CRA tax scam warning and news from regulators

With the April 30 tax deadline closing in, we are reminding people to be on the lookout for tax scams.

The Canada Revenue Agency (CRA) publishes a webpage with the top five tax scams, warning that these are illegal schemes that could have serious consequences if you get involved. In addition to fees you may pay to the scam artist, you could also end up having to pay tax penalties or be charged with tax evasion.

Coming in at number two on the CRA list is what we call an “RRSP unlocking scheme”. In this scam, promoters promise you immediate, tax-free access to assets in your “locked-in” Registered Retirement Savings Plan (RRSP), Registered Retirement Income Fund (RRIF), or retirement income plan. In addition, these schemes sometimes promise excellent returns on the remaining investment or significant tax benefits.

In the end, the schemes all have the same effect – you suffer significant investment losses, on top of serious tax and pension repercussions.

Interest rates and your bond portfolio

Recently, the Financial Industry Regulatory Authority (FINRA) in the US issued an Investor Alert highlighting the sensitivity of bonds to an increase in interest rates. The Alert focuses on “duration” – a measure of bond price volatility. The Alert explains what the duration number on a bond means, and how it correlates to changes in interest rates.

Even though interest rates are currently holding in Canada and the US, the FINRA Alert points out those rates are at historic lows. The Alert explains how a rise in interest rates could have a significant impact on the values of outstanding bonds – those with a high duration number. Learning more about how interest rates affect certain bonds will help you ask your advisor the right questions about the bonds in your portfolio.

CSA implements new disclosure requirements for dealers and portfolio managers

On March 28, the Canadian Securities Administrators announced the implementation of new requirements aimed at providing investors with essential information about the costs and performance of their investments. The new amendments will take effect on July 15, 2013, and will be phased in over the next three years.

Once they are all implemented, you can expect new disclosure that includes:

  • the services and product costs you can expect to pay when you open an account;
  • an annual summary of fees and charges you paid to a firm;
  • transaction costs and deferred costs, at the time of a transaction;
  • your contribution amount and its worth as of the report date;
  • annual and historic deposit and withdrawal information; and,
  • returns and losses for your account over specific time periods.

Watch our Informed Investing section for updates on when they come into effect.