New Royal Canadian Mint Silver ETR is Just Another Fractional Bullion Scam!

The Royal Canadian Mint Silver ETR  is simply absurd. This security is a fractional bullion scam!

The new RCM paper form of silver has several embedded issues which can create the inability of the holder to actually receive the physical silver which they think they are investing in. At the end of the day, when you buy an RCM ETR thinking that you are investing in physical silver and thinking that you can take actual delivery if you want, the RCM has made it extremely burdensome to take actual delivery and can cancel your right to take delivery pretty much at its discretion. I don’t know about anyone else, but if I want to own physical bullion, I would not take the risks embedded in the Royal Canadian Mint ETR. It is nothing more than another version of the fractional ownership paper scam. Wash, rinse, repeat!

 

Submitted by Dave in Denver:

I just read through the prospectus for the new Royal Canadian Mint ETR, priced on Monday at $20 per unit. Each unit initially entitles the holder to a .619525 share of 1 oz. of silver bullion, to be safe-kept by the RCM. Notwithstanding the complicated formula required to calculate the share of bullion ratio on an ongoing basis for several reasons – the new RCM paper form of silver has several embedded issues which can create the inability of the holder to actually receive the physical gold which they think they are investing in.

The RCM does not directly link the prospectus on its website. In fact, it made it a pain the a** to track down and get a copy of it. My bet is that I’m one of the few people out there who has actually undertaken this task and read to the prospectus. I’ve linked it below.

To begin with, like all the other paper metal trusts (except the Sprott trusts – this write up does not apply to the Sprott trusts, let me make that clear), the RCM is the custodian of the bullion and states up front that the silver which is supposed to be for the trust will be held in an unallocated account. This may seem trivial right now, but if and when silver bullion becomes scarce and more people demand physical delivery of bullion that is being safekept by the RCM, the RCM ETR has NO LEGAL STANDING FOR A SUPERIOR CLAIM on the bullion.

In other words, let the lawsuits begin and wait in line if there’s more claims on the silver in at the RCM vault than the RCM can produce. This is the number one and most egregious problem with all paper bullion trusts. Quite frankly, it would not cost any more money to create a separate, allocated storage section which legally specificies that all silver in that part of the vault belongs to the ETR trust. Why do they not do this? Because this security is a fractional bullion scam. Also, don’t forget that it was just a couple years ago that both the U.S. and Canadian mints had suspend production of bullion products because of a shortage.

Second, in order to make a redemption claim on the bullion, the holder much own a minimum of 5000 ETRs, or roughly $100,000 worth of ETRs. This is another hurdle that the promoters of these trusts build into them in order to avoid creating a 1:1 physical backing and in order to try and avoid the problem created by using an unallocated account for the mint. For most investors, $100,000 is too high of a commitment. In other words, the RCM is hoping that most ETR holders never redeem then and instead sell the ETRs in the market in exchange for paper dollar settlement. This issue is endemic to the paper bullion trust scam and the RCM is perpetuating and expanding the scam.

Third, the redemption process itself is quite burdensome. The person redeeming has to follow a mult-step redemption process perfectly, or the RCM can cancel the redemption. Besides the paper work involved, the redeemer ALSO has to provide for a Carrier to go to the RCM vault and pick up the silver. This includes the fact that the redeemer bears all the risk and expense of pick-up, transfer and delivery. While on the surface not unreasonable, typically the delivering party will take the responsibility of this step, including any insurance involved. The way this part of the ETR is structured tells me that the RCM was looking to erect yet another hurdle in order to discourage actual physical redemption and further reinforce the fractional scam that has been created.

Finally, just in case the holder seeking redemption successfully clears the above hurdles, the RCM has added a very broad clause giving it the power to suspend or cancel the redemption. This provision is directly from the prospectus: The Mint may suspend the right of an ETR Holder to redeem its ETRs or postpone the date of delivery or payment of the redemption proceeds (whether physical silver bullion and/or cash, as the case may be) for any period during which the Mint determines that conditions exist which render impractical the fabrication, evaluation or sale of silver or which impair the ability of the Mint to determine the value of the silver bullion owned by the ETR Holder or the redemption amount for the ETRs. Any declaration of suspension made by the Mint shall be conclusive.

