Trinity Petroleum Trust Common Trust Fund Shbi TTYP

Rules

[ExecSpec]

What Investments Can be Held in an RRSP, RRIF,  RESP, RDSP or TFSA?

Income Tax Act S. 146(1), S. 204, Reg. 4900

There are many investments which can be held in an RRSP, RESP or RRIF, RDSP and Tax Free Savings Accounts (TFSA - see link at bottom) including:

money that is legal tender in Canada, and deposits of such money.

Foreign currencies are qualified investments, subject to certain limitations.  See Money and deposits of money in the Canada Revenue Agency (CRA) Folio S3-F10-C1 - Qualified Investments.  Prior to March 31, 2006, foreign currency cash balances were not allowed under the bylaws and regulations of the Investment Dealers Association (IDA) of Canada.  See the IDA bulletin #3522 from March 2006 regarding the amendments which now allow foreign currency cash balances in RRSPs.

Most brokerages now provide the option of holding foreign currencies in registered accounts.  Brokerages make money every time foreign currencies are converted to Canadian funds, so there was not much incentive to provide this service, other than it makes their brokerage much more attractive to RRSP holders.  To reduce the cost of foreign currency transactions in registered accounts if your brokerage does not provide the option of holding foreign currencies, see our article on washing trades.

Canadian federal, provincial and municipal government bonds or similar obligations

bonds and similar obligations of corporations, the shares of which are listed on a prescribed stock exchange

certain annuities, if purchased from a licensed annuities provider

securities listed on a designated (formerly prescribed) stock exchange in Canada or other countries. ITA s. 204, para. (d) of "qualified investment"

	Exception - futures contracts or other derivative instruments in respect of which the holder's risk of loss may exceed the holder's cost.
	Note that most Canadian and US stock exchanges are included here, but Over-the-Counter Facilities such as NASDAQ OTC Bulletin Board facility, and the Canadian OTC Automated Trading System are not included in the list of designated stock exchanges.  The regular NASDAQ system is included in the designated stock exchanges.  See the Department of Finance document Designated Stock Exchanges.
	If you're not sure about the eligibility of a particular stock or ETF, check the website of the issuer for details.

guaranteed investment certificates (GICs)

exchange-traded funds, i.e., funds which have the purpose of holding the securities included in a stock exchange index, in the same portions as the securities are reflected in the index, or of replicating the investment performance of a stock exchange index.  Examples of exchange-traded funds are SPDRs (Standard & Poor 500 Depository Receipts), Diamonds (Dow Jones Industrial Average units), and MSCI funds (Morgan Stanley Capital Investment Index).

	under certain conditions, shares of small business corporations
	under certain conditions, shares of venture capital corporations

	a mortgage in respect of real property situated in Canada
	an interest in a trust such as a mutual fund trust, a unit trust resident in Canada, certain foreign stock exchange trusts, and certain small business investment trusts, as long as they are registered investments

	annuity contracts
	warrants and rights that give the owner the right to acquire property that is a qualified investment
	call options - may be written (sold) as long as the underlying shares are held in the RRSP (covered call option).  CRA indicates in Folio S3-F10-C1 (link at bottom) paragraph 1.41 that the writing of an uncovered call option may result in the plan being considered to be carrying on a business.  Call options also may be purchased inside an RRSP.

put options

put options may be purchased in an RRSP, RESP, RRIF or DPSP.  This was a change from the 2004 Federal Budget.  For more information see the Canada Gazette 2005-09-21 (archived) and scroll down to (b) Part XLIX:  Qualified Investments, which states:

New paragraph 4900(1)(e.01) provides that an option, warrant or similar right listed on a stock exchange referred to in section 3200 or 3201 is a qualified investment, provided that the underlying property is a qualified investment. The effect of this change is to enable RRSPs, RRIFs, RESPs and DPSPs to acquire publicly-listed put options and cash-settled index options, in addition to call options and warrants (which were already qualified investments under former paragraph 4900(1)(e)). This amendment applies after February 27, 2004.

The 2007 budget consolidated a number of provisions for listed securities.  S. 204 (qualified investments definition, paragraph (d)) of the Income Tax Act was amended to refer to any security (other than a futures contract or other derivative instruments in respect of which the holder's risk of loss may exceed the holder's cost) that are listed on a designated stock exchange.  Since s. 204 included the securities listed in 4900(1)(e.01) of the regulations, s. 4900(1)(e.01) was repealed.

put options written are not subject to qualified investment rules because no property is actually acquired at the time the option is written, thus they theoretically may be written (sold) in an RRSP.  However, brokerages do not usually allow this, and CRA indicates in Folio S3-F10-C1 (link at bottom) paragraph 1.41 that the writing of a put option may result in the plan being considered to be carrying on a business.  

investment-grade gold and silver bullion, coins, bars, and certificates on such investments.  These must be acquired either from the producer of the investment or from a regulated financial institution.  For more detail see Reg 4900(t) and (u).

