A mutual fund trust invests its U.S. cash by entering into repo transactions with non-resident counterparties. "The Fund will not be able to resell or reregister the Repo Securities and, therefore, will not pay a fee to the counterparty for the use of the Repo Securities."
In an opinion, CCRA stated that:
"Under a securities lending arrangement, where a buyer of securities is effectively investing its short-term cash with a security lender in a manner that is commercially equivalent to a fully secured loan and under the agreement, the borrower of the securities cannot resell or reregister the securities during the period when the Repo Securities are owned by the borrower (other than in the event of default of the lender), and the identical securities have to be resold to the securities lender, it is our view that it may be reasonable to conclude that for purposes of paragraph 260(8)(b) of the Act, a reasonable fee for the use of the Repo Securities is a nil amount."