David Duval’s Commentary

This insightful commentary from MW in Burlington, Ontario regarding direct registration of shares in Canada should be of interest to Canadian readers.

Dear David,

I thought I’d update you with some research I’ve been doing regarding the DRS in Canada. My findings have a direct result in Jim’s comments about DRS not creating a tax event. This may not be the case in Canada.

Most of my mining equities use Computershare as the transfer agent. Some of the bigger ones use CIBC Mellon.

CIBC does not offer Direct Registration Services at present but they are working on something that they hope to have available in a couple of months.

Computershare obviously does offer DRS in Canada – but according to their customer service department they do not have RRSP or TFSA accounts. Therefore, any request to have equities held in an RRSP account moved to a DRS account means that the value of the account becomes taxable income at the time of transfer. In most cases this will likely result in a 30% withholding tax and then an additional 14% income tax as, I presume, in most cases the additional income would put the individual in the highest tax bracket (44%).

This will likely create a huge dilemma for Canadian investors – especially in light of the Thomson Reuters news article (see below) that casts suspicion on Royal Bank and CIBC.

If any of you folks at JSMineset can comment on this from a Canadian perspective it would be MUCH appreciated. In particular, whether you think Credit Unions might be safer than the large Canadian banks.

To me the gist of the article is that over-leveraging via UK subsidiaries (where there is no limit on re-hypothecation) contributed to what brought down MF Global and Lehman Brothers. The article goes on to say the Jeffries and others – including RB and CIBC – are involved in the same activities.