I don’t think I need to restate the obvious there. At the end of the day, when you buy an RCM ETR thinking that you are investing in physical silver and thinking that you can take actual delivery if you want, the RCM has made it extremely burdensome to take actual delivery and can cancel your right to take delivery pretty much at its discretion. I don’t know about anyone else, but if I want to own physical bullion, I would not take the risks embedded in the Royal Canadian Mint ETR. It is nothing more than another version of the fractional ownership paper scam. Wash, rinse, repeat.

Here’s a link the prospectus: http://www.sedar.com/GetFile.do?lang=EN&docClass=13&issuerNo=00033071&fileName=/csfsprod/data136/filings/01977275/00000001/C%3A\SedarFilesMTL\mint\SilverETRCertificate-ENG.pdf

Comments

  1. The Mafia has taken over. No surprises. lol

    • Sprott did another PSLV allocation today. If you have to have and ETF instead of physical, get Sprotts, where you can get delivery (though you have to take alot). Funny how the Canadian Mint offered their paper-fraud ETF right at the same time. I guess Sprott’s shaking the Cabal more than they are letting on. “First they ignore you…”

  2. Paper silver…

     

  3. Thanks Dave, for this most excellent update. I did buy some of these units, but I now  think that Sprott is much more appealing, especially for my RRSP. I plan to switch over.

    The fact that the ETR silver is in an unallocated account troubles me greatly. The Mint (a Crown Corporation) and its overpaid bureaucrats really pulled a fast one, thanks for letting that cat out of the bag. I wonder if they did the same thing, with their Gold ETR.

    Too bad that Sprott is priced in USD only, I wish they could also have a CDN dollar side. Money changing can be cumbersome and expensive.

    • @spaniel,

      Yes, the Sprott funds are definitely the real deal… and the only way to hold physical in an RSP.

      I solved the USD issue through a TD trading account. If you request it specifically, they can set up your account with an “auto wash” to the USD… you first transfer your account to cash (in USDs), then you buy the stock… any time you sell, the funds are “washed” through USD Money Market funds. When you buy back, the required amount in MM funds are sold and applied to the purchase.

      Bottom line is, in affect, you have a USD account inside a Canadian RSP, even though the rules say they must be in CADs… stil a bit messy with settlements but much better than converting between currencies for every transaction.

    • Even if Sprott’s funds are the real deal, there are still some risks that there might not be some physical silver in his storage and after the collapse of this system, it will be impossible to take deliveries for these physical silver because there won’t be any services for the shipping.

  4. Hi spaniel,
    there is a CDN side from Sprott Silver trust. TSX check Symbol  PHS.U 

    • swissie: yes there is, but it is priced in USD.  I can handle it with the US side of my iTrade trading account. Once, I made a mistake and used the CDN side,when buying PHS.U,  and got hosed to the tune of $150.00, for a $10,000 trade.

      Thats almost 5 oz of silver !
       
      I learned a lot from that mistake, I discussed with the brokerage , it was a difficult conversation as they were explaining with their own confusing vocabulary. They always talk about “spreads”, that contain their exorbitant money-changing fee built-in , to keep the customer in the dark.
       
      I view the transaction as USD/CDN ratio, with added fee. When looking at it in this way, everything becomes clear.

  5. The criteria are spelled out, and if its unallocated, hey its just Kitco X 1,000, so the bottom line is take  your Metal and run.
    However, I find two things of interest:  1/ they will charge a fabrication fee of $3.00 to turn that metal in to maples, and 2/ The Gold Reserve is trading at 1880 on the basis of Gold Metal, in the Mint’s Reserve, which is about a 9% prem.  Don’t know how to figure items that premium would be attirbuted to, in various parts. 
    Whatever this is, it’s clever, as investors carry the inventory for the Mint, both in risk and cost.

  6. Why not buy the physical from SD Bullion and take delivery as soon as possible? Sprott Silver Trust represents paper promises which can easily be broken.

    • silverbullion: One reason is if you have a RRSP, you cant take delivery yourself, unless you de-register and pay high taxes now, that you can defer till later (presumably when one retires, and is in a lower tax bracket).
      Revenue Canada permits holding physical investment-grade silver bullion in your RRSP. Since 2005.
      But you need to find a 3rd party Trustee, authorized to do this for you, and so far I have not been able to find one. And I have looked, asked accountants etc to no avail.
      So, in the meantime the Sprott Silver Bullion Trust seems better than certificates,for RRSP investing, but I would rather have the physical held for me in a allocated account, overseen by a Trustee.
       
