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40% lower dividend payouts on the same shares due to new IG calculation

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Anyone else having this problem with some (not all) US shares? 

This quarter my ISA dividend payouts involved a 11 or 12 line calculation for each share and a drastically reduced payout (on stocks I haven't sold, and which have not reduced their payout)

I've signed a W-8BEN form so it isn't that. 

I'm not getting any useful answers from IG helpdesk and, of course, a total blank from 'Corporate Actions' - whatever that means.

 

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Nobody?

Update: 32 individual calculations - subtractions and additions - for a single payout from Realty Income Corp.

How can that even remotely make sense or be deemed acceptable customer delivery? 

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13 hours ago, JamesIG said:

apologies about the delay on this one @hariboid - let me chase this for you.

 

Thanks James, I'd really appreciate a resolution.

I've made a png showing what IG have done for just a single payout for Realty Corp - an  insane 32 calculations in total. And I have at least 20 different US Reits. 

When I contacted the helpdesk, they spoke to Corporate Actions who replied that I should just add everything up myself. 

Further questions by email about why the payment was lower, and who in management could get involved to sort out this ridiculous state of affairs have gone unanswered. 

I literally cannot get a reply.    

IG_DIV_ST.png

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On 19/03/2019 at 13:01, hariboid said:

Thanks @JamesIG, I'd really appreciate a resolution.

I've made a png showing what IG have done for just a single payout for Realty Corp - an  insane 32 calculations in total. And I have at least 20 different US Reits. 

When I contacted the helpdesk, they spoke to Corporate Actions who replied that I should just add everything up myself. 

Further questions by email about why the payment was lower, and who in management could get involved to sort out this ridiculous state of affairs have gone unanswered. 

I literally cannot get a reply.    

IG_DIV_ST.png

@JamesIG any update? I've still received no reply from customer service and meanwhile new dividends are coming in with the same crazy over elaborate calculations and reduced payouts... 

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Apologies it's taken me a couple of days to get back to you on this one. 

I have just spoken to our corporate actions team and they have confirmed that this stock has gone through an income reclassification process which the underlying company has initiated. Income reclassification refers to changes companies make to all or part of previously reported dividend income to some other tax classification.

  • A dividend is a distribution of a company’s earnings and profits.
  • A distribution by a corporation is taxed as a dividend to the extent of the corporations' earnings and profits, and any distribution in excess of the earnings and profits is generally a non-taxable return of capital.
  • In some cases, a company may have paid out more in distributions than it earned during the year.
  • In this situation, all or part of the distribution may be reclassified from a taxable dividend to a return of capital which is generally non-taxable.
  • A dividend may also be reclassified in other ways (i.e. the reallocation of ordinary dividends to tax-qualified dividends or dividends to capital gain distribution (for mutual funds)

This means the dividend adjustment have had to be CONTRA'd and reissued under the companies newly classified valued. It's a relatively complex reason so apologies that it has taken me a while to get this information for you. 

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@JamesIG many thanks for chasing this up and coming back with some info! 

I think this reply from corporate actions is, frankly, extremely poor. 

Firstly, it does not justify 32 individual calculations to arrive from a single number to another single number. 

Secondly, the reduction in payout, as determined by this complex internal process, is not reflected by UK tax law for ISA's, as I currently understand it. Please do correct me on this if I'm wrong.

Finally, and most tellingly I'm adding a screenshot of the same payout, from the same company (Realty Corp) at the same quarter in a Hargreaves Lansdown account.

It's one number - the dividend the company distributed, converted into sterling, and paid out without any reduction. 

If Hargreaves Lansdown can do this, it substantially undermines the justification given by IG.

 

 

HL.png

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I appreciate that the process is sub optimal and I'll make sure to pass this onto our share dealing corporate actions team. I hope it didn't come across that this was the only way, however it is what we currently have in place. The reason for the 32 lines is that they had to contra the associated lines of div adjustments on your account and reflect changes according. As you stated there is certainly a more efficient clean way to update clients on this one, as HL have done. I guess HL have almost 40 years worth of experience in this space whilst our share dealing arm is relatively new in comparison. We shall of course look to continue to refine our offering and iron out instances such as this.  

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Posted (edited)

@JamesIG 

Appreciate your thoughts and clarification.