Designated Stock Exchanges

Process of Designating Stock Exchanges

Introduction

With the integration of global financial markets, the growth in assets held in savings plans registered under the Income Tax Act (ACT) and technological advances in securities trading systems, Canadian investors are increasingly looking to foreign securities listed on foreign stock exchanges for return enhancement and portfolio diversification. New domestic exchanges are also being created, expanding the range of publicly-listed Canadian securities available to Canadian investors.

In 2007, the Department of Finance updated the concept of "prescribed stock exchange", used for a variety of purposes under the Act, in order to make the prescription process more transparent and flexible to meet evolving market needs. In place of the two former lists of prescribed stock exchanges (domestic and foreign), there are now three categories of stock exchange: Designated Stock Exchange, Recognized Stock Exchange and Stock Exchange. For more detail on the 2^nd and 3^rd categories, please see the Annex.

Designated stock exchanges consist of stock exchanges that have been designated by the Minister of Finance, and include all stock exchanges that were prescribed in the Income Tax Regulations immediately before the designated stock exchange regime took effect on December 14, 2007. The Minister's designation, which is carried out by way of public notice, is both necessary and sufficient for a stock exchange to be a designated stock exchange.

This document presents some of the considerations by which exchanges will be evaluated for designation status as well as the process under which exchanges can seek to be designated by the Minister of Finance.

The Minister of Finance's role is to ensure that investments, given their tax-deferred status for policy purposes, trade on well-governed, regulated and transparent markets. Designated Stock Exchanges must therefore be explicitly designated, by public notice, by the Minister of Finance.

The benefits of listing a security on a designated stock exchange include:

• eligibility to be held as qualified investments in various registered plans; and
• no taxable capital gains inclusion for securities donated to charities (including for non-residents)

The designation process and the kinds of considerations described below expedites the review of applications from exchanges and provide more transparency around the factors used to evaluate such applications. Designation status is not an endorsement or recommendation of individual securities listed and traded on the exchange.

Considerations to Qualify as a Designated Exchange

The Minister will consider all relevant information when evaluating an exchange's application for designation status. This will include the following considerations.

For domestic and foreign-based exchanges:

1. The exchange carries out the normal business of an exchange in listing securities, facilitating the trading, clearing, and settlement of these securities, monitoring and enforcing trades executed on its system, and offering transparent pricing information to the public.

2. The exchange has acceptable standards for new company listings, including standards that address the number of shareholders, the dispersion of ownership, and for the maintenance of a listing.

3. The exchange operates within a regulatory framework that meets acceptable standards in relation to investor protection, disclosure requirements, corporate governance, and market integrity, as may be espoused by the International Organization of Securities Commissions (IOSCO).

4. The exchange has an experienced management and governance team, a successful track record of operations, and sufficient financial resources to ensure long-term viability.

5. The exchange has a range of listings and adequate liquidity for investors to buy and sell securities at reasonable bid-ask spreads.

For foreign-based exchanges:

6. The host country of the exchange has commercial, legal and tax relations with Canada, for example, as demonstrated by having entered into a comprehensive tax information exchange agreement or a comprehensive tax treaty with Canada.

7. The host country is a member in good standing in the international financial community through membership in such organizations as the World Trade Organization, the International Monetary Fund, IOSCO, the Financial Action Task Force, or similar bodies.

8. The securities regulatory and juridical framework of the host country of the exchange provides rights and remedies to Canadian investors, including brokers acting on investors' behalf, which are comparable to those available to investors in Canada.

9. The exchange is recognized by the host government and other foreign governments, where applicable, for tax purposes comparable to those for designated exchanges under the Canadian Income Tax Act.

10. The host country of the exchange has a low risk of imposing capital restrictions or other impediments on the liquidation of investments and the repatriation of funds by foreign investors.

Designation Process

Request for Designation

Exchanges seeking designation should submit a written request from a senior representative of the exchange to the Minister of Finance at the address below. Submissions should include sufficient information about the exchange's governance, ownership, financial resources, trading systems and infrastructure, listings, listing standards, liquidity measures, regulatory framework, and other pertinent factors so as to enable the Department of Finance to assess the exchange's application using the considerations listed above. If an exchange operates more than one tier, submissions are to indicate for which tier(s) the exchange is seeking designation status. Additional information may be requested as needed.

