The Lemon Fool

At least according to Interactive Brokers (IBKR). A few days ago they restricted, without warning, trading on 15 of my 18 investment trust holdings, including trusts such as JGGI, HEFT, FGT &c.. I can no longer add to my holdings. In fact, the only option I have is to sell the entire holding.

Apparently, IBKR has decided that investment trusts are "Complex or Leveraged Exchange Traded Product", and that I'm not qualified to trade them. (There is an option to request trading permission, but I was rejected.)

OK, technically trusts can be leveraged, but only marginally. Rarely enough to make a significant difference. IBKR states

Complex or Leveraged Exchange Traded Products (CLPs) are funds or notes that trade on an exchange but have very different characteristics from shares of stock or ordinary exchange-traded funds (ETFs).

Clearly that doesn't describe most trusts.

Anyway, I guess I need to find a new offshore broker that doesn't have this silliness. However, I'm concerned that a new broker may similarly restrict investment trusts.

Any thoughts?

I’ve no experience of IBKR but they’ve been on my watch list of possible brokers should I need another one. I’m very surprised at their decision and it looks very US centric (almost a misunderstanding of ITs).

I think I’d try messaging them explaining that ITs are not complex leveraged products and asking them to review their decision.

Best wishes, Steve

Would it be also worth notifying the AIC (The Association of Investment Companies) the trade body for the Investment Trust sector?

There's also some discussion on this for IBKR at the end of this thread: viewtopic.php?f=54&t=42468&start=20#p650576

AJ Bell seems to have done a similar thing with the Schroder UK Mid Cap Fund IT, about 3 years ago, though I have a few other ITs with them in a SIPP, and they never said anything about them (though I can't remember what their gearing is). But if you're thinking of moving, it's worth explicitly checking with them, I would say.

As I recall this can happen when the IT has not updated its Key Information Document in time, then they automatically fall into this category.

AfricaHand wrote:Would it be also worth notifying the AIC (The Association of Investment Companies) the trade body for the Investment Trust sector?

Will look into and see if we can work out what is going on.

scrumpyjack wrote:As I recall this can happen when the IT has not updated its Key Information Document in time, then they automatically fall into this category.

Yes. I often check that sort of thing first too. But all three of the KIDs of the companies named are less than 65 days old so it cant be that. Unless they haven't procured them for their platform of course.

DavidM13 wrote:

AfricaHand wrote:Would it be also worth notifying the AIC (The Association of Investment Companies) the trade body for the Investment Trust sector?

Will look into and see if we can work out what is going on.

Will keep you posted in due course.

DavidM13 wrote:Will keep you posted in due course.

Thanks.

I haven't forgotten this. I am still waiting on responses to questions following an initial conversation.

DavidM13 wrote:I haven't forgotten this. I am still waiting on responses to questions following an initial conversation.

They're usually pretty quick. A couple of weeks ago I noticed that my Amedeo Air Four Plus holding could only be sold owing to a missing KID. I raised a ticket with them & included the link to the KID. I received a response the following morning stating that it would be updated & available for trading within 72 hours & it was.

Hi All.

I don't think this is spot KID issue with a given Investment Trust - this is something that appears to be the case for any Investment Trust I have looked at now on IBKR, including very "vanilla" ones, e.g. ATST, FCIT.

Regards, Newroad

Yes. Exactly right. This is not the missing KID issue. It is wider and wronger. (even if that isn't a word!).

I'd assumed it was something to do with leverage. However, if it is, it's not consistent.

PNL, PINT, JMG all have no gearing (according to the AIC), and can be traded.

However, BHMG, CLDN, MWY, PAC also have no gearing, and can not be traded.

3IN has gearing (19%) and can be traded.

I just can't see a pattern here.

scrumpyjack wrote:As I recall this can happen when the IT has not updated its Key Information Document in time, then they automatically fall into this category.

I seem to recall something similar with one of my brokers. Forget which one. Turned out to be a technicality concerning the routine box ticking disclosure which was then resolved and it was back to business as usual.

Oswulf wrote:I'd assumed it was something to do with leverage. However, if it is, it's not consistent.

PNL, PINT, JMG all have no gearing (according to the AIC), and can be traded.

However, BHMG, CLDN, MWY, PAC also have no gearing, and can not be traded.

3IN has gearing (19%) and can be traded.

I just can't see a pattern here.

My understanding of interpretation under MiFID is that even those ICs with gearing are not leveraged financial instruments. It is only if the product is specifically designed to increase exposure would they be classed as such. e.g. the 3x ETFs you can buy. All the CEFs I have seen therefore are not classed as leveraged products under MiFID.

DavidM13 wrote:I haven't forgotten this. I am still waiting on responses to questions following an initial conversation.

Have they got back to you yet? I've reached out to them twice & other than a generic response re: Complex or Leveraged Exchange Traded Products the silence is deafening.

PJ0791 wrote:

DavidM13 wrote:I haven't forgotten this. I am still waiting on responses to questions following an initial conversation.

Have they got back to you yet? I've reached out to them twice & other than a generic response re: Complex or Leveraged Exchange Traded Products the silence is deafening.

I had a call and followed up with two emails. Still awaiting the explanation.

nothing

DavidM13 wrote:nothing

Have your CEO call their CEO....