Stocks and Shares ISAs - Beware of Chinese shares listed on NYSE

[Deleted User]

I have just been advised by my stockbroker that the shares I purchased in to my S&S ISA last August are not permitted to be held.

The shares are listed on the NYSE, which is OK but are for a Chinese Company (TENCENT and Ai-Baba) which is not OK!

At the time of the purchase they admit that they were unaware that the shares were not permitted to be held.

I have to sell or transferred out of the S&S ISA into a nominee account.

I understand that this applies to all Chinese companies with shares listed on Share Indexes around the world!

System

Are these shares or ADRs?
Shares listed on any recognised stock exchange can be held in an ISA.

bowlhead99

It's a main board stock in Hong Kong with ticker 0700 and I'm pretty sure I had it in my ISA not my unwrapped account. However I might be wrong as I sold at some point in the last tax year and haven't done my tax return yet as I know I owe money rather than being owed it

I did hold the HK version rather than the US ADRs though.

[Deleted User]

They were shares on NYSE with the code "BABA".
It was spotted during an internal audit, it seems.
Choice was to sell and leave funds in S&P ISA or transfer to a nominee account where they would be subject to capital gains and tax on income.

System

These are probably ADR or ADS if traded on the NYSE.
Shares in Tencent are listed in HK so it should be OK to hold the ADR in an ISA:
http://www.hl.co.uk/shares/shares-search-results/t/tencent-holdings-ltd-unsp-adr-each-repr-1
Shares in Alibaba are listed in China so I do not think that you can hold the ADS in an ISA:
http://www.hl.co.uk/shares/shares-search-results/a/alibaba-group-holding-ltd-ads

stphnstevey

The OP has given no reason why they couldn't be held, other than being Chinese???

I would want a better explanation from an IFA

I also see no current reason why they couldn't be held in ISA, unless it has something to do with $ not in an ISA, but as no proper reason given, that is a guess

ColdIron

You do know that this thread is over a year old?

stphnstevey

ColdIron wrote: »

You do know that this thread is over a year old?

It came up on a search - you get berated if you don't search, then again if it's comment on something just a year ago jeeze!

Reed_Richards

stphnstevey wrote: »

It came up on a search - you get berated if you don't search, then again if it's comment on something just a year ago jeeze!

You may get berated if you don't search before asking a question but you are bound to get berated if you revive an old thread just to add a comment that is not a very useful addition to what had gone before.

stphnstevey

Reed_Richards wrote: »

You may get berated if you don't search before asking a question but you are bound to get berated if you revive an old thread just to add a comment that is not a very useful addition to what had gone before.

Hows it not useful? I am querying a confirmation of the reason why OP believes not allowed in ISA and promoting further discussion on this topic, the OP may have more information now, all which would be useful to anyone who wishes to hold these in an ISA, anyone searching for terms Tencent or Alibaba and wondering why the warning

bowlhead99

stphnstevey wrote: »

Hows it not useful? I am querying a confirmation of the reason why OP believes not allowed in ISA and promoting further discussion on this topic, the OP may have more information now, all which would be useful to anyone who wishes to hold these in an ISA, anyone searching for terms Tencent or Alibaba and wondering why the warning

OP seemed to change the story slightly after first saying it related to Alibaba and Tencent and then when pressed further, said that the shares were BABA on the NYSE. What trades as BABA on the NYSE is an American Depositary Receipt representing indirect beneficial ownership of the underlying ordinary shares/ common stock.

You can only hold ADRs in an ISA if the underlying security is listed on a recognised exchange, as mentioned by Economic in post #5. So if the ADR is a representation of shares in a Chinese conglomerate or an Indian bank, it may not be eligible to be held in an ISA, even if you could buy it on NYSE, if the actual shares aren't also listed on a recognised exchange. If you wanted them you would have to hold them unwrapped or in a pension.

Tencent is listed on HK and as mentioned in the other recent thread, I have their shares in my ISA. Alibaba isn't listed in HK or on any other recognised exchange as far as I know (I only have it in my SIPP). However, Alibaba is expected to list on HK in due course, following HK softening its rules to accommodate a capital structure that they previously could not. If they were to list in HK, you should be ok to hold either the HK shares or the US ADRs of the HK shares, in an ISA.

OP's comment:

I understand that this applies to all Chinese companies with shares listed on Share Indexes around the world!

simply reflects a misunderstanding. Shares are not listed for people to purchase on 'share indexes', they are listed on stock markets /stock exchanges. And if the shares are listed on a recognised stock exchange, such as Hong Kong (Main Board), they are fine to buy in an ISA.

You mentioned

stphnstevey wrote: »

The OP has given no reason why they couldn't be held, other than being Chinese???

I would want a better explanation from an IFA

Economic had tried to explain. I don't know why an IFA needs to give you a better explanation. Is an IFA advising you to buy shares in individual Chinese companies? The OP didn't say he had an IFA. Why would you want to pay an IFA to explain it rather than just looking up the rules yourself?

It is definitely not 'something to do with $ not being held in an ISA' because that's simply a rule about foreign currency cash not being an eligible asset for an S&S ISA. The OP was talking about his ADRs of a company whose shares are not listed on an HMRC recognised exchange, not being an eligible asset for an ISA. Currency of pricing of the asset is not relevant.