For those who want ONLY the “Readers Digest” version of this post …
This is a long but important post. For some the post will be too long to read and digest. The post is about Fidelity. Those of a certain age will associate Fidelity with legendary fund manager Peter Lynch author of “One Up On Wall Street“.
There is an international trend of financial firms avoiding U.S. citizens. This post is specifically about Fidelity UK (1) refusing to accept U.S. citizens as clients and (2) proactively ridding their client base of those who they know are U.S. citizens or have reason to believe “may be” U.S. citizens!
I recently became aware of the following letter sent by Fidelity U.K. to certain undesirables …
Unconfirmed USP Sell To Cash Letter
Some of you may be satisfied to read the letter.
For those interested in the general context and discussion, here is the complete post …
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Part A – Introduction and context
This is Part 5 in a series of posts that I began writing in 2023. See the Appendix for links to all of the previous posts. The context of this series of posts is that FATCA IGAs require “foreign financial institutions” to provide the U.S. Social Security numbers of their U.S. citizen customers. This is a problem because:
1. The banks cannot provide to the IRS what they sometimes don’t have.
2. Many Americans abroad do NOT have a Social Security number to provide.
3. Many former U.S. citizens have relinquished U.S. citizenship without necessarily having a Certificate of Loss of Nationality (“CLN”).
The first four posts explained how and why U.S. Treasury has taken steps to ensure that foreign banks will escape a designation of “FATCA noncompliance” if they cannot provide Social Security Numbers for certain customers. Part 5 describes the response of Fidelity U.K. to the problem of having customers who they believe “may” be U.S. citizens but have not provided a U.S. Social Security Number. The effects are devastating on those impacted by this problem.
Prologue – The U.S. Government and its citizens:
In 1924 U.S. Supreme Court Justice Joseph McKenna, in upholding the constitutionality of U.S. citizenship taxation in Cook v. Tait ruled that:
In other words, the principle was declared that the government, by its very nature, benefits the citizen and his property wherever found, and therefore has the power to make the benefit complete. Or, to express it another way, the basis of the power to tax was not and cannot be made dependent upon the situs of the property in all cases, it being in or out of the United States, nor was not and cannot be made dependent upon the domicile of the citizen, that being in or out of the United States, but upon his relation as citizen to the United States and the relation of the latter to him as citizen.
I wonder whether many Americans abroad believe that the U.S. government benefits them wherever they may live.
Now, on to our “Feature Presentation”.
Fidelity U.K. and the desire to “Avoid USNess”
I recently became aware that the UK division of Fidelity was sending letters to “suspected U.S. persons”. The purpose of the letters was to notify them that Fidelity – as stated in the terms and conditions of the account – had a policy of NOT doing business with “U.S. persons”. Therefore, because the recipient of the letter was suspected of being a “U.S. person”, the contents of their accounts were to be liquidated. For general investment accounts the liquidation (sale) would necessarily be an income realization event for tax (capital gains) purposes. The immediate impact would be to erode the value of their accounts.
The “bottom line” stated in the note from Fidelity was:
Because you are a U.S. citizen (or other undesirable form of “U.S. person”), you are not welcome here and if you don’t leave within a 30 day period your accounts will be liquidated.
So, much for your life savings!!
But, to be fair: Your life savings and financial “well being” are minor issues when compared with Fidelity’s institutional risk of having “U.S. persons” as customers/clients. One must feel for Fidelity. Fidelity didn’t ask for this! It’s not the UK that dislikes “U.S. persons”. It’s the U.S. government that dislikes “U.S. persons”. The dislike becomes particularly intense when its citizens live outside the United States. Perhaps it’s what Barack Obama meant with his 2008 campaign slogan:
Honestly, I am not aware of any other country that has deliberately, purposefully and knowingly depreciated the value of its citizenship. Perhaps, this is part of the meaning of “American Exceptionalism”.
Understanding Fidelity’s behaviour in the context of two basic principles:
1. U.S. Treasury has specifically allowed Fidelity and other foreign financial institutions to avoid designations of FATCA noncompliance UNTIL 2027 if they cannot provide the TINs of U.S. persons. This means that Fidelity’s aggression toward “U.S. persons” is NOT based on FATCA noncompliance per se.
2. Fidelity is purging its client base of “suspected U.S. persons”, because and ONLY because Fidelity recognizes that, U.S. persons because of citizenship taxation and FATCA, carry unacceptable future compliance risks.
Fidelity is behaving rationally. Whether the purging of its client because of discrimination against “suspected U.S. persons” is lawful, is a subject for a separate blog post. But, for now the most important question (as reflected in Fidelity’s letter) is:
Are you or have you ever been a U.S. person?
