Fidelity Bans Mutual Funds For U.S. Overseas Clients


Fidelity Investments has banned U.S. expats from buying or trading mutual funds in their Fidelity brokerage accounts.

The ban on U.S. expats will affect about 50,000 of Fidelity’s 20 million accounts and will apply to both Fidelity and non-Fidelity mutual funds as well as to exchanges between funds. Current account holders will still be allowed to invest dividends in additional shares of a fund, and 401(k) and 403(b) plans will not be subject to the prohibition.

While denying that the move is in response to any specific issue, the ban’s Aug. 1 start date comes shortly on the heels of the July 1 implementation of the Foreign Account Tax Compliance Act (FATCA). The Wall Street Journal reports that a Fidelity spokesperson said the ban is merely a result of “today’s continually evolving global regulatory environment.”

FATCA is the extrajurisdictional law that requires all U.S. persons, including those outside of the United States, to report all their foreign financial accounts, as well as requiring financial institutions to report to the IRS about accounts of U.S. persons. The United States is the only developed country in the world to levy a tax on its citizens regardless of residency.

Fidelity is only the latest of financial institutions that have taken similar actions to distance themselves from U.S. overseas clients to avoid noncompliance with FATCA requirements.


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