Constitutional Law – Division of Powers –
A unanimous Reference decision of the Alberta Court of Appeal
held that Parliament's proposed Securities Act
("Act") to establish a national
securities regulator is unconstitutional; specifically, the
five-member panel found that the proposed Act is ultra
vires Parliament's authority pursuant to the
Constitution Act, 1867.
Both the federal and Alberta governments agreed that the
proposed Act is, in pith and substance, the regulation of
the participants in the public market and transactions relating to
the raising of capital. At its core, the purpose of the
Act is the regulation of particular investment contracts
and property. Existing case law provides that the provinces have
historically regulated the securities industry within provincial
jurisdiction over "property and civil rights".
The federal government argued, however, that it holds a
concurrent jurisdiction in the area of securities regulation and
that it is therefore also able to create valid law on the subject
pursuant to the "double aspect doctrine". Any conflicting
provincial legislation would then be rendered inoperable to the
extent of the conflict with valid federal law on application of the
The federal government argued that the Act was valid
pursuant to its authority over criminal law, and, more
significantly, under the general branch of the trade and commerce
power, sections 91(27) and 91(2) of the Constitution Act,
The Court of Appeal disagreed: the Act is not criminal
law as the raising of capital has not traditionally been seen to be
criminal and the focus on the statute is not the creation of
prohibitions followed by penalties.
Further, under the general "trade and commerce" power,
the Act failed to meet three of the five indicia used to
assess valid law enacted under this power, as recognised by the
Supreme Court of Canada in General Motors v City National
Leasing ( 1 SCR 641).
Of the failed indicia, the Court held that, first; the proposed
Act did not apply to trade as a whole but only a
particular segment of the economy. Second, the Court held that the
provinces have successfully regulated the securities industry for
decades; the provinces are not incapable of regulating this
industry. Third, as the Act contemplates that some
provinces could "opt-out" of the national regulatory
scheme; it fails to demonstrate the essential need for a national
regulator over trade across the country for the scheme to
After determining that the proposed legislation is
unconstitutional, the Court highlighted that although the federal
government sought to regulate what it considers to be in the
national interest, several provinces had objected to the federal
legislation on the basis that regional autonomy, diversity and
priorities would be sacrificed. The Court recognised that one of
the fundamental principles of the Canadian federal state is the
preservation of local powers and local diversity to enable a
promotion of local interests.
End Note: On April 14, 2011, the
Supreme Court of Canada completed hearings and reserved its
decision, with written reasons to follow, with respect to the
federal government's Reference on the same proposed
Securities Act (In the Matter of a Reference by
Governor in Council concerning the proposed Canadian Securities
Act, as set out in Order in Council P.C. 2010-667, dated May 26,
2010, 33718, (S.C.C.)).
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 Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
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).