Ottawa seeking Supreme Court opinion on national securities regulator

Late Friday Ottawa asked the Supreme Court if the federal government has the authority to create a national securities regulator. For some time the Conservatives have sought a national securities regulator despite opposition especially from Quebec. (This topic, which might otherwise be seen as dull, has the possibility of leading to a major Federal/provincial fight in the context of Quebec nationalism.)

"The government strongly believes that Parliament has the constitutional authority to enact a comprehensive federal securities act and is initiating preparatory steps in that direction," Minister of Justice Rob Nicholson said in a statement.

"In coming to this view, the government is supported by many of Canada's foremost constitutional experts. However, for greater certainty, we will be asking the Supreme Court for its opinion, which is why we are proceeding with this reference."

In July Quebec would go to the Quebec Court of Appeal in a bid to thwart Ottawa's plan to create a national securities regulator. Quebec wants the Court of Appeal to state that securities are a provincial jurisdiction and that any federal intrusion violates the Constitution. The Federal reference to the Supreme Court would forestall Quebec's move since a Supreme Court of Canada decision would trump a decision of the Quebec Court of Appeal.

Currently Canada is the only
major, developed economy without a centralised, national body regulating securities. Instead securities regulation is fragmented, with regulation administered provincially.

This leads to all thirteen provincial and territorial jurisdictions having their own independent set of rules governing the public offering and sale of securities.

Not only is their disparity across the country in the regulations themselves, but also in enforcement powers, tribunal mechanisms, priorities and sanctions.

The Canadian Constitution does not explicitly assign securities regulation to either level of government.  Regulation has traditionally fallen to the provinces under the "property and civil rights" power of the Constitution (subsection 92(13)).  The federal government also has jurisdiction over capital markets pursuant to its power to legislate in respect of "trade and commerce" under subsection 91(2) of the Constitution Act.

Ottawa claims that it can restrict provincial regulation by implementing a national securities regulator using the federal trade and commerce power (subsection 91(2) of the Constitution Act). There are those, including Quebec, who argue regulation of domestic trade in securities, as well as the regulation of corporate structures and capital arrangements, is a matter that is in pith and substance related to provincial responsibilities and any federal intervention in these matters is an intrusion on provincial jurisdiction.
Provincial jurisdiction must be respected, and failure to do so will certainly result in a constitutional challenge; as mentioned Quebec has already said it will oppose any Federal attempt to create a national securities regulator.

James Morton
1100-5255 Yonge Street
Toronto, Ontario
M2N 6P4

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