Investments held in non-registered accounts are subject to fiscal regulations on an annual basis. Investors must therefore take into account capital losses and gains, dividend income, interest income, and any other type of possible income when developing their investment strategy if they intend to use one of the following accounts:
All transactions done in a cash account must be settled by the settlement date at the latest. Borrowing funds from the broker is not authorized for this type of account, nor is trading in options and short sales.
The cash account is available in Canadian or U.S. funds. If you trade Canadian and U.S. securities, you have the choice of having an account in each currency or having a single account in Canadian funds in which you trade on both Canadian and U.S. exchanges. Consult How to Trade for more information.
For your first purchase, you must ensure that the required amount has been deposited to your account (consult How to Deposit Funds to the Account).
Any subsequent purchase is subject to the prescribed settlement timeframe, described in Lots, Round lots and Settlement Dates, as long as the amount of the transaction does not exceed 100% of the net value of the account (market balance plus cash on hand). However, immediate payment will still be required if the account contains speculative securities or is concentrated (a single security or diversified within a risk sector).
When you deposit a certificate to your brokerage account, it is immediately sent to the transfer agent who ensures its validity. In general, this takes no more than a few days, but in certain cases could take several weeks (for example, for certain U.S. securities, a certificate registered in the name of a company and other exceptions). For a sale, the securities must already be held in your account or the delivery of the certificate must be confirmed by an employee of the Laurentian Bank. Following a sale, a request for payment may be made once the validity of the security has been confirmed by the transfer agent.
The margin account allows you to use the value of your investment loans to borrow a portion of the amount necessary to acquire new securities. This is the principle of financial leverage.
The risk associated with this investment technique must be carefully evaluated. If the value of the investment increases, the return is higher than what would have been obtained if the same investment were fully paid for. However, the same reasoning applies if the reverse occurs. The loss resulting from a margin investment is greater than the loss resulting from an investment paid for in full.
For these reasons, margin accounts are for experienced investors who can deposit additional funds if a margin deficiency occurs.
The maximum amount of money that can be loaned depends on the loan value of the securities provided as a guarantee and on the margin required by LBDB. Other conditions apply when there is a concentration of securities in the portfolio.
To find out more about this subject, please read our margin policy in the Margin Tables and Policies.
The interest on the amounts borrowed is calculated daily on the closing balance and is applied to the account once per month. Consult Interest Rates.
While you can limit yourself to opening purchase transactions and closing sales of options, trading options on stocks, stock market indexes and bonds can also be used for more elaborate investment scenarios. Laurentian Bank Discount Brokerage gives you access to the various types of options available on the North American exchanges from the moment your options account is authorized.
The options account allows you carry out several types of transactions according to the level of approval you have been assigned. Each level includes those that precede it:
The higher the level of approval, the more experience is required in trading options and the higher your risk tolerance must be.
An options account is automatically carried on margin unless you specify in writing on the account application form that your intention is solely to do Level 2 options in a cash account or a registered account.
Given that an option has no loan value and that the settlement date is the business day following the transaction, the cash balance or the margin required to completely cover the purchase of the option must be in the account before the order is accepted.
When you open an options account, a document entitled "Disclosure Document for Recognized Market Options" is issued to you. The document covers several subjects regarding trading options, and it is a source of a wide range of useful information. You must read the options account agreement carefully.
The short sell account is carried on margin and allows you to sell a security that you do not hold. This strategy is used to realize a profit if the price drops. LBDB loans you the security if it holds it or can borrow it.
The short sale of securities is a speculative operation reserved for experienced investors who are able to maintain the margin required in the account if there is a rise in the market, and who have high risk tolerance. The margin required varies according to the loan value of the security and its fluctuation in price.
At the moment of the transaction, a representative will verify whether it is possible to lend you the securities that you wish to sell short. However, once you have a short position, LBDB has the right the recall the securities at any moment and to close short positions in the event that it is no longer possible to maintain the loan of these securities.
Credit balances generated by a short sale do not carry interest. The dividends declared owing during the period that the security is short are payable by the seller of the security.
The joint account allows each of the account signatories to act separately in issuing investment instructions and to make requests for payment.
The advantages and disadvantages associated with this type of account depend on the personal and tax situations of each of the joint holders. It is very important to read the joint account agreement in order to thoroughly understand what are the partners' commitments.
The rules that apply to the joint account are the same as those that apply to individual accounts.
All types of non-registered accounts except for the QSSP may be joint accounts.
The Quebec Stock Savings Plan II enables individual Quebec residents to deduct the adjusted cost of admissible investments. Any Quebec individual can deduct from his taxable income investments in commons shares or in investment fund securities that are SSP II admissible and issued on the primary market.
The principal conditions of the SSP II for individuals who are Quebec residents as at December 31 of a taxation year can be summarized as follows: