The Supreme Court of Canada has unanimously rejected the federal
government's proposed Canadian Securities Act, which
would have created a national securities regulator, as
On May 26, 2010, the federal government released the proposed
Canadian Securities Act, which is intended to harmonize
the existing provincial and territorial securities legislation into
a single, federal statute. At the same time, the government
referred the draft legislation to the Supreme Court of Canada for
an opinion as to its constitutionality.
The opponents of the legislation, led by the governments of
Alberta, Quebec, Manitoba and New Brunswick, argued that the
proposed statute is outside the legislative authority of the
federal government because the regulation of the sale and trade in
securities is a matter of "property and civil rights" and
therefore is the exclusive jurisdiction of the provinces. The
federal and Ontario governments argued that the statute falls
within its exclusive jurisdiction over general trade and
Prior to the Supreme Court hearing in April 2011, appellate
courts in both Quebec and Alberta ruled, almost unanimously, that
the proposed statute was unconstitutional.
The Supreme Court's Reasons
For legislation to be a matter of general trade and commerce, it
must engage the national interest in a manner qualitatively
different from provincial concerns. The Court considered five
issues: (a) whether the law is part of a general regulatory scheme;
(b) whether the scheme is under the oversight of a regulatory
agency; (c) whether the legislation is concerned with trade as a
whole rather than with a particular industry; (d) whether it is of
such a nature that provinces, acting alone or in concert, would be
constitutionally incapable of enacting it; and (e) whether the
legislative scheme is such that the failure to include one or more
provinces or localities in the scheme would jeopardize its
successful operation in other parts of the country.
In this case, the main thrust of the proposed Act is to
regulate, on an exclusive basis, all aspects of securities trading
in Canada, including the trades and occupations related to
securities in each of the provinces. The purpose of the Act is to
implement a comprehensive Canadian regime to regulate securities
with a view to protect investors, to promote fair, efficient and
competitive capital markets and to ensure the integrity and
stability of the financial system. The Court held that the effects
of the Act would be "to duplicate and displace the existing
provincial and territorial securities regimes." The Court said
that the Act's main thrust "does not address a matter of
genuine national importance and scope going to trade as a whole in
a way that is distinct and different from provincial
concerns." In the Court's view, the federal government
failed to establish that the area of securities has been so
transformed that it now falls to be regulated under the federal
head of power. The Court did acknowledge that some aspects of the
proposed Act, such as control of systemic risk and data collection
on a nationwide basis, are properly federal powers.
The Court concluded that the proposed Act "overreaches
genuine national concerns". Though the "economic
importance and pervasive character of the securities market may, in
principle, support federal intervention that is qualitatively
different from what the provinces can do", those factors do
not, in the Court's view, justify "a wholesale takeover of
the regulation of the securities industry".
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