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  1. #1
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    Default New NZ Gov't Regulation on Overseas Trading Accounts

    Just received today from my broker in the US.
    "Dear Valued Client,

    We have important news about your account. Because of a New Zealand regulatory requirement, accounts with a New Zealand address will no longer be allowed to maintain options, futures, or forex trading privileges as of September 30, 2019.

    There will be no other changes to your service. Your trading platforms, commissions, and interest rates will stay the same. However, this change does mean you are no longer eligible to apply for options or futures and forex trading. "
    Not that I trade in futures and options (derivatives for that matter), I do believe this is not fair and a clear example of how the NZ gov't has restricted their residents on their ability to manage their foreign assets. I suspect this all pertains to the FIF rules which (if I recall correctly) does not apply to foreign derivatives.

    I also question, do managed NZ funds that trade in overseas investments fall under the same restriction (of not able to trade options and futures contracts in overseas US markets?). I have not been able to find such online news confirming this NZ gov't regulation?

    The principal is not very good just like Kiwi Saver and FIF.

  2. #2
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    I had this too. OMF confirms there are no new govt regulations. I think it's this from https://www.fma.govt.nz/contact/faqs/#Foreign:

    My foreign exchange broker has just told me they must close my account because of New Zealand regulatory requirements. Why?
    Most foreign exchange brokers issue derivatives. If they are offering derivatives to retail investors they must be licensed by us Ė even if they are making an online offer from outside of New Zealand. Some providers have applied for a licence but others have decided to leave the New Zealand market. This means they cannot accept new retail business from New Zealand and they must close all New Zealand retail customer accounts.
    Why canít I use an Australian regulated, European regulated, or US regulated foreign exchange provider?
    You can, but itís illegal for them to offer derivatives to retail investors in New Zealand without being licensed by us. If they are willing to break the law to get your business, itís likely they will be cutting corners in other areas and you will have much less protection if things go wrong.
    Generally youíll be a retail investor unless you meet certain criteria, for example, youíre a family trust or you have a large sum of money Ė in which case you could be considered a wholesale investor.
    If you are a wholesale investor, derivatives issuers can continue to deal with you without being licensed by us.
    We recommend you only use providers licensed by us, even if they are or appear to be regulated overseas. Itís hard to distinguish between genuine and fraudulent overseas providers Ė putting you at a much higher risk of being scammed.
    So unless we're a wholesale investor, or managed fund to answer your question, we apparently need protecting from ourselves. And the US brokers have obviously made the decision that this market isn't worth the time/money/hassle to get a licence from the FMA when the rest of the world is their oyster.

  3. #3
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    Quote Originally Posted by ream View Post
    I had this too. OMF confirms there are no new govt regulations. I think it's this from https://www.fma.govt.nz/contact/faqs/#Foreign:

    So unless we're a wholesale investor, or managed fund to answer your question, we apparently need protecting from ourselves. And the US brokers have obviously made the decision that this market isn't worth the time/money/hassle to get a licence from the FMA when the rest of the world is their oyster.
    I think you're right on the spot with the FMA being the problem. I had no idea NZ had such regulatory requirement that applied to OVERSEAS financial institutions. I thought the FMA was to clean up the NZ investment industry over bad deals going on like the collapse of Hanover Finance.. etc. Anyways I heard a similar problem for Canadian residents some years ago where US brokerage firms stopped issuing new foreign accounts and / or basically looked at closing their accounts because they couldn't meet some IRS requirement. If I recall correctly, some US brokers had to prove to the IRS that they had a bon a fide relationship / business in Canada. This was not a problem for brokerage firms like TD / Ameritrade which operates in both countries but for some like Interactive Brokers, they simply refused to open foreign accounts.

    I'm also not happy with the double standard that the FMA states. It's ok for clients with "large sums of money" but not for the retail investor? I mean what the h3ll does "large sum of money" mean in terms of a figure?

    I've spoken with local brokerage firm Jarden Investments and they were unaware of such regulatory law change.

    Not that I trade derivatives or forex but I do fear that the next step is they will simply just close all NZ address accounts. We're already subjected enough under FIF / FDR, i'm certain this offers absolutely no incentive for the wealthy migrant (who is already invested in US equities / options etc) to move to NZ. For now i'm 1 step being closer to moving back to Canada.
    Last edited by SBQ; 29-08-2019 at 09:54 PM. Reason: More to add...

  4. #4
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    Yes, and Jarden also owns OMF. Last time I looked the only other one offering US derivatives trading was Charles Schwab, and the commissions were horrendous. The rest of the world is trending to zero commissions and yet TD were the only one willing to offer NZ accounts at all. Now they're not, and I see why. So the effect of the FMA's wrapping us in cotton wool is that we have to pay through the nose to access what the rest of the world can choose to do at very low cost. Perfect.

  5. #5
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    Here we go again - the thin end of the wedge.

    These b*ggers won't be satisfied until the only legal investment for New Zealanders are bank deposits and kiwisaver funds.

  6. #6
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    The only person I could think of for the cause of all this problem? Michael Cullen. A bit of history when I crossed paths with him way back in 2002. As the NZ reserve bank minister at the time (or being sworn in), I had long discussions at his office on his push to implement Kiwi Saver scheme while pushing FIF behind the back. His argument was NZ citizens need a more "broad and diverse" way of invesment other than buying real estate. He also told me that without FIF, a "savy" person could make tremendous capital gains in overseas share markets and not pay any taxes on the gains (and without saying NZ investors owning NZ houses could sell without paying taxes...). What I didn't realise was Kiwi Saver was only the start to changing the course of how NZ residents would be subjected to more taxation.

    Yet we still see him again recently during the Working Tax Group recommendation that NZ should have some form of CGT though the conculsion was he could not advice Jacinda Ardern how exactly to implement a form of CGT. What a lot of $$ wasted for that working group review. Anyways Mr Cullen knew implementing CGT into NZ would be a huge negative to his Kiwi Saver scheme and would also require a re-design or removal of the FIF tax rules.

    My wife tells me success isn't about how much money you can make or how more more wealth you have. She says real success means having "options" in life and she has no problems if all of a sudden we pack up and move to Canada (others don't have that ability). From my view when I look at my children growing up and wonder, what kind of standard of living will they have in NZ? We're already at the point that over-reguation has killed business confidence and recent reports show the economic outlook survey shows NZ is at it's lowest since 2008 (pre-GFC time).

    And would you know, during John Key's time where the National Party had been pushing to roll out UFB networks so that NZ can maintain high speed internet, it did not do a damn thing in improving the economics of NZ. Should we not try improve the quality of living such as improving the aging housing stock? It's like, "Yeh the house is old, cold, high maintenance, and not very comfortable, BUT - it's got blazing fiber optic internet connection..."
    Last edited by SBQ; 01-09-2019 at 08:44 PM. Reason: Spelling mistakes, grammar

  7. #7
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    I recently was instructed to close my preferred forex trading account by the provider Oanda as they effectively said they couldn't meet regulatory requirements - I understood them to mean they couldn't be bothered.

    It sucked big time!!

    I still have a different platform to trade on, but Oanda was my preferred charting platform, so now I just use their demo platform for charting.
    For clarity, nothing I say is advice....

  8. #8
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    Quote Originally Posted by peat View Post
    I recently was instructed to close my preferred forex trading account by the provider Oanda as they effectively said they couldn't meet regulatory requirements - I understood them to mean they couldn't be bothered.

    It sucked big time!!

    I still have a different platform to trade on, but Oanda was my preferred charting platform, so now I just use their demo platform for charting.
    same here. i was forced to close all my positions with oanda and repatriate all my money. it cost me at least A$3000 in potential profit. i asked the guy if i supply you an Australian address, can i keep the account...the answer is No lol...

  9. #9
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    Has anyone had any recent luck opening an account with an offshore brokerage that provides option trading? Currently trying to get a Tastyworks account opened...would have preferred TDA with their thinkorswim platform but seems they don't want to offer derivatives to kiwis now.

    My strategy is to acquire a select few stocks, but may exit and re-enter positions on swings. I will buy longer term options for insurance, and sell shorter term options to hopefully bring down my cost basis / generate cash-flow to reinvest. Right now I have just under NZD 50k available to invest, but given this mixed strategy Iím not sure how to identify any tax considerations to keep in mind...appreciate any tips/tricks/insights from anyone doing something similar.

  10. #10
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    Quote Originally Posted by SPG View Post
    Has anyone had any recent luck opening an account with an offshore brokerage that provides option trading? Currently trying to get a Tastyworks account opened...would have preferred TDA with their thinkorswim platform but seems they don't want to offer derivatives to kiwis now.

    My strategy is to acquire a select few stocks, but may exit and re-enter positions on swings. I will buy longer term options for insurance, and sell shorter term options to hopefully bring down my cost basis / generate cash-flow to reinvest. Right now I have just under NZD 50k available to invest, but given this mixed strategy I’m not sure how to identify any tax considerations to keep in mind...appreciate any tips/tricks/insights from anyone doing something similar.
    Try capital 19 in Sydney, they are good with options.

  11. #11
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    Quote Originally Posted by SPG View Post
    Has anyone had any recent luck opening an account with an offshore brokerage that provides option trading? Currently trying to get a Tastyworks account opened...would have preferred TDA with their thinkorswim platform but seems they don't want to offer derivatives to kiwis now.