The problem that Fidelity’s purging itself of “Suspected USNess” is designed to address …
As I explained in a November 2024 post discussing the FATCA noncompliance of foreign financial institutions:
Those familiar with FATCA IGAs will know that the FFIs (“Foreign Financial Institution” AKA your local bank) are required by the FATCA IGAs to obtain a US TIN (AKA SSN) from their U.S. citizen clients. Failure to obtain the SSN places the FFI in violation of the FATCA IGA (and theoretically subject to the FATCA penalties potentially imposed on banks). Therefore, the FFIs are EXTREMELY motivated to obtain the SSNs. It makes perfect sense for the FFIs to cease doing business with those U.S. customers who do not supply SSNs. That said, there are many U.S. citizens living outside the USA who simply do NOT have a U.S. SSN.
In late 2022 the IRS issued Notice 2023-11 which prescribed conditions under which the FFIs would avoid a designation of non-compliance (even when they are/were unable to obtain an SSN from their U.S. citizen clients). Notice 2023-11 covered the FFIs for the years of 2022, 2023 and 2024. We are coming to the end of 2024. There are still many U.S. citizen customers who have not provided CLNs to their banks. The banks are getting nervous and are reaching out to non-compliant customers. Those customers are being threatened with the closure of their bank accounts.
Because the problems continue, on October 24, 2024 the IRS issued Notice 2024-78 which is just a repackaging of Notice 2023-11. Notice 2024-78 “kicks the can down the road” for another three years (2025, 2026 and 2027). The FFIs will continue to avoid a designation of non-compliance in return for meeting the same specific conditions described in Notice 2023-11 and described in the Appendix below.
Clearly the U.S. has opted to continue its harassment of FFIs and Americans abroad. The purpose is to enforce U.S. taxation on the residents of other countries.
No reason to take my word for it, let’s look at the actual letter Fidelity sent to “suspected U.S. persons”.
Part B – The Actual Letter From Fidelity
Thepdf of the actual letter (complete with colour coding) is available here:
Unconfirmed USP Sell To Cash Letter
The text of the letter is:
Sell to Cash Letter – Unconfirmed US Person
Important – We are selling your investments 30 days after the date of this letter. This is your last chance to confirm your tax residency status before we deduct US withholding tax.
Dear [PI /FAS/WM client]
We wrote to you previously about information on your account which
leads us to believe that you are a US person
. In our previous letter
we said that we would sell your investments to cash
and that we’d write to you before we did this.
We’re writing to you now to confirm that
we will be selling your investments to cash
and to let you know what this means for you. Your ISA and SIPP ‘wrappers’ will not be affected.
A reminder of why we wrote to you before
We can’t do business with US persons and they can’t hold investments on our platform. It’s in our Terms and Conditions.We believe you’re a US person and we don’t have a US Tax Identification Number (TIN) for you, we’re therefore required by US law to deduct US withholding tax and pay it to the US Internal Revenue Services (IRS).
Sell to Cash
We will sell all your investments with exception to any workplace pensions, these will not be affected. If you have suspended funds which can’t be sold, these will be sold as soon we’re able to do so; we will not write to you again before we do this.When we sell your investments to cash, any regular income plans that you have will not be impacted, these will continue to be paid to you until you withdraw your cash off the Fidelity platform. The proceeds from the sale of your investments will be placed in each product and won’t be moved. Cash will continue to earn interest whilst it remains in your account.
Your ISA and SIPP ‘wrappers’ will not be affected and you can still transfer your ISA or SIPP to another provider and retain the wrapper. You can also withdraw your cash from your ISA and GIA accounts at any time once we’ve completed the sale of your assets. With regards to your SIPP you would need to follow the normal rules regarding when and how you withdraw money from your SIPP.
Fidelity will issue you a confirmation of transaction once the sell transaction has been completed.
If you hold a General Investment Account, you may be liable to pay Capital Gains tax.
Fidelity won’t be held liable for any losses, liabilities, costs, claims or expenses incurred because of having to sell your investments.Tax Deductions (please note that tax deductions do not apply to SIPP accounts)
We will deduct any US withholding tax from your account. This is calculated at 24% of the value of any gross dividends, interest amounts, sale proceeds or fee rebates credited to your account since you were identified as a US person through the information on your account or since 1st April 2023, whichever date is most recent.You will be able to see the tax amount on your statement which is issued on a quarterly basis and also the 1099 report. This is a US tax form that reports payments made in a calendar year to you, a copy is sent to you and to the IRS.
We will pass this money onto the IRS.
IRS Reporting
We will send you a copy of IRS form 1099 which will show you all of the transactions which we have reported to the IRS and for which we have deducted US withholding tax. We will also file a copy of this form with the IRS.Read the enclosed Q&As for further information.
Q&As
What might make me a US person?Any of these could make you a US person. If you believe you aren’t a US person, or you’ve renounced your US citizenship, send us the documents we need as soon as possible.
I am a US citizen and/or I hold a US passport. I have a US Tax Identification Number (TIN).