I was told by customer support, this was an ''ongoing dividend reclassification project.'

To the question: 'when will this ongoing project be completed?' I received no reply from customer support. Despite several requests for one. I don't think that takes 40 years of experience. 

I can understand that if this is somewhat new - although US REIT dividends have been in existence for 20+ years and trade on the worlds biggest stock exchanges - there might be a few teething problems. But surely even as a first attempt, the 'solution' that's been implemented is patently unacceptable? 

And the question still remains: There is no tax to pay on dividends of US Reit stocks held in a UK ISA, so why is this reclassification being done? Why are my payouts reduced? And who is receiving the money that used to go to me?   

 

 

 

Edited by hariboid
typo correction
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US reits do not function in the same way as UK reits and this is a bit of a red herring. Granted its a complex situation, but we are simply reflecting what the company has decided. This is therefore how the US operates, with the company informing Citi, who in turn inform us and by extension yourself. There may be more information on that specific companies Customer Relations or Investor Relations page. The change is cash has effectively gone back to the issuing company. 

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11 hours ago, JamesIG said:

US reits do not function in the same way as UK reits and this is a bit of a red herring.

@JamesIGIt certainly is, since I never mentioned UK Reits. 

I don't hold any of those. 

The tax on US REITS held within a UK ISA is tax free. 

And I do not believe the US takes any tax from the dividend either. 

So I continue to fail to see why the deduction.  

Could you direct me to the specific piece of tax legislation or rule change that would account for the new reduced payout? 

I also find it amazing that there isn't one capable and sufficiently empowered person within IG who can implement a non-terrible solution for this. Even more incredible that the current one is deemed acceptable. 

 

 

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Hey @hariboid - I appreciate that this isn't the single contact resolution you should expect from IG. I've forwarded this case to one of our trading services managers who is going to be in contact directly, as well as review all interactions you've had with our Trading Services team and Corporate Actions teams. They should be in contact with you directly to go over this with you. All the best. 

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@hariboid  I've been having the same problem. This can't be normal? Taking the whole dividend two or three months later with no warning and leaving the account in negative balance. If this carries on i'll be taking my business else where.

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Posted (edited)

@Tony82 Definitely isn't normal by any standard - whether basic accounting rules, common sense, or a commitment to decent client service. 

Honestly, the calculation IG now use is so long and complicated I have no idea what has been paid out or deducted.

Thanks to @JamesIG someone from IG - Matt Stevens - has now reached out and tried to at least begin to address the lack of response and lack of clear answers. If I have to move my portfolios I'd at least like to make the decision based on logic and clear information. 

I've asked that the issue go beyond the customer service team because whoever is implementing this 'dividend reclassification project' is manifestly doing a terrible job, and not being held accountable for it. Plus Corporate Actions seem to me to be dismissive of client needs, at best, and remain totally unreachable. Leaving customer services to deliver vague second hand answers, if they reply at all.   

If there was a pm function here I'd happily get your contact details and cc you in to my emails with Matt. Even better, if you can find a way to contact literally anyone at IG who has a senior position with oversight of operations, something meaningful might happen. 

The one good thing. IG tell me they don't charge to transfer holdings out onto a different provider. Got to give them props for that. 

 

 

 

Edited by hariboid
typo correction
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Update:

I sent Matt Stevens on the helpdesk the following email and also followed up with three specific questions

What is my actual - final - payout for each stock?
When is this insanely stupid 'project' going to end?
Who has oversight of this at management level?
 
Dear Matt,
 
Many thanks for reaching out. Your message is appreciated.
 
Honestly, I'd much rather this issue was resolved in a rational way so that I can continue to be a customer and build my portfolios on the platform. If it cannot then I'll have no choice but to move. 
 
And I can't imagine i'm the only client who holds US Reits and MLP's and finds the incredibly complex calculation of the dividend payment somewhat, sub-optimal, shall we say?
 
If you look at the 30 something individual calculations per dividend for holdings like Realty Corp, OHI and Crown Castle, it's very surprising to think this is considered an acceptable customer facing solution from whoever is working on it internally, or that the wider approvals process allowed it through. 
 
The sense I've got from being on the receiving end is that it - and clients with these type of holdings - are just not considered very important.   
 
