Corporate Action in LISA

qbadger

I have some units of LSE: PRIW in my Lifetime ISA with AJ Bell. This ETF is being merged with another fund (amundi prime global ucits etf dist) with effect from 22 Nov 2024.
Does anyone know the fund currency for the resultant fund? I've been told by AJ Bell that it won't be listed on LSE and I will receive the new units in my general investment account instead. Would that incur a 25% government withdrawal charge?

eskbanker

qbadger said:

I've been told by AJ Bell that it won't be listed on LSE and I will receive the new units in my general investment account instead.

I don't know the answers to your questions but if that's what AJ Bell have told you then I'd have thought it would make sense to sell the units before the action, in order to guarantee the money staying within the LISA wrapper.

qbadger

Yes that does seem like the safer option, but I'm curious about what should happen if I still held the units on the effective date. I've asked AJ Bell for clarification, but thought someone here might have been in a similar situation and could share their experience.

masonic

The following cannot both be true:

1) The new units can be held in a GIA without it constituting a withdrawal from the LISA.

2) The new units could have been held in the LISA if they were listed on LSE without it constituting a new subscription.

So I think it is vanishingly unlikely that if you do nothing you'll avoid a 25% penalty and loss of ISA status on the funds.

The info about the receiving fund can be found in the RNS to shareholders: https://www.amundietf.co.uk/pdfDocuments/download/fb17e36b-45d2-4042-a4ac-5973c1e1f440/NoticeToShareholders_LU1931974692_GBR_ENG_20241016.pdf

qbadger

It could be that I have misinterpreted what AJ Bell said: 

Please note, the resultant ETF will not be listed on the London Stock Exchange, therefore it will not be eligible to be held in an ISA. If you hold the current units in an ISA, you will need to move them from your ISA within 30 days of the merger effective date. If you have a Dealing account, we will credit the new units to your Dealing account following completion of the merger.

Does this mean I will have until 21 Dec to "move" (i.e. sell) the units of the receiving ETF from the LISA and keep the wrapper status?

In theory the new ETF should have lower spread, so if I had a choice I would prefer to sell down post merger rather than now.

masonic

qbadger said:

It could be that I have misinterpreted what AJ Bell said: 

Please note, the resultant ETF will not be listed on the London Stock Exchange, therefore it will not be eligible to be held in an ISA. If you hold the current units in an ISA, you will need to move them from your ISA within 30 days of the merger effective date. If you have a Dealing account, we will credit the new units to your Dealing account following completion of the merger.

Does this mean I will have until 21 Dec to "move" (i.e. sell) the units of the receiving ETF from the LISA and keep the wrapper status?

In theory the new ETF should have lower spread, so if I had a choice I would prefer to sell down post merger rather than now.

I am having difficulty interpreting AJ Bell's statement. The last sentence is the more troubling, stating they will credit the new units following completion of the merger, whereas for the ISA, they make reference to the old units having to be moved... suggesting they may withhold the new units and not credit them to an ISA at all, leaving you unable to do anything but move the original units out to receive the new ones. I guess how you were seeing it also, perhaps it is sloppy wording and they meant to refer to the new units when they said "them".

However, aren't you interested in the redemption option presented in section C of the notice?
"Shareholders who do not agree with the terms and conditions of this Merger have the right to redeem or convert their shares at any time free of charges (excluding  redemption fees charged by the Absorbed Sub-Fund to cover divestment fees and except for the fees acquired by the Absorbed Sub-Fund to prevent dilution of shareholders investment) from the date of this notice until the “Cut-Off Point” as set out in Appendix III."

qbadger

masonic said:

However, aren't you interested in the redemption option presented in section C of the notice?
"Shareholders who do not agree with the terms and conditions of this Merger have the right to redeem or convert their shares at any time free of charges (excluding  redemption fees charged by the Absorbed Sub-Fund to cover divestment fees and except for the fees acquired by the Absorbed Sub-Fund to prevent dilution of shareholders investment) from the date of this notice until the “Cut-Off Point” as set out in Appendix III."

Thanks for pointing me to that section. Yes I would be interested in the redemption option, assuming redemption here means getting GBP cash back instead of hundreds (thousands?) of the underlying securities. 
I'll message AJ Bell with the request and see what they say.

mdonaldo

The last trading date on the LSE is Nov 21.

Amundi are giving you until Nov 15 to decide whether you want to redeem through them. 

Though ISA rules give you 30 days grace when an investment becomes non-qualifying, that's butting against the reality of the timeline for this particular ETF. 

Why do you think the spread would theoretically be better for the new ETF? Because it'll be bigger? That may or may not be the case but regardless, the current spread is fine. It was 100th of a percent at close on Friday:
Sell: $33.83|Buy: $33.8625

I've been looking through LISA rules but they're very lightly drafted and it's unclear whether a transfer of shares outside of your LISA would count as a withdrawal or not. I would guess they would not but then again why take the chance for an at best marginal and theoretical gain on the spread? 

masonic

mdonaldo said:

I've been looking through LISA rules but they're very lightly drafted and it's unclear whether a transfer of shares outside of your LISA would count as a withdrawal or not. I would guess they would not but then again why take the chance for an at best marginal and theoretical gain on the spread?

If not then it would be a quite the loophole. Anyone with a S&S LISA could buy these up and have them transferred out to get around the withdrawal penalty. Seems rather unlikely.

mdonaldo

Masonic that's a fair point and you may well be right. But it also seems unlikely to me that the government wants to read negative headlines about innocent LISA investors being penalised on a technicality. 
I haven't yet found a concrete answer to the question. It must be relatively common as it affects stocks and shares ISAs, too. If an investment becomes non-qualifying and it's transferred out then does that reduce your allowance if your S&S ISA is non-flexible? Nobody is providing an answer which may be because it's not clear cut. The OP is probably better-off selling given the lack of clarity. 

mdonaldo

@Masonic - thinking about it, if you were wrong, then there'd probably be posts out there promoting the massive LISA hack, so I guess you are right.