An Australian company announcement has this as the first line:
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES OR TO US PERSONS
A dividend reinvestment document states that a shareholder with a US or Canadian address is not eligible to participate in their dividend reinvestment program.
What are the restrictions of US citizens and foreign financial information and how did they come about?
Here’s my guess: If you are resident in the US, then dividends in companies anywhere in the world are taxable as income in the US, for federal income tax purposes. You don’t even get the benefit of the franking credit system in Australia. (This affects me, as an Australian resident in the US, with a small holding of shares in an Australian company). It may be that dividend reinvestment in an Australian company causes problems in the federal income tax system in the US.
WAG: It could be that the US has very strict guidelines about soliciting certain investment documents. If you notice a lot of ads for investments end with some quick spoken disclaimer along the lines of “this is not an offer to buy or sell, this offer may cause four-hour erections, do not taunt Happy Fun Ball…” There are also myriad disclosure requirments and other items that must be included in a prospectus (and I assume similar marketing documents). Perhaps they don’t want to pay a US attorney to make their materials compliant (or can’t), and don’t want to run afoul of some SEC regulations.
Giles is close, it’s the Australian tax implications of franking credits.
US based investors, who are therefore not able to access the tax credit, cannot be distributed their entitlements and hence the company is able to hoard profits on which somebody else has paid the tax.
Aren’t we nice, looking after the fiduciary interests to all you high-personal wealth investors in this little colonial backwater?