So there is the issue of how dividends on US Reits and MLP's are calculated. and there is the issue of how clients are treated. 
 
To the latter, I would say that getting a simple acknowledgement from IG (and specifically Corporate Actions) of the problem, and some meaningful answers to perfectly reasonable questions would have gone a long way to helping. A response to the question 'when is this ongoing dividend reclassification project due to be completed' would also at least have given me some idea of timelines. An attempt at an interim solution in the meantime would have at least shared the burden and been a gesture of help. Being told I should just add up and subtract what must run to 300+ lines of calculations to determine my dividend payout, with no idea when these liner items finally end since they seem to continue being adjusted for up to a week, is....contemptuous.  
 
I fully appreciate that customer service is a difficult job at the best of times, and I can have my moments as a difficult individual, so I do apologise for the times when I have been unjustifiably abrupt or inconsiderate to anyone on the team.
 
In this specific instance, however, I do feel poorly served.
 
It's taken a lot of time and effort on my part to get to the point where someone - you - is taking me seriously.
 
Customer service first simply relayed totally inadequate, and somewhat dismissive responses from Corporate Actions, and then later just simply ignored me.
 
I tried to reach out to someone at a higher level via linkedin but was ignored.
 
James on the community site needed prompting by another user before he took up the issue, but in fairness to him, stuck with escalating it in the absence of any meaningful answers to the problem. 
 
So here we are. At least now in a position to move forward in a more rational, respectful and communicative way.     
 
I look forward to hearing from you and hope to gain a better understanding of the situation so I can determine the best course of action for my portfolios. I'd also ask that whoever has oversight over customer service and corporate actions - or the COO - be sent this email. 
 
 
He took 5 days to reply. and this is what I got back:
 
Thanks for your emails, and apologies for the delay in response.
We have received some feedback from our brokers regarding the multiple dividends and contras on the account.

Our custodian uses a vendor for the annual reclassification of process, which captures all the relevant data for holdings of securities "in scope" for reclassification. The vendor provides us with data which they action from their side. While some entities make public their reclassification information, many do not.

If you are searching publicly for reclassification data, you may want to seek out the Form 8937 of the issuer in question. Sometimes these are public and will contain information related to reclassification.


If you have any further queries, please do not hesitate to contact us. Alternatively, we've recently launched our new

Help & Support site which gives you answers from our huge knowledge-base, online community, and education hub. 

Regards,
Matt Stevens
Trading Services
 
 
Judge for yourself. 

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On 21/03/2019 at 10:35, JamesIG said:

Apologies it's taken me a couple of days to get back to you on this one. 

I have just spoken to our corporate actions team and they have confirmed that this stock has gone through an income reclassification process which the underlying company has initiated. Income reclassification refers to changes companies make to all or part of previously reported dividend income to some other tax classification.

  • A dividend is a distribution of a company’s earnings and profits.
  • A distribution by a corporation is taxed as a dividend to the extent of the corporations' earnings and profits, and any distribution in excess of the earnings and profits is generally a non-taxable return of capital.
  • In some cases, a company may have paid out more in distributions than it earned during the year.
  • In this situation, all or part of the distribution may be reclassified from a taxable dividend to a return of capital which is generally non-taxable.
  • A dividend may also be reclassified in other ways (i.e. the reallocation of ordinary dividends to tax-qualified dividends or dividends to capital gain distribution (for mutual funds)

This means the dividend adjustment have had to be CONTRA'd and reissued under the companies newly classified valued. It's a relatively complex reason so apologies that it has taken me a while to get this information for you. 

I've experienced the same bizarre treatment and explanation. IG withdrew money from my ISA on the 23rd, in relation to the $2 special dividend on MATCH, then credited me a greater amount on the 25th. This means I'm missing 89% of my dividend amount. 

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That reply by Matt Steven's after 5 days was complete rubbish. He should be ashamed!

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6 hours ago, Situation said:

That reply by Matt Steven's after 5 days was complete rubbish. He should be ashamed!

@Situation, it only got worse from there. I'm in the process of moving my portfolios out of IG. 

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Has this problem been resolved for any investors? I am missing part of a dividend in a tax wrapper that was expected to arrive a couple of weeks ago.

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