Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
Is the Over-the-Counter Bulletin Board a prescribed stock exchange?
Position: No
Reasons:
It may be related to the NASDAQ but it is not the NASDAQ since both are subsidiaries of National Association of Securities Dealers, Inc.
970466
XXXXXXXXXX M.P. Sarazin
Attention: XXXXXXXXXX
March 7, 1997
Dear Sirs:
Re: National Association of Securities Dealers Exchange
This is in reply to your letter dated February 7, 1997, wherein you requested our views as to whether the Over-the-Counter Bulletin Board market in the United States is considered a prescribed stock exchange for the purposes of subparagraph 3201(o)(viii) of the Income Tax Regulations (the "Regulations").
Based upon the information provided in the corporate description of the National Association of Securities Dealers, Inc. ("NAS Inc."), the Over-the-Counter Bulletin Board is an electronic, screen-based market for securities that are not listed on the NASDAQ stock exchange, the New York Stock Exchange or the American Stock Exchange. You are of the view that the reference to NASDAQ in subparagraph 3201(o)(viii) of the Regulations is to NAS Inc. and not just "The NASDAQ Stock Market", a subsidiary of the NAS Inc. Consequently, the Over-the-Counter Bulletin Board and other subsidiaries of NAS Inc. would qualify as prescribed stock exchanges for the purposes of subparagraph 3201(o)(viii) of the Regulations.
Subparagraph 3201(o)(viii) of the Regulations prescribes the "National Association of Securities Dealers Automated Quotation System" ("NASDAQ") as a qualified stock exchange for the purposes of paragraph 13(27)(f) and sections 149.1, 204, 206.1 and 207.5 of the Income Tax Act (the "Act") and of the definition of "grandfathered share" in subsection 248(1) of the Act. The February 9, 1989 Regulatory Impact Analysis Statement states that the NASDAQ was added to the list of prescribed foreign stock exchanges because the listing requirements for NASDAQ are similar to those of conventional stock exchanges and, as a result, a NASDAQ listed security will be given the same sort of protection as investments in conventional stock exchanges.
Since the provisions of section 3201 of the Regulations refer specifically to stock exchanges in countries other than Canada, we are of the view that paragraph 3201(o)(viii) should be restricted to the NASDAQ stock exchange. We can find no support for including the various other markets affiliated with NAS Inc. in the list of prescribed stock exchanges outside of Canada. Consequently, we would not consider the Over-the-Counter Bulletin Board as a prescribed stock exchange for the purposes of section 3201 of the Regulations.
If you would like to have specific stock exchanges added to the list of prescribed stock exchanges outside of Canada, the matter would have to be taken up with the Department of Finance in order to have amendments to the existing provisions of section 3201 of the Regulations drafted to include the particular stock exchange.
We trust the above comments will be of assistance to you.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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