Investing

Mistakenly bought an otc stock on questrade

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  • Jul 29th, 2020 7:31 pm
[OP]
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Nov 26, 2016
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Mistakenly bought an otc stock on questrade

I bought stocks of planet 13 holdings (PLNHF) on questrade-in Canada in a TFSA. I was then told by a friend that I was not allowed to buy any stocks listed on OTC in a TFSA. Now I'm worried and stuck on what to do. What should I do next? Do I just hope eventually the stock gets added to an index? like nasdaq or something?

Ron
11 replies
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Jan 6, 2015
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I am not sure about this, but I think you can buy some of OTC stocks if they co-listed on another qualified stock exchange, you may need to switch OTC to another exchange. :rolleyes:
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Jun 15, 2012
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Saskatoon
If otc stock is not allowed you won’t be able to buy it. If you bought it is allowed.
No need to type thank you; upvote=thanks.
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[OP]
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Electric Light Bulb
ukrainiandude wrote: If otc stock is not allowed you won’t be able to buy it. If you bought it is allowed.
Oh ok. So will it still get treated as any other stock I have in my account? Or is there anything I should do differently with this stock? I did notice that there is PLNHF-OTC (the one I bought) and PLTH-CNSX. Not sure of the difference between the 2.
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ukrainiandude wrote: If otc stock is not allowed you won’t be able to buy it. If you bought it is allowed.
ronnielarmond wrote: Electric Light Bulb

Oh ok. So will it still get treated as any other stock I have in my account? Or is there anything I should do differently with this stock? I did notice that there is PLNHF-OTC (the one I bought) and PLTH-CNSX. Not sure of the difference between the 2.
Completely incorrect. Do not follow Ukraniandude's answer as following this could lead you to an unqualified investment.

A brokerage does not stop you from buying an unqualified security.

In this specific case, the same shares trade on the Canadian Securities Exchange which is a designated exchange. They trade under different symbols, but they qualify as they are the same equivalent security.

https://www.canada.ca/en/department-fin ... anges.html

An article about an example

https://www.financialpost.com/personal- ... edf9e/amp/

A brokerage will not stop an non-qualified investment. That would require huge investigation and implementation, and there isn't any rule saying one can't buy the investment, it just means the gain is taxed.

As for what to do, if you are fine holding it as US traded shares, you can leave it as such. The only difference is one trades in the US in US$, the other in Canada in CDN$. For ease, I would stick with holding one, not both. CDN would be easier because you wouldnt have to exchange US dollars. You could request the shares be transfered to the CDN equivalent by making a request to your brokerage.
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Saskatoon
@xgbsSS
I have personal experience with questrade, I don’t know about others. Do you have personal experience with Questrade? Or it is all theoretical for you.
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ukrainiandude wrote: @xgbsSS
I have personal experience with questrade, I don’t know about others. Do you have personal experience with Questrade? Or it is all theoretical for you.
I use Questrade for my sister's accounts. And I know how the qualified investments work for TFSAs and RRSPs. Brokerages won't catch every unqualified investment out there because there are too many to catch. Questrade also doesn't stop trades from being made other than unsupported exchanges, lack of margin, but not because the tax rules for the security is unqualified. And even if Questrade did stop such transactions, what happens if they missed one? How about transaction support for previously qualified investments that are now unqualified?

Some brokerages will stop all OTC exchange (and other non-designated exchange) trades being made on RRSP and TFSA accounts because overall this exchange doesn't qualify. But you and I know many OTC securities qualify under equivalent securities being traded on designated exchanges.

Irregardless, your advice using the fact a transaction will go through is reckless. TFSAs can have non-qualified investments in it. Just the account holder pays taxes on it. You could cost readers taxes they though they were sheltered from.
Last edited by xgbsSS on Jul 28th, 2020 9:44 pm, edited 1 time in total.
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xgbsSS wrote: I use Questrade for my sister's accounts. And I know how the qualified investments work for TFSAs and RRSPs. Brokerages won't catch every unqualified investment out there because there are too many to catch. Questrade also doesn't stop trades from being made other than unsupported exchanges, lack of margin, but not because the tax rules for the security is unqualified. And even if Questrade did stop such transactions, what happens if they missed one? How about transaction support for previously qualified investments that are now unqualified?

Irregardless, your advice using the fact a transaction will go through is reckless. TFSAs can have non-qualified investments in it. Just the account holder pays taxes on it. You could cost readers taxes they though they were sheltered from.
Okay, good to know. Thanks. I was more familiar with large companies from Europe that trade on otc here. And then questrade rep told me they have some sort of filter for otc in reg accounts.
No need to type thank you; upvote=thanks.
Buffett, investors are focusing “not on what an asset will produce but rather on what the next fellow will pay for it.”

“Because gold is honest money it is disliked by dishonest men.” – R. Paul
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ukrainiandude wrote:
Okay, good to know. Thanks. I was more familiar with large companies from Europe that trade on otc here. And then questrade rep told me they have some sort of filter for otc in reg accounts.
They do, but I do not recommend using that as a catch because they can miss many. Questrade or other brokerages has no responsibility for any unqualified security trades made.

Off topic, but my favorite non-qualified OTC stock (not investment wise)

OTC:CRZY
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Nepean
Not sure if it holds true for tfsa but one of my equities once became non-rrsp eligible and the only reason I found out was that I was given a monthly fine on my statement. This was in a TD rrsp account.

I called TD and they swapped it out with the equivalent cash amount.
[OP]
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Nov 26, 2016
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xgbsSS wrote: Completely incorrect. Do not follow Ukraniandude's answer as following this could lead you to an unqualified investment.

A brokerage does not stop you from buying an unqualified security.

In this specific case, the same shares trade on the Canadian Securities Exchange which is a designated exchange. They trade under different symbols, but they qualify as they are the same equivalent security.

https://www.canada.ca/en/department-fin ... anges.html

An article about an example

https://www.financialpost.com/personal- ... edf9e/amp/

A brokerage will not stop an non-qualified investment. That would require huge investigation and implementation, and there isn't any rule saying one can't buy the investment, it just means the gain is taxed.

As for what to do, if you are fine holding it as US traded shares, you can leave it as such. The only difference is one trades in the US in US$, the other in Canada in CDN$. For ease, I would stick with holding one, not both. CDN would be easier because you wouldnt have to exchange US dollars. You could request the shares be transfered to the CDN equivalent by making a request to your brokerage.
OK. I will keep my OTC shares for simplicity sake. So essentially its the same stock just traded on different exchanges and because one of them is on a designated exchange (the canadian securities exchange) then I won't be penalized for it even if its in a TFSA? Thanks very much for your info!!Smiling Face With Open Mouth
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ronnielarmond wrote: OK. I will keep my OTC shares for simplicity sake. So essentially its the same stock just traded on different exchanges and because one of them is on a designated exchange (the canadian securities exchange) then I won't be penalized for it even if its in a TFSA? Thanks very much for your info!!Smiling Face With Open Mouth
For the most part, yes. A good way to check is

1. Look at the invetor's relation page of a stock. It should tell you whether the shares are equivalent
2. Failing that, investigate the CUSIP number
3. If an ADR, read up on the ADR representation or use a database such as adr.com to figure out the equivalent shares.

The rules are complicated. The best advice I can give is if you are not sure, hold it non-registered or do not buy.
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