      Maybe the Doc has some ideas.

      There is a lot of business waiting for someone who can solve this problem, for us Canadians, and it should be solvable.

    • @spaniel I am sure AG and the Doc can assist because when you’re holding any form of paper, you’re holding a promise that can be broken. 

  7. What is that saying?
    If you don’t hold it, you don’t own it.” 

    • Exactly.

    • That is true! Most of the people don’t realize this and they only think about profits in terms of dollars while holding some gold and silver so for them, it doesn’t matter if it is the real thing or not. They will realize that their papers are useless once there is a physical gold and silver shortages.
       

  8. I looked on-line to see WTH an ETR is but found no listing other than a list of abbreviations, none of which seemed likely for a silver trust investment.  Anyone know what ETR really means.

    From the article, it looks as if an ETR is structured in a way that is similar to an ETN.  Never ever buy an ETN or any other promise-to-pay note instrument.  I have a sneaking suspicion that an ETR is similar in its lack of real ownership “features”.   In any case, this is not anything I have any interest in.  I will buy an ETF from time to time and have done well with them.
     

  9. I might be stupid, but I am not ignorant. People can do whatever they want, for their own reasons, but I will never be caught holding any kind of paper with a silver promise.

  10. @ The Royal Canadian Mint, Can You Use A Great Sticky Note Guy? I Have Experience. LMAO  If You Don’t Hold It, You Don’t Own It.  PERIOD!!!!!
     

  11. Buy an ETF, ETR, or an ETN instead of Physical?
    You must be on LSD!

    (Unless you are just trading.)    

  12. I post this because I care: Sprott’s PSLV is no better than the other paper investments. Check out… http://kiddynamitesworld.com/debunking-misleading-silver-posts-with-pure-fact/

    • Yeah, I care too SilverStar. Kid Dynamite is a terrible source on anything concerning precious metals.  

      He was telling people to sell gold when it was $700 and silver was 10 bucks. So now he’s “debunking” Sprott who has all his own money in gold and silver? LOL…

      The dude is a clown. 

    • I read silverstar80 link, and it does seem there are some serious problems here. If I need 10 Good Delivery Bars minimum,that is way too much.
       
      Us silverbugs need something better than this.
       
      What I want is to invest in allocated silver bullion, that I can redeem at any time, in reasonable increments. Im also happy to pay a reasonable storage and management fee. This thinking applies to my RRSP investments in silver.
       
      Anything else, I want to hold the physical myself.
       
      Another way of looking at the Sprott PSLV, is that if:
       
      1) the price of silver goes sky high
      2) you can redeem for cash, and then buy physical with the cash.
       
      If there is a decoupling between paper and physical prices, then this wont work.
       
      Another way of handling Sprott, is for holders of Sprott units to transfer these into a special Trust that can be set up, have the Trust take delivery, and then hold the bullion in a private vault for the owners. Then the 10 LGD bar minimum (required for redemption) would be no problem. But aah, the paperwork.

      It would be nice if us silver investors could work together in some fashion, to establish our own ETR, traded on the exchanges , that does things right. And if, one day, the storage vault is empty because of mass redemptions, we can then rejoice in the fact that the purchasers of the ETR units have got their silver.
       
       

  13. Don’t let past horrible trading/investment calls cloud what is found in Sprott’s own documents. KD’s source is the SEC filed prospectus. One example, Sprott can suspend or cancel redemption, just like RCM.
    “In certain circumstances, the Manager, on behalf of the Trust, may suspend the right of unitholders to request a redemption of their trust units or postpone the date of delivery or payment of the redemption proceeds of the Trust (whether physical silver bullion and/or cash, as the case may be) with the prior approval of Canadian securities regulatory authorities having jurisdiction, where required.”
    Physical is the only way to go.

    • Yes, I agree with you. I wasnt promoting Sprott’s funds at all, just criticizing a guy who has an axe to grind. KD is most likely a Wall Street bankster shill pushing another agenda.

  14. If you don’t hold it you don’t own it! I will never get into the paper market, to much risk.

  15. I knew it! I mean all the members on this website already knew that. Nowadays, it is really hard to redeem your paper silver for the physical silver because the physical silver stocks are really low and because of that, the price of silver will skyrocket soon.

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