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Discussion Starter · #1 ·
I'm a bit distressed by this behaviour I'm seeing from Scotia iTrade and wanted to share. I sent them a secure message, but does anyone know what else I can do about this?

I have a cash account at iTrade, not a margin account. As far as I know, brokers can't borrow securities from out of these cash accounts. Their account statement even states the following, on the last page:

Segregated Quantity
Securities regulations stipulate that all fully paid and excess margin securities must be
promptly segregated and are not available for use in the general conduct of our business. All
security positions displayed under the account holdings section are segregated unless
otherwise indicated under the security description column.
In the last couple of months, here is what I have seen. On the May statement, for my "Canada Housing Trust" government bonds where I hold 25,000 quantity, there was a note 2000 SEG" which I think means that 2,000 shares were segregated, and 23,000 shares -- that's 92% of this bond -- was borrowed by Scotia iTrade.

I thought it was just a glitch, then I looked at the June statement. On another bond, my "Government of Canada" 2026 bond where I hold 20,000 quantity, there's a note saying "0 SEG" which I think means that zero shares are segregated, and Scotia has borrowed 100% of my bond position.

Scotia seems to really want to get their hands on my bonds. How are they able to do this? How can I stop them? I don't think this is allowed according to regulations, and in all my years I have never seen securities borrowing happen out of a non-margin account. I even have $10,000 excess cash sitting in the account.
 

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Discussion Starter · #3 ·
I think you need to call for a 'live person' to explain what is going on.
Ok, I will phone, but somehow I doubt that a regular phone agent can make sense of something like this. I suspect this will require some back and forth with iTrade, so I'm thinking of breaking it into two questions and starting with (a). Do you think this is a good way to proceed?

(a) why is this marked SEG, what does that indicate?
(b) as per your legal text, it must be fully segregated. Why isn't it?
 

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Ok, I will phone, but somehow I doubt that a regular phone agent can make sense of something like this. I suspect this will require some back and forth with iTrade, so I'm thinking of breaking it into two questions and starting with (a). Do you think this is a good way to proceed?

(a) why is this marked SEG, what does that indicate?
(b) as per your legal text, it must be fully segregated. Why isn't it?
I'm a bit distressed by this behaviour I'm seeing from Scotia iTrade and wanted to share. I sent them a secure message, but does anyone know what else I can do about this?

I have a cash account at iTrade, not a margin account. As far as I know, brokers can't borrow securities from out of these cash accounts. Their account statement even states the following, on the last page:



In the last couple of months, here is what I have seen. On the May statement, for my "Canada Housing Trust" government bonds where I hold 25,000 quantity, there was a note 2000 SEG" which I think means that 2,000 shares were segregated, and 23,000 shares -- that's 92% of this bond -- was borrowed by Scotia iTrade.

I thought it was just a glitch, then I looked at the June statement. On another bond, my "Government of Canada" 2026 bond where I hold 20,000 quantity, there's a note saying "0 SEG" which I think means that zero shares are segregated, and Scotia has borrowed 100% of my bond position.

Scotia seems to really want to get their hands on my bonds. How are they able to do this? How can I stop them? I don't think this is allowed according to regulations, and in all my years I have never seen securities borrowing happen out of a non-margin account. I even have $10,000 excess cash sitting in the account.
Way beyond me but it seems they can:
I did a quick Google search and had difficulty understanding it but it tends to support my initial comment. I am sure they also use any cash in your account; the same as a bank or other financial institution.
 

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I've been with iTrade since it bought out E*Trade and while their front line agents are not always knowledgeable, they do ask those that know. I've never seen what you have experienced so that is out of my league.

My belief is they can lend your securities with SEG simply meaning segregated from the brokerage's assets, i.e. not commingled. Per Investopedia
Segregation refers to the separation of assets from a larger group or creating separate accounts for specific groups, assets, or individuals. Segregation is common in the brokerage industry and is designed to avoid the commingling of customer assets with the working capital of the brokerage firm.
 

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Discussion Starter · #6 ·
My belief is they can lend your securities with SEG simply meaning segregated from the brokerage's assets, i.e. not commingled. Per Investopedia
Interesting. Anyway, I will inquire and see what they say about this.

I was under the impression that fully paid for securities cannot be borrowed out of my account, and their statement says the same thing.
 

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I would have thought so myself albeit I've never really dug into this issue seriously before. I've never had a bond or debenture in a non-registered account so there may be different rules for these instruments.
 

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Interesting. Anyway, I will inquire and see what they say about this.

I was under the impression that fully paid for securities cannot be borrowed out of my account, and their statement says the same thing.
I have a margin account in BMOIL and I don't use it anyway. I paid full cash to purchase stock shares. I didn't find BMOIL borrowed stock shares or cash from my account.
 

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Brokerages ALWAYS use the cash position in non-registered accounts to lend out at higher interest rates than they pay you, which is zero in cash balances, and more than they pay you in their ISA deposit accounts.
 

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Discussion Starter · #10 ·
Brokerages ALWAYS use the cash position in non-registered accounts to lend out at higher interest rates than they pay you, which is zero in cash balances, and more than they pay you in their ISA deposit accounts.
Right. The cash is always for their business use, I have no disputes about that. My concern are these securities positions.
 

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Discussion Starter · #12 ·
J4B what did you get figured out on this ?
I was waiting for a Scotia response, but haven't seen any message from them. I will phone and talk to someone, I guess.

I thought the 'secure message' system was supposed to be more efficient for everyone.
 

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Discussion Starter · #13 ·
I phoned an iTrade representative, and spent nearly an hour on the phone with two different agents.

They don't know what is happening. The agents were not familiar with the "segregated" terminology or meaning. They say they will ask their back office and then get back to me next week.

They also have not replied to my 'secure message'.
 

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I phoned an iTrade representative, and spent nearly an hour on the phone with two different agents.

They don't know what is happening. The agents were not familiar with the "segregated" terminology or meaning. They say they will ask their back office and then get back to me next week.

They also have not replied to my 'secure message'.
Any update on this?
 

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Discussion Starter · #15 ·
Any update on this?
Nope. They didn't respond to my online message, and the phone agent didn't get back to me either. They said they would look into it and phone me back.

Maybe the smart guys at iTrade are all thinking and working hard on my problem LOL. "How are we borrowing securities out of this guy's CASH account?"
 
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