You are a US person. Send us your US Tax Identification Number (TIN). Complete and sign the Self-Certification Form we’ve enclosed and send them back to us. Make sure you include your TIN.
I was born in the US
Send us your Certificate of Lost Nationality (sometimes called a renunciation certificate).
I have, or have had in the past, an address in the US
You’ll need to confirm that this is no longer your current address and you aren’t a US person. Complete and Sign the enclosed Self-Certification Form and send it back to us.
I hold bank accounts in the US
You’ll need to confirm that you aren’t a US person. Complete and Sign the enclosed Self-Certification Form and send it back to us.
I have provided Fidelity with some information that shows I may have been a US person in the past
You’ll need to confirm that you aren’t a US person any longer. Complete and Sign the enclosed Self-Certification Form and send it back to us.
I was a US citizen and/or I held a US passport. I have renounced my citizenship
Send us your Certificate of Lost Nationality (sometimes called a renunciation certificate).
Why do you need to know if I’m a US person?
We can’t do business with US persons and they can’t hold investments on our platform. It’s in our Terms and Conditions.If we believe you’re a US person and we don’t have a US Tax Identification Number (TIN) for you, we’re required by US law to deduct US withholding tax and pay it to the US Internal Revenue Services (IRL).
What happens if I’ve already given you my TIN?
If you have recently provided us with a valid TIN, you don’t need to do so again. We would recommend that you check your information to ensure the TIN is correct. If it is, withholding tax will not be deducted. If the TIN we hold for you is missing or invalid, withholding tax will be deducted.If we have a TIN for you, you still can’t hold investments on our platform but we won’t need to deduct US withholding tax. Some of the restrictions on your account/s will be lifted.
This will allow you to sell and withdraw your investments with Fidelity or transfer to another provider.
If you have a TIN and haven’t yet provided it to us, you must do so within 30 days of this letter, otherwise we will still deduct US withholding tax.
What happens if I’ve already confirmed that I’m not a US person?
If you have very recently provided us with information and we’ve been able to verify that you are not a US person, you don’t need to take any further action. We recommend that you check your information to ensure your details are correct.How can I renounce my US Citizenship?
You’ll need a Certificate of Lost Nationality – sometimes called a renunciation certificate. You can ask the US Embassy and Consulates to issue you with one. Their website explains how to go about it: https://uk.usembassy.gov/loss-of-u-s-citizenship-i-e-expatriationIf you are renouncing, you must tell us immediately and be able to provide copies of the DS4079 and DS4080 forms that you’ve submitted to the US Embassy.
Any withholding tax up to the point of renunciation will still be deducted.
What do I do if the information on my account is wrong
If you believe information on your account which indicates that you are a US person is incorrect, please notify us immediately. We will ask you to complete a self-certification form and provide us with a valid non-US passport.Why do you need to sell my investments?
Our Terms and Conditions state that we can’t do business with US persons. That means you’re not allowed to hold investments on our platform and they must be sold.Can I sell my own investments?
You can sell the investments yourself but you must let us know within 30 days from the date of this letter otherwise Fidelity will sell your investments.Will the cash stay in my ISA or SIPP?
Yes. The proceeds from the sale of your investments will be placed in each product and won’t be moved. Your ISA and SIPP ‘wrappers’ will not be affected. You can transfer your ISA or SIPP to another provider and retain the wrapper.What is a 1099 form
A 1099 form is a type of information return that documents certain types of income an individual may have received that are not considered employment income.
Unconfirmed USP Sell To Cash Letter
“All Roads Lead To Renunciation!”
John Richardson – Follow me on X.com @Expatriationlaw
Appendix – The complete series of posts
What follows are the four posts I wrote starting in 2023 discussing the problem of Foreign Financial Institutions and U.S. Social Security Numbers. This post is “Post Number 5” as part of the series.
Part 1 – Notice 2023-11: The Carrot, The Stick And Heightened FATCA Enforcement On Overseas Americans
Part 2 – Notice 2023-11: Non-US Banks May Be Forced To Sever Ties With US Citizen Clients Because Of FATCA
Part 3 – Notice 2023-11: Is FATCA Aimed At Resident Americans, Residents Of Other Countries Or Both?
Part 3 – Notice 2023-11: Is FATCA Aimed At Resident Americans, Residents Of Other Countries Or Both?
Part 4 (November 3, 2024) Notice 2023-11: Notice 2024-78 Is A Continuation of Notice 2023-11
Part 5 – Fidelity U.K. – Cleansing The Firm Of “Suspected” U.S. Citizens And The Problems They Bring (October 31, 2025)
Part 5 – Fidelity U.K. – Cleansing The Firm Of “Suspected” U.S. Citizens And The Problems They Bring
For once, “Thanks, Obama!” is actually true. Especially egregious considering the USA is like the second largest money-laundering country on the planet.