| 5-923282 | |
| 24(1) | D. Duff |
| (613) 957-8953 |
Attention: 19(1)
November 16, 1992
Re: Qualified Investments in a Registered Retirement Savings Plan
This is in reply to your letter May 21, 1992, regarding the Department's position on the holding of foreign currency in trusts governed by registered retirement savings plans ("RRSPs").
In our letter of April 7, 1992, to 24(1), we addressed the problem incurred by trusts governed by RRSPs that were holding foreign currency as a result of trading in securities denominated in foreign currency. While such securities can be a qualified investment for the RRSP the foreign currency is not. This created a problem because interest and dividends were paid, and transactions done, in foreign currency, so it was necessary for the RRSP to hold foreign currency at some time if it had these securities. In the aforementioned letter we stated the position that the trust would not be considered to have acquired a non-qualified investment if it was converted to an otherwise qualified investment in a reasonable time.
In your letter and in a telephone conversation of November 2, 1992 (19(1)/Duff) you indicated that RRSPs receiving interest and dividends in a foreign currency would not normally receive enough to transact further in these securities and would have to convert to Canadian currency until it had sufficient funds to purchase more of them. Because there is a fee charged for these conversions to and from Canadian currency, you suggested permitting the RRSP to maintain an upper limit of foreign currency indefinitely, in order to accumulate sufficient funds to participate in foreign currency transactions, thereby avoiding such conversion fees. In effect, you are requesting that the Department consider that a certain amount of foreign currency be considered a qualified investment for trusts governed by RRSPs.
As it is the responsibility of the Department of Finance to determine what is a qualified investment for a trust governed by an RRSP we have forwarded your letter to them for their consideration. In the meantime, it is the Department's position that foreign currency is a non-qualified investment for a trust governed by an RRSP, except in the limited situation described above.
We trust this is satisfactory.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate