| 19(1) | File No. 5-9503 |
| D.S. Delorey | |
| (613) 957-3495 |
February 28, 1990
Dear Madam:
This is in reply to your letter of February 1, 1990 written on behalf of the 24(1) .
You comment that the 24(1) . In this regard, where a corporation or a trust engages in such securities lending activity, you ask if, by virtue only of such activity,
(a) the corporation could not qualify as a mutual fund corporation on the basis that it has an undertaking other than the investing of funds of the corporation and, therefore, the requirement in paragraph 131(8)(b) of the Income Tax Act (the "Act") would not be met, or
(b) the trust could not qualify as a mutual fund trust on the basis that it has an undertaking other than the investing of funds of the trust and, therefore, the requirement in paragraph 132(6)(b) of the Act would not be met.
For the purposes of our reply, you ask us to assume that the securities lending activity would occur under "securities lending arrangements" and would involve only "qualified securities" as those terms are defined in proposed legislation set out in Bill C-28; in particular, in proposed subsection 260(1) of the Act.
It is our view that, in general, the lending of securities by the corporation or trust would constitute an undertaking that is the investing of funds of the corporation or trust within the meaning of paragraphs 131(8)(b) and 132(6)(b), respectively, of the Act.
The above comments are an expression of opinion only and are not binding on the Department, as explained in paragraph 24 of Information Circular 70-6R. We trust however that they are of assistance to you.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate