Canada: Round I To The Provinces: Alberta Court Of Appeal Rejects Canadian Securities Act As Unconstitutional

Earlier this month, the Alberta Court of Appeal rejected the federal government's proposed national securities legislation as unconstitutional.1 The Quebec Court of Appeal's decision on the same issue is expected shortly. Though the Alberta decision is strongly worded, the final decision rests with the Supreme Court of Canada, which will hear arguments on April 13 and 14, 2011. It remains to be seen whether the Alberta decision foreshadows the Supreme Court's reasons, or becomes the voice of dissent on this issue.

In May 2010, the Government of Canada released the proposed Canadian Securities Act (CSA), which provides for the harmonization of the existing provincial and territorial legislation into a single federal statute and creates a national securities regulator. The CSA is similar to provincial securities legislation, but still contains significant changes from the current regime. At the same time as releasing the CSA, the federal government referred the question of its constitutionality to the Supreme Court. Shortly after, both the Alberta and Quebec governments submitted similar reference questions to their respective appeal courts.

The Constitution Act, 1867 divides certain powers between the provincial and federal governments. The legal issue in all of the references is whether the CSA falls under a provincial or a federal head of power. The provinces have traditionally had jurisdiction over the regulation of the securities industry under their "property and civil rights" head of power. But the federal government argued that it had concurrent jurisdiction based on the general branch of the federal "trade and commerce" power. If there is concurrent jurisdiction, the federal legislation prevails over the provincial legislation under the paramountcy doctrine.

The Court of Appeal first considered the "pith and substance" of the CSA, which the parties ultimately agreed to be "the regulation of the participants in the public capital markets in Canada, and transactions relating to the raising of capital." However, the federal government argued for a characterization of the pith and substance as comprehensive national securities regulation (and necessarily beyond the authority of the provinces). The Court rejected this argument: "merely because something is of general interest throughout Canada is not enough to create federal jurisdiction."

The federal government also argued that the securities industry has changed in the last decade, becoming more complex and international in nature, and the CSA was necessary to address systemic risk. The Court rejected these arguments as well, finding that a more complex and global securities market does not change the pith and substance of the legislation and there is nothing concrete in the CSA about systemic risk. While a small portion of the CSA could be supported based on the federal government's criminal power, the Court found that, as a whole, the CSA is not criminal law.

In an earlier decision,2 the Supreme Court set out five non-definitive factors that demonstrate when legislation may be validly enacted under the general trade and commerce power:

1. the legislation is part of a general regulatory scheme;

2. the scheme is monitored by the continuing oversight of a regulatory agency;

3. the legislation must be concerned with trade as a whole rather than with a particular industry;

4. the legislation is of a nature that the provinces jointly or severally would be constitutionally incapable of enacting; and

5. the failure to include one or more provinces in a legislative scheme would jeopardize the successful operation of the scheme in other parts of the country.

The Court found that the CSA did not meet the last three of these criteria. First, the CSA does not concern trade as a whole; it is only concerned with a particular industry which is only a segment of the economy. Second, the provinces are not incapable of regulating the securities industry, as they have been doing it for decades. Third, the exclusion of some provinces from the regime would not undermine its operation in other provinces, which was demonstrated by the CSA's "opt in" provision. Provinces would voluntarily opt in to the national securities regulator, meaning that the failure to include a province would not jeopardize the scheme. The Court analogized the securities industry to the insurance industry, which the federal government had unsuccessfully tried to regulate for years. In the Court's view, the federal government was essentially attempting to overturn those cases "and to rewrite Canadian constitutional history in a way that would disrupt the predictability required in constitutional law".

The Court of Appeal did recognize the "double aspect doctrine" may be applicable. It contemplates that similar provincial and federal legislation may both be constitutional when they fall within both a provincial and federal head of power. In that case, the federal legislation becomes paramount. As the Court found that the CSA did not fall within a federal head of power, the double aspect doctrine does not apply. Furthermore, the doctrine has not been applied where the federal and provincial legislation were wholesale duplications of one another. In the Court's view, it would be wrong to apply the doctrine when both sets of legislation were pursuing the same purpose by similar means. The Court of Appeal's concluding remarks rejected the federal government's approach, stating that "the way to accomplish this [the national securities regime] is through negotiation with the provinces, not by asking the courts to reallocate the powers under the Constitution Act through a radical expansion of the trade and commerce power."

Though this decision is not binding on the Supreme Court, it does provide a framework for analysis. The federal government will have to consider how to best frame its oral submissions to deal with the concerns raised by the Alberta Court of Appeal and persuade a majority of the Supreme Court that the CSA is within federal authority. Notably, the Alberta and Quebec governments are opposing the CSA in the Supreme Court, and will undoubtedly be relying heavily on these reasons.


1. Reference re Securities Act (Canada), 2011 ABCA 77.

2. General Motors v. City National Leasing, [1989] 1 S.C.R. 641.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Jeffrey S. Leon
Ranjan K. Agarwal
Scott H.D. Bower
In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.