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Money matters- THE HERALD Wednesday September 19 1990- Page 15 Where to keep securities If you invest in individual stocks and bonds you have to decide where to keep these securities Your choices are to hold them yourself or leave them at your brokerage house known as keep ing them in street name Here are some questions Im fre quently asked about where to keep securities What does leaving securities In street name really mean It means that your shares of stock or your bonds along with those owned by the brokerage firms other customers are registered in the firms name The number of shares or bonds you own is clearly and legally established through your purchase confirma tions and account statements from the firm Dividends on stocks and interest on bonds are paid to the firm and are credited to your ac count Why should I leave my securities in street name First convenience especially when you want to sell If youre an active investor its almost essen tial to keep your stock and bond certificates at your brokerage house Otherwise youll constantly be sending securities by messenger or overnight delivery to meet settlement deadlines risking possible loss of the certificates in transit Also there could be occa sions when you are out of town on business or vacation and there is a change in the status of your invest ment for example a takeover or a move in the market price If your shares are locked away in a safety deposit box you will be unable to act on any changes Second your earnings can go to work much faster because when dividends or interest are paid on your investments they are Brian Slessor Dollars and Senso fl automatically deposited to your account at your brokerage firm where they earn a competitive in terest rate If the issuers mail these payments to you instead you could lose up to two weeks earn ings while the cheque is in transit and while you wait for it to clear Third you can quickly borrow money against your investment portfolio at very competitive rates But to qualify for margin loans you must leave your securities in the physical possession of your brokerage firm The fourth major benefit is that recordkeeping and tracking the performance of your portfolio are greatly simplified All of your holdings are valued on each state ment you receive usually if there is activity in the account At the end of the tax year you receive a summary of all income and dividends and just one slip If you move a phone call changes your address rather than having to contact each company whose securities you own How safe are the securities I leave in my brokerage houses care Very safe since most brokerage firms are members of the National Contingency Fund Established in by the Investment Dealers Association of Canada the four Canadian Stock Exchanges and their members the fund insures all securities and cash balances that result from transactions in all of the activities earned on by the brokerage firms Unlike some government insurance funds there is no maximum limit set on the amount the Fund will pay n a valid claim Indeed valid claims from individual investors dealing at arms length have all been paid in full since the inception of the fund in 1969 You should also know that securities paid for in full and held by a brokerage firm are held aside for you in segregation and are not used in the conduct of a firms business If you deal with a large well- known brokerage firm insurance is really just an extra protection The firms commitment to main tain its reputation for integrity and financial stability are just as im portant maybe more so Plan ahead for 1990 tax return ad- anyone street name is vantageous why would take delivery of securities Some people prefer to have physical control of their securities especially if they plan to hold them for the long term They like to know that the certificates are in a safedeposit box with other impor tant documents Surprisingly however many banks dont insure the contents of safedeposit boxes Check with your bank You may need your own insurance Brian Slessor is an Investment Executive with Questions should be directed towards Brian who can be reached at Call collect if out side Toronto By MURRAY CA With your income tax return out of the way now is the ideal time to take steps to minimize taxes and headaches a year from now Here are taxplanning tips for your 1990 return Make your registered retire ment savings plan con tributions as soon as possible so that the money starts earning in terest earlier If your spouse has little or no income consider con tributing all or part of your limit to a spousal plan Upon removal of the money at retire ment the proceeds are shared the tax term is splitting income and this results in two pension in come credits rather than one Con sequently the income tax cost will likely be less than it would have been on one head In the limit for a per son without a pension plan is 7500 or per cent of earned in come if that is less If you belong to a pension plan the limit is minus your pension contributions If you receive Canada Pension Plan benefits and your spouse does not consider splitting the benefits which can be done on application to an income security programs of fice of Health and Welfare Canada Again the purpose is to split income with a spouse who will likely pay less tax A third way to split income with your lowerincome spouse is possi ble if you are receiving a pension Up to a year of periodic pen sion income can be rolled over each year until into a spousal If you are at least you can generate a pension income credit immediately by annuitizing enough funds about to produce of in come Either spouse may claim medical expenses for both pro viding they exceed 3 per cent of the taxpayers net income If you have to pay income tax in instalments you do if you owe or more of federal tax and more than a quarter of your in come is not subject to tax withholding at source pay promp tly to avoid the new steeper in terest rates and harsher penalties As interest and penalties are not deductible you should avoid these costs since they are aftertax costs the cost is almost double Be aware that the dates by which the instalments must be received have been moved up to March June September 15 and December If you have tax carryforwards from previous years remember to claim them For example if you have contributed more than per cent of income to charity you have up to five years to claim the ex cess Keep in mind that you now must report accrued interest earned but not received as on a fiveyear guaranteed investment certificate every year For advice on TV see Your Wealth available on channels in Ontario and on satellite across Canada or see Money in the Bank on your community cable channel Money can Is general financial advice by Canadas chartered ac countants Murray Is with Ernst and Young ARE YOU AFRAID TO ASK HOW MUCH OF A MORTGAGE CAN YOU AFFORD HOW MUCH DOES A LAWYER COST AND WHAT WILL HE DO HOW A BUILDING 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