Notification

All requests for designation will be acknowledged in writing. Following the assessment process, exchanges designated by the Minister of Finance will be notified and the official name of the exchange, or tier(s) of the exchange, will be published on the Department of Finance's website.

Where the Minister of Finance declines an application for designation status, the exchange will be notified in writing. Exchanges may resubmit a request for designation if their circumstances change sufficiently to address any deficiencies, errors, or omissions identified in their initial application.

The Minister reserves the right to re-evaluate the circumstances of a previously designated exchange and, where justified, revoke its designation status. Once designated the exchange should notify the Minister of Finance within 30 business days of any change to the exchange structure, governance, ownership, and/or operation that could impact the assessment of the exchange’s qualification with respect to the published criteria.

Address:

Minister of Finance

Department of Finance Canada
Hon. James Flaherty Building
90 Elgin Street
Ottawa, ON  K1A 0G5, Canada

c.c.: Assistant Deputy Minister, Tax Policy Branch; Assistant Deputy Minister, Financial Sector Policy Branch

Annex

With the introduction of three categories of stock exchange, most income tax provisions that previously referred to "prescribed stock exchange" will now refer to "designated stock exchange". Over time, the Government will review the appropriateness of using the second and third categories for certain of those provisions. This Annex provides further background on the Recognized Stock Exchange and Stock Exchange categories.

Recognized Stock Exchange

The term “recognized stock exchange” is used for limited purposes under sections 95 and 116 of the Act.

This category will consist of stock exchanges that are located in Canada or in another country that is a member of the Organisation for Economic Co-operation and Development and that has a tax treaty with Canada. This category will also include all designated stock exchanges. There will be no formal identification of recognized stock exchanges; a stock exchange is a recognized stock exchange based strictly on its location, and not (except in the case of a designated stock exchange) by any action on the part of the Minister.

Stock Exchange

This category will include any stock exchange, regardless of where located, and will include all designated and recognized stock exchanges. As in the case of a recognized stock exchange, there will be no process by which an entity is formally identified as a "stock exchange". Instead, it is intended that the general legal and commercial meaning of the term will govern. This category will be used for the purposes of the securities lending rules under the Act.

Designated Stock Exchanges

• Canada: Aequitas NEO Exchange
• Canada: Canadian National Stock Exchange (operating as the Canadian Securities Exchange)
• Canada: Montreal Exchange
• Canada: TSX Venture Exchange (Tiers 1 and 2)
• Canada: Toronto Stock Exchange
• Australia: Australian Securities Exchange
• Austria: Vienna Stock Exchange
• Belgium: Euronext Brussels
• Bermuda: Bermuda Stock Exchange
• Brazil: BM&F Bovespa Stock Exchange
• Czech Republic: Prague Stock Exchange (Prime Market)
• Denmark: Nasdaq Copenhagen
• Finland: Nasdaq Helsinki
• France: Euronext Paris
• Germany: Frankfurt Stock Exchange
• Germany: Boerse Stuttgart AG (Stuttgart Stock Exchange)
• Hong Kong: The Hong Kong Stock Exchange
• Ireland: Irish Stock Exchange
• Israel: Tel Aviv Stock Exchange
• Italy: Borsa Italiana S.p.A (Milan Stock Exchange)
• Jamaica: Jamaica Stock Exchange (Senior Market)
• Japan: Tokyo Stock Exchange
• Luxembourg: Luxembourg Stock Exchange
• Mexico: Mexico City Stock Exchange
• Netherlands: Euronext Amsterdam
• New Zealand: New Zealand Stock Exchange
• Norway: Oslo Stock Exchange
• Poland: The main and parallel markets of the Warsaw Stock Exchange
• Republic of Korea: Korea Exchange (KOSPI and KOSDAQ)
• Singapore: Singapore Stock Exchange
• South Africa: Johannesburg Stock Exchange
• Spain: Bolsa de Madrid (Madrid Stock Exchange)
• Sweden: Nasdaq Stockholm
• Switzerland: SWX Swiss Exchange
• United Kingdom: London Stock Exchange
• United States: BATS Exchange
• United States: Nasdaq BX
• United States: Chicago Board of Options
• United States: Chicago Board of Trade
• United States: Chicago Stock Exchange
• United States: Investors Exchange LLC
• United States: National Association of Securities Dealers Automated Quotation System (Nasdaq)
• United States: National Stock Exchange
• United States: New York Stock Exchange
• United States: NYSE Arca
• United States: NYSE MKT
• United States: Nasdaq PHLX