#FATCA #AIFMD & Securing the Borders against U.S. Persons: Why #USPersons residing abroad cannot purchase mutual funds in U.S.A.

star us person
U.S. Citizens and their families can’t win for losing: Can’t purchase financial products where they live-can’t purchase financial products from the Homeland. This could give confirmation that the borders are closed to keep citizens IN.

You may have received notice by a mutual fund to restrict ownership access to yourself as a US person living abroad.  While FATCA dominates the headlines, these restrictions are coming off the back of new legislation within the EU called the Alternative Investment Fund Managers Directive (AIFMD) which fully went into effect in July 2014.

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AIFMD was put in place in an effort to create a harmonized regulatory framework within the EU for the management, administration and marketing of all investment funds within the EU. As the directive applies to all US asset managers who manage funds in the EU, or manage funds in the US but simply market to investors living in the EU, US institutions are one-by-one choosing to opt out of this heavy burden and restrict asset ownership.

This summer Fidelity became the latest in a growing list of asset managers to inform their US clients living overseas that they can no longer purchase or trade US mutual funds within their brokerage accounts as of 1 August 2014. Most asset managers are not forcing affected individuals to sell out of existing positions, but they will be unable to make new purchases or reinvest dividends going forward.

Despite this legislation having a large potential impact on US persons living within the EU, it has not received much press. Some institutions have sent out letters to clients making them aware of the new restrictions while others may not find out about restrictions until they next go to make trades in their accounts.

A rash of letters from the major U.S. financial institutions had arrived in expat mailboxes during 2014 to present. Most mutual fund owners find an intimidating login screen when using a non-US internet connection.

fidelity screen

While this European law creates havoc for U.S. mutual funds, U.S. persons living outside of U.S. are usually forbidden from purchasing  any investment products where they live, unless they can prove to their bank that they are exempted from classification as a U.S. person for purposes of the Securities Act of 1933. This proves difficult for persons who have already been FATCA-identified as U.S. Persons for Tax purposes.

nordea united states person

A combination of laws, which combine applicability due to both/either citizenship and residence, go together to make sure that Nothing is Legal.

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