Published | Category: GST and QST

Participation of Securities Dealers and Investment Dealers in the Distribution of Private Investments

Securities dealers and investment dealers can facilitate the distribution of private investments by helping the issuer of a private investment find investors and by carrying out certain tasks, such as making sure that:

  • documents are duly completed;
  • payments are processed;
  • share certificates are issued.

For the purposes of the GST and the QST, investment dealers must first determine whether the supply of services or property is a single supply or multiple supplies. For more information, consult the GST/HST Policy Statement P-077R2, Single and Multiple Supplies.

Supply of a financial service

If it is determined that a single supply is being provided, then the predominant element of that supply must be established to determine the nature of the supply. This determination will be generally based on written agreements, between the person providing the service and the person's client, detailing the actions, responsibilities and obligations of the person in connection with the supply. For more information, consult the GST/HST Technical Information Bulletin B-105, Changes to the Definition of Financial Service.

To determine whether an investment dealer who is facilitating the distribution of private investments is taking measures to provide a financial service, certain factors must be reviewed, such as: 

  • the degree of direct involvement and effort of the dealer in the provision of a financial service;
  • the time expended by the dealer in the provision of a financial service;
  • the degree of reliance of both the issuer and the investor on the dealer in the course of providing a financial service.

Whether or not the service provided is a financial service cannot be determined on the basis of one factor only. For example, a service provided by an investment dealer is not considered to be a measure taken to carry out a financial service only because the investment dealer is the sole intermediary between the issuer and the investor. Furthermore, if the investment dealer provides a preparatory service for the supply of a service that will result in transfer of ownership of a financial instrument, the service provided by the dealer will not be considered a financial service.

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