January 7, 2023
Hi, went in to set up TFSA, FirstOntario selling their Class B Investment Share Offering. Issues: 1) No deposit protection (but their claim, "we are too big to fail"). 2) Although claimed to be 6% dividend that can be held in TFSA, this is not guaranteed (claim, "we have never not paid a promised dividend % in past"). 3 "Redemptions of Class B Shares, Series 2023 are permitted at the sole and absolute discretion of the board and are not permitted during the five years following their issuance except when a shareholder dies or is expelled from membership in the Credit Union. Redemptions are limited in any fiscal year to 10% of the Class B Shares, Series 2023 outstanding at the end of the previous fiscal year". But can they control redemption % after 5 years has passed? 4)The Class B shares are not yet issued, so they would deposit money firstly in a TFSA at 4%, before it goes into shares, does that break the 'deposit withdrawn from a TFSA can't be reinvested until following year rule'?https://www.firstontario.com/personal/investing/investment-share-offering
October 27, 2013
Speculative investment vs Savings? Where have we seen this movie before, i.e. as in PACE? Six percent seems too good to be true and without digging deeper may be based on corporate preferred shares in the marketplace. Even something as simple as CPD (current yield almost 6% in eligible dividends) or ZPR (current yield of about 6.3% in eligible dividends). It works until it does not.
September 30, 2017
January 12, 2019
March 30, 2017
April 6, 2013
People should "shop around" and see what other preferred shares are available, especially publicly traded preferred shares covered by sites like PerfBlog. One of the criticisms of those PACE Financial preferred shares was that one could have got similar yielding preferred shares that were publicly traded and issued by well known companies that filed quarterly financial reports.
The targeted 6% dividends from the FirstOntario investment shares are not guaranteed to be in cash:
What is the dividend that will be paid on this new investment share series?
FirstOntario’s Board of Directors considers whether to declare a dividend, and at what rate, annually. Dividends may be paid in cash, shares, or in a combination of both. It has been the past practice of FirstOntario to pay dividends on its investment shares in the form of additional shares. …
Also, don't confuse the right to submit a redemption request with the right to have the shares redeemed. Asking for something is not the same as being entitled to the same thing:
… Once that five-year non-redeemability period ends, members can request redemption at any time. Redemption requests are considered twice each year, at the Board meetings in March and September. Redemptions are limited to 10% of the shares issued and outstanding at the end of the preceding fiscal year. …
That "10% of the shares issued and outstanding at the end of the preceding fiscal year" instead of "10% of the shares issued and outstanding originally" means it will be a long, long time before one's shares are redeemed if lots of people want their shares redeemed.
March 15, 2019
October 21, 2013
I don't buy them either. If I wanted or "needed" this kind of risk, I'd compare with other options first. I don't think the little bit of extra projected income matches the risk when you can get insured CU GICs for 5.3 - 5.5% through a deposit broker.
And they're definitely not "eligible dividends" under CRA. You will pay tax at same rate as interest or earned income.
October 27, 2013
It seems to me this is insidious marketing preying on the average CU member who may not know what is really going on with these investments. Like Pace, front line staff may not even know what they are peddling.
I do not know how CUs operate but maybe FSRA(?) should be alerted to investigate the potential for cross-selling / cross-contamination between CU operations and investment peddling. From what i briefly read from the link in post #1, it appears to smell somewhat.
November 18, 2017
4)The Class B shares are not yet issued, so they would deposit money firstly in a TFSA at 4%, before it goes into shares, does that break the 'deposit withdrawn from a TFSA can't be reinvested until following year rule'?
Credit union shares can be held as tax-free registered assets. (Or, if you will, as a TFSA, though they're not a savings account.)
If the financial institutions offers both, they can transfer funds from a TFSA GIC into a share GIC without leaving registered status, and thus no delay or rule violation.
If they are doing a "jumpstart" type promotion where they put the money into a non-registered GIC before transferring it into the shares at year-end when the client has more TFSA room, the funds are only entering the share account once.
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