Principal Issues: [TaxInterpretations translation] Do securities listed on the Alternative Investment Market division of the London Stock Exchange qualify as a qualified investment under 204(d)?
Position: No.
Reasons: The Alternative Investment Market division of the London Stock Exchange is not a "designated stock exchange".
XXXXXXXXXX 2007-025356 Catherine Ayotte, Notary, M.Fisc. March 6, 2008
Dear Madam,
Subject: Qualification of a XXXXXXXXXX security of as a qualified investment in an RRSP account.
This is in response to your email of September 25, 2007, requesting confirmation that securities of XXXXXXXXXX, listed on the Alternative Investment Market of the London Stock Exchange, are a qualified investment for a trust governed by a registered retirement savings plan (RRSP). We understand that XXXXXXXXXX is not resident in Canada.
It appears to us that the situation described in your letter may be an actual situation involving taxpayers. As explained in Information Circular 70-6R5, it is not the Directorate's practice to comment on proposed transactions involving specific taxpayers otherwise than in the form of an advance tax ruling. If your situation involves a specific taxpayer and transaction, you should forward all relevant facts and documentation to the appropriate Tax Services Office for its views. However, we can offer the following general comments that we hope may be helpful to you.
Please note that, unless otherwise indicated, all statutory references herein are to the provisions of the Income Tax Act; any reference to "Regulations" is to the Income Tax Regulations.
The types of investments that are qualified investments for a trust governed by an RRSP are described in the definition of "qualified investment" in subsection 146(1). Paragraph "a" of that provision refers to the definition "qualified investment" in section 204. Paragraph (d) of the definition "qualified investment" in section 204 includes securities that are listed on a "designated stock exchange".
The concept of "designated stock exchange", together with the concepts of "recognized stock exchange" and "stock exchange", replaced, effective December 14, 2007, the concept of "prescribed stock exchange" (former sections 3200 and 3201 of the Regulation).
The new concept of "designated stock exchange" is defined in section 262 and specifies that the Minister of Finance may designate a stock exchange, or a part of a stock exchange, for the purposes of the Income Tax Act. In addition, a transitional measure is enacted in subsection 262(5) to deem the Minister of Finance to have designated each stock exchange and each part of a stock exchange that was, immediately before December 14, 2007, a "prescribed stock exchange".
For the UK, the only stock exchange that was referred to in the Regulation is the London Stock Exchange (formerly listed in 3201(n) of the Regulation). The London Stock Exchange comprises several markets including the Alternative Investment Market. The Alternative Investment Market is regulated very differently from the main London Stock Exchange market and does not fall within the new definition of "designated stock exchange". As such, securities listed on the Alternative Investment Market are not securities that are listed on a "designated stock exchange" as required by the definition of "qualified investment" in paragraph 204(d).
We hope that our comments are of assistance.
Best regards,
Ghislain Martineau
Manager
Financial Sector and Exempt Entities Section
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch.