| Financial Institution | |
| Debbie Lightheart | |
| November 22, 1989 |
Issue: Meaning of the phrase redemption "at the demand of the holder" found in the definitions of unit trust in paragraph 108(2)(a)(i) and mutual fund corporation in paragraph 131(8)(c)(i).
Background
We were asked to rule that after certain amendments had been made to the Class A shares, a corporation would qualify as a mutual fund corporation defined in subsection 131(8).
24(1)
Position
We were unable to rule favourably and the corporation withdrew its ruling request.
24(1)
Concern
An article in the October 1989 issue of Business & The Law entitled "Mutual Funds - Current Issues" discusses mutual fund trusts and specifically addresses the issue of Redeemable at the Demand of the Holder on page 80. The following excerpt causes our concern:
"We have received verbal confirmation and written technical interpretation from RCT confirming that it will interpret reasonably the meaning of "at the demand of the holder". RCT has confirmed that redemptions on a quarterly basis will satisfy the redemption requirement. In fact, we were verbally assured that in and of itself semi-annual redemptions would not necessarily cause a fund to fall outside of the Act requirements."
Rationale
Arguably, anything short of payment upon presentation of shares of a mutual fund corporation or units of a mutual fund trust would not meet the requirement of redeemable "at the demand of the holder".
24(1) 21(1)(b)
Discussions with 24(1) indicated that the fund in our instance would be classified as an "other" fund.
Based on our position in the past and the requirements of the 24(1) we were unable to conclude that this fund met the requirements of redemption "at the demand of the holder".
B.W. Dath