In March 1999, in response to requests from the Investment Funds Institute of Canada (IFIC), the SEC published for comment a rule that would grant registration exemption to Canadian brokerages handling the accounts of their U.S.-based customers.
The bulk of that business involves Canadian retirees who winter in the United States. Those investors are often unable to manage their accounts while in the states because the securities in their retirement accounts--and in some cases their brokers--are not registered in the United States.
While the comment period for the proposed rule expired in May 1999, the SEC hasn't made a decision. That has left many Canadian snowbirds in limbo during the first quarter of this year when tax-driven adjustments are often made to retirement accounts.
However, representatives from IFIC and other groups remain optimistic that the SEC will finally act favorably on the issue.
"It is our understanding that the SEC will move forward with this change," says John Mountain, IFIC's vice president of regulation. He could not provide a specific time frame.
One executive at a brokerage in Toronto complains that investors' funds are "being held hostage by regulatory politics." The problem is reciprocity. The SEC doesn't want to do for Canadians what Canadian regulators don't do for U.S. residents in Canada.
Since 1995, both U.S. and Canadian regulators have gone back on forth over registration exemptions for cross-border trading.