“INT @21%”
Hmm. That strange line appeared in my InvestorLine RRSP statement. It seemed to be related to my latest Norbert Gambit, which is a way to save money with currency exchanges. All have gone reasonably smoothly until recently when I was hit with a mystery interest charge.
To exchange Canadian dollars for U.S. dollars, I have bought the exchange-traded fund DLR that trades in Canadian dollars and then sold the equivalent ETF DLR.U that trades in U.S. dollars. The idea is simple enough, but a mistake with some accounting generated an interest charge that shouldn’t be there.
To make everything balance out, InvestorLine adds some extra transactions to the Norbert Gambit trades. I did the trades on a Monday. This means that the trades settled three days later on Thursday. So my account statement showed a buy of DLR units and a sell of DLR.U units. To balance things out, InvestorLine added a transfer out of DLR units and a transfer in of DLR.U units. Unfortunately, they accidentally showed these extra transfers as taking place on Wednesday instead of Thursday. Oops.
So, this means InvestorLine computers thought my account was short units of DLR on Wednesday (“short” means I held a negative number of shares). I was charged 21% interest for one day which amounted to over $40. Maybe the rate was so high because I was using an RRSP account where margin isn’t permitted.
InvestorLine quickly agreed to reverse the charge, but if I hadn’t noticed it and called them, I don’t think this would have been fixed. The moral of the story is to check your account statements for unusual activity. This is easy to overlook when you have online account statements.
I use BMOIL too and have had other glitches. But I've had similar types of issues with TDW and Questrade. My rule of thumb is always check afterwards whenever doing anything slightly out of the ordinary or non-automated. It seems to go with the turf of being a DIY investor. With varying degrees of hassle and delay, I've almost always managed to get such annoyances fixed, even sometimes when it was my fault e.g. I sold out a position of stock after an ex-div date, only to find myself with one share from the dividend reinvestment, which the broker agreed to sell for me without commission.
ReplyDelete@CanadianInvestor: It's good to know that they are willing to fix such problems without much fuss. I try to keep my investing very simple, but expensive currency exchanges force me to add complication to save money.
DeleteRBC Direct Investing also charges this interest. It has happened to me several times, In all my cases the system didn't even mix up the dates. I'd say it should be a straightforward fix for all discount brokerages, but they don't fix it probably because the number of people impacted is pretty small.
ReplyDeleteBut like you said, if we don't notice the charge we could up losing a few hundred dollars.
@Ram: Investorline seems to only charge interest if short positions are resolved on the same day. RBC Direct Investing sounds worse in this respect, unless there is some other explanation for the interest you were charged.
DeleteThis happens to me almost every single time I do the gambit with BMOIL -- in both my cash and registered accounts. I have just come to expect it. I try to get them to close the positions on the sames day as settlement, but they always occur one day later, creating an interest charge. BMOIL has stated this is a glitch in their system (possibly intentional),
ReplyDeleteI have never had a problem having the charges reversed -- I don't even phone anymore -- just send them a message -- and it's corrected in a day or two.
@Anonymous: Sounds annoying. Here's hoping that it stops sometime soon.
DeleteWhen you do the gambit, do you use DLR as I have, or do you use some other inter-listed stock? I've been told that some discount brokers allow you to sell a Canadian stock, buy an inter-listed stock in Canada, sell the same stock in the U.S., and then use the U.S. dollar proceeds to buy a U.S. stock, with all trades taking place online within seconds of each other. Further, the broker figures it all out without having to place any telephone calls. I don't know if this is possible at InvestorLine.