Originally published in Blakes Bulletin on Litigation
& Dispute Resolution, March 2011
In the battle over the future of securities regulation in
Canada, the first round has been decided in favour of the
provincial opponents of a national regulator. In a decision filed on March 8, 2011, the Alberta
Court of Appeal (the Court) found that the federal government does
not have the constitutional authority to regulate securities, and
that the currently proposed federal securities legislation would
accordingly be unconstitutional. The Court had been asked to opine
on the federal government's authority over securities by way of
a reference brought by the Province of Alberta.
Advocates for a national Canadian securities regulator have long
argued that Canada's current status quo – which
involves separate securities legislation and regulation for each
province – is unnecessarily duplicative, is inefficient,
and places Canada at a competitive disadvantage in a global capital
marketplace. A number of Wise Persons' commissions and other
reports have studied the issue over the past several decades and
have tended to support these arguments.
In response to the longstanding calls for action on a national
Canadian securities regulator, on May 26, 2010, the Government of
Canada published a proposed draft of a federal Canadian
Securities Act (the Act), which it proposed to enact under
its constitutional authority over "trade and commerce". A
background to the draft Act can be found in the June 2010
Blakes Bulletin: Canadian Government Releases Proposed Canadian
Alberta and Quebec subsequently declared their opposition to the
federal initiative, and each province directed a reference to their
respective provincial appellate courts regarding the
constitutionality of the proposed Act. Both references were argued
in January 2011, and the Alberta decision was the first of the two
to be published. Quebec's decision is expected in the coming
weeks. For its part, the federal government has directed a
reference to the Supreme Court, which is scheduled to be heard in
Anyone looking to the Alberta decision for an assessment of the
practical merits of federal-level securities regulation will be
disappointed. Indeed, in its decision, the Court declines to make
any finding on the merits of the proposed regulator on the basis of
its conclusion that, notwithstanding the principle that the
Constitution can be interpreted in a contextual manner and as an
evolving document, in the case of securities regulation, "It
is neither appropriate nor necessary for this Court to try and
determine whether it is "better" for Canada to have a
national, as compared to a provincial, system of securities
Having concluded that it would be improper to consider the
practical merits of the issue before it, the Court proceeds to also
dismiss a line of constitutional law precedents tending to allow a
relatively broad and flexible assessment of the scope of the
federal "trade and commerce" power. In the Court's
view, securities regulation falls within the exclusive provincial
jurisdiction under the provinces' power over "property and
civil rights", and the federal government has no power
allowing it to enter the field.
Having dismissed consideration of both the practical arguments
in favour of a national regulator and the most favourable
constitutional precedents for the federal side, the Court proceeds
to reach its conclusion that the proposed Act is
Where Do We Go From Here? In the coming weeks, the Quebec Court of Appeal is
expected to release its decision on the parallel reference directed
to it by the Province of Quebec. Blakes will publish an update to
this bulletin when the Quebec decision is published.
Ultimately, both the Alberta and Quebec decisions will be
precursors to the true showdown, which will take place at the
Supreme Court via the reference scheduled for mid-April. The
decision that is eventually rendered by the Supreme Court will
trump both the provincial decisions, and will definitively
determine the future of national securities regulation in Canada.
Advocates of a national securities regulator will have to hope that
the Supreme Court takes a broader view of both the relevance of
practical considerations, and the flexibility granted it in
interpreting the federal powers in the Constitution, than that
adopted by the Alberta Court of Appeal.
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