Canada: Alberta Court Upholds Constitutionality Of ASC’s Power To Compel Testimony And Document Production

Last Updated: March 13 2015
Article by Michael A. Marion and Andrew Pozzobon

Most Read Contributor in Canada, September 2016

The Alberta Court of Queen's Bench recently released a decision that may be of interest to any Canadian issuer that issues securities into the United States, has US-based investors or could otherwise see their activities scrutinized by American regulators at some point. This is particularly so where we have seen an increased usage of the Alberta Securities Commission's investigation powers at the request of US agencies like the Securities and Exchange Commission and the Commodities Futures Trading Commission.

On January 22, 2015, the Court of Queen's Bench of Alberta released its decision in Beaudette v Alberta (Securities Commission), 2015 ABQB 57 (found here). The Applicant, Scott Beaudette, challenged the constitutionality of certain sections of Alberta's Securities Act. Mr. Beaudette was concerned that information compelled from him by the Alberta Securities Commission ("ASC") would be shared with US authorities and could result in criminal prosecution and argued that the Canadian Charter of Rights and Freedoms ("Charter") protected him from providing information to the ASC. The Court dismissed Mr. Beaudette's arguments and confirmed that effective securities law enforcement demands that there be inter-jurisdictional cooperation and reciprocal assistance between the regulatory agencies including between Canada's regulatory enforcement agencies and the United States regulatory enforcement agencies. 


As background, in April 2012, the ASC issued an investigation order (the "Investigation Order") and a Summons to a Witness (the "Summons") pursuant to section 42 of the Securities Act, requiring him to attend for examination at the ASC and to produce documents, for potential contraventions of the Securities Act.  Following receipt of the Summons, counsel for Mr. Beaudette wrote the ASC and took the position that the proposed examination would violate Mr. Beaudette's Charter rights unless the ASC could provide written assurances that any evidence compelled from Mr. Beaudette would be kept confidential and would not be shared with US law enforcement agencies such as the SEC and the US Department of Justice. Mr. Beaudette did not attend the ASC for the examination and the ASC commenced proceedings in the Court of Queen's Bench seeking various orders. Mr. Beaudette brought an application challenging the constitutionality of sections 42 and 46 of the Securities Act.

The wording of section 42, briefly stated, empowers the ASC to summon a witness, to compel that witness to give testimony and to compel that witness to produce documents. Section 46 provides the power to the ASC to share information with other securities or financial regulatory authorities, law enforcement agencies or other governmental or regulatory authorities in Canada and elsewhere.

Court of Queen's Bench Decision

In the application before the Court, Mr. Beaudette argued that sections 42 and 46 of the Securities Act infringed sections 7 and 8 of the Canadian Charter of Rights and Freedoms and were therefore of no force and effect.

(i) Section 7

The primary thrust of Mr. Beaudette's argument pertained to s. 7 of the Charter, which provides that "everyone has the right to life, liberty and security of the person".  Mr. Beaudette argued that his right to be protected from self-incrimination would be violated if he was forced to compel to testify before the ASC and the ASC shared the compelled testimony with the SEC, as the sharing of compelled testimony could lead to criminal prosecution in the US.  The Court held that effective securities law enforcement demands that there be inter-jurisdictional cooperation and reciprocal assistance between the regulatory agencies. The Court then went on to note that while the Charter did go further than granting rights only against interference from actions by Canadian governments, the case law showed that Canadian courts could only limit otherwise constitutionally acceptable Canadian actions, where the individual faced foreign consequences that shocked the Canadian conscience. This was not such a case. While Mr. Beaudette could face prosecution in the US, there was no suggestion that he would be subjected to extreme measures such as the death penalty or torture.  As such, sections 42 and 46 of the Securities Act did not violate s. 7 of the Charter.

(ii) Section 8

Mr. Beaudette also argued that section 8 provided a guarantee of security from unreasonable search and seizure.  Therefore, he argued that he was entitled to a "reasonable" expectation of privacy.   The Court noted that in the context of securities regulation, the expectation of privacy is low. The Court noted that the primary goal of securities legislation is the protection of the investor, but other goals include capital markets efficiency and ensuring public confidence in the system. In a highly regulated industry, such as the securities market, the individual is aware, and accepts justifiable state intrusions. All those who enter this market know or are deemed to know the rules of the game. As such, the individual engaging in such activity has a low expectation of privacy. Further, the Court noted that multi-jurisdictional cooperation between law enforcement authorities furthers the administration of justice in all the jurisdictions involved.  


The decision also confirms that in a highly regulated industry, such as the securities market, the individual is aware, and accepts justifiable state intrusions.  The purpose of the securities legislation and enforcement agencies are to regulate the market, something that often requires inter-jurisdictional sharing of information. This decision highlights that even the Charter does not prevent the ASC from sharing information with foreign authorities.

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