The Investment Industry Association of Canada (IIAC) provided recommendations to Canada’s Department of Finance in respect of Qualified Investments (QI) in Registered Plans.
Among its recommendations, IIAC wrote that registered plans should be permitted to loan any QI asset pursuant to a fully paid securities lending (FPL) program, provided that the FPL transaction: qualifies as a securities lending arrangement as defined in tax legislation; and is afforded protections, in its capacity as securities lender, that are equivalent or superior to those in Investment Dealer rules.
FPL transactions provide a lender “with an additional passive income opportunity from lending its FPL Securities, while simultaneously ensuring the FPL Lender has significant protections from the risks of engaging in such FPL transactions,” the IIAC wrote in its consultation response: “The arbitrary distinction on the permissibility of FPL transactions in registered versus non-registered accounts puts lower income Canadians at a disadvantage by restricting their ability to earn additional passive income.”