Is a Canadian resident allowed to participate in a direct stock purchase plan from a U.S. company such as Pfizer?

By Rob Renaud AAA
A:

There is no law that prevents Canadians from participating in direct stock purchase plans offered by U.S. companies. There are also no laws preventing Canadians from participating in dividend reinvestment plans (DRIPs) offered by U.S. companies. However, if these plans interest you, be advised that the U.S. company in question must allow foreign participation in the direct stock purchase plan or DRIP in order for you to participate.

Pfizer (NYSE: PFE) has both a dividend reinvestment plan and a direct share purchase plan, and at the time of writing (January 2006), it allowed Canadian residents to participate in both of these programs. Non-U.S. citizens should be certain that participation in a U.S. company's direct share purchase plan or its DRIP does not violate U.S. law or the laws of their home country. It is impossible to check every international law regarding share purchase, but laws that could potentially be violated include those involving matters of local and international tax, foreign currency exchange, stock registration, foreign investment, money laundering, trade embargos, and so on.

If you are in doubt about your government's regulations governing participation in direct share purchase plans or DRIPs in a particular country, you should contact your respective taxation authority and any other government bodies concerned. To find out whether a company has a direct stock purchase program or a DRIP that allows foreign participation, check with the company's investor relations department, shareholder services agent or transfer agent.

For more information, read The Perks Of Dividend Reinvestment Plans and What is a DRIP?

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