Words and Phrases - "dealer"

The appellant derived 80% of its revenue from cashing cheques, i.e., it would receive endorsed cheques from clients, and charge them a fee for depositing the cheques in its bank account. Whether it was subject to compensation tax under Part IV.1 of the Taxation Act (Quebec) turned on whether it was a financial institution under ETA s. 149(1)(a).

The Court found that the appellant was a financial institution under s. 149(1)(a)(iii) as a person “whose principal business is as a … dealer in … financial instruments.” The Court first found (at para. 26) that the cheques were “debt securities,” namely, “a right to be paid money.”

Turning to the meaning of “dealer,” the Court stated (at para. 29, TaxInterpretations translation):

[T]he author Simon Labrecque properly states that the term “dealer” … relates to a person “whose business consists of dealing in financial instruments for its own account…” where this is for the purpose of profit. This entails, according to him, “an elevated level of transactions, in volume and frequency.”

In finding that the appellant was thus a dealer, the Court stated (at para. 31):

Indeed, its cheque-cashing service consisted of dealing in financial instruments for its own account, and where this was for the purpose of profit. Furthermore, the role of the appellant – which was to the receive a cheque endorsed by the client, to whom it made the charges, followed by cashing it into its own bank account as endorsee – indicates that it was acting as a financial intermediary, the criterion identified by … Labrecque… .