIRC.

[bizaro86]

You can't keep it unless it is on a designated exchange. That's a big list, but the penalty is a 50% tax, so worth being sure.

[nodnub]

Suspended from trading or de-listed

1.21 Shares of a corporation resident in Canada that were (emphasis mine) listed on a designated stock exchange in Canada but that have been suspended from trading or delisted will generally retain their qualified investment status on the basis that such a corporation continues to be a public corporation. As discussed in ¶1.23, shares of a public corporation are qualified investments. Qualified investment status could be lost, however, if the corporation elected (or was designated) not to be a public corporation. In most other situations, the suspension or delisting of a security will result in loss of qualified investment status, unless the security also qualifies under another provision.

[scorpioncapital]

Questrade does not seem to reject pink sheet order in RRSP.

The question I was wondering if the penalty is per month or per rrsp-year. If it's per-rrsp year, then you can sell before year-end if it doesn't uplist.

 

[scorpioncapital]

Ok I can confirm questrade does restrict pink sheet in rrsp.

If the stock is dual or triple listed on a designated exchange, do you need to ask them for a manual override to buy the otc stock in question? Anyone get a broker to respect the cra law?