In a long-awaited decision released yesterday, the Supreme Court
of Canada has unanimously held that the proposed Canadian
Securities Act is unconstitutional as presently drafted,
frustrating the hopes of those (including the federal government,
the Province of Ontario, the Canadian Coalition for Good Governance
and the Ontario Teachers' Pension Plan, among other
intervenors) who had sought to replace the current system of 13
different provincial and territorial securities regulators with a
single national securities regime.
The notion of a Canadian national securities scheme has been
percolating for more than 50 years. Numerous royal commissions,
provincial panels and advisory committees have recommended the
establishment, in one form or another, of a national securities
regulator with jurisdiction over Canada's entire capital
markets industry. These efforts gained momentum over the last
decade, and in 2008 the federal government appointed an expert
panel (known as the Hockin Panel) to seek input on the development
of a model common securities act for Canada. The proposed federal
Securities Act in the form considered by the Court had its
origins in the recommendations of the Hockin Panel.
The Province of Ontario, along with a number of other securities
industry bodies, was quick to embrace the notion of a single
national securities regime, but the proposal ran into vigorous
opposition from many of the other provinces, led by Alberta and
Quebec, on constitutional grounds. To resolve this matter, the
federal government elected to refer the draft Securities
Act to the Supreme Court of Canada for an advisory opinion as
to the Act's constitutional validity.
The Parties' Positions
Canada, joined by Ontario and several intervenors, argued that
the proposed Act, viewed in its entirety, was a constitutional
exercise of Parliament's general power to regulate trade and
commerce. They acknowledged that the regulation of securities has
historically been a matter for the provinces, but contended that
the evolving character of securities markets, and the increasing
importance of (and recent experiences with) systemic risks, could
only be effectively dealt with at the national level and prompted
the need for all aspects of securities regulation to be brought
under federal jurisdiction. Alberta, Quebec, Manitoba and New
Brunswick, along with other intervenors, rejected the argument that
securities markets have evolved to become a matter of genuine
national concern and maintained that jurisdiction over these
matters properly belongs in provincial hands.
The Court's Decision
While the Court concluded that elements of the proposed
Securities Act related to trade and commerce in general
terms and therefore fall under federal purview (referring
specifically to those sections that deal with the management of
systemic risk and data collection on a nationwide basis), it
ultimately determined that the Act, viewed as a whole, was
principally directed at the day-to-day regulation of all aspects of
the securities industry, which is constitutionally within the
domain of the provinces. As such, the Court unanimously held that
the Securities Act as proposed is not constitutional.
The Supreme Court, in its decision, has closed the door to the
unilateral implementation of comprehensive federal securities
legislation that would exclusively occupy the field. At the same
time, though the Court was naturally carefully to focus on the
constitutional analysis and not on broader policy questions of
whether a single national securities scheme is preferable to
multiple provincial regimes, the Court has left open some
In particular, the Court made a point of recognizing that the
economic importance and pervasive character of the securities
markets may, in principle, support federal intervention in certain
targeted areas. The Court further noted that a cooperative approach
was available to Parliament and the provinces that could allow the
federal government to deal with those specific issues that
constituted genuinely national concerns. Time will tell whether the
federal government (together with the provinces in the context of
any cooperative initiative) will seek to pass through these windows
left open by the Supreme Court.
The content of this article does not constitute legal advice
and should not be relied on in that way. Specific advice should be
sought about your specific circumstances.
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The Canadian Office of the Superintendent of Financial Institutions ("OSFI") recently ruled that a bank cannot promote comprehensive credit insurance ("CCI") within its Canadian branches under the Insurance Business (Banks and Bank Holdings Companies) Regulations (the "Regulations").
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