On December 22, the Supreme Court of Canada released its much-anticipated opinion,
rejecting the federal government's proposal to implement a
national securities regulatory scheme under the oversight of a
national securities regulator. The express question posed to the
Court was whether the proposed Securities Act (the "proposed
Act") fell within Parliament's general authority to
regulate trade and commerce under section 91(2) of theConstitution Act, 1867. The Supreme
Court answered in the negative, concluding that taken as a whole,
the proposed Act was chiefly directed at regulating matters falling
within provincial authority over property and civil rights.
In considering the division of powers between Parliament and the
provinces, the Supreme Court noted the emergence of a flexible view
of federalism "that accommodates overlapping jurisdiction and
encourages intergovernmental cooperation," highlighting that
while important, cooperation and flexibility cannot override or
modify the separation of powers. The Supreme Court then applied a
"pith and substance" analysis against this backdrop of
"cooperative federalism," looking at the purpose and
effects of the proposed law to determine whether its "main
thrust" was within Parliament's jurisdiction over
trade and commerce.
The Court turned first to the breadth of the federal trade and
commerce power. While broad on its face, the Court noted that
it has been confined to matters that are "genuinely
national" in scope and "qualitatively distinct" from
those falling under provincial authority, with its essence being
its national focus. According to the Court, this circumscribed
scope of the general trade and commerce power is linked to another
facet of federalism, being "the recognition of the diversity
and autonomy of provincial governments in developing their
societies within their respective spheres of jurisdiction."
Being the only federal power invoked in the reference, the
Court's analysis was confined to the general trade and
commerce power. The Court's opinion was also limited in
that it did not address the question of an optimal model for
securities regulation, that being a question of policy and not one
for the courts to decide.
Turning next to the "main thrust" of the proposed Act,
viewed as a whole, the Court found the Federal government's
attempt to comprehensively encompass securities regulation as
beyond its general authority under the trade and commerce branch.
Keeping with Canadian jurisprudence that has generally viewed
securities regulation to be a matter of property and civil rights
under provincial jurisdiction, the Court did not agree that the
national concerns raised by the proposed Act justified overreaching
the proper scope of the trade and commerce power, and the wholesale
displacement of provincial regulation that would result. While
acknowledging that historic regulation by the provinces would not
necessarily preclude a federal claim to jurisdiction, the Court was
not able to conclude that securities markets had undergone a
sufficient transformation so as to fall under a different head of
power based on the legislative facts presented in the
The Supreme Court did, however, provide some advice for the
federal government should it choose to move forward with a national
securities regulatory scheme, pointing to examples of other
governments that have grappled with the issue of overlapping
jurisdiction regarding securities regulation. While it refrained
from exploring the particulars of what an appropriate arrangement
might look like for Canada, the Court cited jurisdictions such as
the United States, Germany and Australia and commented on the
"growing practice of resolving the complex governance problems
that arise in federations... by seeking cooperative solutions that
meet the needs of the country as a whole as well as its constituent
parts." Various prior Canadian attempts at achieving national
securities regulation, the Court noted, also generally envisaged
cooperation between the provinces and the federal government. Such
an approach, the Court states, "is supported by constitutional
principles and by the practice adopted by the federal and
provincial governments in other fields of activities. The backbone
of these schemes is the respect that each level of government has
for each other's own sphere of jurisdiction. Cooperation is
the animating force. The federalism principle upon which
Canada's constitutional framework rests demands nothing
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