Query Regarding Execution-Only Brokerage’s Obligation to Notify Investors of Impending Delisting [Ireland]

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Topic Author
Pyrrho
Posts: 23
Joined: Wed May 16, 2018 7:09 pm

Query Regarding Execution-Only Brokerage’s Obligation to Notify Investors of Impending Delisting [Ireland]

Post by Pyrrho »

I live in the US, but have a friend in Ireland to whom I give a little informal investing help. They have an execution-only brokerage account in which they hold a euro-denominated ETF that was recently delisted from the London Stock Exchange (presumably owing at least in part to Brexit), although the ETF still trades on several EU exchanges. The brokerage did not notify them of the impending delisting, and now they have to pay an additional foreign transaction fee to dispose of the stranded shares, when the sole reason for buying them on the London Stock Exchange was to avoid incurring such fees.

The brokerage’s position is that—since the account is execution-only and the information was publicly available —they were under no obligation to notify their clients of the delisting, and—irritatingly—that they did not consider it appropriate to do so. They have however agreed to waive part of the foreign transaction fee as a gesture of goodwill without any admission of liability.

I am not a securities lawyer, so I don’t know what legal obligations apply, but common sense suggests that since the shares were held by the broker in street name in a nominee account, they would have received the shareholder letter alerting them to the impending delisting, and should have passed it on to their affected clients, the beneficial owners, who cannot reasonably be expected to scour investment management company websites daily for such information. I understand that discount brokers do not provide investment advice to execution-only clients, but I don’t think that notification of an impending delisting falls under that heading.

The sums of money involved are not large, but it’s more a question of principle. Would it be best simply to let the matter drop? Or might it be worth referring it to the Financial Services and Pensions Ombudsman—the equivalent of the Consumer Financial Protection Bureau in the US—less perhaps for the sake of my friend than for that of future investors who could get caught out in the same way? Any insight would be greatly appreciated.
DJN
Posts: 833
Joined: Mon Nov 20, 2017 12:30 am

Re: Query Regarding Execution-Only Brokerage’s Obligation to Notify Investors of Impending Delisting [Ireland]

Post by DJN »

Hi,
Brexit has led to the de-listing of many ETFs for EU investors and in most cases the platforms don't make any special arrangements regarding informing the holders. However they have mainly posted notices on their websites warning of these events.
I would move on and take the offer.
In respect to investing from Ireland for a non-US person tax resident in Ireland, perhaps the investor might look at the section in Bogleheads Wiki:
https://www.bogleheads.org/wiki/Investing_from_Ireland, there are some serious anomalies.
If they are using a local Irish broker I would suggest trying an international platform like deGiro or IBKR in preference for the lower fees and the greater choice.
DJN
Yah shure. | Have a look at the Bogleheads Wiki in the first instance.
Topic Author
Pyrrho
Posts: 23
Joined: Wed May 16, 2018 7:09 pm

Re: Query Regarding Execution-Only Brokerage’s Obligation to Notify Investors of Impending Delisting [Ireland]

Post by Pyrrho »

Thanks for your advice DJN. It sounds like taking their offer would indeed be best.

“Serious anomalies” is right. The Irish retail investment environment is an exasperating nightmare in multiple respects.

My friend’s shares are in a country-specific tax-sheltered pension account analogous to a 401(k), so unfortunately transferring them to an international platform like DeGiro or Interactive Brokers is not an option.
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