    My strategy is to acquire a select few stocks, but may exit and re-enter positions on swings. I will buy longer term options for insurance, and sell shorter term options to hopefully bring down my cost basis / generate cash-flow to reinvest. Right now I have just under NZD 50k available to invest, but given this mixed strategy I’m not sure how to identify any tax considerations to keep in mind...appreciate any tips/tricks/insights from anyone doing something similar.
    As you have read in this thread, the problem is brokerage firms dealing with the NZ FMA. NZ based brokers basically lobbied the gov't to ensure NZ residents to go to NZ brokers to do options and FX trades. You could go to Australia as stoploss mentioned but then again, they would have to be still licensed by the FMA. Many NZ brokers have affiliates in Australian so they may be able to offer NZ residents within the FMA licensing framework. Want to play US equities, then expect to pay more for those trades, especially options trades as the NZ broker would take a cut on top of the US broker. BTW, no NZ broker trades direct with NYSE or Nasdaq. They use a brokerage account abroad no different than what a customer would use having account there to trade. Their fees get transferred on top of their fee cut to the NZ client.

    $50K NZD is pretty much the limit you're allowed under FIF to be exempt of taxes. Once you cross over that amount on foreign shares then you have to do complex tax reporting of the account (ie FDR / CR / quick sale / buy calcs). You could open up a joint account and have up to $100K NZD of FIF exemption.

    On the grand of things, the NZ gov't has signaled to the international investment community what they want by restricting where NZ residents can invest their $. In return, major firms like GS, TD Ameritrade, and dozens of others have stopped accepting any NZ clients and for some brokerage firms, they've taken retaliation response by not allowing NZX trades. Hence why the dwindling liquidity in the NZX. So when the brokers themselves abroad shut out the NZ equity market, the losers are going to be the listed NZ companies and their investors (look to why Xero left the NZX). It's a very different approach to how Canada & US dealt with cross border trades. I remembered a time in Canada that portfolios must not exceed more than 33% foreign content... now it's wide open and both sides can invest either way and the exchange rates convert with little or no commission.

    Whereas in NZ, the introduction of the AML has done nothing to deter cash handling by illicit operations (drugs, gangs, etc in NZ). As my bank manager told me, the ones that suffer under AML are the legit customers through red tape and compliance. Kinda like gun regulations.

  12. #12
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    Quote Originally Posted by SBQ View Post
    BTW, no NZ broker trades direct with NYSE or Nasdaq. They use a brokerage account abroad no different than what a customer would use having account there to trade. Their fees get transferred on top of their fee cut to the NZ client.

    .
    That is true, but the likes of Hatch and soon Sharesies are paving the way. Hatch allows $3 trades on US stocks and I am sure Sharesies will be competitive going forward. That aside, the FIF rules are a joke and plain theft. Not helping Kiwi's in any way possible.

  13. #13
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    Quote Originally Posted by blackcap View Post
    That is true, but the likes of Hatch and soon Sharesies are paving the way. Hatch allows $3 trades on US stocks and I am sure Sharesies will be competitive going forward. That aside, the FIF rules are a joke and plain theft. Not helping Kiwi's in any way possible.
    Hey! I'm ALL for Sharesies and Hatch to pave the way through and change how investing can be done a lot easier. My aunt has an account with MacQuaries and she tells me they have all sorts of account mgt fees she pays (like 1% of balance) and foreign equities trades cost a lot in commissions. If Sharesies can lower the bar, I do hope that would get more people into investing and therefore, one should not have to look abroad to buy the shares they want. This happened in Canada throughout the 90s when 'discount brokerage' firms from the US took up most of the Cdn customers wanting to trade US equities. This quickly followed by Cdn banks following suit by becoming competitive.

    At a recent neighbourhood gathering last summer, I came across this accountant / finnacial advisor and boy did we knock heads. If you think my points were as aggressive on this forum, I was very so in discussion with him; to the point that he had to walk away. "You mean you're a financial advisor but don't know how bad FIF is to individual investors?" another elderly lady told me they would prefer to pay a paper gain tax instead of paying a capital gains tax at the time of sale of the shares. I was trying to explain about deferred taxation in relation to the person's income levels as it's generally accepted that, those age 30 to 60 would have much higher incomes than those age 60 or high in senior age. When you can defer those taxable gains to a period where you have low incomes and at a low tax bracket, it's huge win. But with this FIF, it penalises those that earn $ from their day job, and then pay another tax on the gains from it because the only time a person has money to invest is when they are working. Why penalise them more on the years they're most productive? Unfortunately it was a concept they didn't understand or was lost in translation.

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