April 19, 2004
New Qualified Investments for Deferred Income Plans
The types of investments that can be held by RRSPs and other deferred income plans (RRIFs, DPSPs and RESPs) are proposed to be amended. Some forms of investment have been added, while others have been restricted. Subject to certain conditions, investment grade debt of certain corporations and trusts that hold indebtedness would now be qualified investments for these deferred income plans. This change is intended to permit deferred income plans to hold certain asset-backed securities that are backed by loans and other indebtedness.
The proposed amendments also restrict the holding of warrants and rights by deferred income plans. According to the current rule, a warrant or right to acquire property that is a qualified investment is itself considered a qualified investment. Under the proposed amendments, only warrants and rights to acquire qualified investments that are shares and units of certain arm's-length entities would themselves be qualified investments. The amended version is proposed to apply only to property acquired after February 27, 2004.
Options listed on a prescribed stock exchange to purchase or sell qualified investments or to receive cash in lieu of the delivery of that property would now be qualified investments. This would permit RRSPs and other deferred income plans to acquire put options, which they could not do before.
Lastly, it is proposed that debt of a limited partnership whose units are listed on a prescribed Canadian stock exchange would constitute a qualified investment.
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