18 November 1998 External T.I. 9829765 - RRSP QUALIFIED INVESTMENTS WEBS

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:

Are World Equity Bench mark Shares (WEBS) qualified investments for registered plans?

Position:

Yes

Reasons:

While the shares are not registered in the name of the RRSP because of industry practice in registration of such shares, it is appropriate to accept them as qualified investments where the beneficial owner of the shares is the RRSP trust.

XXXXXXXXXX

November 18, 1998								982976

Dear XXXXXXXXXX:

Re: Qualified Investments - World Equity Benchmark Shares (WEBS)

We are writing to you further to our letter on this topic dated October 13, 1998, wherein we noted we would continue our review of WEBS to determine if such investments are qualified investments for Registered Retirement Savings Plans (RRSPs).

In our earlier letter we noted that we had reviewed the March 6, 1996 Canadian offering circular and the prospectus for World Equity Benchmark Shares (WEBS) Foreign Fund, Inc. (the “Fund”) and made the following observations. The Fund is organized as a Maryland Corporation and is an index fund consisting of separate series of funds each tracking a foreign equity market index. Shares will be issued in respect of each WEBS Index Series. The WEBS have been listed for secondary market trading on the American Stock Exchange, Inc.. However, direct ownership of the shares is not permitted and investors will acquire a beneficial ownership in WEBS through participants in the securities depositary, DTC (the Depository Trust Company). Since we last wrote to you we have received a more recent (October 29, 1997) prospectus and Canadian offering circular. We have also discussed this matter with an official of the American Stock Exchange.

Under paragraph (h) of the definition of “qualified investment” in section 204 of the Income Tax Act (the “Act”), “shares listed on a prescribed stock exchange in a country other than Canada” are qualified investments for RRSPs. Under subparagraph 3201(o)(i) of the Income Tax Regulations (the “Regulations”), the American Stock Exchange is a prescribed stock exchange for purposes of section 204 of the Act. As noted above, WEBS are shares and the shares are listed on a prescribed stock exchange. The registration and trading of investments in WEBS will be carried out through a system maintained by DTC and beneficial owners will receive written confirmation relating to their purchase of WEBS from or through DTC. It is our understanding that the DTC (which is apparently similar in function to the Canadian Depository System (CDS) in Canada) is a book entry only system for the recording of share ownership (to facilitate the clearance and settlement of securities transactions) and is common industry practice. Even though registration and trading of WEBS is maintained by DTC, we will nevertheless consider the WEBS to be qualified investments for RRSPs that are the beneficial owners thereof.

We trust these comments will be of assistance.

Paul Lynch
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate