May 25, 1984
TO: MONTREAL DISTRICT OFFICE
Attention: J. M. Boucher Section 142-5 8th Floor
FROM: HEAD OFFICE Corporate Rulins Directorate Rick Campbell
Tel: (613) 593-6937
RE: Underwriter Fees
In response to your memorandum of January 25, 1984 it is our opinion that the underwriter fees paid to XXXX in respect of the XXXX issue of common shares should be allowed as a deduction under paragraph 20(1)(e).
We regret the delay in answering which was necessitated by the review of our policy on the deductibility of underwriter compensation. Our policy is now clarified and it is proposed that IT-341R , paragraph 5, be changed to say that where an underwriter acquires shares as principal and such shares are to be distributed to the public, the fees of the underwriter which are clear costs associated with the issue are deductible under paragraph 20(1)(e) to the extent they are reasonable in the circumstances, and to say that reasonable fees will be determined by comparison to charges for services where the underwriter acts as agent in a similar issue.
We are forwarding the results of our research to the Compliance Directorate for their information and action in respect of any audit guidelines that may be required.
Chief Finance, Insurance & Leasing Section Specialty Corporations Rulings Division Corporate Rulings Directorate Legislation Branch