Canada/US structuring

C

cruisecontrol

I've been trading US equities professionally for nearly a decade now. I've been offshore to optimize taxes but now I'm looking to move back to my home country which is Canada.

I want to continue to trade but there's a problem. The US based brokers I work with do not deal with Canadian resident individuals or corporations. I do high frequency stuff and I can't use just any broker. I'm not aware of any Canada based brokers that are suitable.

Trading with a prop firm could potentially be a solution but there are many issues with this and it would be a last resort.

One idea I'm wondering about is creating a structure that is superficially similar to a prop firm with contract trader. It would go something like this:
  • USco, US C-Corp holds a brokerage account with a US based brokerage.
  • Canco, a Canada LTD company, generates trade signals.
  • USco contracts Canco to provide the trading signals in exchange for 95% of the profit they generate.
Is there any reason this obviously wouldn't work or anything to be aware of with a structure like this? Would USco have any heavy duty compliance/regulatory requirements? As described I don't believe it would be considered to be a financial institution for example.
 
cruisecontrol said:
One idea I'm wondering about is creating a structure that is superficially similar to a prop firm with contract trader. It would go something like this:
  • USco, US C-Corp holds a brokerage account with a US based brokerage.
  • Canco, a Canada LTD company, generates trade signals.
  • USco contracts Canco to provide the trading signals in exchange for 95% of the profit they generate.
Is there any reason this obviously wouldn't work or anything to be aware of with a structure like this? Would USco have any heavy duty compliance/regulatory requirements? As described I don't believe it would be considered to be a financial institution for example.
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It's an interesting solution, and I too think it should be ok, esp. as such international cooperations & business relations are very much normal and usual.

But OTOH one has to know/research the reason why many US brokers are not allowed to have Canadian clients.

I'm just an outsider from Europe, just want to understand myself...
 
Talk to Morse at Lightspeed - knows the community well. If your account size merits a Prime, chat with a few of them and it's very possible your overall friction would decline. Depends on your product mix.
 
Quanto said:
But OTOH one has to know/research the reason why many US brokers are not allowed to have Canadian clients.

I'm just an outsider from Europe, just want to understand myself...
More...

I've opened many accounts with US brokers using my Canadian passport. So it's clearly the part about being resident that makes the difference. That one article referenced in your linked thread that talks about citizenship is incorrect.

I suspect one reason relates to the tax information exchange agreements between Can/US. There is this concept of a "Canadian Reportable Account" in the treaties that could create reporting obligations the brokers don't want to deal with. The definition of Canadian Reportable Account mentions residency too.
 
ajacobson said:
Talk to Morse at Lightspeed - knows the community well. If your account size merits a Prime, chat with a few of them and it's very possible your overall friction would decline. Depends on your product mix.
More...
Thanks, I am in touch with him. The rest of your post, I don't really understand how it relates to my question.
 
Unfortunately, various registration requirements in Canada and Australia prevent us from opening accounts for those who are residing in or a citizen of Canada or Australia. These are the only two countries where we have this issue. They are not on any OFAC or FTAF restricted list. The regulator of those countries require both Lightspeed and Wedbush Securities to be registered and have a place of business in their country to offer brokerage services to their residents. This is why there is a TD Canada and IB Canada.

Quanto said:
But OTOH one has to know/research the reason why many US brokers are not allowed to have Canadian clients.
More...
 
I've inquired with 3 brokers about whether they could open an account for a US C-corp where one shareholder is Canadian resident.

So far,
  • One said yes it's no problem, what matters is the company's residence.
  • One said they won't do it if any "partner" is Canadian resident. (Maybe they thought I was talking about an LP?)
  • Still waiting to hear back from the third.
 
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